Monday, May 14, 2012

Vague allegations can't plead around first sale

Brain Pharma, LLC v. Scalini, --- F. Supp. 2d ----, 2012 WL 1563917 (S.D. Fla.)

BPI, which makes supplements, sued Scalini and others, including, for violating the Lanham Act and coordinate Florida laws.  BPI alleged that Allstarhealth misrepresented itself as an authorized BPI agent.  Because the products defendants sell aren’t inspected by BPI, BPI alleged that the products aren’t genuine.  BPI further alleged that defendants were selling its products at “excessively discounted prices” (50% below retail). 

First sale doesn’t apply if there are material differences in the products, and the threshold for materiality is low.  But that doesn’t mean that you can ignore the pleading standard.  As to the authorized dealer allegations, the complaint didn’t properly allege that claim.  A printout from the website was attached to the complaint, and, rather than supporting the claim of authorization, it only showed that defendants sold BPI products; the court could consider this as it was incorporated in the complaint.  The mere allegation of misrepresentations of authorized status couldn’t support the infringement claim, given that when a purchaser simply resells a product and does nothing more there can be no actionable misrepresentation.  Other cases accepting authorization-based claims involved additional conduct like metatags (sigh) or incorporation of the mark into domain names.

Like me, the court also believed that an allegation of too-low prices doesn’t state a claim for infringement.  First sale means that the seller can’t control the product once it’s out the door.

Finally, the quality control allegations were insufficient for failure to allege (1) what BPI’s quality control measures were and (2) how the products sold by defendants failed to comply wiht these quality control measures.  As other cases have held, “quality control” is not “a talisman the mere utterance of which entitles the trademark owner to judgment.” 

Boldly (and, I think, unwisely), BPI alleged federal dilution.  BPI unsurprisingly failed to allege sufficient facts establishing true fame; this claim was dismissed with prejudice, but I hope there’s the prospect of a fee award if BPI tries again.  BPI also failed to allege that defendants started use after the mark became famous, and it also failed to allege facts supporting either blurring or tarnishment.  BPI alleged that sales at deeply discounted prices “diluted the value of the BPI Mark and diminished BPI's reputation as a provider of reliable, high quality, cutting edge products.”  Reselling genuine products at a discount can’t be dilution by tarnishment, though the court did cite a 2003 case holding that a complaint stated a tarnishment claim when it alleged that the defendant distributed genuine goods with an inferior warranty, which I think is also wrong.  BPI didn’t state a claim for dilution by blurring because it didn’t allege that defendants used the mark to sell unrelated goods or services.  Selling the genuine article can’t create associations with unrelated goods.  Everything was dismissed with leave to amend.

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