Friday, June 29, 2012

potential competitor could state false advertising claim

Tecnomatic, S.p.A. v. Remy, Inc., 2012 WL 2376066 (S.D. Ind.)
Tecnomatic makes stators, a key component of electric motors.  Remy wanted to get into stator technology.  Their failed attempt to share knowledge led to this litigation.  The gist of the complaint was that, “after obtaining the technology, inventions and know-how of Tecnomatic, and filing patent applications on such technology, and while blocking Tecnomatic from developing technology with the Remy Defendants' competitors, the Remy Defendants began to execute their original confidential strategy to control the hybrid car industry through improper means.”  I won’t discuss the core breach of confidentiality agreement and trade secret claims, which survived Remy’s motion to dismiss.  Some other claims did get kicked out.
In its claim for unfair competition, Tecnomatic alleged that Remy deceptively held itself out as the inventor, developer, and owner of technology that it improperly acquired from Tecnomatic.  This didn’t state a claim for unfair competition under Indiana law, which covers passing off; the state courts haven’t recognized a claim for reverse passing off in the sense of inventorship etc.: “Tecnomatic has not alleged that Remy removed any name or trademark from its product. Rather, Tecnomatic alleges that Remy manufactured the technology it is selling, albeit based on information it wrongfully acquired from Tecnomatic.”
As you might expect, this was a problem for the Lanham Act claims as well.  Tecnomatic alleged that Remy made misrepresentations to the Department of Energy to secure a grant, and then misrepresnented the performance of its motors in an ad. Tecnomatic argued that customers, contracts, and the DOE grant would have gone to Tecnomatic but for Remy’s misrepresentations about its relationship to the technology—reverse passing off.  Tecnomatic also argued that Remy used the DOE grant and images of the American flag to mislead consumers into thinking that the feds endorsed Remy; though this should state a separate theory of deceptiveness, the court was uninterested, stating that Tecnomatic failed to allege that it had any rights in the images.
In the absence of secondary meaning, there was no cause of action based on the stator technology itself, and Tecnomatic didn’t allege that the tech had secondary meaning signalling Tecnomatic as its source (and functionality would presumably be a problem anyway).  Appropriation of the actual features of the product or credit for the creation of the product aren’t matters within the scope of §43(a)(1)(A), per Dastar.
The court then turned to the false advertising claim based on Remy’s ad stating, “HVH patented winding technology provides more power and torque density than any other competitor” and “provides customers with better continuous power than any other motor on the market.”  Tecnomatic argued that these statements were false, and that Remy falsely held itself out as the developer/inventor of several innovations.
Remy argued that Tecnomatic failed to plead that it was in competition with Remy, since it doesn’t offer its products in the US.  The court disagreed.  “Tecnomatic alleges that Remy's motivation for feigning interest in a joint venture with it was to prevent Tecnomatic from using its inventions, technology and trade secrets in competition with Remy. Tecnomatic has also alleged that Remy was concerned that its customers may begin going directly to Tecnomatic for its hybrid motor needs, cutting Remy out of the transaction as an unnecessary ‘middle man,’ the implication of which is, of course, that Remy was concerned that Tecnomatic would compete with it.”  This was sufficient on a motion to dismiss.
However, Tecnomatic failed to allege likely injury: it didn’t allege lost sales or goodwill, and its allegation that “customers, contracts, and the [DOE grant]” would have gone to Tecnomatic in the absence of falsity was directed at the false inventorship claim.  Thus, this claim was dismissed without prejudice.
Tecnomatic also argued that statements to the DOE in order to procure the grant were false advertising, but the court found it clear that those statements weren’t made in advertising or promotion.  Plus, Remy’s touting of the fact of the grant isn’t misleading: the DOE did in fact award Remy the grant, no matter how it was acquired.

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