Friday, August 03, 2012

Impersonating competitor's endorser does not violate Lanham Act or publicity rights (!)

Palermo v. Underground Solutions, Inc., No. 12 cv 1223 WQH (BLM) (S.D. Cal. Aug. 1, 2012)
HT Eric Goldman.
Gene Palermo alleged that he was an “internationally recognized expert” regarding “the plastic piping industry” who “has become a champion for certain types of piping, including high density polyethylene (‘HDPE’) piping and polyvinyl chloride (‘PVC’).”  He’d published and presented widely highlighting the risks of fused PVC.  Defendant Underground Solutions specializes in selling fused PVC.
Defendant allegedly registered and put content on it purportedly showing that HDPE was dangerous, fragile, and expensive, completely contrary to his true views.  This was allegedly calculated to confuse visitors, and did so. 
In addition, defendant also circulated a pamphlet, Palermo’s Negative Sales, Scare Campaign Revealed describing Palermo as “‘an unqualified shill’ for the HDPE industry and someone who has ‘no independent credibility’ and whose professional presentation is ‘mere propaganda.’”
Palermo sued; his claims against the website were for false designation of origin/false association under federal law, along with California false light and misappropriation of likeness, while his claims against the pamphlet were for defamation, and he added a statutory unfair competition claim as to both.  He moved for a preliminary (and permanent) injunction against the confusing use of his name and the dissemination of the pamphlet.
I’ve got to say that I find the alleged facts highly sympathetic.  On the pleadings, Palermo is being impersonated in a highly offensive way, for the ultimate (though not direct) commercial benefit of the defendant.  Palermo, however, chose not to request injunctive relief on his false light claim, so the court didn’t discuss it; he instead relied on the other claims.
On the Lanham Act claims, Palermo argued that defendant created a false association between himself and the website’s claims, which was likely to confuse consumers.  Underground Solutions responded that its use of Palermo’s name wasn’t commercial because the website didn’t offer anything for sale, didn’t contain any ads, and didn’t identify anyone with whom consumers could do business.  (If Palermo had alleged that defendant was the dominant player in the fused PVC business, would the lack of a name matter?  The FDA considers ads about conditions to be “reminder” ads not subject to the full disclosure requirements of drug-specific ads; is this similar?)
The Lanham Act bars the use of a name that deceives the public into believing that a person endorsed, sponsored, or approved of the defendant’s product.  Under the governing Bosley case (involving a dissatisfied customer, not an impersonator), a court should consider context to determine whether a use is commercial.  Context includes whether the defendant earns revenue for the site, sells through the site, links to a plaintiff’s competitors (note that this will be very important: Palermo is paid by defendant’s competitors, but he isn’t one himself), or contains ads.
The website here said nasty things about HDPE and linked to 14 description of HDPE pipe failures.  But Palermo doesn’t make or sell HDPE pipe.  Instead, Performance Pipe was Underground Solutions’s primary competitor in the market for underground trenchless-installed pipelines.  Performance Pipe paid Palermo to endorse HDPE pipe, as he stated in a deposition in a separate action: “it’s pretty obvious I have a relationship with Performance Pipe. I have a consulting agreement with them. I do work for them.”  I have to say, I’d find this site commercial—though I’m not sure that confusion over whether Palermo endorses an entire category of pipe instead of a particular producer should be actionable under the Lanham Act, again unless the category and the company are almost identical.  Supposing the site said false things about HDPE (which was not alleged), for example, Performance Pipe should be able to challenge it as false advertising, given Underground Solutions's commercial interest in making HDPE look bad.
The court disagreed that the site was commercial (I would say, commercial for purposes of Palermo's claims).  There was no evidence that the site itself generated revenue; it didn’t name Underground Solutions or refer to fusible PVC or any other Underground Solutions product.  It didn’t list products for sale or link to any sites that sold Underground Solutions products; it didn’t link to any of Palermo’s competitors (whoever those might be); it didn’t collect information from visitors; and it didn’t have ads.  Thus, on this record, the court concluded that the facts didn’t show that a visitor would believe that “Palermo originated, sponsored, or approved Defendant’s product, fusible PVC.”  There was no likelihood of success on the merits, so no injunction.
The same with the state-law misappropriation of likeness claim.  Commercial purpose is a requirement of the law: “Any person who knowingly uses another’s ... likeness, in any manner, on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods or services, without such person’s prior consent ...” is liable.  Here, Palermo failed to show that the website was commercial in this sense; there wasn’t enough of a “direct connection” between the website and a commercial purpose.
Palermo also argued that defendant’s conduct was an unfair and fraudulent business practice containing falsehoods relevant to the industry.  Defendant argued that Palermo hadn’t shown that he’d been harmed, and the court agreed.  His declaration stated: “My credibility and reputation have suffered due to the content of the Website and the pamphlet and their exposure to individuals, plastic pipe manufacturers and purchasers in the industry. I have been contacted by numerous individuals in the industry questioning my abilities and work in the industry, and whether I authored and/or endorse the content on the Website and whether I am aligned with [Defendant]. I have had to reassure these individuals and the industry that my views on HDPE piping have not changed and that I have absolutely no connection with the Website.”  The court found this not to constitute evidence of injury.  Though the court didn’t explain its reasoning, it may be that, from what Palermo said, he’d been able to correct misimpressions (perhaps aided by the size/sophistication of the relevant consumers?) and thus was not relevantly damaged long-term: needing to reassure people is not the same as losing their respect, and indeed it’s somewhat hard to see why anyone would blame Palermo for being impersonated.  (To the extent that people questioned his abilities, see the defamation claim below.)
The defamation claim based on the pamphlet was separate.  Palermo alleged that the title, “Palermo’s Negative Sales, Scare Campaign Revealed” and the statements that Plaintiff is an “unqualified shill,” that “shills have no independent credibility,” and that messages from shills “are mere propaganda” were defamatory. Underground Solutions argued that they were nonactionable opinions, supported by the facts disclosed in the pamphlet, and the court agreed.  The pamphlet stated that Palermo was unqualified because he was “not a registered professional engineer and does not have a degree in engineering” and that he was a “shill” because he was paid to give his presentations without disclosing the fact of the payment.  The general tenor of the pamphlet—a critique of Palermo’s presentations, with pictures of slides—indicated that it contained some facts and some opinion.  A reasonable reader would assume that there was a factual basis for the statements that Palermo wasn’t a registered professional engineer and that he was paid for his HDPE endorsement, but Palermo didn’t allege that either of those were untrue or defamatory.  Again, no likely success.

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