Continental and Avery compete in the market for self-adhesive address labels. Continental sued for patent infringement, unfair competition/false advertising, and tortious interference with its dealings with Staples and Office Depot. The patent claims were stayed pending reexamination. The court here granted summary judgment to Avery on the Lanham Act and tortious interference claims.
In 2006, the parties began to market easier-to-peel labels: Avery’s Easy Peel and Continental’s FastPly. Each product’s backing sheet was perforated, allowing them to be torn into columns that exposed the edges of the labels. This enabled easier peeling than traditional backing sheets did. In 2008, Avery introduced its next generation of Easy Peel labels, which could be folded rather than torn and thus a partially used sheet could be flattened and even re-run through a printer. Avery’s instructions advised users not to put a sheet through a printer more than once, but many consumers did so, and Staples saw this capability as an advantage. Rather than revamping the FastPly labels, Continental tested them and concluded that they could also be folded to make the labels “pop up” without needing to be torn.
Avery’s 2008 advertising materials claimed “Only Avery label sheets bend to expose the Pop-up Edge™” and “Only Avery offers the Pop-up Edge™ for fast peeling—just bend the sheet to expose the label edge.” Avery also applied to register Pop-up Edge with the PTO; its application was granted in 2010, and Continental didn’t challenge its validity.
Continental unsuccessfully sought to place its products in Staples and Office Depot, allegedly because of Avery’s threats to sue for patent infringement, despite not having relevant patents at the time (a patent was later granted). Two Continental officers were told by Staples and Office Depot representatives that those retailers feared a patent suit from Avery, as did others. In 2009, an Avery rep sent an email to Staples stating, “Once the patents are granted Avery will aggressively defend its IP [intellectual property],” and an internal Avery document from mid–2008 referred to the Easy Peel labels as a “Patented Avery Exclusive” well before Avery had actually been granted a patent.
The Lanham Act claim was that the “Only Avery” statements were false because FastPly labels could also be folded to expose their edges without being torn. The court began by quoting the unfortunate, intent-heavy language from Schering-Plough: “‘literal’ falsehood is bald-faced, egregious, undeniable, over the top.... The proper domain of ‘literal falsity’ as a doctrine that dispenses with proof that anyone was misled or likely to be misled is the patently false statement that means what it says to any linguistically competent person.”
Plainly, the “Only Avery” claims were that only Avery had something called “the Pop-up Edge™.” But what was that—the generic feature of bendability so that edges pop up, which for purposes of this motion the court assumed that FastPly also possessed, thus making the claim false? Or instead a trademarked feature—the particular version of that function carrying the “Pop-up Edge” name—which would be true?
This is where falsity by necessary implication would be very useful. The “only Avery” claim doesn’t make sense as a reason to buy unless the claim is about functionality—why would a consumer care that the name of Avery’s implementation of the functional feature is trademarked? But the court didn’t agree, and instead held that no reasonable jury could find that Avery was referring to the function instead of the mark. LensCrafters, Inc. v. Vision World, Inc., 943 F.Supp. 1481 (D. Minn.1996), supported this—the court there held that claims to be the exclusive supplier of “Featherwate” lenses wasn’t false even though identically composed unbranded lenses were widely available, and Featherwate was just as descriptive as Pop-up Edge was.
Analogizing to a far more famous mark, Avery argued that while a McDonald’s ad claiming “only McDonald's serves hamburgers with quarter-pound patties” would be literally false, an ad that “the Quarter Pounder® hamburger is available only at McDonald's” would not be false. I think this analogy proves the exact opposite: the non-TM-claimed parts of the statements “Only Avery label sheets bend to expose the Pop-up Edge™” and “Only Avery offers the Pop-up Edge™ for fast peeling—just bend the sheet to expose the label edge” explicitly refer to the functionality of the pop-up edge, thus directing consumers to think about the descriptive aspects of the phrase even if it also has trademark significance, similar to the false “quarter-pound patties.” Likewise, note that Quarter Pounder, not Quarter Pounder hamburger, is the mark for McDonald’s, while for Avery the claimed mark states the whole product feature, again making it more likely that consumers would understand the claim to encompass the feature and not just its source. (In other words, the fact that Avery’s mark is for a feature, not for a product or service as a whole, the way a traditional trademark is, may well affect consumer understanding.)
Since no reasonable jury could find literal falsity, the court turned to misleadingness. Continental offered an expert survey of likely users of self-adhesive labels. The test cell used the “Only Avery” statements and the control cell used the same statements without “only” and “unique.” The questions:
What does this sentence communicate or say regarding how many label companies offer this feature? (Read each possible answer and then choose one)
______ No label company offers this feature
______ Just one label company offers this feature
______ Two label companies offer this feature
______ Three or more label companies offer this feature
______ This sentence does not say how many label companies offer this feature
In the test cell, 82.1% or 82.5% selected “just one label company offers this feature,” while 34.4% and 36.7% of the control group did so. But the court found that this survey just proved the unremarkable proposition that “only” and “unique” convey exclusivity to many consumers. But the pertinent question was not exclusivity, but exclusivity as to what, and the survey didn’t answer that question. Thus, there was no evidence of misleadingness, and summary judgment was granted to Avery.
Continental also lost its tortious interference claim because it couldn’t show an intentional and unjustified interference that induced or caused the loss of a business expectancy. Had Avery claimed to hold a patent, not just a pending patent application, or had it claimed that it was going to sue for infringement of its patent application, those statements would have been false and unjustified, but Continental didn’t provide enough admissible evidence from which a reasonable jury could find that Avery actually made either of those statements. Continental’s witnesses testified that Staples and Office Depot believed that Avery, rather than Continental, had a patent on the product, but their testimony was hearsay. Avery’s direct statement, which was in essence that it would sue anyone it saw as an infringer once its patent was granted, wasn’t false, and in fact federal patent law would preempt any state law imposing liability for warning of potential patent litigation, without bad faith, and there was no evidence of bad faith.