Monday, January 14, 2013

Another court says false advertising can't get around Dastar

Sweet Street Desserts, Inc. v. Better Bakery, LLC, 2013 WL 81385 (E.D. Pa.)

Sweet Street Desserts sued Better Bakery for violations of the Lanham Act, common law unfair competition, breach of contract, unjust enrichment, and misappropriation of Sweet Street's trade secrets. Better Bakery successfully moved to dismiss many of the claims.

Sweet Street, which engages in R&D, production, and distribution of speciality baked goods, worked with Better Bakery to develop a new pretzel sandwich/stuffed pretzel, aka the “Sweet Street Pretzel Sandwich.”  (Better Bakery allegedly had already tried unsuccessfully to make a prototype before the parties agreed to work together and executed a confidentiality agreement.)  The complaint alleged that the stuffed pretzel had unique design features and visual appeal: showing the “stuffed” contents through distinctive angled slits.  Sweet Street alleged that its expertise was important in “amplify[ing]” the quality, appeal, and distinctiveness of the product.  The relationship soured; Sweet Street alleged that Better Bakery stole its secrets and sold a “knock-off” on a large scale, including to many Sam’s Clubs.  The knock-offs allegedly used the design elements created by Sweet Street and protected by the confidentiality agreements, including the wide top slits.

Along with its trade secret/breach of contract claims, Sweet Street alleged reverse passing off because Sweet Street was “solely responsible for the creation, design, testing, and production of this successful and unique product.”  The court pointed out that this claim was brought “in the face of … clear guidance from the Supreme Court”: Dastar says that “origin” means the producer of tangible goods, not the author of any idea, concept, or communication embodied in those goods.  Better Bakery was the origin of the product at issue and sold it under its own name.

Sweet Street also alleged false advertising based on the fact that the products were labeled and branded by Better Bakery, even though the product concept wasn’t created, developed, or produced by Better Bakery.  While the complaint didn’t specify what Better Bakery statements were allegedly false or misleading, the court presumed that Sweet Street contended that the mere act of putting the product on the market was an attempt to misled the public.  It was clear that Sweet Street’s complaint was “based solely on the defendant's alleged false attribution of the authorship of the pretzel sandwich.”  The harm alleged was that the public would wrongly believe that the original concept came from Better Bakery and not Sweet Street.  But false attribution of authorship/inventorship isn’t actionable as false advertising because it doesn’t concern the nature, characteristics, or qualities of the goods and because such a cause of action would interfere with patent and copyright law (citing Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed.Cir. 2009) and Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1144 (9th Cir. 2008)).

Nor could the same arguments sustain a claim for common law unfair competition, since Pennsylvania law tracks the Lanham Act (and, I should note, would be conflict preempted if it purported to give a right of action in this type of case).


Anonymous said...

What is meant by this, from the end?

"(and, I should note, would be conflict preempted if it purported to give a right of action in this type of case)."

I don't think the Lanham Act pre-empts any State Law Claims.

Rebecca Tushnet said...

Anon, the rationale of Dastar was that interpreting "origin" in the Lanham Act to mean "origin of ideas" would conflict with the Copyright Act. That's not preemption because both are federal laws, but if a state trademark/unfair competition law purported to cover "origin of ideas" it should by the same rationale be conflict preempted, not by the Lanham Act but by the Copyright Act, just as the Patent Act would preempt state trademark law purporting to protect functional trade dress (see Sears/Compco). The Lanham Act does preempt state law claims in one circumstance: state law dilution claims against registered marks.