Friday, January 25, 2013

preliminary injunction mandates corrective advertising for literal falsity

Generac Power Systems, Inc. v. Kohler Co., 2013 WL 238843 (E.D. Wis.)

Previously, the court denied Generac’s motion for a Lanham Act preliminary injunction on the ground that materials sent to over 1200 dealers weren’t commercial advertising or promotion.  After the Seventh Circuit’s decision in Neuros Co., Ltd. v. KTurbo, Inc., 698 F.3d 514 (7th Cir. 2012), the court granted Generac’s motion for reconsideration on that point.

Generac had already established that Kohler's statement that the Generac Generator lacks a “Low–Speed Diagnostic Exercise” was literally false. Falsity was enough to lead to a finding of irreparable injury in the context of comparative advertising (citing McCarthy and Axiom). 

Kohler argued that injunctive relief was moot because the offending handbook was no longer in circulation.  Still, Generac argued that, to avoid the lingering impact of the false advertising, Kohler should be required to inform dealers and distributors of the falsity of its statements and to instruct them to destroy the old handbook. The question was whether the harm Generac would suffer in the absence of an injunction was greater than the harm that Kohler would suffer if it were granted.  The more likely a plaintiff is to prevail, the less heavily need the balance of harms favor it.  Kohler argued that, given the narrow audience of dealers and the lack of evidence about how they used the handbook, the remote possibility of lost goodwill was less weighty than the harm to Kohler of having to take unnecessary corrective action and harming its own reputation.

The court disagreed, given Generac’s strong probability of prevailing on the merits.  The harm to Generac was the risk of continued dissemination of the falsity in existing copies of the handbook.  Since Kohler didn’t tell its dealers why it provided a replacement handbook or direct them to destroy the prior version, the remaining steps were necessary to eradicate any residual effects of the false advertising.

Kohler also argued that the public interest was minimal because the parties provided consumers with lots of advertising related to their respective generators.  But it’s always in the public’s interest to have truth replace falsity.  Thus, Kohler would be required to inform its dealers and distributors of the falsity of its statement and instruct them to destroy any remaining copies or CDs of the Handbook.

Generac asked for attorneys’ fees because Kohler dragged the case out for eleven months after ceasing distribution of its false statements, but the court didn’t find that the case was exceptional.

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