Bern Unlimited, Inc. v. Burton Corp., No. 11-12278, 2014 WL 2649006 (D. Mass. June 12, 2014)
Bern sued six of its competitors in the market for sports helmets, alleging trade dress infringement. Answering Bern’s third amended complaint, defendants asserted false advertising counterclaims, which the court struck in part.
First, defendants alleged that Bern falsely advertised that its helmets were the “first visor helmet offering a protective visor cover in the front.” The court found this, and claims that the helmets were the “original” and the “first functional visor lid” to be puffery. They were not specific and measurable, and thus not actionable. (No Dastar analysis required, then.)
Second, defendants alleged that Bern falsely advertised that its helmets were covered by a patent, implying that its competitors’ helmets were imitations. Bern argued that there could be no falsity because the patent in fact issued and was presumed valid. But the presumption can be overcome by showing objective and subjective bad faith. What counts as bad faith is determined on a case by case basis; if the patentee knows of invalidity but represents that a competitor is infringing, that’s clearly bad faith.
The counterclaims alleged that Bern advertised and sold the helmet more than a year before the applicant applied for the patent, triggering the old on sale bar. If the counterclaims were true, Bern’s statements that the patent covered the helmet were made in bad faith because it couldn’t reasonably have believed that the patent was valid.
Bern argued that statements could only be actionable if they directly referred to a competitor or its products, and that it didn’t explicitly claim that the defendants were infringing its patent. But the counterclaims alleged that Bern characterized competing helmets as imitations, and did so in the same marketing materials that included references to the patent. One ad included, on the same page, both a reproduction of the first page of the patent and the statement, “Every single brand in the market now has a brim, but your customer wants the original!” While the argument that these statements in combination would reasonably cause consumers to believe that competing helmets were infringing was “thin, at best,” the allegations were sufficient to state a claim.
Bern also argued that defendants didn’t allege proximate cause, as required by Lexmark. But Lexmark’s requirement of injury flowing directly from advertising is satisfied when “deception of consumers causes them to withhold trade from the [claimant].” The counterclaims properly alleged that scenario.
The court also rejected Bern’s argument that the counterclaims were added too late. Defendants argued that they didn’t know until they received Bern’s document disclosure that Bern knew the patent was invalid from its inception, thus completing their counterclaim with the requisite bad faith. The court had “doubts” about the timing and purpose of the counterclaims, but still declined to strike them on grounds of undue delay. There would be some prejudice to Bern, because Bern would be entitled to discovery on deception and materiality (even though literal falsity creates a presumption of deception, that can be rebutted, and materiality has to be shown independently; thus discovery would be appropriate). But that prejudice was not enough to overcome the interest in adjudicating related claims together; much relevant discovery was already completed, and it would be a waste to separate the claims.