Friday, January 30, 2015

false advertising claim based on "innovative/unique" survives

Ferris Mfg. Corp. v. Carr, No. 14 C 04663, 2015 WL 279355 (N.D. Ill. Jan. 21, 2015)
Ferris sued Roy Carr and Curaline. Ferris makes various wound care products, allegedly award-winning and covered by several patents.  Carr was formerly a high-level Ferris employee, even a co-inventor on various Ferris patents related to wound dressings.  He allegedly signed confidentiality agreements.
He left Carr in 2003, and a bit over a month later he and another former Ferris employee filed a confidential provisional patent application with the USPTO. Though this application was later abandoned, Carr became the COO of Curaline, a Ferris competitor that now markets a wound care product called DevraSorb. DevraSorb allegedly incorporated the Ferris information that was included in the patent application.
Ferris alleged breach of fiduciary duty and contract, as well as false designation/false advertising by “representing to the market that its DevraSorb products are innovative and unique” and “by failing to disclose that they are based on or derived from know-how that Carr had misappropriated from Ferris.”
The court denied the motion to dismiss the breach of contract and fiduciary duty claims before more facts emerged.
Moreover, the Lanham Act claim was sufficiently alleged to satisfy Rule 9(b).  The complaint quoted Curaline’s marketing materials claiming that Curaline’s DevraSorb products are “innovative” and “unique” as well as Curaline’s own Department of Health and Human Services submission conversely claiming that Ferris’s PolyMem product was the “principal predicate” to Curaline’s DevraSorb product, and that DevraSorb is the “substantial equivalent” of Ferris’s PolyMem product.  
Curaline argued that the Ferris information allegedly incorporated into DevraSorb wasn’t confidential or proprietary any more.  But that didn’t go to whether Curaline misrepresented those products as “innovative” and “unique” and failed to disclose that they are instead “based on or derived from” Ferris’s information. (In a footnote, the court noted that the parties were unclear about whether this was a false designation of origin case or false advertising, but found the difference immaterial because the parties weren’t fighting about particular elements.  That doesn’t matter, of course, since the false designation claim is clearly Dastar-barred, and only false advertising—with its crucial materiality element—is a possibility here.)

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