Thursday, March 19, 2015

picture of refurbished equipment wasn't literally false passing off

Stolle Machinery Co., LLC v. RAM Precision Industries, --- Fed.Appx. ----, 2015 WL 1137429, No. 13–4103 (6th Cir. Mar. 16, 2015)
Stolle makes used to produce food and beverage cans. Stolle’s former employee, Shu An moved back to China, and in early 2004 started a competitor company, SLAC. Stolle alleged that An stole its trade secrets, including technical drawings, in order to launch his business.
In 2003, Stolle sent a letter to its suppliers alerting them to Stolle’s concerns about An’s behavior. In response, An retained counsel in the US, who sent a letter to Stolle in February 2004 accusing Stolle of “defamatory, or at best, very aggressive tactics, to prevent Mr. An from earning a livelihood.” Stolle replied that although “Stolle Machinery does not agree with your characterization of communications Stolle had, or is alleged to have had, with various companies regarding your client[,] ... Stolle does not anticipate having any communication with other companies regarding your client in the future.” Stolle’s explanation for taking no further action at that time was “How do you secure drawings from a Chinese nationalist who is hiding in China? I don’t know. … If he was an American living in the U.S., I probably would have done something more. … How do I go after him in Jiangsu, wherever he is hiding.”  Over the years, Stolle got more information about An’s copying, and even contacted the FBI, but couldn’t prove espionage.
In late 2009, Stolle’s director of sales left the company and accepted a job at RAM Precision Industries, a firm that had been one of Stolle’s parts suppliers. In early 2010, Stolle learned that Fultz and An had jointly met with customers in China during the previous month. “At this point the wheels of this litigation finally began to turn.”
The district court found that only a claim against An for copyright infringement could survive summary judgment; the court of appeals found that there was personal jurisdiction and mostly affirmed but reversed the grant of summary judgment to SLAC on Stolle’s claim of trade secret misappropriation because there was a genuine issue of material fact about when the statute of limitations began to run against SLAC, which didn’t exist during the beginning of these events and thus couldn’t benefit from events before its existence.
Lanham Act/state Deceptive Trade Practices Act: Stolle alleged reverse passing off because An and SLAC were incorporating Stolle’s trade secrets into their own machine and passing it off as their own. This claim failed as a matter of law under Dastar.  (Small but notable point: by treating the state law claims as governed by Dastar, which interpreted the meaning of “origin” under the Lanham Act, the court is making a potentially significant move as to claims that are barred by Dastar but would not have been preempted by copyright/patent law—a state could in theory decide to read “origin” more broadly, right?)
An argument in the reply brief that SLAC passed off a refurbished Stolle machine as a new SLAC machine would have constituted a cognizable Lanham Act violation if it had been made in time.
Stolle’s false advertising claim arose from a photo of a piece of Stolle machinery that had been refurbished by SLAC. Stolle alleged that SLAC was depicting Stolle equipment bearing Stolle’s trademark as SLAC’s own equipment. But to get damages, Stolle needed to show literal falsity or evidence of actual deception, and to get an injunction it would need to show a tendency to deceive. And Stolle didn’t provide evidence that SLAC was doing anything other than what it said: “posting the picture on their website to illustrate that they were in the business of refurbishing Stolle machines.” Without further context, the court didn’t find literal falsity, and Stolle didn’t show actual deception or a tendency to mislead.
Finally, Stolle argued that SLAC shouldn’t have gotten summary judgment on Stolle’s copyright infringement claim.  There was evidence that An copied Stolle’s drawings, but not that SLAC did.  The allegedly infringing drawings were labeled February 13, 2003, when SLAC didn’t exist, and there was no evidence of copying after SLAC was formed. “The use of copies to manufacture a product does not, by itself, constitute copyright infringement: to hold otherwise would transform a copyright into a patent.”

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