Wednesday, March 25, 2015

Wannabe competitor lacks standing to challenge false advertising

Maine Springs, LLC v. Nestlé Waters North America, Inc., 2015 WL 1241571, No. 2:14–cv–00321 (D. Me. Mar. 18, 2015)
Maine Springs was founded seven years ago to start a bottled water operation in Poland Spring, Maine. Maine Springs owned the natural springs, bottling facility, bulk water facility and necessary equipment for bottled water operations. The bottling facility was located in Poland Spring, and the bulk water facility was about 2 miles away in Poland, Maine. Each had its own spring water source, and Maine Spring’s permits make it the holder of the single largest natural spring water withdrawal permit issued by the State of Maine.
Nestlé Waters is the largest distributor of bottled water in the US, with a 31.6% share of all bottled water sales in the United States, almost double that of its closest competitor. Among its 15 brands is Poland Spring, America’s leading brand of bottled water.  Nestlé Waters represents that Poland Spring® bottled water is 100 percent natural spring water. The bottle says: “not all water is created equal. Poland Spring® Brand 100% Natural Spring Water comes only from carefully selected mountain springs that are continually replenished. What starts out as rain and snow, soaks into the ground and is filtered naturally by the earth with a distinct composition of minerals to create our crisp, refreshing taste.” This is part of a general strategy by bottled water sellers to differentiate their products from regular bottled tap water.
Although Nestlé Waters has a bottling plant in Poland Spring, the original Poland Spring is not used as a resource for Poland Spring water, because that spring has been dry for decades. Nestlé’s product doesn’t come from the same aquifer as the original source. Thus, Maine Spring alleged that Nestlé Waters’ representation that the Poland Spring was one of its sources was literally false.  (Wouldn’t the mark be subject to cancellation on this ground if the falsity were material?) In addition, Maine Springs alleged that the ground or well water sold as Poland Spring doesn’t necessarily come from “carefully selected mountain springs that are continually replenished,” as advertised. Though Poland Spring was sold as 100% natural spring water Main Springs alleged that the water comes from a variety of sources including springs, ground water and well water in the Maine geographic area.
Maine Springs made attempts to supply bottling companies with its bulk water, but was rejected, and it alleged that “[o]ther bottling companies and at least one distributor have similarly rejected Maine Springs’ proposals for fear of threatened litigation by Nestlé Waters.” Thus, the bottling and distribution facilities have sat idle. Nestlé Waters threatened litigation against Maine Springs for trademark infringement: Nestlé Waters’ position was that Maine Springs could not identify the source of its water, Poland Spring, without creating confusion.  As it wrote, “While we appreciate that there is a geographic location known as Poland Spring, Maine, the predominant associations created by the statement are that the ‘Poland Spring’ is the source of the water and that its contents are associated with the Poland Spring® brand.” 
Nestlé Waters demanded that Maine Springs not use any label that identified Poland Spring, Maine as the source of its water, but, as a matter of federal and state law, bottled water must identify its source on the label, including city, state and ZIP code.  (Sounds like an interesting preemption/preclusion defense.)  Maine Springs thus changed its label from “Source: Poland Spring, Maine” to “Source: Located in Poland Spring, Maine,” but Nestlé Waters advised that it did not approve of the change.
Maine Springs sued for violation of the Lanham Act; Nestlé Waters argued that Maine Waters didn’t come within the zone of interests protected by the Lanham Act and failed to sufficiently allege proximate cause. But that was distinct from Article III standing, which the court had to address independently, and found wanting. Maine Springs needed to show that Nestlé Waters has invaded “a legally protected interest that is ‘concrete and particularized.’”  It didn’t. Its claims of harm from the false advertising were bald and conclusory.
Maine Springs alleged that consumers of bottled water choose Poland Spring water due to Poland Spring’s false statement that its water is natural spring water from the Poland Spring, whereas if Poland Spring were truthful consumers would buy Maine Springs water instead.  But Maine Springs hadn’t actually entered or attempted to enter the bottled water market in any way. Instead its facilities are idle and the complaint didn’t allege that it was prepared to sell bottled water. Thus, the allegedly false advertising couldn’t have diverted consumers. Maine Springs’ plans of eventually marketing and selling bottled water were “too speculative to constitute an injury-in-fact for its Lanham Act claim.”
Maine Springs also alleged that bottling and distribution companies rejected its supply proposals, which was a concrete and particularized injury, but it failed at the causation stage. The alleged violation of the Lanham Act was the false advertising, but the rejection of supply proposals wasn’t connected to that.  (This also prevented Maine Springs from alleging proximate cause under Lexmark.)
The court declined to exercise supplemental jurisdiction over Maine Springs’ tortious interference claim.

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