Thursday, May 14, 2015

No need to name competitor if context does

Champion Laboratories, Inc. v. Central Illinois Manufacturing Co., 2015 WL 2208198,  No. 14 CV 9754 (N.D. Ill. May 8, 2015)
The parties are the leading manufacturers and suppliers of fuel dispensing filters in the United States. “Fuel dispensing filters are incorporated in fuel dispensing equipment, such as gas pumps, and they are designed to remove particulate contaminants from petroleum and other fuels before being dispensed into a vehicle.” Champion (which makes PetroClear) alleged false advertising by Central Illinois (Cim-Tek and Bio-Tek).  The key difference between the parties’ filters is composition: Champion’s are made from cellulose, while Central Illinois primarily makes filters from microglass.

With respect to the first challenged claim, “Return to Full Flow,” Central Illinois ran an ad touting three comparative advantages of Cim–Tek ethanol filters against “competitor’s filters.” It stated: “Cim–Tek ethanol filters reduce the flow of fuel if phase separation [contamination] is detected and will not return to full flow as with competitor’s filters.”  Central Illinois argued that there were no representations about Champion’s filters in the ad, but instead the ad referred to “other filters that do not return to full flow.”  But an ad need not name a competitor to be false. Champion avoided dismissal because it pled that the parties were the leading suppliers; that they sold more than half the filters in the US; and that they sold to the same customers.  Though the market may be less concentrated than a two-party market, “many customers deciding on which filter to purchase are choosing between the two options: Cim–Tek or PetroClear.”  Thus, when Central Illinois used the word “competitor” and touted the benefits of microglass elsewhere in the ad, customers might infer a reference to PetroClear, especially since the ad used the singular and not the plural to refer to “competitor,” thus suggesting a comparison with the leading product and not with one of the 25 other competitors with smaller market shares.

Similarly, other claims were potentially false because they touted test results that Champion plausibly alleged weren’t industry accepted and didn’t correctly validate the performance or strength of a filter.  Also, Central Illinois issued a white paper claiming that customers “Save 20% to 50% by using Bio–Tek Dispenser Filters.” The white paper included a table that compared the total costs of buying and replacing two filters with model numbers: (1) “Cellulose (Paper) 70015 (400–10)” and (2) “Bio–Tek 400BMG–10 (Microglass), 70104,” favoring the latter.  Both model numbers referred to filters made by Central Illinois.  Champion could proceed on a misleadingness theory.  “The table states only the model number and not the brand name of the cellulose filter, and a reasonable customer may not understand Defendant to be comparing two of its own products,” especially given that Champion pled that the defining difference between the parties’ products was their composition.  Further, the white paper had a blown up notation on the side stating that “competitors” use cellulose filters.  The court analyzed similar comparisons to “cellulose filters” in other ads similarly, despite Central Illinois’ argument that it was comparing its microglass filters to its own cellulose filters.

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