Tuesday, June 16, 2015

Apples-to-oranges comparison is literally false, justifies finding of irreparable harm

Market Track, LLC v. Efficient Collaborative Retail Marketing, LLC, 2015 WL 3637740, No. 14 C 4957 (N.D. Ill. June 11, 2015)
Market Track provides business intelligence services, principally tracking and analyzing information relating to consumer advertising. ECRM is Market Track’s principal competitor in the ad tracking business. After ECRM began competing directly with Market Track, some of Market Track’s customers switched to ECRM’s ad tracking product, while others were able to negotiate lower prices from Market Track’s products and services.
Market Track sued for patent infringement, tortious interference, and false advertising.  The court invalidated the patent, titled “Automatic Creation of Output Files from Images in Database,” as too abstract under Alice/Mayo.  The tortious interference with contract claims were preempted by the Illinois Trade Secret Act, because they depended on allegations of misappropriation, defined to include “breach or inducement of a breach of a confidential relationship or other duty to maintain secrecy or limit use.”  Moreover, Market Track failed to show harm from any breach. Its claimed loss of market share, price erosion, and loss of customer goodwill couldn’t be causally linked to any contractual interference, as opposed to alleged patent infringement or other factors.  For example, a 2014 Market Track study found that, despite the fact that ECRM’s data was inferior to Market Track’s in terms of coverage, granularity, and completeness, ECRM’s user interface was more appealing, ECRM’s customer service satisfaction was higher, ECRM had a reputation of being more innovative, and ECRM’s pricing was lower than Market Track’s.
Market Track also couldn’t get a preliminary injunction on most of its Lanham Act/state law deceptive trade practices claims, but did win on one.  Market Track challenged seven ECRM statements, particularly a slide featuring a side-by-side juxtaposition of “Leading Competitor Coverage” of “Top 50 Advertising DMA’s” next to “ECRM Data Coverage” of “Over 65,000 Stores” and “100% Census Coverage”:

ECRM didn’t dispute that this slide qualified as advertising, but the other challenged statements were in emails to potential customers: ECRM represented that Market Track double-counts ads in its own data, and that ECRM has converted a high number of Market Track’s existing customers to the ECRM service. Market Track said that these statements are false, because it employs sophisticated techniques to avoid double counting ads in its data, and because its own records show that fewer than 80 clients have switched from Market Track to ECRM. However, the emails weren’t pervasive enough to count as “commercial advertising or promotion” under the Lanham Act, and the parties agreed that the Illinois Deceptive Trade Practices Act used the same standards (though I would say that “commercial advertising or promotion” is usually a point of departure for state statutes, which after all are usually configured to allow individual consumers to sue for misrepresentations made to them).  Under the Lanham Act, “private one-to-one communications do not constitute ‘commercial advertising or promotion’ unless systematically communicated to a substantial portion of the relevant market for a product, and Market Track’s 850 customers meant that two emails that accuse Market Track of “double counting” and four emails that overstated the number of clients who switched were more like isolated one-to-one communications.
The slide remained.  Market Track argued literal falsity, because its coverage area was substantially larger than the graphic depicted.  ECRM responded that the slide didn’t literally identify Market Track as the “leading competitor” or literally say that Market Track only tracked 50 designated market areas (DMAs).  But the other slides in the presentation did identify Market Track as the leading competitor, and arguably the sole competitor.  Any viewer would understand the reference to Market Track.  Moreover, the slide was literally false: the standard is not a full statement of an untruth in words, but “a showing that the challenged statement is unambiguous and could not reasonably be understood to mean anything different.”  The graphic offered a misleading juxtaposition, like other misleading comparisons found to be literally false.  The side-by-side maps “unambiguously communicate that the two maps are intended to be an apples-to-apples comparison of objective fact.”  The unavoidable conclusion was that ECRM’s coverage was complete, down to individual stores, while Market Track’s coverage was far less complete. 
ECRM argued that it was just stating “that competitor products generally collect only one sample retailer ad per DMA rather than many ads from all stores over the entire area of a DMA.”  But that didn’t make sense. First, Market Track’s map was arbitrarily capped at the “Top 50” DMAs, rather than the “more than 200” DMAs tracked by Market Track.  Second, the Market Track data “inexplicably consolidates all retailers (up to 1500) of any given DMA into a single dot on the ‘competitor’ side but not the ECRM side.”  Third, each “sample retailer ad” was represented by an identically sized dot on the maps, “inviting the conclusion that the each dot represents an identical geographical footprint.” As a result, rather than conveying a message of more granular coverage, the slide misrepresented that ECRM’s data covered 1300 times the geographic area as Market Track, and that Market Track didn’t offer granularity at the retailer level.
Literal falsity allows deception to be presumed, and this claim is obviously material.  Moreover, “disparaging false statements about a competitor’s product, especially when the relevant market is nearly entirely occupied by two competitors, harms the competitor’s goodwill and competitive position.”  These are cognizable injuries under the Lanham Act, “even absent a showing of business loss,” because “it is virtually impossible to ascertain the precise economic consequences” of such harms.  Because plaintiffs need not show business loss, the causation problems afflicting the tortious interference claim didn’t apply here. “Market Track would be hard pressed to identify lost customers or price erosion specifically attributable to false advertising, either, but Market Track has identified separate injuries–to reputation and goodwill–which naturally flow from false advertising and support the Lanham Act claim.”
Does eBay allow a resulting presumption of irreparable harm? Cases in the Northern District of Illinois continued to apply that presumption, but only one of them even cited eBay, without discussing its implications for Lanham Act cases. Out of an abundance of caution, the court didn’t apply a blanket presumption.  Because the challenged conduct was “a literally false statement disparaging the leading competitor in a market primarily shared by two competitors,” about a material fact (coverage) which was precisely where Market Track claimed a competitive advantage over ECRM, the court found irreparable injury likely.
With that out of the way, the balance of hardships and the public interest also weighed in favor of issuing an injunction against using the slide or substantially similar graphics. ECRM’s voluntary cessation meant an injunction wouldn’t burden it but didn’t moot the case.

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