Monday, November 06, 2017

Competitor can't challenge compliance w/certification standards

Board-Tech Electronic Co. v. Eaton Electric Holdings LCC, 2017 WL 4990659, No. 17-cv-5028 (S.D.N.Y. Oct. 31, 2017)

Board-Tech accused its competitor in the light switch market, Eaton, of false advertising because, while Eaton was authorized to apply the “UL” certification mark to certain products (as Board-Tech was), those Eaton products allegedly didn’t comply with the requisite safety standards. For the parties’ light switches, the prevailing standard is UL 20, required by the National Electric Code for new buildings; the NEC is state or local law in all 50 states, and even where its use is voluntary, consumers rely on UL 20 labeling for safety information; many retailers also require UL 20 labeling before they’ll sell a switch.

The UL certification mark, “certifies that representative samplings of the goods conform to the requirements” of Underwriters Laboratory.  Authorization requires a manufacturer to provide six sets of representative samples of switches they want certified, which must then pass a series of tests.  The testing can’t guarantee that the products actually sold comply with applicable safety requirements, merely that a purportedly representative sample did.  However, Board-Tech alleged (plausibly, to me) that consumers rely on the certification mark or listing, and base their purchases on the belief that every product containing a mark or that is listed actually complies with the applicable written safety standards. According to UL, “it is the responsibility of the manufacturer to ensure that all of the products it sells bearing the UL mark actually comply with the standards tested for, not just the samples that were tested.”

Board-Tech alleged that tested samples of UL 20-labeled switches sold by Eaton from the 7500, 7600, and 7700 series, and that all eight sets of six light swiches, 48 in total, failed the UL 20 standards.  However, the court dismissed the complaint for failing to specify the precise products at issue from the relevant series.  Board-Tech alleged that it had sufficiently alleged testing of a sample, but the court disagreed, because Board-Tech failed to specify what it had sampled.  Nor had it explained why it was plausible to extrapolate from a few non-specific switches to entire product lines—more than 125 of them.  Failure to provide any allegations as to which product(s) within a broader product line failed was also necessary in order for defendants to investigate the claim and prepare a defense. “If allowed to proceed in such a broad manner, plaintiff would no doubt seek access to the internal design of competitive products as well as highly sensitive technical data. Damages discovery would involve all of defendants’ sales of this series of products.”  The court wasn’t willing to let that happen without more specifics.

Separately, the court didn’t think Board-Tech could bring claims based on failure to meet the UL’s standards when the UL certification concededly existed.  “[P]laintiff’s claim is that even if defendants are authorized to use the mark, they are deceiving customers by using it.”  But Board-Tech didn’t allege there had been post-certification changes to the product, or that the UL had found Eaton non-compliant.  The authorized use of the mark was not “capable of being a deceptive use.”  The mark was limited by the scope of its registration, and it certified merely that (manufacturer-designated) representative samples conformed to UL’s safety requirements.  [Do consumers know this?  Why would they?]  Board-Tech conceded that Eaton’s switches had been through that process.  “[I]f defendants are authorized to apply the mark (which plaintiff concedes they are), then plaintiff is simply policing the mark. It is up to United Laboratories to police the mark.”  Board-Tech could only challenge UL’s policing by seeking to cancel the mark for failure to police. 

The court was unwilling to allow a competitor to police the use of a certification mark by a competitor, because “[p]rivate testing of a product against standards could be used to commence a lawsuit that could expose competitive design and information to precisely the entity that should not have it. While there are many cases in which competitors are proper plaintiffs – and do obtain discovery – one should not open the floodgates to such litigation without careful consideration.” Comment: Compare to the cases finding that claims requiring interpretation of FDA rules, or policing of compliance with the “organic” standard, can’t be brought under the Lanham Act because the enforcement of those rules has been delegated to an entity other than the court.

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