Rosenthal Collins Group, LLC v. Trading Technologies International, Inc., 2005 WL 3557947 (N.D.Ill.): RCG, the plaintiff, sought a declaratory judgment of patent invalidity, non-infringement and patent misuse relating to two patents on computer software used for electronic trading in the futures market. In addition, RCG alleged antitrust, Lanham Act false advertising, and state-law unfair competition claims. The false advertising/unfair competition claims were based on a subset of the conduct alleged to violate the antitrust laws: In a press release, TT (the defendant) claimed, “By making a premier order-entry system commercially available [at a specified price], TT has truly leveled the playing field among market participants through our innovative technology.”
RCG alleged that, to the contrary, TT had introduced the technology to slant the playing field in its favor, by trying to get a monopoly on electronic trading.
The court granted TT’s motion to dismiss the false advertising claims, holding that TT’s claims could not be construed as assertions of fact. The specific thing RCG alleged was false was TT’s intent or rationale in introducing its new product. A statement of intent, said the court, is a non-actionable subjective statement, neither specific nor measurable; moreover, it was directed at a sophisticated audience and part of a larger attempt to persuade traders to go along with the proposal. (My comment: the sophisticated audience point seems hard to rely on for purposes of granting a motion to dismiss, since there’s no indication this was alleged in the complaint.) TT also argued that, if the allegation of falsity was taken to refer not to intent but to the ability of its system to “level the playing field,” that was mere puffery, and the court agreed. Moreover, the court held that no reasonable consumer (a member of the “specific sophisticated trade audience”) would rely on such a statement; indeed, the four major futures exchanges targeted by the press release did reject the proposal, showing they weren’t duped.
The court engages in a brief discussion of the state law claims, in this case based on the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), the Illinois Uniform Deceptive Trade Practices Act (UDTPA), and common law unfair competition. As usual, “[n]either party devotes much time or effort to arguments regarding these claims, and each relies primarily on its arguments regarding the Lanham Act claims.” The court notes that Illinois courts have required ICFA claimants to plead the circumstances constituting fraud with particularity under Rule 9(b), but apparently TT didn’t notice that.
Ultimately, the state claims fail for what the court says is the same reason as the Lanham Act claims. This is so despite a brief ray of hope under the UDTPA, which prohibits (among other things) making false or misleading statements of fact “concerning the reasons for, existence of, or amounts of price reductions.” RCG didn’t show that TT’s statement of reasons for its price proposal was material to any decision RCG made or that RCG relied on the statement; materiality and reliance are necessary elements of an UDTPA claim. Comment: the UDTPA clearly contemplates that some statements about why a price is set at a certain level can be factual. “Going out of business sale,” for example, is the kind of claim at which the relevant provision of the law is clearly aimed. There is thus some tension between the court’s analysis of the Lanham Act claims and its resolution of the state claims, which the court finesses by adding in materiality and reliance. Some statements about intent may be actionable, like opinions in general, if they imply the existence of facts (“going out of business”) that affect a reasonable consumer’s assessment of the extent to which the price is a bargain.
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