Monday, January 09, 2006

Patent claims as the basis for false advertising claims -- or not

Chip-Mender, Inc. v. Sherwin-Williams Company, 2006 WL 13058 (N.D.Cal.)

Plaintiff sued defendant for patent infringement involving a touch-up paint pen. Defendant alleged a number of counterclaims, including state-law unfair competition and false advertising claims. The unfair competition claims based on plaintiff’s delay in licensing discussions and filing suit were dismissed because plaintiff’s acts didn’t threaten an incipient violation of antitrust law, didn’t violate the spirit of the antitrust law, and didn’t otherwise significantly harm competition, thus didn’t qualify as “unfair” under California state law.

Defendant also alleged that plaintiff’s attempts to license patents it knew or should have known were invalid and unenforceable constituted false advertising under California law. The statutory provision invoked by defendant, however, requires a false claim made with the intent to sell (or lease, etc.) real or personal property or to perform services, and patents are not real or personal property. Moreover, defendant’s counterclaim failed to allege facts indicating that the public, the group protected by the law, was likely to be deceived.

Defendant pointed to plaintiff’s website, which stated that the Chip-Mender pens were patented. But that’s true, until there’s a finding that the patents are invalid. The court did not address whether this claim was misleading; logically, if the patents are invalid the statement could well be misleading. Thus, this aspect of the court’s reasoning, unlike the rest, seems unsound. Other courts have held that false statements relating to patent matters can state false advertising claims under the Lanham Act. The court did not discuss these cases; perhaps the parties failed to bring them to its attention.

Finally, defendant made a counterclaim under the Ohio Deceptive Trade Practices Act, alleging the same facts as its California law-based claims. Ohio’s DTPA lists a variety of practices that violate the law, and defendant alleged that plaintiff’s statements "[r]epresent[] that goods or services have ... characteristics ... that [they] do[ ] not have ..." Again, the court relied on the fact that the patents have not been invalidated, and again this seems wrong.

My comment: an interesting attempt to use the differences between various state unfair trade practices laws to a claimant’s advantage. From what I can see, Ohio law should have offered defendant a potential for success under a theory of misleadingness – always depending, of course, on the invalidation of the patents in the same suit. Likewise, a Lanham Act claim might have been of assistance to the defendant-counterclaimant, if plaintiff's licensing attempts were sufficiently widespread to constitute "advertising or promotion." If defendant succeeds in invalidating the patents, does plaintiff instantly become a false advertiser? It seems likely, assuming the statement on the website is directed at potential customers and is material.

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