Wednesday, March 08, 2006

I'm your only plumber but I'm not actually your plumber

Just Water Heaters Inc. v. Affordable Water Heaters and Plumbing, Inc., 2006 WL 449136 (N.D.Cal.)

Plaintiffs sued defendants for, among other things, copyright infringement, false advertising, and fraud. According to the complaint, plaintiffs "have applied for copyright registration with the U.S. Copyright Office covering the protectible content of stickers containing emergency water heater shutdown procedures." Hmm … any guesses about defendants' possible reasons to dismiss the copyright claims? Anyway, defendants are copying, modifying and selling these emergency stickers. Moreover, defendants have been including statements with their materials designed to mislead consumers into thinking they've previously done business with defendants. In particular, Affordable sent stickers with new telephone numbers to customers with instructions to place stickers over Affordable’s old stickers – except, of course, they weren’t Affordable’s old stickers, they were plaintiffs’. Customers were thus deprived of contact information for plaintiffs and simultaneously induced to think they’d been dealing with Affordable all along. (This is a false advertising claim that is a trademark claim in all but name.)

There's no jurisdiction over a copyright claim until the copyright has been registered. There's a split over when jurisdiction attaches: when a certificate issues, or when the registration is pending. Surprisingly, the Court of Appeals for the Hollywood Circuit has yet to weigh in (or maybe it's not so surprising – mature industry players tend to get their registrations in as a matter of course), and the district courts are not in agreement (no reason to be ashamed -- panels on the Ninth Circuit are not always in agreement). This district court picked the side with which I agree – that the issuance of a certificate is a prerequisite to bringing an action.

Plaintiffs’ unjust enrichment claims would ordinarily be preempted by the Copyright Act, but the false advertising claims offered an alternative basis to sustain the claim. Plaintiffs also claimed that defendants’ false statements violated the California Business and Professions Code’s prohibition on fraudulent deceit, but they failed to plead that consumers suffered an injury in fact and lost money or property because of the deceit, as required by the law, so the court dismissed that claim. Likewise with plaintiffs’ fraud claim – they failed to plead how they relied on any of defendants’ representations to their detriment.

The Lanham Act claim, however, survived. Though the court found that plaintiffs had only minimally alleged the elements of false advertising based on defendants’ instructions to place their sticker “over our old sticker,” they had done enough – even though the statement may not be literally false, it is “plausible” that it could mislead or confuse consumers. Comment: I’m not sure what’s minimal about this. If the facts are as plaintiffs allege, this seems to be a calculated scheme to capture plaintiffs’ goodwill through the false implication – I would say necessary implication, since “our old sticker” can have no other meaning in this context – that defendants are the people with whom customers have already been doing business.

In any event, plaintiffs requested a preliminary injunction, including the transfer of the phone number on the stickers to them. The court denied the injunction – which seems right, since there’s no mention of any evidence being submitted either way.

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