Allegations of patent infringement aren't disparaging (or advertising)

Conditioned Ocular Enhancement, Inc. v. Bonaventura, 2006 WL 2982140 (N.D. Ill.)

Plaintiff sued defendants for infringing a patent on a method of vision training. Defendant Davidson counterclaimed, alleging Lanham Act violations based on cease and desist letters plaintiff’s law firm sent to current and prospective customers. The court relied on the cases holding that false advertising Lanham Act claims, as well as coordinate Illinois state law claims, are governed by Rule 9(b)’s heightened pleading requirement. In the 7^th Circuit, however, cease and desist letters sent to customers are not “commercial advertising or promotion,” ISI Int'l, Inc. v. Borden Ladner Gervais LLP, 316 F.3d 731, 733 (7th Cir.2003), and thus there’s no Lanham Act claim regardless of pleading details.

State-law disparagement claims remained. The court reasoned that Illinois’s Uniform Deceptive Trade Practices Act codified the common-law tort of commercial disparagement. The letters said that Davidson was an unlicensed and unauthorized user of the patented system, and that a patent infringement suit is pending. But, the court ruled that this did not disparage the quality of Davidson’s business. Thus, again regardless of pleading, there’s no state-law claim.

Comment: this is an extremely, I think unsupportably, narrow view of what counts as “disparaging.” Given the concerns of the patent system, it might be a good idea to have higher fault requirements in such cases than in ordinary false advertising cases, but the potential harm such letters pose to a business cannot be denied.

Davidson also counterclaimed under the Illinois Consumer Fraud and Deceptive Business Practices Act, which requires (1) a deceptive act or practice and (2) an intent that the recipient rely on the deception (3) in the course of trade or commerce. Competitors may use this consumer protection law to redress competitive injury when they allege that the conduct involves trade practices directed to the market generally or otherwise implicates consumer protection concerns. Here, Davidson failed to plead the required consumer protection nexus. Sending out only seven letters, and only to Davidson’s customers, failed to implicate the required consumer protection concerns.

Davidson’s counterclaim for tortious interference with prospective economic advantage, however, survived the motion to dismiss.