Wednesday, April 04, 2007

Nothing sues like an Electrolux

Imig, Inc. v. Electrolux Home Care Products, Ltd., 2007 WL 900310 (E.D.N.Y.)

If you sue a competitor for false advertising for telling people that your products infringe its IP rights, you can expect some IP counterclaims. And that’s what happened here.

Imig copied two Electrolux models, the Sanitaire models 866 and 899, as the Perfect P101 and P102, having them produced in China. Of relevance here, Electrolux makes vacuum cleaners similar to the 866 and 899 as “private label” machines sold by other parties under their own brand names. After Electrolux allegedly said nasty things to distributors, Imig sued, and Electrolux counterclaimed for trade dress infringement, false comparative advertising, and copyright infringement based on copying of Electrolux’s Owner’s Guide.

Copyright infringement was easy: Imig’s Chinese manufacturer copied the owner’s guide wholesale. Imig denied that it knew of or was involved in the creation of the infringing owner’s guide, but the court found that irrelevant because Imig met the standards for vicarious infringement. From the way the court describes the situation, it seems that the reproduction occurred overseas, raising a Subafilms-type issue of whether one can be vicariously liable under US law for authorizing conduct that doesn’t violate §106. But what about the distribution right? Wouldn’t Imig be directly liable for distributing the guides in the US regardless of its role in violating the reproduction right? Maybe the details of how the vacuums and their manuals got to the US made Imig a vicarious infringer of the distribution right, too.

Imig also made various unsubstantiated comparative and absolute statements about the motor life and strength of Perfect vacuums in its ads. Electrolux conducted independent testing disproving those statements (also, Imig’s “tests prove” claims were wrong, since the tests it conducted didn’t prove the claims) and thus prevailed on its false advertising counterclaims under federal law. The court denied summary judgment on the New York false advertising counterclaims because Electrolux hadn’t shown evidence of injury as required. Imig did not attempt to defend the truth of its statements, arguing instead that it had ceased to disseminate them. Legally, this was a slam dunk, but it shouldn’t be discounted that Electrolux had to conduct extensive and possibly expensive testing to prove its case.

As for Electrolux’s allegedly false statements, Imig charged that Electrolux had told people throughout the industry that the Perfects “infringed on the Sanitaires and that anyone who purchased the Perfects would be sued along with Imig.” Electrolux used affidavits and depositions from every individual identified by Imig denying that they heard such statements from Electrolux. One person claimed that he’d heard those statements from his customers and other sources, but didn’t identify Electrolux as the source. The court thus granted Electrolux summary judgment on the false advertising and related claims. (It’s worth noting that Imig could be right that any claim of infringement would be false, given the court’s ruling on the trade dress issue. But there would still remain an issue of whether bad faith was required and present.)

Trade dress infringement dominated the case, which provides a nice illustration of the three principles I tell my students are key in §43(a) trade dress cases: (1) the plaintiff’s ability to select and define elements of its claimed trade dress based on what it is that the defendant copied; (2) the key role of functionality and the tensions between refusing to protect functional features and protecting overall nonfunctional dress; and (3) the role of word/house marks in fending off confusion. Because of the factual uncertainty surrounding issues of protectability and confusion, the court denied summary judgment to both parties.

Electrolux claimed protection for six elements of its design, including the shape and color of the base, the on/off switch, and the height adjuster, as well as the font, writing, and position of the writing on the bag. Imig conceded that the overall combination of elements wasn’t essential to the use or purpose of the vacuums. The court thus asked whether the particular combination of features had a measurable effect on the cost or quality of the vacuums, and found conflicting evidence. Electrolux primarily argued that alternative designs were feasible, meaning that there’d be no competitive detriment to protecting its trade dress. The court disagreed that this was the sole test after Traffix.

Essentially, the court conflated protectability with protection: “[T]he fact that a competitor could manufacture a comparable product with a different design has minimal bearing on the question of whether the product design for which protection is sought is inextricable, in the mind of the consumer, with identification of the product's source.” The court correctly pointed out that protection for nondistinctive designs, like protection for functional designs, would grant monopoly rights in the underlying product – but I can’t see how that makes a nondistinctive design unprotectable as a result of functionality doctrine.

Despite this confusion, the court proceeded to analyze whether Electrolux had demonstrated secondary meaning. The flexibility §43(a) grants in defining trade dress is offset by barriers in proving that the selected features are responsible for any consumer perception about source. Here, Electrolux submitted a survey in support of its claims; 118 of 157 respondents identified one or more of the six relevant features as signifying that the tested vacuum was a Sanitaire. But none identified all six, let alone the combination. Indeed, two-thirds cited the red color as their reason for identifying the Sanitaire. The court gave no probative weight to the survey because it didn’t demonstrate “the symbolic function of the product design, overall, with respect to the source of the product.” Because Electrolux submitted no other evidence on distinctiveness, factual issues remained. (Is this right? Shouldn’t Imig have been able to get summary judgment in the absence of other evidence of distinctiveness?)

Assuming Electrolux could show nonfunctionality and distinctiveness, there were issues over likely confusion. On the strength of the mark, Electrolux’s private label line of vacuums virtually identical to the Sanitaires was important. “The more that the market is populated with vacuum cleaners designed like the Sanitaires, the less likely consumers will be to associate the Sanitaires' trade dress with a single source. The strength of the Sanitaires' trade dress is diluted accordingly.” (Could Electrolux flip the relevance of this point? If consumers think that Electrolux makes private label brands, isn’t it possible that they’d think that the Perfects were private-label productions despite the differing word marks? Or is that a competitive strategy we don't want to support with the protections of trademark law?)

On to the other confusion factors: There were clear similarities between the Perfects and the Sanitaires, but the court refused to find the overall impression of the two confusingly similar as a matter of law. The two key points were the different colors (red v. dark blue or black) and the different brand names on the fronts of the bases. This was insufficient to justify summary judgment for Imig – consumers might expect that the same source would make a product in multiple colors, and the label “Perfect” might not be sufficient to distinguish the Perfects from the better-known Sanitaires – but it was enough to require a factfinder’s resolution.

Given that the vacuums were designed and marketed for commercial use, the market could have more discerning consumers than average. Actual confusion evidence – which Electrolux didn’t have – would be highly probative.

On good faith, there was no dispute that Imig deliberately copied some Sanitaire features; Imig’s patent counsel commissioned a patent search to see if it was free to copy the appearance, and perhaps also the mechanics, of the Sanitaires. Yet there was also no evidence of intent to deceive consumers. Given Imig’s comparative advertising, arguably there was a clear intent to distinguish the products.

Quality, that strange leftover factor that never favors a defendant, was also in issue because Imig’s vacuums suffered significant quality problems; several customers returned all purchased vacuums, and Imig accepted 40% of the Perfects as returns. But, as the court pointed out, there was no indication of any source confusion – people complained directly to Imig, and made their returns to Imig.

As to consumer sophistication, the court declined to speculate in the absence of any evidence about the relevant market or the consumers therein.

My feeling is that Electrolux got a pass on its trade dress claims because of Imig’s false advertising, copyright infringement, and general chutzpah in suing Electrolux. If this had just been a trade dress case, Imig should have prevailed on summary judgment.

1 comment:

Nathaniel said...

Now I support both these companies. I have a Perfect P101 and I love it. It lost in a test of mine to a 1968 Hoover (on Youtube right now, by newhohokam, "Today's Best Vs. Yesterday's Best") but Electrolux is getting a bit too mad. Sueing Perfect owners!? That's crazy!!

P.S I found this on