Lying in the gutter (but looking at the law)

Bassett Seamless Guttering, Inc. v. GutterGuard, LLC, 2007 WL 2079714 (M.D.N.C.)

The parties sell gutter replacement systems in North Carolina. Each is licensed to sell patented components made by K-Guard. Plaintiff Bassett allegedly had an exclusive market area agreement with K-Guard; it claimed that defendants induced K-Guard to breach this agreement and entered Bassett’s exclusive area. Plaintiff’s claims included tortious interference with prospective contracts with end consumers and false advertising.

Usually, tortious interference with prospective economic advantage requires plaintiffs to identify specific lost business. Here, however, the claim is that any sales defendant made within plaintiff’s exclusive trading area would have gone to plaintiff in the absence of defendant’s tortious conduct, because the components at issue are patented and so plaintiff should have been the only available source within that area. Given the existence of the exclusive territory, there’s nothing speculative about the harm to plaintiff. The court allowed the claim to proceed on that theory.

The state and Lanham Act false advertising claims were based on defendants’ claim that its products were its own patented design – “our patented system, “only one is the patented two-channel system from GutterGuard,” etc. (Given that K-Guard is apparently the manufacturer, Dastar isn’t necessarily a fatal barrier to § 43(a)(1)(A) claims – you could construe this as classic reverse passing off, though if the complaint is couched as one about “design” then Dastar is at least implicated.) Analyzed as a false advertising claim, defendants’ statement was at least potentially explicitly false, since they didn’t own a patent. Defendants argued that their ads were misleading at most, because certain components of the system are patented, but the court found this to be a dispute on an issue of material fact and denied summary judgment. (Also, the key here is not system v. components, but whether consumers could get the patented benefit elsewhere – if the patent claim is deceptive, it’s deceptive because of the promise of exclusive benefit, not because of a distinction between parts and whole.) The court suggested that there was “reason to believe” that some of defendants’ customers would have bought from plaintiff if they’d known the systems were the same, since plaintiff offered a lower price.