good fences make good lawsuits?

Futuristic Fences, Inc. v. Illusion Fence Corp., 2008 WL 1908471 (S.D. Fla.)

The plaintiffs compete in the market for ornamental fence panels. A former ornamental fence panel maker, Jova, sold Illusion panels of a certain design. Jova sold Futuristic its manufacturing equipment, allowing Futuristic to make the Jova design. Illusion owns a design patent. Illusion fence panels are only sold in Florida, while Futuristic panels are sold in Florida and, through distributors, nationally and internationally.

Illusion sent four C&D notices to Futuristic distributors alleging infringement of the design patent. Futuristic responded by suing. The court granted summary judgment on noninfringement. The remaining claims were unfair competition and false advertising.

Illusion argued that it hadn’t taken any action affecting interstate commerce. The court handily rejected that claim. Nonetheless, the Lanham Act claims failed. They were based on Futuristic’s argument that Illusion’s C&D letters contained knowingly false misrepresentations of patent infringement. The court applied the ever-popular Gordon & Breach test to see whether Illusion’s letters were advertising or promotion covered by the Lanham Act.

The court was guided by Avery Dennison Corp. v. ACCO Brands, Inc., Case No. 99-1877, 2000 WL 986995 (C.D.Ca. Feb.22, 2000), which involved a false advertising counterclaim to a trademark infringement suit. In that case, the court found that the plaintiff’s C&D letter was not commercial advertising or promotion. In particular, “(1) the central message of the letters was the plaintiffs belief that its legal rights were being violated and that it did not want the recipients to continue that violation; and, (2) the purpose of the letter was not to influence the recipients to only buy the company’s goods; rather, the letter sought to inform customers of the alleged infringement and to stop the recipients from promoting or publishing the other company’s goods.”

Futuristic argued that this case was different because Illusion sent its C&Ds before filing suit and threatened to sue the recipients. The court found that these distinctions didn’t matter. The letters were not marketing and sales tools, but an attempt to protect perceived legal rights. Though Illusion was wrong, it wasn’t trying to sell Illusion products. The court found this reasoning particularly applicable because Illusion held an issued patent. The court analogized to the rule that C&D letters don’t confer personal jurisdiction over the sender; they serve an important social purpose in resolving disputes without litigation, and principles of fair play allow a patentee to inform others of its patent rights without subjecting itself to a foreign jurisdiction. Moreover, a warning is required to alleged infringers in order to receive a damage award.

Thus, the court concluded, a patentee has an apparently absolute “right to send cease and desist letters for the purpose of discontinuing allegedly infringing activity without subjecting the patentee to liability under the Lanham Act,” though the court said that its holding was not that a C&D could never be commercial speech. The court noted that there was no evidence that Illusion “asked its attorneys to send the letter for the purpose of discouraging the recipients from buying [Futuristic] fence panels or to encourage the recipients to purchase the fence panels only from [Illusion].” (One must wonder, however, what other purpose the letter would serve than to “discourag[e]” the recipients from buying Futuristic fence panels.)