Semi-falsity: California law rejects Lanham Act implicit/explicit divide

Silicon Image, Inc. v. Analogix Semiconductor, Inc., 2008 WL 4974325 (N.D. Cal.)

Silicon sued Analogix for copyright infringement, trade secret misappropriation, and unfair competition/false advertising. The false advertising was that Analogix allegedly promoted its microchip as “drop-in replaceable” with Silicon Image’s chip, misleading customers to think that they could use Silicon Image’s configuration software with Analogix chips even though Silicon Image’s software license agreement prohibits such use.

Silicon Image conceded that Analogix’s source code was not substantially similar to its own. The copyright infringement claim was thus based on a single email between Analogix employees containing Silicon Image source code. Analogix argued that this could not support an award of injunctive relief or damages. (Statutory damages were unavailable for want of timely registration.) The court held that, under the circumstances—where Silicon Image had alleged that Analogix went to great lengths to misappropriate confidential Silicon Image information—a past infringement could support an injunction against future infringements of different copyrights. (It remains to be seen whether there was actually an infringement under US law—the email was sent between two employees in China, though the email was stored on a server in the US; under the “volition” test for direct infringement, server storage may be insufficient. Without any actionable infringement at all, presumably there's no basis for injunctive relief even if the court determines that Analogix is a bad actor.)

Analogix argued that there was no extrinsic evidence that consumers had been deceived by its allegedly false advertising. Silicon Image had evidence that Analogix chips weren’t software-compatible even though they were pin-compatible and register-compatible, and that this divergence prevented them from being truly “drop-in replaceable.” Silicon Image’s claim was brought under California state law, which doesn’t make the explicit/implicit distinction found in Lanham Act jurisprudence. Thus, all Silicon Image needed to establish was that the ad claims were likely to deceive a reasonable consumer, and it need not provide survey or other evidence of actual deception. The meaning of “drop-in replaceable” to a reasonable target consumer was a trial issue.