Saturday, December 13, 2008

Freedom of the press: Lanham Act claim against reseller fails

St. Croix Printing Equipment, Inc. v. Sexton, 578 F. Supp. 2d 1195 (D. Minn. 2008)

Plaintiff St. Croix (St. Croix Minnesota) sells used printing presses, including used Shinohara presses, but is not an authorized Shinohara dealer. Defendant Sexton used to be in business with one of St. Croix’s principals. Sexton opened her own business, St. Croix Printing Equipment Imports, Ltd., and “after a bit of litigation, the parties apparently agreed to live and let live.” Sexton’s business (St. Croix Iowa) is an authorized dealer for new printing presses made by the Japanese parent company of defendant Shinohara USA.

St. Croix Minnesota sued for unfair trade practices. Specifically, St. Croix Minnesota claimed that defendants approached its customers and told them false and misleading things about St. Croix Minnesota and its products, causing customers to break their contracts. Shinohara counterclaimed in mirror image: it argued that St. Croix Minnesota was engaging in trademark infringement, false designation of origin, and coordinate state-law claims.

Because Shinohara sought money damages, circuit precedent required proof of actual confusion, intent to cause confusion, and a causal connection between confusion and harm. Shinohara alleged as follows: until November 2007, plaintiff’s website used Shinohara’s logo and trademark; the website contained false representations about plaintiff’s inventory, warehouse space, years in business, and availability of “factory trained technicians” on staff; plaintiff tells customers that it sells Shinohara presses and can get anything they need from Shinohara, including parts for a used press, and pretends to be an official Shinohara representative; plaintiff copied software from English-language Shinohara presses to Japanese-language Shinohara presses; plaintiff tried to sell a damaged press without disclosing that it was likely unusable; and plaintiff’s contract with at least one customer spoke of “delivery, installation and training by Shinohara with print and register warranty” (emphasis added).

The court considered these allegations largely irrelevant to the legal claims. Copying software, for example, isn’t relevant to whether customers are confused about origin. (Sounds like Shinohara should have hit harder on the line of cases about genuine goods: a variance in language might well be sufficient to make grey-market Shinohara presses count as infringing. Of course, if Shinohara sells Japanese-language presses in the US as well, that line of cases would be no help.) Likewise, the court didn’t see how the allegedly false statements on plaintiff’s website violated the Lanham Act, “which prohibits the misuse of trademarks.”

§43(a)(1)(B) allows a civil action against “(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-… (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities ….” It may well be the case that Shinohara can’t make out all the requisite elements; standing, for example, is likely to be a problem in the current climate. But the Lanham Act covers false advertising, and has done so for a very long time. I can’t speak to Minnesota state law, but I’m going to guess that it probably does too.

Anyway, the court only looked at the claims relating to (1) use of the Shinohara logo and trademark; (2) the allegation that plaintiff told potential customers that it had access to “everything Shinohara”; (3) statements to one customer that gave an impression of a direct relationship with Shinohara; and (4) the language in the contract indicating that Shinohara would provide services.

As to the website, plaintiff removed Shinohara’s logo and mark from its site shortly after Shinohara demanded that it do so. Shinohara failed to show any damages, even assuming that this violated the Lanham Act. As to the general claims that plaintiff feigned a direct relationship with Shinohara, the court found the supporting testimony too general: an installer thought that plaintiff’s principal “tries to make it sound like he is a dealer and that there's some type of connection.” This testimony, however, might well have been about confusion between St. Croix Minnesota and St. Croix Iowa, which apparently (and understandably) confused a lot of consumers, but was irrelevant to Shinohara’s claims. This was insufficient to show actual confusion.

One of plaintiff’s potential customers testifed that plaintiff told him that it could get parts directly from Shinohara in Japan, quoted him “the official factory response,” and otherwise “gave a definite impression” of a direct relationship with Shinohara. But the customer also said that he simply assumed that plaintiff was an authorized dealer because plaintiff told him that it would sell him and support the Shinohara press. Even if this created a genuine issue of material fact on confusion and intent to confuse, there was no evidence of injury: the customer ultimately bought a new Shinohara press from St. Croix Iowa.

The final instance is pretty clearly the worst for plaintiff: in May 2006, a printer named Schuster contracted to buy a Shinohara press from plaintiff. The press was cracked (though genuine), and the contract contained a phrase promising services from Shinohara. For purposes of the motion, plaintiff conceded confusion. After Schuster signed the contract, Sexton visited him and told him that the press was cracked and that Shinohara wouldn’t warranty it. (How did she know? There are such layers of drama encoded into this apparently bitter dispute.) Schuster cancelled the purchase agreement and bought a new Shinohara press from St. Croix Iowa. Once again, Shinohara couldn’t show damages.

Practice pointer: it can be really hard to go for damages-only Lanham Act claims. If you aren’t looking for injunctive relief, the client needs to think very hard about whether the game is worth the candle. Of course, the calculus may be different in cases like this one, where the issue is whether to bring a counterclaim. But I still wonder whether this was a good use of litigation resources.

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