No injury without materiality of patent-related claims

Appliance Recycling Centers of America, Inc. v. JACO Environmental, Inc., 2010 WL 1767313 (9th Cir.)

The district court granted summary judgment on plaintiffs’ state and federal false advertising claims. The lead plaintiff’s name describes the market in which the parties compete. JACO’s statement that its method for recycling appliances was a “unique” system with “unprecedented” results was puffery: a general, subjective claim. Likewise, certain product-specific statements, in context, weren’t false, including a claim that, before JACO showed up, “no other company” could handle contaminated foam. In context, where plaintiffs’ existence had explicitly been acknowledged, that might have meant “before JACO, no other company could compete with plaintiffs,” especially since the statement was made to the California Public Utility Commission, which was obviously aware that plaintiffs had been recycling appliances for utilities in southern California for the preceding nine years. Thus, no reasonable jury could find that the statement actually deceived the Commission into believing that JACO was the only company that could process contaminated foam.

Of more general interest, plaintiffs brought claims predicated on JACO’s allegedly false statements about patent rights: express references to a patent, claims to have designed or pioneered the method, claims that the system was “JACO’s,” and allegations of patent infringement. To manage the patent/false advertising intersection, such claims—unlike Lanham Act claims generally—require a showing of bad faith to succeed. The court of appeals upheld the district court’s determination that there was no material issue on bad faith. More importantly, plaintiffs also failed to raise a genuine issue on materiality and injury.

“No reasonable jury could find statements referring to the patent, claiming to have designed or pioneered the system, or claiming that the system was ‘JACO’s’ to be either material or likely to cause future injury.” Three utility officials testified that the “patent pending” status of JACO’s method wasn’t relevant to their decision, and there was no evidence that it was material to anyone. Because the patent status wasn’t material, “a fortiori, a mere claim to have designed or pioneered the method or that the method was ‘JACO’s’ could not have been material.” (For the record, I think this is too brief, though I have no quibble with the result. It does not follow as the night the day that the status of a company as an innovator is irrelevant just because customers don’t care about patents. It’s the “a fortiori” that bugs me.)

Anyway, there was no evidence that the patent-related statements caused actual injury, and because of lack of materiality, “no reasonable jury could find that they or any similar statements were likely to cause future injury.”

Now this is an important point! If only courts paid attention to it in trademark law!

Finally, though there was a genuine issue of material fact as to the materiality of the infringement allegations, JACO signed a covenant not to enforce its patent against the plaintiffs, so it was unlikely to make similar statements in the future.