Thursday, November 04, 2010

Positive tension

Dayco Products, LLC v. Dorman Products, Inc., 2010 WL 3855221 (E.D. Mich.)

Dayco sued Dorman for trade dress infringement and false advertising under the Lanham Act and Michigan law. Dayco sells automatic belt tensioners in the original equipment manufacturer (OEM) and automotive parts aftermarket. It alleged that its tensioners have distinctive, nonfunctional features, including their overall configuration as well as an arbitrary and nonfunctional six-petal rosette design and a design consisting of three rays on many of its tensioners, and that the tensioners have secondary meaning.

Dorman allegedly copied Dayco’s tensioners, including the rosette and triple ray designs on some products. “The overall configuration of each Dorman tensioner is identical to the corresponding Dayco tensioner down to minute, arbitrary and nonfunctional details giving the clear impression that it is manufactured by the same company, thus creating confusion respecting the origin of the tensioners.” Dayco’s complaint included photos of the Dayco and Dorman tensioners, as well as of other third-party tensioners, demonstrating the similarity in appearance and (allegedly) nonfunctionality, though of course the presence of other designs on the market is not necessarily evidence of nonfunctionality.

Dorman argued that Dayco failed to plead the protected trade dress with sufficient specificity. First, it argued that the rosette and triple ray designs don’t appear on every belt tensioner, resulting in the lack of a consistent overall look across the product line. However, Dayco wasn’t alleging a trade dress in its line, but rather 20 individual trade dresses specific to each belt tensioner in the line. A single producer can seek protection of dissimilar forms as long as each form is protectable.

Dorman then argued that Dayco failed to specifically identify the discrete elements of the individual trade dresses embodied in its automatic belt tensioners, alleging merely "distinctive, aesthetic, non-functional design elements, including, inter alia, the overall configuration and appearance of the products.” The court was not worried. First, the photos of the parties’ products and a corresponding noninfringing third party tensioner “provide the requisite factual allegations in pictorial form.” Including photos of the relevant trade dress in the complaint satisfies the general pleading requirements that the elements of trade dress be specifically identified and articulated—at least during the early stages of litigation, before discovery has commenced. If the case proceeds further, Dayco will have to list the elements of the design and the unique combinations it claims, but it did enough to state a claim and put the defendant on notice of that claim.

Dayco also alleged false advertising. First, Dorman used the phrase "OE Solutions" in marketing materials, allegedly falsely representing Dorman to be an original equipment (OE) manufacturer. Dorman argued that the phrase was comparative: Dorman provides a less expensive alternative, or “solution,” to using OE products. The court found this argument more suitable for summary judgment. Dayco sufficiently alleged that the statement was misleading by alleging that the term OE is used in the automotive industry generally to refer to original equipment; that Dorman does not sell original equipment; and that a trademark examiner found “OE Solutions” descriptive, stating "the wording immediately informs the potential purchaser of applicant's goods that the goods are 'original equipment' products. No imagination, thought, or perception is required to determine the nature of applicant's goods." “OE Solutions” was plausibly misleading, though not literally false because it did not assert a fact, by contrast to the phrase “OE Products.” Though Dayco didn’t expressly allege materiality, the court was willing to infer that it was: “Believing Dorman's products to be original equipment--a desirable product--would clearly influence one's purchasing decisions, especially because they cost less than OE products.”

Dayco also alleged false advertising of equivalence to OE tensioners through promises of “OE Quality,” “OE Performance,” "as good as OE," and "Dorman offers a premium product." Dorman also uses the term "OE# " in its advertisements. The court found that Dayco failed to state a plausible claim that OE# was false or misleading, since it had the “unambiguous purpose of providing customers with the proper information regarding which Dorman tensioner may replace an original equipment tensioner” and the parts listing clearly distinguished Dorman tensioners from OE tensioners. “It is implausible to believe that customers would be led to believe that Dorman provides original equipment simply by Dorman's use of the phrase "OE# " in a comparative manner in its advertisement.”

However, Dayco stated a claim with respect to three of the other phrases. Dorman argued that they were nonfalsifiable statements of opinion, which the “premium” statement was, but the others could be judged true or false in a way that admits of empirical verification. The statements suggested that the Dorman tensioners meet the specifications for OE tensioners. Dayco sufficiently alleged that Dorman tensioners don’t in fact meet those specifications. Allegedly, OE specifications are significantly more demanding than SAE specifications, and Dorman tensioners both failed to meet the former and occasionally even failed to meet the latter. In addition, Dorman’s ads answered "Yes" to the question "Are these as good as OE?" In combination with Dorman’s claim to meet SAE specifications, this could lead the consumer to equate SAE and OE specifications, and thus to believe that Dorman tensioners met the OE specifications. This was all falsifiable.

Dayco then alleged that Dorman falsely advertised that Dorman is a manufacturer of belt tensioners while Dayco isn’t, through this Q&A:

Q: [Can I] wait for my current supplier to lower their price?
A: The current suppliers all buy from the same OE sources. None of them are dominant because none of them can be significantly more price competitive.

“The Court cannot conceive of any way in which this colloquy could imply that Dorman is a manufacturer while Dayco is not.” It doesn’t mention Dayco by name; Dayco is a manufacturer, and the colloquy is about suppliers.

Dayco also alleged that Dorman overstates its market position by claiming 80% of traditional aftermarket sales for its 28 tensioners, while that line only covers 70% of the relevant market. The complaint failed to plead actual or likely deception and materiality, and it’s not reasonable to infer that a 10% difference in market coverage would influence purchasing decisions. The complaint also alleged that Dorman falsely claimed that Dayco makes only 120 different tensioner models, when the number is really 165. But since Dorman makes only 28, so Dayco makes at least four times as many models than Dorman no matter what the number is. The statement might be false, but there was insufficient pleading of materiality: “it is not plausible that a purchaser would make the decision to purchase a Dorman tensioner over a Dayco tensioner simply because Dayco only makes 120 models rather than 165.”

Dayco next alleged that, because the tensioners appear externally identical, the mere presence of Dorman tensioners causes purchasers to believe that they have identical internal mechanisms.

This sounds like a case for Dastar: this is the pure evasion of a secondary meaning requirement that the Dastar Court cautioned against in discussing why, if Fox’s reverse passing off theory were correct, the decisions in Wal-Mart and other cases would have to have been different. But: Dorman first argued that Dayco failed to allege “commercial advertising or promotion.” The court found no legal basis for concluding that the sale of products themselves can’t be commercial advertising or promotion.

Dorman then argued that it had made no false statements about use of Dayco technology or association with Dayco. The court found it plausible that, “because of the outward appearance of Dorman tensioners, purchasers could believe that Dorman tensioners utilize Dayco technology, even where Dorman tensioners bear a Dorman trademark.”

Without discussing Dastar, however, the court did address the heart of the matter. Dorman argued that Dayco would have to show a valid trade dress to win this argument; because the trade dress claims survived, that was okay. Dayco sufficiently alleged that people reading the Gates Bulletin (which apparently analyzed the Dorman tensioners and found them lacking) would believe that Dayco tensioners “suffer from the same technology shortfalls as do Dorman tensioners,” sufficiently implying deception among a substantial portion of the intended audience. If the trade dress claims ultimately fail, then this claim should as well, though the court didn’t say this outright. But especially if the trade dress lacks secondary meaning, or even if the target consumers do use the house marks to distinguish manufacturers, then I think Dastar has to control and bar a false advertising claim.

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