Monday, April 04, 2011

Rule 9(b) dooms Lanham Act counterclaim

Control Solutions, LLC v. Oshkosh Corp., 2011 WL 1131329 (N.D. Ill.)

Control Solutions makes, among other things, a power door system for armored vehicles. Oshkosh makes armored vehicles under the registered Oshkosh mark. In 2008, the Army solicited bids for a new armored vehicle. Control Solutions built a prototype power door system on some of Oshkosh’s prototypes, which Oshkosh used to bid on the contract. The Army awarded Oshkosh the contract for the vehicle and the separate contract for the power doors. Oshkosh didn’t use Control Solutions’ power door systems when it began making the new vehicles, and Control Solutions sued for breach of contract. Oshkosh counterclaimed for various torts, including trademark infringement and false advertising.

The court accepted Control Solutions’ argument that claims for false advertising, unfair competition, and false designation of origin must be pled with particularity under Rule 9(b) because they sound in fraud. The counterclaims failed that standard because they only alleged that "on information and belief, on at least one occasion Control Solutions made an advertising presentation to the United States military wherein Control Solutions claimed that its power door system was being used on the Oshkosh M-ATV vehicles." Oshkosh further alleged that someone from the military called Oshkosh about the presentation, and Oshkosh had to clarify that Control Systems’ power doors weren’t being used. Oshkosh failed to state a basis for its suspicions that these things occurred, and failed to plead the who, what, where, and when with particularity. Anyway, a single instance of confusion was insufficient to support a violation of the Lanham Act.

The trademark infringement claims, false designation of origin, and false advertising claims were also dismissed for failing to allege use in commerce. Perhaps not realizing the significance of this move, the court looked to the Lanham Act’s definition of “use in commerce” as “the bona fide use of a mark in the ordinary course of trade,” for goods when placed on the goods/displays associated with them and the goods are sold or transported in commerce. The counterclaim didn’t plead use “in commerce.” Rather, on one occasion Control Solutions stated that its power door systems were used on Oshkosh’s vehicles, which, the court stopped to point out, was literally true. But there were no allegations that Control Solutions sold or transported any goods with the Oshkosh mark. (Though this question has been most litigated with keyword ads, note the implications for initial interest confusion for goods as well.)

The court also dismissed Oshkosh’s state and federal dilution claims with prejudice for failure to allege fame. Because Oshkosh supplies vehicles to the military and is not advertising to the general public, there was “no evidence” that Oshkosh had meaning relating to armored vehicles to the general consuming public, and the counterclaims were dismissed with prejudice. (“No evidence” on a motion to dismiss seems, at a minimum, the wrong way to put it. Maybe we all know that amendment would be futile, and maybe that’s proper under Iqbal. But I think the public is aware of the Stealth bomber, even though none of us can buy one.)

The false advertising claim was further deficient for failing to plead the elements with particularity. Specifically, Oshkosh failed to allege “commercial advertising or promotion.” A single instance of an in-person sales pitch isn’t commercial advertising.


Mark said...

Wow - I can't say I recall ever seeing a Lanham Act claim subjected to Rule 9(b)

RT said...

Mark, the opinion is vague at best about whether standard 43(a)(1)(A) trademark claims would need to be pled with particularity--which of course highlights the inconsistency of applying Rule 9(b) to false advertising claims, which no more sound in fraud than TM claims do. I've seen a number of pure false advertising cases apply 9(b), or say that they don't need to decide whether 9(b) applies because the complaint satisfies the heightened pleading standard anyway.