No state law standing for manufacturer against retailer

Aviva Sports, Inc. v. Fingerhut Direct Marketing, Inc., 2011 WL 4457956 (D.Minn.)

Aviva makes inflatable waterslides and pools, in competititon with Manley. The parties’ products are available through retailers including Fingerhut, Menard, and Kmart. Aviva argued that Manley’s ads violate the Lanham Act and Minnesota UDTPA by superimposing scaled-down images of children onto images of its products to make the products appear larger than they actually are. Interesting reviews here on that point. The court previously dismissed Wal-Mart as a defendant and denied a preliminary injunction.

Though a few of Aviva’s sales are through its website, almost all are retail. The defendants here are retailers who sell both parties’ products in stores and on their websites. Thus, Aviva lacked standing under the Lanham Act.

Under the UDTPA, "[a] person engages in a deceptive trade practice when, in the course of business, vocation, or occupation, the person ... (5) represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have ...; or (13) engages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding." The law specifies that a plaintiff need not prove competition or actual confusion (this comes out of the UDTPA’s history as a trademark-plus statute).

Still, Aviva lost because it failed to show likely injury from defendants’ conduct. It alleged lost opportunity for sales. This was a competitive injury. Though Aviva argued that it didn’t need to be a competitor, the cases it cited did not involve allegations of competitive injury. (They involved allegations of false advertising causing injury to consumers, which current Lanham Act jurisprudence doesn’t cover.) “Where plaintiffs have not alleged competitive injuries, direct competition is not a requirement for standing.” But where competitive injury is asserted, requiring competition is a better fit with the plain language of the law. “Standing under the statute requires likelihood of damage--which may or may not require competition between the parties, depending on the type of damage alleged.” (This is probably the right result, but saying it’s based on plain language seems pretty weird. The statute requires damage and does not require competition; Aviva argued that defendants were a necessary part of the causal chain of lost sales, which sure seems like damage.)

The court found support in its review of the original UDTPA, drafted by the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association. The drafters commented that the no-competition provision was designed to "remove[ ] the enumerated factors as absolute bars to relief." They cited what we’d now call a trademark case involving false association between two businesses that didn’t directly compete. Thus, in certain contexts, especially in passing off/false association/trademark cases, competition need not be proved. But that doesn’t mean that a competitive injury won’t require competition. (So what exactly is damage to reputation or goodwill? If it’s not competitive injury, what is it?)

In addition, Minnesota courts have noted that the UDTPA generally mirrors the Federal Lanham Act and that claims under both statutes are analyzed in essentially the same way. The standing provisions are therefore similar: "any person who believes that he or she is or is likely to be damaged" may bring a civil action, 15 U.S.C. § 1125(a)(1), and "[a] person likely to be damaged by a deceptive trade practice of another" may do the same under state law, Minn.Stat. § 325D.45, subdiv. 1. “This parallel language strongly suggests that the requirements for standing under the UDTPA are the same as those under the Lanham Act.” Indeed, the original drafters commented that "[s]imilar phraseology determines standing to sue under Section 43(a) of the Lanham Trademark Act."

But doesn’t the UDTPA explicitly disavow a competition requirement? And don’t some circuits hold that competition is a Lanham Act requirement? The court reasoned that (1) this categorical test is not applicable under the UDTPA, but the multifactor/reasonable interest Lanham Act standing tests would be, and (2) there might or might not be a conflict on standing for consumers (you think?); fortunately, this case didn’t involve a consumer plaintiff.

Summary judgment for these defendants.