HT Eric Goldman, who recalled my earlier post on this
case, which involved a preliminary injunction including corrective advertising.
Northern Star Industries, Inc. v. Douglas Dynamics, LLC,
2012 WL 507827 (E.D.Wis.)
The grant of an injunction is conditioned on posting
security. Damages caused by an erroneous
preliminary injunction can’t exceed the amount of the bond, courts err on the
high side, though they must give reasons for the figures chosen.
Defendant requested a $6.2 million bond, based on its
engineering director’s estimate of costs for corrective advertising and
replacement advertising at just under $120,000 each, and over $5.9 million in
lost sales. Northern Star disagreed.
First, the amounts claimed for creative work had to be
eliminated since the court’s order would specify what the corrective ads must
stay, which knocked $20,000 off. Douglas
also intended to shift away from safety to a new theme, possibly resulting in
an entirely new production, but that wasn’t Northern Star’s problem, so the
court allocated the cost of producing 45 seconds of replacement video to fix
the false claims.
What about the big numbers?
Northern Star argued that lost profits was a more accurate measure of
financial impact than lost revenue. But the court here was offered no profit
margin information on the snow plow industry, so it stuck with lost
revenue. Still, Douglas had included estimated
lost revenues for plows that it didn’t tout in the ad campaign the court found
to be false. This led to a total
required bond of just under $4 million, erring on the high side. (The court did not make clear how the lost sales figures had been calculated, but apparently the method was acceptable as applied to the advertised plows; while I have little sympathy for the defendants here, I do see an argument that corrective advertising might harm the entire brand, even the unadvertised models, though it would be hard to calculate how much.)
So, subject to the bond being posted, Douglas was enjoined
not to republish various statements, and to edit the revised videos it had
posted to include a court-required statement.
This statement had to be “recited by a narrator at a speed that is
easily understood and consistent with the narrator's speech throughout the rest
of the video … and while being read by the narrator, … displayed in print in
clearly viewable black Myriad Pro 14 pt font on a white background.” It was to say that the district court had
granted a preliminary injunction, finding that, “subject to final determination
of the merits of the parties' claims,
statements that ‘the BOSS Power V-XT v-blade cannot trip in the V or scoop
mode’ and certain statements claiming or implying that users of blade-trip
plows will be physically injured but users of Fisher/ Western edge-trip plows
will not were literally false. Accordingly, as preliminarily ordered by the
Court, Douglas Dynamics withdraws those advertising claims.” (Not the easiest statement to understand, I
think.)
If, after editing, comparison tests or demonstrations were
shown, the following should also be added: “The following series of comparison
tests were conducted by Fisher/Western. The reliability of the test
methodologies which included measuring speed with a speedometer without any
type of calibration or verification and using of three different truck models
although of a similar vehicle class have been called into question. Comparison
tests should be as similar as possible with as many variables controlled as
possible, and the variables in Dynamics' tests are not well controlled.” Unless no test runs were shown, the video
must include at least one test run showing Northern Star’s plow performing
successfully.
Douglas also had to send a letter to all its dealers, post
notices on its Facebook pages and Plowsite.com threads (which may go to show
that competitor-plaintiffs know where consumers are getting their information)
in the same font and size as other thread discussions, run full-page print ads
publishing the corrective ads in a number of different specialty magazines.
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