Palermo v. Underground Solutions, Inc., No. 12 cv 1223 WQH
(BLM) (S.D. Cal. Aug. 1, 2012)
HT Eric Goldman.
Gene Palermo alleged that he was an “internationally
recognized expert” regarding “the plastic piping industry” who “has become a
champion for certain types of piping, including high density polyethylene
(‘HDPE’) piping and polyvinyl chloride (‘PVC’).” He’d published and presented widely
highlighting the risks of fused PVC.
Defendant Underground Solutions specializes in selling fused PVC.
Defendant allegedly registered genepalermo.com and put
content on it purportedly showing that HDPE was dangerous, fragile, and
expensive, completely contrary to his true views. This was allegedly calculated to confuse
visitors, and did so.
In addition, defendant also circulated a pamphlet, Palermo’s
Negative Sales, Scare Campaign Revealed describing Palermo as “‘an unqualified
shill’ for the HDPE industry and someone who has ‘no independent credibility’
and whose professional presentation is ‘mere propaganda.’”
Palermo sued; his claims against the website were for false
designation of origin/false association under federal law, along with
California false light and misappropriation of likeness, while his claims
against the pamphlet were for defamation, and he added a statutory unfair
competition claim as to both. He moved
for a preliminary (and permanent) injunction against the confusing use of his name
and the dissemination of the pamphlet.
I’ve got to say that I find the alleged facts highly
sympathetic. On the pleadings, Palermo
is being impersonated in a highly offensive way, for the ultimate (though not
direct) commercial benefit of the defendant.
Palermo, however, chose not to request injunctive relief on his false
light claim, so the court didn’t discuss it; he instead relied on the other
claims.
On the Lanham Act claims, Palermo argued that defendant
created a false association between himself and the website’s claims, which was
likely to confuse consumers. Underground
Solutions responded that its use of Palermo’s name wasn’t commercial because
the website didn’t offer anything for sale, didn’t contain any ads, and didn’t
identify anyone with whom consumers could do business. (If Palermo had alleged that defendant was
the dominant player in the fused PVC business, would the lack of a name
matter? The FDA considers ads about
conditions to be “reminder” ads not subject to the full disclosure requirements
of drug-specific ads; is this similar?)
The Lanham Act bars the use of a name that deceives the
public into believing that a person endorsed, sponsored, or approved of the
defendant’s product. Under the governing
Bosley case (involving a dissatisfied
customer, not an impersonator), a court should consider context to determine
whether a use is commercial. Context
includes whether the defendant earns revenue for the site, sells through the
site, links to a plaintiff’s competitors (note that this will be very
important: Palermo is paid by
defendant’s competitors, but he isn’t one himself), or contains ads.
The website here said nasty things about HDPE and linked to
14 description of HDPE pipe failures.
But Palermo doesn’t make or sell HDPE pipe. Instead, Performance Pipe was Underground
Solutions’s primary competitor in the market for underground
trenchless-installed pipelines.
Performance Pipe paid Palermo to endorse HDPE pipe, as he stated in a
deposition in a separate action: “it’s pretty obvious I have a relationship
with Performance Pipe. I have a consulting agreement with them. I do work for
them.” I have to say, I’d find this site
commercial—though I’m not sure that confusion over whether Palermo endorses an
entire category of pipe instead of a particular producer should be actionable
under the Lanham Act, again unless the category and the company are almost
identical. Supposing the site said false things about HDPE (which was not alleged), for example, Performance Pipe should be able to challenge it as false advertising, given Underground Solutions's commercial interest in making HDPE look bad.
The court disagreed that the site was commercial (I would say, commercial for purposes of Palermo's claims).
There was no evidence that the site itself generated revenue; it didn’t
name Underground Solutions or refer to fusible PVC or any other Underground
Solutions product. It didn’t list
products for sale or link to any sites that sold Underground Solutions
products; it didn’t link to any of Palermo’s
competitors (whoever those might be); it didn’t collect information from
visitors; and it didn’t have ads. Thus,
on this record, the court concluded that the facts didn’t show that a visitor
would believe that “Palermo originated, sponsored, or approved Defendant’s
product, fusible PVC.” There was no
likelihood of success on the merits, so no injunction.
The same with the state-law misappropriation of likeness
claim. Commercial purpose is a
requirement of the law: “Any person who knowingly uses another’s ... likeness,
in any manner, on or in products, merchandise, or goods, or for purposes of
advertising or selling, or soliciting purchases of, products, merchandise,
goods or services, without such person’s prior consent ...” is liable. Here, Palermo failed to show that the website
was commercial in this sense; there wasn’t enough of a “direct connection”
between the website and a commercial purpose.
Palermo also argued that defendant’s conduct was an unfair
and fraudulent business practice containing falsehoods relevant to the
industry. Defendant argued that Palermo
hadn’t shown that he’d been harmed, and the court agreed. His declaration stated: “My credibility and
reputation have suffered due to the content of the Website and the pamphlet and
their exposure to individuals, plastic pipe manufacturers and purchasers in the
industry. I have been contacted by numerous individuals in the industry
questioning my abilities and work in the industry, and whether I authored
and/or endorse the content on the Website and whether I am aligned with
[Defendant]. I have had to reassure these individuals and the industry that my
views on HDPE piping have not changed and that I have absolutely no connection
with the Website.” The court found this
not to constitute evidence of injury.
Though the court didn’t explain its reasoning, it may be that, from what
Palermo said, he’d been able to correct misimpressions (perhaps aided by the
size/sophistication of the relevant consumers?) and thus was not relevantly damaged
long-term: needing to reassure people is not the same as losing their respect,
and indeed it’s somewhat hard to see why anyone would blame Palermo for being impersonated. (To the extent that people questioned his abilities, see the defamation claim below.)
The defamation claim based on the pamphlet was
separate. Palermo alleged that the
title, “Palermo’s Negative Sales, Scare Campaign Revealed” and the statements
that Plaintiff is an “unqualified shill,” that “shills have no independent
credibility,” and that messages from shills “are mere propaganda” were
defamatory. Underground Solutions argued that they were nonactionable opinions,
supported by the facts disclosed in the pamphlet, and the court agreed. The pamphlet stated that Palermo was
unqualified because he was “not a registered professional engineer and does not
have a degree in engineering” and that he was a “shill” because he was paid to
give his presentations without disclosing the fact of the payment. The general tenor of the pamphlet—a critique
of Palermo’s presentations, with pictures of slides—indicated that it contained
some facts and some opinion. A
reasonable reader would assume that there was a factual basis for the
statements that Palermo wasn’t a registered professional engineer and that he
was paid for his HDPE endorsement, but Palermo didn’t allege that either of
those were untrue or defamatory. Again,
no likely success.
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