Monday, October 15, 2012

If unauthorized use of TM falsely advertises functionality, is the term generic?

FLIR Systems, Inc. v. Sierra Media, Inc., 2012 WL 4792397 (D. Or.)

FLIR, which makes thermal imaging cameras, sued its competitor Fluke and Fluke’s media/marketing company Sierra for false advertising and related claims, while Fluke counterclaimed for false advertising, trademark infringement, and related claims.  The parties consented to having a magistrate judge deal with the case, and got a slightly quirky but careful opinion on the summary judgment cross-motions.

Fluke introduced the Ti10 and Ti25 models as its lowest-price cameras, and FLIR then introduced the ix series at an even lower price, marketed as “entry level” cameras.  Since at least 2008, FLIR used images captured by higher resolution thermal imaging cameras superimposed on the display of lower resolution cameras depicted in its ads.  In a deposition, FLIR’s VP of marketing admitted that, “[i]f a customer purchased an i3 based on the belief that the images shown in the advertisement for the i3 were in fact from an i3 thermal imaging camera or another 60 by 60 thermal imaging camera, that customer would be mistaken[.]”

In late 2009, Fluke and Sierra created a video comparing “drop test” results for equipment manufactured by Fluke to four competing products, including the FLIR i7, FLIR i60, and FLIR T400.  The video claimed to have tested the cameras by dropping them two meters onto a concrete floor.  The video shows the Fluke Ti32 bouncing and appearing to remain intact (five times).  The video also shows each FLIR camera dropping multiple times, including at least one drop where no visible damage results, but also shows drops that cause exterior damage.  Text in the video included “2 meter drop”; “Solid concrete floor”; “All products subjected to identical tests by third party”; “Fluke Ti32 ... 17 drops and counting”; “The ONLY rugged thermal imager”; “Why waste money on tools that break?”

After setting out the doctrine, the judge concluded that “establishment claim” falsity is a subset of falsity by necessary implication, and set out to determine whether FLIR’s ads were literally false.  FLIR was using images from higher resolution, more expensive cameras on the displays of cheaper, lower resolution cameras.  For example, a 2008 brochure for the FLIR i5, which has an 80x80 pixel resolution, showed a picture of the i5 with a thermal image on its screen; this image was undisputedly taken by a camera with a 320x240 pixel resolution, and thus of a better image quality than the i5 could ever produce.  Thus, Fluke argued, FLIR misrepresented that the i5 creates an image of 320 x 240 quality.

FLIR disagreed.  It knew that the advertised cameras couldn’t reach the image quality of the displayed images, but its intention was merely to show how the images were displayed, not to present precise representations of the cameras’ capabilities.  (Interesting defense.  I wonder why they didn’t tell consumers that?)

The court declined to grant summary judgment, since a reasonable jury could conclude that the ads weren’t literally false, even though Fluke’s arguments were “well-taken.”  The issue was that thermal imaging cameras, even high-resolution ones, produce “somewhat cloudy” images, and the vast majority of images in FLIR’s ads were extremely small, “which means it may not always be practical to use images produced by FLIR's lowest resolution thermal imagers.”  The court cited Nikkal Indus., Ltd. v. Salton, Inc., 735 F.Supp. 1127 (S.D.N.Y.1990) (mashed potatoes and food shortening used instead of actual ice cream because the heat generated by the lights needed to photograph the product made use of actual ice cream impractical).  This is a limitation on the classic case FTC v. Colgate-Palmolive Co., 380 U.S. 374 (1965), which made a distinction between visuals used as evidence and visuals not used as evidence:

In the ice cream case the mashed potato prop is not being used for additional proof of the product claim, while the purpose of the Rapid Shave commercial is to give the viewer objective proof of the claims made. If in the ice cream hypothetical the focus of the commercial becomes the undisclosed potato prop and the viewer is invited, explicitly or by implication, to see for himself the truth of the claims about the ice cream's rich texture and full color, and perhaps compare it to a "rival product," then the commercial has become similar to the one now before us. Clearly, however, a commercial which depicts happy actors delightedly eating ice cream that is in fact mashed potatoes or drinking a product appearing to be coffee but which is in fact some other substance is not covered by the present order.

So the question becomes what kind of evidence Fluke would need to present to the jury to show that consumers are “invited” to see for themselves the qualities of the camera.  If a survey is required, then it’s not a literal falsity case; if it could be a literal falsity case, then there’s at least the possibility that expert testimony about the relevant market could get the job done, on which see below. 

The judge also remarked that “it is not entirely clear how much of an impact the size, file type, and image editing software utilized had on an image's quality (i.e., perhaps a dramatic reduction in the size of, say, a 320 x 240 image renders it the equivalent clarity of an image produced by a lower resolution camera, depending on the circumstances).”  This might be better understood as materiality rather than falsity, especially since the court noted that all the ads specified the advertised cameras’ resolution.

In addition, the ads didn’t show the actual size of the camera’s display; they were shrunk, affecting their resolution.  The judge noted that the largest image of the i5 screen in one brochure was “about the size of the first knuckle of my thumb.”  And the resolution of the print ad could also change the image quality, as could a customer’s graphics display for the internet ads.  Thus, there was a genuine issue of fact on literal falsity.  (Again, this seems like materiality, but ok.)

FLIR offered expert reports from: (1) Silverman, an advertising expert whose testimony was proffered to demonstrate “how customers perceive and respond to images in print and on-line advertising and traditional catalog environment” and whether “FLIR's use of so-called ‘cut-andpaste images' in their printed and on-line promotional materials were in any way likely to deceive or confuse potential customers”; (2) Madding, a technical industry expert whose testimony was proffered to demonstrate that Fluke did the same thing in its own ads; and (3) Seffrin, an industry expert whose testimony was proffered to demonstrate that “[t]he practice of providing high resolution sample images in descriptive literature is customary within the infrared industry ... has been around for many years and is well known within the infrared community.”  The judge didn’t rule on admissibility at this point because summary judgment was denied on other grounds, but expected argument on the Daubert motions.

Fluke also moved for summary judgment on FLIR’s claims against the drop video.  Given that this was comparative advertising, summary judgment largely turned on whether there was enough evidence to go to a jury on literal falsity.  If there was, FLIR would be entitled to pyramiding presumptions in its favor on deception, reliance/materiality, and harm.  FLIR’s evidence centered on its expert witness, Bisenius, who testified that there were “numerous problems” with the drop test that rendered the results inconclusive and invalid.  Bisenius had extensive experience in compliance testing of products, and concluded that the drop test wasn’t conducted by an independent source and was conducted in numerous ways that rendered it invalid; he also concluded that there’d been deceptive editing of the video results and that the text in the video wasn’t accurate. 

As to whether the source wasn’t independent and whether the text was accurate, jurors “are just as well equipped to listen to the evidence and decide if Sierra is an independent source and if the embedded statements in the video are true. There is nothing about the training and experience of Bisenius that renders his opinion helpful to the jury on these issues.”  Counsel could make the arguments themselves.  But criticism of the testing method was within his expertise.  Fluke’s objections (such as his lack of expertise in drop testing thermal cameras specifically) could be raised to the jury.  He could also testify about whether the video had been “edited, enhanced or touched up,” since that was “something a jury may well be ill-equipped to discern depending on the facts.” 

That out of the way, a reasonable juror could find that the drop video was literally false because the tests were unreliable.  Bisenius criticized Sierra and Fluke for not using any test standard in developing their methodology, controlling the testing environment, and testing Fluke’s competitors using more precarious positions than used for Fluke’s own cameras.

Fluke did better getting rid of FLIR’s trade libel/commercial disparagement claim.  FLIR couldn’t show malice given Fluke’s legitimate business motives.  At most, Fluke “could have been more rigorous in conducting its drop test depicted in the video. That is not enough under Oregon law to establish malice.”  The judge concluded that trade libel required a showing that defendant’s false statement was made with the primary purpose of maliciously injurying the plaintiff, if not the sole purpose.  The record wouldn’t support such a conclusion here—Fluke wanted to make a more rugged camera that would compete well, and FLIR recognized that ruggedness was a legitimate competitive issue between the parties.  This also got rid of the civil conspiracy claim.  Fluke instructed Sierra's president to treat all of the thermal imagers tested “exactly the same” in an attempt to produce legitimate results.

Sierra sought summary judgment in its favor as well, and won it on Lanham Act standing grounds.  As a marketing company, it wasn’t in competition with FLIR, and the 9th Circuit requires “competitive” injury; standing exists “where misrepresentations about product quality could theoretically draw a consumer away from [a] competitor's product.”  FLIR argued that this caselaw didn’t deal with joint and several liability; other cases have found that a competitor’s marketing firm can be liable under the Lanham Act.  But those were primarily from the Second Circuit, which has a different standing test from the 9th Circuit’s categorical standing test.  (I’m not sure that the Second Circuit’s standing test, which was only articulated in its current form after the marketing-agency cases were decided and which like all standing inquiries has mutated in recent years under heavy defendant pressure, is really driving those decisions.  Why not ask whether there was contributory false advertising?)

FLIR also moved for summary judgment on Fluke's trademark infringement and unfair competition claims based on Fluke’s purported IR Fusion trademark.  The judge concluded that there was a genuine issue of fact on whether IR Fusion was generic, descriptive, or suggestive for the products.  IR Fusion was federally registered (but apparently not incontestable), but still arguably descriptive “insofar as it describes a feature of Fluke's thermal imager: its ability to blend thermal and visible light images.”  A descriptive mark can still be strengthened by market success, though, and Fluke submitted evidence of extensive advertising; this was enough to go to the jury.  A reasonable jury could also reject the genericness claim (FLIR apparently didn’t seek summary judgment in its favor on that).

FLIR argued that Fluke’s trademark-related claims were barred by laches, using the 2-year statute of limitations for fraud as an analogy as other courts in the district had done.  The facts were complicated, with a hiatus between Fluke’s initial C&D and its renewed claims over slightly over two years; this was the kind of thing that should go to a jury.

FLIR argued that Fluke lacked evidence that its use of “IR Fusion” and “fusion” was false or misleading, given that the ads plainly identified FLIR as the source of the advertised products/fusion functionality of those products.  But a reasonable jury could find literal falsity, at which point no further evidence of consumer reaction would be required.  This doesn’t square well with the now-standard multifactor confusion test, but might not be a bad description of the same mark/same goods rule that still applies in countries other than the US, and Fluke for whatever reason apparently asserted a “trademark-related false advertising counterclaim” and the court applied false advertising doctrine.  The idea was that FLIR was falsely representing that its product had fusion functionality equivalent to that of the Fluke IR Fusion. But the parties have different patents, making their features not the same.  Even if IR Fusion isn’t a valid mark, it could falsely necessarily imply that FLIR’s cameras had the same functionality as Fluke’s cameras. 

Comment: this argument strikes me as extremely dangerous to Fluke’s trademark claims.  It depends on the factual proposition that IR Fusion describes something specific in terms of functionality, which Kellogg would therefore make freely available for all competitors to use once the patent expires.  And the term would necessarily be generic now, too, even if others can’t yet use the patented functionality.  The false advertising claim, which will require a showing of materiality and possibly misleadingness—since it might be hard to prove that IR Fusion definitionally means a specific method of fusing thermal and visible light images to the relevant consumers—seems riskier than perhaps justified.

The court also refused to grant summary judgment on other assorted false advertising counterclaims.

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