M-Edge makes accessories for mobile devices. In 2008, it
started making a protective jacket for the Kindle, sold through Amazon. It was such a success that M-Edge became a
“special partner” with Amazon, receiving prelaunch information about new Kindle
versions. It also created an integrated book light for the protective cover of
an e-book reader and patented certain features of the device. During negotiations with Amazon-related
entities, Amazon executives allegedly threatened M-Edge to get larger
percentages of its sales, including threatening to delist M-Edge products and
deny pre-launch access to new Kindle versions.
In mid-2010, Amazon launched a new Kindle with only one day
of notice to M-Edge, and immediately started selling “knockoffs” of M-Edge
accessories, including the Amazon Kindle Lighted Leather Cover, which allegedly
infringed M-Edge’s patent. M-Edge could only
join Amazon’s Preferred Vendor Program if it agreed to pay Amazon a portion of
its proceeds, and then, when M-Edge resisted, circulated to its
reseller-customers and potential reseller-customers a list of “Amazon Approved
Accessory Vendors” that didn’t include M-Edge. Amazon also discouraged customers
from dealing with M-Edge, and in some cases, threatened these customers with
repercussions if they persisted. As a result, M-Edge alleged, several customers
caved and at least fourteen potential customers decided not to contract with
M–Edge. Amazon continued to display
M-Edge products on its site, stating that they were “currently unavailable,”
and coupled those displays with competing items, including “knockoffs.”
M-Edge sued for patent infringement, unfair competition,
intentional interference with contracts/economic relations, and false
advertising under the Lanham Act. Amazon
moved to dismiss the non-patent claims, and the court denied the motion.
First, the court found that the choice of law provision in
Amazon’s 2009 contract with M-Edge didn’t govern. It said “[t]his Agreement will be governed by
the Laws of the State of Delaware, without reference to its choice of Laws
rules.” However, the agreement provided
only for the application of Delaware law to the contract itself, not to related tort claims, as opposed to the
choice of forum clause, which covered any legal proceedings “arising out of or
related to this Agreement.” Amazon
secondarily argued that Washington state law should apply, but, applying
Maryland’s choice of law rules and looking to where the actual damage occurred,
Maryland law governed.
Maryland’s unfair competition law is flexible: As the
Maryland Court of Appeals said, “Each case is a law unto itself, subject, only,
to the general principle that all dealings must be done on the basis of common
honesty and fairness, without taint of fraud or deception.” The essential element is actual or probable
deception. M-Edge alleged facts
sufficient to present a plausible claim that Amazon used deception to compete
unfairly. On the pleadings, a reasonable
consumer could be misled by Amazon's stating that an M-Edge product was not
‘currently available’ together with an offer of a competing product to mean
that the M-Edge product was not available from any source whatsoever.” Also,
the court accepted that a reseller customer could be misled into believing that
it could not sell M–Edge Kindle accessories without Amazon approval.
The tortious interference claims also survived. Tortious interference requires intentional
and willful acts, calculated to cause damage to the plaintiff in its lawful
business, done with the unlawful purpose to cause such damage and loss, without
right or justifiable cause on the part of the defendant, and actual damage. M-Edge’s allegations that Amazon threatened
to contact its customers, and that Amazon deliberately sought to create the
impression that M-Edge wasn’t “approved,” were sufficient, along with
allegations of specific harm—including harm to its potential relationship with
Sam’s Club.
Amazon then argued that M-Edge failed to plead a Lanham Act
claim because the allegations themselves established truthfulness. There were two kinds of falsity at issue: (1)
Statements to consumers in response to a search on Amazon.com for M-Edge
products that the M-Edge products are “currently unavailable” and (2) statements
to reseller-customers that communicate that sale of a Kindle accessory requires
approval from Amazon that hadn’t been given for M-Edge products. Both types of
statements might be found misleading or false, though Amazon also might well
ultimately defeat M-Edge’s claim.
Amazon then argued that these statements weren’t made in
commercial advertising or promotion.
Applying Gordon & Breach,
the court disagreed. The relevant
statements were pled to be commercial speech, plausibly made to influence
consumers and reseller-customers to buy Amazon’s goods and services. And the
allegations plausibly stated a claim that the representations were disseminated
sufficiently to constitute advertising or promotion in the relevant contexts.
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