Thursday, February 28, 2013

press release announcing patent/misappropriation lawsuit might violate Lanham Act

United Services Auto. Ass’n v. Mitek Systems, Inc., 2013 WL 652420 (W.D. Tex.) (magistrate judge)

USAA moved to dismiss Mitek’s false advertising counterclaim and strike its claims of bad faith; the magistrate judge recommended denying these motions.  USAA provides various financial services, and alleged that in 2005 it invented a method for consumers to remotely deposit financial documents. It filed patent applications for this invention, and chose Mitek as the software vendor for software to read the numbers on checks.  USAA allegedly disclosed the invention to Mitek subject to a confidentiality agreement.  In 2008, allegedly unbeknownst to USAA, Mitek filed a provisional patent application, reciting a claim to a similar invention.  In 2012, Mitek began telling USAA that it was infringing on Mitek’s patents.  USAA sued for a declaratory judgment of nonfringement/invalidity/etc. 

Mitek alleged that USAA violated the Lanham Act by accusing Mitek of conducting its commercial activities in an unethical manner.  USAA’s press release, “USAA files Suit Against Mitek Systems, Inc.,” states:

USAA has filed suit against Mitek Systems, Inc. for misappropriation of USAA's proprietary information, breach of contract, and fraud, among other claims.

USAA spokesman Paul Berry says, "USAA invented remote deposit capture technology to meet the needs of our highly mobile military membership, enabling them to deposit checks with a scanner or smartphone wherever they may be stationed. USAA has invested substantial time and money in the development and implementation of an invention which has revolutionized the banking industry."

"Mitek misappropriated USAA's proprietary and confidential information while working under contract for USAA, and then took numerous steps to claim it as its own,” says Berry. “USAA filed this lawsuit to protect USAA members and our Association."

The magistrate judge concluded that this was commercial advertising or promotion.  It was widely disseminated and promoted USAA by claiming that USAA developed an invention that has “revolutionized the banking industry,” and that USAA is looking out for its members and filed the suit to “protect” them.  Such statements “go well beyond describing the allegations in a lawsuit and arguably involve an attempt to influence customers to buy USAA's goods and services.”  USAA argued that it was simply identifying its allegations, but the press release didn’t specify its allegations or say that USAA was giving its “beliefs, opinions or views." Instead, the press release presented its contents as factual statements "and, by suggesting that it was protecting its customers in filing suit, USAA intimates that Mitek's products and/or services are somehow unsafe or untrustworthy.”  (At a minimum, this conclusion seems in tension with the law surrounding Lanham Act claims based on statements made about pending patent lawsuits, though that’s not a “commercial advertising or promotion” problem.)

USAA then argued that it wasn’t in competition with Mitek.  The magistrate judge found sufficient competition: “both companies have apparently sought to develop and implement a product to designed to enable mobile banking.”  USAA targets individual customers while Mitek targets banks as potential users/licensees, but that “hardly [made] a difference; the parties clearly are both vying for use of the same technology with the intent of selling this product and/or service to its customers” (emphasis added).

USAA also argued that it wasn’t trying to influence customers with the press release.  (Whose customers?  This might bear on the “competition” question, though I also think that the fact that one company has integrated production and one supplies just one component of the overall experience is relevant and might be enough to justify a finding of competition under some circumstances.)  Mitek, though, argued that USAA’s claims jeopardized its well-earned reputation (with whom? Mitek’s customers or USAA’s customers?).  The magistrate judge concluded that the press release could be understood “to influence customers to continue or commence business with USAA.”

The magistrate judge also concluded that the statements alleging misappropriation of confidential information concerned the nature/characteristics/qualities of Mitek’s services or commercial activities.

USAA then argued that it accurately described its allegations.  But the press release suggested that Mitek’s actions were unethical and that customers needed “protection.”  “These statements go well beyond merely describing the allegations in the complaint and arguably convey a false impression of Mitek's goods and/or services, providing USAA with an unfair advantage in the marketplace.”  (The marketplace for what?)

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