Dastar knocks out a false advertising by misappropriation claim

United Services Auto. Ass'n v. Mitek Systems, Inc., 2013 WL 781900 (W.D.Tex.) (magistrate judge)

In another ruling in this case about electronic check scanning, the magistrate judge recommended granting Mitek’s partial motion to dismiss without leave to amend.  USAA alleged that it invented a method for consumers to remotely deposit financial documents, e.g., checks, using a digital camera or similar device.  USAA alleged that its software provider, Mitek, filed for a patent on elements of remote scanning technology and started claiming that USAA was infringing; USAA sued for a declaratory judgment etc.  USAA alleged a claim for false advertising, false designation of origin, and reverse palming off based on Mitek’s statements that Mitek “played a key role in the development of remote deposit capture”; that “USAA's RDC technology is ‘powered by Mitek Systems' “; that “mobile RDC software is proprietary to Mitek”; and that “USAA's mobile RDC service incorporates Mitek proprietary technology.”  While USAA apparently acknowledged that Dastar barred a §43(a)(1)(A) claim, it contended that §43(a)(1)(B) was still available to it, insofar as the Supreme Court said so. The question was whether allegations that Mitek passed off USAA’s trade secrets as its own product could be viable under §43(a)(1)(B). 

Patent law is supposed to reward manufacturers for innovation, not trademark law. Dastar said that an ad that gave consumers the false impression that a product was “quite different” from the plaintiff’s product could create a valid cause of action for Lanham Act false advertising, but didn’t sanction a false advertising claim “premised entirely on false designation of authorship.”  USAA didn’t allege facts similar to those posited by the court in Dastar, but just restated its false designation of origin claim. Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009), involved a similar situation, and held that “authorship, like licensing status, is not a nature, characteristic, or quality, as those terms are used in Section 43(a)(1)(B) of the Lanham Act.” Similarly, allegations that “Mitek engaged in classic false advertising by misrepresenting its role in the development of RDC technology and [in] misrepresenting the nature, characteristics, and qualities of USAA's services and products” failed to state a claim.  So too with the “proprietary,” “key role,” etc. allegations.

Moreover, USAA failed to plausibly plead materiality: “As the Supreme Court noted in Dastar, whether Mitek or USAA owned the product in question would be immaterial to a consumer purchasing this product.”  (Unless the consumer feared getting sued for patent infringement ….)