Wednesday, July 03, 2013

Dastar doesn't bar claim based on allegedly stolen technology

Nippon Steel & Sumitomo Metal Corp. v. POSCO, 2013 WL 3285206 (D.N.J.)

Nippon and POSCO are engaging in a global IP battle.  This is one aspect.  Nippon alleged that POSCO has “engaged in a multi-year program of corporate espionage, including theft and bribery,” directed toward Nippon's specialized steel technology, and that POSCO incorporated Nippon's technology into its own manufacturing process.  The court here dealt with a motion to dismiss the Lanham Act false advertising claims. 

Nippon alleged that POSCO’s statements about its technology were false or misleading because POSCO claimed that its own innovation gave its products uniquely superior characteristics and qualities, such as “excellent performance and high energy efficiency,” “superior electric and magnetic property,” and “consistent quality improvement,” such that “customers prefer products made by POSCO.”  Since the technology was Nippon’s, Nippon alleged, these statements can’t be true.  (I’m surprised that POSCO didn’t move to kick most or all of these out as puffery as a matter of law.)

The court found that Nippon stated a claim.  “[U]se of such statements in advertising must necessarily be a comparison of POSCO's … product to those of competitors, including Nippon.”  This was a false advertising claim, not a passing off claim.  Dastar and Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009), didn’t bar the claims.  First, Dastar involved a full record, not a motion to dismiss, and Baden involved post-trial motions.  (Hunh?  What record development would make a difference here?)  Second, Dastar was a § 43(a)(1)(A), case, not a § 43(a)(1)(B) case. Nippon alleged more than copying; it alleged that POSCO falsely promoted its products as the customer choice based on false statements of uniquely superior characteristics and qualities.  This went beyond Baden, where Baden just challenged Molten’s claims to be an innovator and didn’t target Molten’s representations about physical or functional attributes of its products.  Here, Nippon did allege statements relating to the “physical or functional attributes” of its products.

Because the federal claim survived, coordinate state law claims under the New Jersey Fair Trade Act and common law unfair competition did so as well.

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