Previous
discussion, wherein the court dismissed Marvellous Day’s claims except for
its design patent infringement claim, which remains on hold pending
reexamination. Repleading didn’t help.
Marvellous Day makes LED string lights under a design patent
it owns. Initially, MD sold its lights
to defendant HBL, which imported them into the US. HBL sold the lights to Ace, which sold them
to retail customers. In 2011, HBL
switched to another manufacturer, causing Ace to switch. Along with design patent infringement and
false marking, MD alleged that HBL and Ace violated the Illinois Consumer Fraud
Act (CFA) and Illinois Unfair and Deceptive Trade Practices Act (UDTPA) by
using a photograph of Marvellous Day’s Christmas lights in ads for the
infringing lights and by using the terms “patented” and “always lit” to
describe the infringing lights.
First the court found that the false patent marking
allegations failed to state a plausible claim.
MD alleged that Ace continued to advertise its Christmas lights as
having the “Patented T5 LED bulb” actually exclusive to MD, in order to deceive
consumers into thinking they were still getting the same product. The statute states in relevant part:
Whoever, without the consent of the
patentee, . . . uses in advertising in connection with anything made, used,
offered for sale, or sold by such person within the United States, . . . the
name or any imitation of the name of the patentee, the patent number, or the
words “patent,” “patentee,” or the like, with the intent of counterfeiting or
imitating the mark of the patentee, or of deceiving the public and inducing
them to believe that the thing was made, offered for sale, sold, or imported
into the United States by or with the consent of the patentee . . . Shall be
fined not more than $500 for every such offense.
Violations have to be pleaded with particularity. Here, MD didn’t plausibly allege “that by
describing its Christmas lights as ‘patented,’ Ace intended to deceive
consumers into believing that Marvellous Day was the manufacturer.” (Yeah, false marking seems like a pretty dead
letter now, except maybe in certain counterfeiting cases (despite the
disjunctive “or”).) There needs to be
some objective reason to infer that by using the word “patented,” Ace intended
to deceive the public into believing that its Christmas lights were still
produced by MD.
There were no allegations that would support an inference
that “patented” would conjure any association with MD in consumers’ minds; the
PTO has issued millions of patents over the years. MD alleged that, because Ace first used the
term to describe Marvellous Day’s Christmas lights, its continued use of the
term was intended to deceive consumers into believing that nothing had changed. But this was implausible: MD itself argued
that Ace used the term “in order to communicate to consumers that the T5 LED
light string product was superior to other light string products.” This was the opposite of an intent to
counterfeit. A motive to make products
seem innovative doesn’t suggest a motive to have consumers believe the products
were authorized by MD. The law required more than an intent to deceive
consumers about the patent status of the product: it required MD to show that
Ace intended to deceive consumers into believing
that the Christmas lights were manufactured by MD. Using “patented” wouldn’t plausibly do that. The complaint didn’t allege that any
consumers actually associated the unique and novel ornamentality of MD’s lights
with MD as a single source. Possibly
something like “Still the Same Patented Design” or “Patented and Unchanged”
would have qualified.
The state law claims also failed. The court rejected the argument that the
parties needed to be competitors to allow a claim—these laws weren’t identical
to the Lanham Act. Nor did the court buy
that there could be no claim because the defendants didn’t intend for MD to rely on any deceptive act or
practice. The Illinois courts have
recognized that victims of disparagement and other commercial plaintiffs can
bring CFA claims, even though the defendant’s intent was for third party
consumers to rely on the deceptive statement.
Allowing a plaintiff damaged by a defendant’s attempted deception to sue
furthered the broad remedial purposes of the CFA.
However, MD didn’t adequately allege materiality, and here
things get a little weird. Materiality
looks to whether a reasonable person would be expected to rely on a matter in
making a purchase decision. MD failed
plausibly to plead the materiality of “patented,” which is a standard result. MD alleged that “patented” was material “because
consumers would prefer a product being claimed to have superior patented design
qualities and consumers would associate the product and its source with such
patented bulb shape and design qualities.” That wasn’t enough to plead facts sufficient
to support an inference of materiality.
(Here we have a normative disagreement on what constitutes a “fact”—MD is
pleading a fact about consumer psychology; the court just doesn’t believe it
and wants further supporting “facts.”)
The possibility that a patent would make a product seem higher-quality
wasn’t enough for plausibility.
This is where I’m surprised: the court found that the claims
related to “always lit” suffered the same defect. The court initially wanted “qualitative,
quantitative, or even anecdotal evidence that might provide some basis to
support its conclusory claim that the ‘always lit’ phrase is material to
consumer purchasing decisions.” I don’t
know why logical inference wouldn’t suffice: consumers want Christmas lights
for decorative purposes; burnt-out/unlit bulbs look bad; therefore features
that makes it easier to deal with a burnt-out bulb would seem material. This is the magic of common sense: courts
always demand more evidence for things that they don’t think are true (though I
don’t know why the court is skeptical here, other than bleedthrough from the
other claims) and don’t notice when they find logical inference sufficient for
materiality in claims like “this product will improve your health!”
Anyway, MD didn’t plead real facts, just
alleged that consumers preferred their Christmas lights to have this feature
and that they understood that it meant that if an individual bulb in a string
was burned out the rest would remain lit and the bulb could be replaced without
turning off the remaining lights. This
didn’t add any “factual information,” whether qualitative, quantitative, or
anecdotal. “To say that a characteristic
is material because consumers prefer products with that characteristic is a
tautology; it provides no basis to assess the plausibility of the major premise.” Moreover, “a claim about what ‘consumers’
understand a term to mean cannot be taken at face value; it requires some
factual foundation.” (What would “qualitative” evidence be? A dictionary definition of “always lit”? Pleading that experts in the field consider this feature important?) The judge’s common sense, under Iqbal/Twombly, routinely fills in these
gaps—so it’s very important to know what seems like common sense to an Article
III judge. The court noted that it was
required to use experience and common sense in assessing plausibility, but couldn’t
do so here without “factual information” about what consumers understand the
term “always lit” to mean.
Finally, MD’s allegations about Ace’s use of a photo of MD’s
bulbs in ads for non-MD bulbs failed for the same reason. MD alleged that the photos sold replaceable
bulbs but that Ace actually sold lights without replaceable bulbs. But it failed to allege facts sufficient to
show that replaceability was material.
And it was also implausible to believe that consumers would recognize
the bulbs in the photo as MD’s or that, even if they did, that increased the
likelihood of purchase.
Similarly, MD didn’t sufficiently allege causation. MD alleged that defendants’ deceptive conduct
caused consumers to buy competing lights, diminishing the demand for its own
lights. It also alleged that its US sales
dropped 65% during the period of wrongful conduct. This wasn’t enough, because the complaint didn’t
allege facts from which one could plausibly infer that the drop in sales
reflected consumer deception, rather than defendants’ shift to another supplier. That loss could’ve occurred whether or not
defendants engaged in wrongful conduct, and mere consistency with liability isn’t
enough to plead plausibility. The UDTPA
claims failed for the same reasons.
No comments:
Post a Comment