AvePoint sued Power Tools (aka Axceler) and Burns (Axceler’s
regional VP of sales for Western North America) for defamation, breach of
contract, trademark infringement, false advertising, and violations of the
Virginia Computer Crimes Act. The
parties compete to provide software for Microsoft SharePoint products. The most interesting part of the case:
Axceler allegedly created an account on LinkedIn pretending to be an AvePoint
employee, deceiving even other AvePoint employees into believing that “Jim Chung”
was a colleague, and the court holds that this could be trademark
infringement. Burns allegedly publicized
Jim Chung’s profile, including by tweeting “# Axceler and Jim Chung are gonna
rock Vegas” and “Just ran into jim chung from avePoint Good guy.” In response,
Christian Buckley, Axceler’s Director of Product Evangelism (ed.: really?),
tweeted: “@MICHAELBURNS Free Jimmy! # Axceler.”
Axceler also allegedly made up an email account to obtain a
copy of the most recent version of one of AvePoint’s products, claiming to be
Jill Wagner from “Kohl\ ’s Food Stores.”
This allegedly violated AvePoint’s website terms and conditions, which allowed
use of material from AvePoint’s website “solely for personal and noncommercial
use” (I don’t understand how this covers the trial copy of the software, since
that wasn’t on the site).
The court refused to dismiss the claims, starting with the
defamation claim. The following claims
were allegedly defamatory: (1) AvePoint was a Chinese company; (2) its software
wasn’t developed, supported, or maintained in the United States; (3) its
software was maintained in India; (4) Axceler’s product was Microsoft
recommended over AvePoint; (5) AvePoint customers are “dumping out of 3 year
deals in year 2 to buy Axceler’s Controlpoint”; and (6) Axceler uses its
maintenance revenue to improve its customers’ existing product whereas AvePoint
uses its maintenance revenue to develop new products to which its customers
have no access. These statements were
made via Twitter (e.g., referring to AvePoint as the “Red Dragon” and
“MADEINCHINA”) and in conversations.
Axceler argued that the first three statements weren’t
defamatory as a matter of law. The court
didn’t agree. While most Americans may
no longer cling to ideas that Asian goods are inferior or that buying them is
unpatriotic, AvePoint specifically alleged that these claims had a significant
impact on customers’ willingness to buy, especially with federal government
customers who are required to give domestic preferences. Axceler’s tweets even said so: “Is where your
#SharePoint products developed important to you? Government Answer; Absolutely!
@Axceler #ControlPoint #MADEINTHEUSA”; “Ouch ... Another #Federal Deployment
Finds Out Where the Competition is Developed. #SharePoint #RedDragon
#Governance #FDCCI @Axceler.”
The Microsoft-recommended statement, Axceler argued, wasn’t
necessarily harmful, since both products could be good. But on a motion to
dismiss, it could still be defamatory per se.
The next, a tweet that “the Evil Avenue’s customers are dumping out of 3
year deals in year 2 to buy Axceler’s ControlPoint,” was also potentially
defamatory and not just opinion. (The
case law on this is thin, but you can mark this court down as one that doesn’t
discount for Twitter posting, as some courts have done for blog postings which
they’ve considered almost inherently hyperbolic and nonfactual.) Finally, the claim that AvePoint uses
maintenance revenue to develop new products instead of improving existing
products was also potentially defamatory, since it implies misuse of revenue
from customers and allegedly caused AvePoint to lose a sale.
The court also refused to dismiss the breach of contract
claim based on AvePoint’s browsewrap. At
this stage, AvePoint alleged an enforceable contract; though it was just a link
at the bottom of the website, AvePoint plausibly alleged that Axceler had
actual or constructive knowledge of the terms and conditions, given that
Axceler “went to the trouble of creating a fictitious profile and email account
in order to download the software,” and that it had a similar browsewrap
agreement on its own site.
Next, the court found that it was plausibly trademark
infringement (and false endorsement/false association/false designation of
origin) to create a fictitious AvePoint representative on LinkedIn. The allegations, if true, showed use in
commerce, since LinkedIn is allegedly an instrumentality of interstate commerce
used for advertising and promotion. (In
a footnote, the court declined to rule on whether “use in commerce” must be the
same kind of use sufficient to register a mark, but said that this would
qualify anyway.) And this was use in
connection with sale/advertising of goods or services, that is, commercial
use.
Allegedly, “defendants set up the fictitious LinkedIn
account to fortify Axceler’s position in the marketplace and reap competitive,
commercial benefits.” The profile
encouraged users to contact Jim Chung regarding “business deals” with AvePoint,
“new ventures” with AvePoint, and “consulting offers” related to AvePoint
products and services. But contacts
would unwittingly be directed to AvePoint’s primary competitor. AvePoint alleged that defendants diverted
business and profited from AvePoint’s goodwill by fielding customer inquiries
through this account. This wasn’t merely
a parody website or a site promoting “opposing behaviors or ideas” (PETA, largely superseded by Lamparello), but rather an alleged
masquerade by a direct competitor.
Defendants argued that Jim Chung’s profile was “best
described as a resume for Chung, listing his experience, education and
groups/associations,” and allegations to the contrary about business purposes
“def[y] the very organization of LinkedIn.” But that didn’t help at the motion to dismiss
stage.
AvePoint also sufficiently alleged likely confusion; it
alleged both an intent to confuse and resulting actual confusion among actual
AvePoint employees and current and potential customers. (Technically, the first category—AvePoint
employees—isn’t subject to the kind of confusion the Lanham Act targets since
they aren’t the relevant consumers.
Still, I see the relevance, even though the harm alleged, albeit
“insidious,” isn’t Lanham Act harm but rather trade secret harm: “those
employees unwittingly enabled Axceler to access other AvePoint customer and
employee contacts—including those customer contacts associated with legitimate
AvePoint employees’ profiles—and other competitive business information.”) Defendants argued that the LinkedIn users
were merely confused about whether they knew Jim Chung, but that wasn’t enough
at this stage.
Although it accepted that basis for false designation of
origin, the court didn’t agree that misrepresenting AvePoint as a Chinese
company could be a false designation of origin under §43(a)(1)(A), which speaks
to the origin of the defendant’s own
goods or services; that’s a §43(a)(1)(B) false advertising claim. As you might expect, though, the false
advertising claim also survived.
AvePoint plausibly alleged at least some conduct amounting to commercial
advertising or promotion under Gordon
& Breach: the messages on Twitter.
Though these posts didn’t mention AvePoint by name, that wasn’t
required: statements about the “Red Dragon” and “SinkingREDShip” could be
fairly understood to refer to AvePoint and its products and services. They were
also plausibly “advertising,” since AvePoint alleged that Twitter was “a
commonly-used means of advertising in the software industry,” and that the
messages “were published and republished to hundreds of customers, potential
customers, and other members of the Microsoft SharePoint community.” Axceler
allegedly used certain hashtags to link the messages to the US Army Twitter
community and other federal customers.
Thus, Axceler allegedly misrepresented the geographic origin and quality
of AvePoint’s products and services.
(Similar state law claims also survived; Virginia state law requires
“non-oral” ads causing “actual injury.”)
In addition, in a decision that ought to worry people who
worry about the CFAA, AvePoint stated a claim under the Virginia Computer Crimes
Act by allegedly obtaining a trial copy of AvePoint’s program for competitive
purposes. The VCCA provides that “[a]ny person who uses a computer or computer
network, without authority and ... [o]btains property or services by false
pretenses ... is guilty of the crime of computer fraud.”
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