Tuesday, December 17, 2013

FCC regulation doesn't preempt action against wireless router ads

Netgear, Inc. v. ASUSTeK Computer, Inc., No. C 13-3405, 2013 WL 6512700 (N.D. Cal. Dec. 12, 2013)

Netgear sued defendants, whom I’m going to call ASUS, alleging claims for false advertising/unfair competition, tortious interference, and violations of the Sherman Act.  The parties compete in the market for wireless routers.

The FCC has made rules for wireless routers.  They must be tested and authorized by the FCC before they can be marketed or used in the US.  Manufacturers or sellers can certify compliance with FCC limits by performing tests on the routers to measure how much radio frequency energy they radiate, and to confir that they comply with FCC requirements.  The applicant must file a report with the FCC detailing its procedures and lab results.  The FCC reviews the report and may or may not request a sample for tests.  If the application checks out, the FCC will issue its certification. The FCC doesn’t test transmitters as a matter of course to determine if they match reported test results.

The complaint alleged that ASUS obtained certification for multiple wireless routers using tests performed by the Taiwanese QuieTek Corp.  The measurements were allegedly either false when made, or ASUS modified the models at issue after testing without FCC authorization.  In fact, the models allegedly produce outputs “far in excess of those represented to the FCC, produce outputs that exceed FCC maximum output levels, unlawfully cause interference with adjacent bandwidths (potentially including critically important navigation communications, and safety devices), and operate in a manner that has never been accurately reported to the FCC.”  ASUS thus falsely advertised the routers’ compliance with FCC regulations, which harmed Netgear because ASUS routers were touted by some (interesting vagueness there) as being more powerful and providing a more stable connection than Netgear’s competing products.  To the extent this was true, Netgear alleged, it was possible only because of the noncompliance with FCC radiation standards.

ASUS moved to dismiss the claim as preempted by the FCC’s exclusive authority to enforce its standards. There’s no private cause of action for violating an FCC regulation.  ASUS relied on Pom Wonderful LLC v. Coca–Cola Co., 679 F.3d 1170 (9th Cir. 2012), and PhotoMedex, Inc. v. Irwin, 601 F.3d 919 (9th Cir. 2010), which both barred Lanham Act claims that would have required the court to interpret FDA regulations. 

PhotoMedex involved allegations that a laser was falsely advertised as “FDA approved,” but the FDA eventually found that the laser was substantially equivalent to the earlier laser, which was enough for approval.  The plaintiff couldn’t bring a claim: “In a context where the statute and regulations place responsibility in the first instance on the manufacturer to determine whether its device is covered by a previous FDA clearance and permit marketing of the product without an affirmative statement of clearance by the FDA, it is impossible for PhotoMedex to prove that Ra Medical’s device had not been cleared by the FDA when the FDA itself did not take that position.” 

Pom barred a lawsuit over the labeling of a product as “Pomegranate Blueberry Flavored Blend of 5 Juices” when it contained only 0.3% pomegranate juice and 0.2% blueberry juice, because the Ninth Circuit determined that FDA regulations authorized the name.

Both cases emphasized the importance of evaluating each case and giving as much effect to both statutes as possible. Here, unlike cases where resolution of Lanham Act claims would conflict with FDA regulations and require the court to undermine what the FDA apparently determined, Netgear could prove its claims by showing that ASUS falsely advertised that its products met FCC standards, either by submitting falsified test results or by altering their wireless routers after testing. Such proof didn’t risk undercutting the agency’s expert judgments, because the allegations didn’t implicate FCC determinations or require interpretation of ambiguous regulations. 

For similar reasons, ASUS’s field preemption argument against the state law claims failed.  ASUS argued that Congress clearly intended the FCC to occupy the field of setting and enforcing technical standards for radio frequency emissions. But the claims here didn’t implicate the FCC regulation of interference, or seek to impose additional requirements not imposed by the FCC; they were just false advertising claims.

Nor would the court stay the claims based on the primary jurisdiction doctrine.

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