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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