keyword purchase supports unfair competition verdict

Chow v. Chak Yam Chau, --- Fed.Appx. ----, 2014 WL 92094, No. 12–15994 (11^th Cir. Jan. 10, 2014)

Michael Chow credits himself with introducing “high-end Chinese cuisine in a fine dining setting to the west” through the “Mr Chow” restaurants he opened across the country, starting in 1974 (reaching NYC in 1979 and expanding through 2009).  Mr Chow restaurants have signature dishes, distinctive décor, and feature the “noodle show,” where a staff member makes fresh noodles by hand.

Philippe Chow Chau, born Chak Yam Chau, worked in the kitchen of the NYC 57^th Street Mr Chow restaurant for 25 years, then partnered with Stratis Morfogen to open a restaurant called “Philippe by Philippe Chow” on 60th Street, a few blocks from the Mr Chow.  They later opened additional restaurants, including in cities where Mr Chow operates. The menu, décor and “noodle show” were very similar to those in the Mr Chow restaurants.  Michael Chow believed that Chau stole his recipes and business plan.

Chow and the related corporate entities sued Chau, Morfogen, etc., alleging trademark infringement, false advertising, misappropriation of trade secrets, and unfair competition under federal, state, and common law. The Philippe Restaurants filed counterclaims for defamation and to cancel the Mr Chow’s trademark.  Defendants also won summary judgment to the extent that Chow’s claims were based on alleged illegal compensation practices by the Philippe Restaurants, finding that plaintiffs hadn’t shown any damages therefrom.  The district court also kicked out the trade secret claim as barred by the applicable statute of limitations.  The jury found for plaintiffs only on the claims for false advertising/unfair competition and awarded roughly $500,000 from the 60^th Street restaurant to the 57^th Street restaurant, and $500,000 from Morfogen to Chow (a verdict that was set aside because Chow shouldn’t have appeared separately on the verdict form; the court of appeals reinstated the award).  None of the other plaintiffs were found to have been damaged. The jury rejected the counterclaims.

The parties appealed on various issues; I’ll focus on false advertising/unfair competition.  The district court ruled that Mr Chow failed to show any connection between its allegations that the Philippe Restaurants illegally paid their staff cash “under the table” and any damage Mr. Chow sustained, especially given evidence that Mr Chow did the same thing.  The court of appeals affirmed, because any connection to harm to Mr Chow was speculative.

The court of appeals also affirmed the jury’s verdict against the 60^th Street restaurant.  There was evidence of potentially deceptive public statements attributable to the relevant defendants, such as that Philippe Chau was the “mastermind” and “architect” of the menu at the Mr Chow restaurants and that Philippe Chau was a critically-acclaimed chef in his own right.  Morfogen also bought “Chow” and “Mr Chow” so that sponsored links would appear in search results—the court didn’t discuss the text of the resulting ads.  “A reasonable jury could conclude that, taken together, the public statements and the sponsored links were misleading and had the capacity to deceive consumers.”  A reasonable jury could have rejected Mr Chow’s trademark infringement claims and still found liability for unfair competition under §43(a), since that section is broader than trademark (not clear if the court means "because it also includes false advertising" or if it thinks there's some inchoate form of unfair competition that involves neither false advertising nor infringement; I hope it's the former).