NY statutory law covers B2B false advertising, but common law unfair competition doesn't

Leason Ellis LLP v. Patent & Trademark Agency LLC, No. 13 CV 2880 (S.D.N.Y. July 2, 2014)

Leason Ellis (of Trademark Blog fame) sued PTA for false advertising, unfair competition, deceptive business practices, and tortious interference with prospective economic relations. Here the court grants in part and denies in part a motion to dismiss.

The complaint alleges that PTA “seeks to confuse trademark owners into purchasing services under false color of authority,” holding itself out as a government entity (or as affiliated with the USPTO) “by using a misleading name and website, and by employing a website URL located in the “.org” top-level domain instead of the ‘.com’ top-level domain (i.e., ‘www.patenttrademarkagency.org’).”  PTA allegedly mails confusing “reminder” notices to trademark owners that appear to be government-issued and falsely state the owners’ trademarks are about to expire. Instead, the notices are solicitations, which don’t disclose that the fee charged by the USPTO to renew a trademark is $100 per class, whereas PTA charges $985 to renew the registration of one “class” of goods or services and $385 for each additional class.  PTA’s website says “[w]e are not lawyers and do not provide legal advice,” but Leason Ellis alleged that defendants nevertheless advertised legal services/engaged in the “unauthorized practice of law” by appearing before the USPTO without a law license in violation of certain USPTO regulations. 

PTA allegedly solicited Leason Ellis’s clients and potential clients, leading clients to complain to Leason Ellis and causing confusion.  Leason Ellis alleged that these efforts “create a false and deceptive representation of equivalence with the legitimate trademark-related services provided by those such as [p]laintiff,” thereby unfairly “diverting business” from plaintiff and allowing defendants “to unjustly profit from providing inferior services to unsuspecting trademark owners.”

The court concluded that there are only two bases of liability under §43(a)(1), and if you choose (B) it must be false advertising, as opposed to (A)’s false association.  Leason Ellis alleged only the former, using various theories.  PTA argued that Leason Ellis lacked standing; the court disagreed, given the allegations of damages.

However, the common law unfair competition claims had to fail.  New York courts have now clarified that there are “two theories of common-law unfair competition: palming off and misappropriation.”  That’s it, despite earlier broad statements.  Leason Ellis alleged neither.  Alleging that the public confused the PTA with the PTO didn’t matter in the absence of a plausible allegation of confusion of PTA with Leason Ellis, or even with law firms generally. 

By contrast, GBL §349 and 350 claims survived.  The challenged practice must be “consumer-oriented,” but businesses can be consumers in appropriate circumstances, which were present here.  A claim under these statutes must allege consumer injury or harm to the public interest; the allegations, if proven, would involve public harm.