Ecore International, Inc., v. Downey, No. 12–2729, 2015 WL
127316 (E.D. Pa. Jan. 7, 2015)
Ecore makes recycled rubber flooring; defendants allegedly
relabeled and resold Ecore’s goods as its own.
Downey owns an engineering consulting company that provided consulting
services to Ecore, and founded and was the sole shareholder of defendant
Pliteq, also in the business of sound-control flooring products. Defendants bought Ecore products through
third parties, first buying unlabeled goods and adding Pliteq labels. Later, defendants had workers remove the
Ecore labels and replace them with Pliteq ones. Defendants allegedly took
precautions to prevent the relabeling from being discovered, including instructing
employees not to mention Pliteq when communicating with Ecore. Defendants also
published marketing materialis misrepresenting that Pliteq created and manufactured the products.
Defendants argued that there was an email agreement between
Downey and Ecore to relabel to deal with some competitors, and that Ecore used
similar private labeling strategies with other partners. Ecore denied this and
denied that the relevant person even read the part of the message at issue. The
court found that the relevant email, while it appeared to discuss competitors’
products, was “difficult to comprehend fully from an outside perspective, even
with the benefit of some deposition testimony.”
The key portion says:
If Irvine is willing to accept
alternates, I have told Mark that we will sell a private label of QT [Ecore’s
product brand], called Pliteq GenieMat, through our distributor at $0.75/SF. It
won’t have the same level of testing, or say QT on it, but at least is
comparable with the SoundSeal testing, and we can provide a letter saying it is
a private label as manufactured by Ecore. This should alleviate their need for
lowest price.
Ecore’s response email said “F* * * them ... cut their
throat on price....this is a war and our nuclear device is not ready yet. The
USRR suit is going to cost a f* * *ing fortune to defend. Take no prisoners ...
we’ll clean up the market mess once we have the reissue in hand” (ellipses in
original). Ecore said that the recipient
didn’t even read the relevant portion of the email, and also noted that
defendants’ conduct was inconsistent with the alleged proposal because the
relabeling never came with any sort of “letter saying it is a private label as
manufactured by Ecore.” Plus, defendants
resold the products at a higher price, which didn’t seem in keeping with the
alleged agreement.
Given the highly factual nature of the dispute, the court
denied summary judgment for Ecore. The court also noted that defendants’
argument that relabeling/private labeling was common wasn’t sufficiently
shown. They cited a case finding that, “because
it was common in the clothing industry for retailers to add their own labels,
retailer labels do not express or are not understood by consumers as a
designation of origin at all, and thus they cannot constitute false
designations of origin for the second element of a reverse passing off claim.” But defendants only offered examples of Ecore’s
own private labeling agreements; they didn’t show a common industry practice.
Plus, defendants didn’t just relabel. They made express statements of origin on
their website and in marketing materials. However, the existence of private
labeling agreements did potentially enhance the credibility of the claim that Ecore
had a similar agreement with defendants, further showing that the issue should
be for the jury.
The false advertising claims were based on largely the same misrepresentations
as to the source of the products in marketing materials. Ecore argued that actual deception and
materiality could be presumed given literal falsity. But this presumption only
applied for injunctive relief, not money damages. Ecore’s off-hand reference to evidence that
two actual consumers were misled wasn’t enough to grant it summary judgment.
Those incidents involved a sales rep who wrongly tried to push customers into
buying defendants’ products rather than Ecore’s, which had little or nothing to
do with the advertising statements at issue.
No comments:
Post a Comment