Monday, July 06, 2015

Exaggerated and outdated photos literally false, court rules

Spruce Environmental Technologies, Inc. v. Festa Radon Technologies, Co., 2015 WL 4038802, No. 15–11521 (D. Mass. July 2, 2015)
Spruce and Festa compete in the radon mitigation industry, selling products for testing and reducing indoor levels of the colorless and odorless radioactive gas radon.  Festa began using a catalog with a section titled “*Dare to Compare* U.S. versus THEM.” It compared a “7 year old AMG Fan v.[a] 5 year old fan from our competitor” and provided a photograph of a gray Festa fan next to a bright yellow Spruce fan. 

Further comparisons, with side by side photos, compared US (referring to Festa) and THEM (referring to Spruce)
1)      “Secure Lock Lever Nuts”
“Inexpensive Wirenuts”
2)      “Solid lid with four screws to ensure a watertight fit. Comes with 2 extra in case you drop one”
“Molded Plastic lid secured with only two screws”
3)      “Factory Sealed Motor Wire”
“Motor wire caulked to seal”
4) “Solid motor lead wires”
“Stranded motor lead wires”
5) “Factory Stamped, Dated, & Serialized”
“Generic–No Manufacture Info”
6) “Terminal Box With (4) Screw Holes With Brass Inserts To Prevent Stripping”
“Terminal Box With (2) Screw Holes. Screw Directly Into Plastic”
7) “Motor Mounted With (4) Mounting Screws. Allows For Better Stability And Quiet, Vibration Free Operation”
“Motor Mounted With only (2) screws”
8) “Capacitor With Factory Installed Lead Wires For Direct Connect”
“Capacitor Requires Wires Installed during assembly”
9) “Watertight Pivoting Grommet”
“Plastic Sleeve Requiring Caulking”
Festa put the same content on its website. Several of the images in Festa’s catalog portray products bearing labels indicating that they are both Home Ventilating Institute (“HVI”) and Energy Star certified.
The court evaluated five falsity claims, but didn’t go into detail on two so I won’t either.  The key claims: 1) depictions of Festa’s products as HVI and Energy Star certified when they are not, 2) claims that the Spruce fan motors are “Generic–No Manufacture Info” even though they do have a manufacturer’s label, and 3) implications that the Spruce fan casing will degrade and change into a yellow color after five years. Even if these weren’t literally false claims, Spruce argued, Festa’s intentional deception justified an inference of actual deception.
Festa responded that it engaged in comparative advertising only after Spruce’s sales representatives told customers that Festa’s radon mitigation fans were “garbage” and “junk.”
As for the yellowing issue, Festa submitted photos of Spruce fans that “have undergone pronounced yellowing after exposure to sunlight.”  However, at the hearing, Festa displayed the Spruce fan shown in Festa’s catalog.  “Although the fan certainly was discolored, it was not the bright shade of yellow portrayed in the photograph.” RT: Note the finding of literal falsity based on visual exaggeration—not unique, but worth highlighting (so to speak). The lack of apples-to-oranges comparison, discussed next, probably plays a role: “Defendant admitted that plaintiff’s fan was photographed with flash while defendant’s fan was not, which may have resulted in the enhanced brightness of the Spruce fan.” The court therefore found likely success on the merits as to this comparison.
As for the certifications, Festa acknowledged that there was a lapse in its Energy Star certification due to missing paperwork and that its fans had not been HVI certified since 2010. Festa submitted the necessary paperwork and expected to be Energy Star certified again shortly, but also removed references to Energy Star from its website and no longer places Energy Star stickers on its fans. The Court found that, even though the fans photographed in the catalog themselves were Energy Star certified, defendant was falsely representing that its fans were currently Energy Star compliant, and likewise with older photos of fans showing an HVI sticker.
How about the description of the Spruce motor as “Generic–No Manufacturer Info”?  Festa argued that the motors appeared generic because the Spruce labels lacked a model number, product name, trademark and manufacturer name, and that one of the motor manufacturer’s own sales representatives did not recognize the motor because the product was not branded.  The court concluded that, though the motor was specifically made for Spruce by another company, the description wasn’t literally false, and that Spruce didn’t prove intentional deception.
Thus, Spruce was likely to succeed on its false advertising claim based only on the comparison of the colors of the fans and the Energy Star and HVI representations. 
The First Circuit measures irreparable harm on a sliding scale, in conjunction with likely success on the merits.  Spruce presented an email from a customer expressing concern over several aspects of its fans, including the discoloration issue because it suggests that “it is a cheap product casing.” The court concluded that money damages would mostly compensate Spruce, but that Spruce showed a “modicum” of irreparable harm to its goodwill and reputation.  Likewise, the balance of equities tipped somewhat in Spruce’s favor because the false representations weren’t egregious.  Festa argued that an injunction would be against the public interest because it would suppress competition, but consideration of Spruce’s potentially anticompetitive motives for suing would have to wait for a later stage; it was in the public interest to remove false advertising from the marketplace.  Thus, the court granted a limited preliminary injunction.

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