Wednesday, August 10, 2016

failure to speak can be advertising but not presentations to trainers

WIKA Instrument I, LP v. Ashcroft, Inc., 2015 WL 11199059, No. 13-CV-43 (N.D. Ga. Jul. 10, 2016)

WIKA sued Ashcroft, a competing maker of pressure gauges, for false advertising and related claims, and Ashcroft counterclaimed similarly.  WIKA sells the XSEL Process Gauge, available with either a dry case or a liquid-filled case, and Ashcroft’s competing models are the Ashcroft Type 1279 Duragauge and the Type 1259 Duragauge.

Of broader note: Durability claims made in PowerPoint slides created by Ashcroft for use in a “Train the Trainer” presentation shared with Ashcroft’s sales force and product specialists at its distributors:  These people weren’t members of the relevant purchasing public. The only evidence that the advertisement may have been disseminated to an actual consumer was one exchange.  This wasn’t enough to constitute “commercial advertising or promotion,” given the size of the pressure gauge market.

Ashcroft’s counterclaims: Ashcroft alleged that WIKA mislead consumers regarding the composition of its gauges by selling consumers its gauge made of thermoplastic material despite consumers identifying in their requests for quotation (“RFQ”) that they sought a phenolic gauge. Ashcroft claimed that WIKA should have filed an “exception” to any RFQs for a phenolic gauge to notify customers of the discrepancy.  WIKA argued that this wasn’t commercial advertising or promotion because it was merely a failure to speak, but the cases didn’t support a distinction between affirmative and negative conduct. “False advertising claims often turn on what was not said or disclosed by the defendant; less than full disclosure may constitute actionable false advertising.”

WIKA argued that only consumers had standing to challenge its practice because they decided whether WIKA needed to “except” to a bid specification.  But that didn’t distinguish WIKA’s practices from those of advertisers in general; consumers might be injured too, but the Lanham Act isn’t for them.

As for durability claims, Ashcroft argued that cited tests didn’t support WIKA’s claims. For example, Ashcroft argues that the tests only showed, on average, that the XSEL lasted 4.46 times longer than the 1279 rather than 5 times longer, and the test included only Ashcroft and no other competitors. WIKA responded that the difference between 5 and 4.46 was “a partial truth, at worst,” and that WIKA reasonably assumed that its gauge would outlast other, cheaper competitors.  The court left this dispute for the finder of fact.

Ashcroft did offer testimony about harm about specific consumers who bought XSEL gauges rather than 1279 gauges when WIKA failed to except to bid specifications for phenolic gauges.  Moreover, a presumption of injury could apply in this case, given that there was sufficient evidence for a reasonable trier of fact to conclude that some comparative statements were willfully deceptive: “Specifically, there is evidence that WIKA did not have access to the tests performed by its German parent company prior to making the 5 times longer claim based on the tests. There is also evidence that WIKA did not perform its own testing for the 2.5 times or more representation; WIKA relied only on an anecdote from a consumer.”

The same evidence failed for tortious interference, though, because Georgia requires more than circumstantial evidence that the plaintiff would have received the business—it requires direct evidence. 

WIKA Instrument I, LP v. Ashcroft, Inc., 2013 WL 12061904, No. 13-CV-43 (N.D. Ga. Jul. 3, 2013)

Showed up in the same Westclip search (I’m getting a lot of these oldsters recently).  Of possible greater relevance: the court declined to require WIKA’s Lanham Act claim to satisfy Rule 9(b).  In addition, WIKA was not required to plead that it had consumer surveys supporting its allegations of misleadingness. “[T]he standard on summary judgment is different than the standard on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6). WIKA is not required to prove every element of its claim at this stage of the proceedings.”

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