Thursday, August 04, 2016

Strict liability means competitor can create literal falsity by bringing out better product

SharkNinja Operating LLC v. Dyson Inc., No. 14-cv-13720 (D. Mass. Aug. 3, 2016)

In 2013, Dyson launched an ad campaign claiming that some of its vacuums had “twice the suction of any other vacuum” on the market. In July 2014, however, SharkNinja released a vacuum called the Shark Powered Lift-Away, as to which the “twice the suction” claim was untrue. SharkNinja sued Dyson for false advertising and Dyson counterclaimed based on SharkNinja’s packaging for the Shark Rocket upright stick vacuum, which claimed that the product “deep cleans carpets better vs. a Full Size Dyson.”

Twice the suction: On May 7, 2014, counsel for SharkNinja sent a letter to in-house counsel at Dyson, advising him that in July 2014, SharkNinja intended to launch a new vacuum, and that the performance capabilities of this new vacuum would render Dyson’s TTS claim literally false, though SharkNinja didn’t enclose any test results. On July 9, 2014, SharkNinja’s general counsel sent another letter, telling Dyson that the Shark Lift-Away was officially on the market, and that testing demonstrated that Dyson’s “twice the suction” claim was literally false. Dyson then bought Shark Lift-Away units for testing. By early September, 2014, Dyson had received both internal and third-party test results confirming that the Shark Lift-Away had more than half the suction of its models.

Dyson conceded that the launch of the Shark Lift-Away rendered its TTS claim literally false as of July 8, 2014. Dyson argued that it took prompt, commercially reasonable steps to remove the “twice the suction” claim from the marketplace, while SharkNinja argued that Dyson dragged its feet. Dyson did not begin stickering over the claim on product packaging in stores until mid-November, and SharkNinja argued that the false claim remained on the market until early 2015.

The court found that Dyson’s promptness, or lack thereof, was irrelevant to its basic liability.  Intent or lack of good faith isn’t required under the Lanham Act, which is a strict liability statute and which was enacted to remove the common-law requirements of intent to deceive/willfulness.  Dyson’s citation of cases in which courts allowed advertisers a reasonable period of time to remove false claims from the market involved court-issued injunctions.

The language of the statute is compulsory, and it includes no exceptions for cases in which a manufacturer undertakes good faith, commercially reasonable efforts to remove a false claim from the marketplace upon learning of its falsity. Good faith is simply not a defense to a false advertising claim under the Lanham Act. Thus, the case law and the statute seem to appropriately establish that an advertiser that puts a claim into the marketplace bears all of the risk of the claim being false or becoming stale. An approach that allowed such an advertiser to continue to benefit from false or stale claims, so long as reasonably commercial efforts were undertaken to remove the advertising, would not adequately disincentivize the behavior prohibited by the Lanham Act or foster vigilance about the accuracy of advertising claims. Further, it would unfairly shift the cost of stale or inaccurate claims from the sponsor of such claims to its competitors, as long as the sponsor made reasonable efforts to remove those claims.
Thus, SharkNinja was entitled to partial summary judgment on Lanham Act liability.  SharkNinja also showed that the “twice the suction” claim was material as a matter of law. Suction is an “inherent quality or characteristic” of vacuum cleaners, and materiality was presumed. Likewise, literal falsity leads to a presumption of deception. “Dyson is liable for any damages proximately caused by its false TTS advertising claims appearing after July 8, 2014, assuming that SharkNinja proves such causation and damages at trial.”  There were also factual issues about whether Dyson’s conduct was willful.

The Rocket “deep cleans carpets better than a full-size Dyson”: The claim had an asterisk, corresponding to a footnote that said “*Based on the Dyson DC40 ASTM F608 (imbedded dirt removal on carpet).” The comparative claim claim appeared on five out of the six box panels for the Rocket vacuum, but the footnote appeared only on one side panel, at the very bottom, in tiny print. Dyson argued that the disclaimer was too small and discreetly placed for consumers to take notice of it, so the claim made was that the Rocket outperformed every full-sized Dyson upright vacuum, which was false.

SharkNinja argued that its claims were literally true, but literal falsity is usually an issue of fact.  The factual dispute about what message was actually communicated couldn’t be resolved on summary judgment.  Dyson also argued misleadingness and offered a survey; SharkNinja challenged the survey, but the court didn’t find flaws sufficient to exclude it at trial.  As for materiality, cleaning ability is also an “inherent quality or characteristic” of vacuum cleaners, so materiality was presumed.

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