Thursday, March 09, 2017

"same quality as Made in USA" is not puffery, says magistrate

University Loft Co. v. Blue Furniture Solutions, LLC, 2017 WL 876312, NO. A–15–CV–826 (W.D. Tex. Mar. 3, 2017) (report and recommendation of magistrate judge)

University sued Blue alleging false advertising and trademark infringement under the Lanham Act, unfair competition under Texas and Florida common law and the Florida Deceptive and Unfair Trade Practices Act, and tortious interference with prospective business relationships. Blue allegedly falsely claimed that that: (1) it offers Chinese “high quality products made exactly as ‘Made in USA’ products”; and (2) it “is able to achieve low prices and fast delivery on such high quality products, because of the intimate relationship between the manufacturer and Blue’s president Jeff Zeng, and Blue’s understanding of how the local government in China operates.”  University alleged that the quality was not equivalent to “Made in the USA” products, and that the lower prices were due to evasion of customs duties, because Blue mislabeled its products as “steel” to avoid additional anti-dumping duties that are required for “Wooden Bedroom Furniture” imported from China. Finally, University alleged that Blue’s use of the mark “LOFT” for one of its furniture lines infringes on University’s registered and common law word and design trademarks.

The magistrate rejected Blue’s puffery argument.  As to the first statement, Blue argued that the statement was non-actionable in the context of other claims in the challenged article that Blue provided either “high quality, high price,” or “low quality, low price” products. But this explanation appeared pages before the allegedly misleading statement.  The relevant paragraph read:

The ability of my company to not ever have to worry about these issues and properly provide exactly what we had indicated we will, when we will, is amazing. Our process is very smooth and we continue to make our clients happy with the quality of our product. The price is always lower than the amount the client has to spend and they receive exactly what they ask for. When working with my owner, understanding that China has many amazing, high quality products made exactly as “Made in the USA” products is important. The only difference is that China offers these products for a much lower price.

The judge found that this statement “goes beyond mere puffery.”

Likewise, the statement that Blue’s low prices were based on a special relationship with the Chinese government was factual, and thus falsifiable.  Nor did the claim rely on an illegitimate attempt to bring a private claim based on evasion of the Tariff Act; University wouldn’t have to prove anything about dumping to prove  its claim, only that Blue’s manufacturer didn’t have a special relationship with the Chinese government; the assertion that the prices were lower because of tariff evasion could bolster the claim, but the claim itself wasn’t based on tariff evasion.  This reasoning also allowed the state law unfair competition claim to survive, and the magistrate recommended not deciding the choice of law issues as to whether Florida or Texas deceptive trade practice statutes applied.

Trademark infringement: Blue argued that University’s registration explicitly excluded the furniture that Blue Furniture sells under the allegedly infringing mark. University’s registration for LOFT explicitly excluded loft beds and furniture used with loft beds. (Imagine that.) Blue argued that all its furniture could be classified as furniture “used with” loft beds, because “loft furniture could include any furniture found or used in an upper room or floor.” The magistrate understandably termed this argument “nonsensical,” given that any type of furniture could potentially be placed in a “loft.” Plus, the scope of the registration didn’t go to protectability but rather to infringement.

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