Monday, October 02, 2017

"information and belief" isn't enough to allege competitive injury in false advertising case

Brickstructures, Inc. v. Coaster Dynamix, Inc., 2017 WL 4310671, No. 16 CV 10969 (N.D. Ill. Sept. 28, 2017)

Brickstructures, a LEGO-structure-creating business, sued Coaster for breach of contract, breach of fiduciary duty, and false advertising under the Lanham Act. Given that the complaint’s allegations of diversity jurisdiction were insufficient, the court looked at the Lanham Act claims.  Brickstructures’ founder conceived of the idea of a brick-based roller coaster many years ago. He began by adapting a piece from a model roller coaster kit sold by Coaster, which used glue and not LEGOs, then reached out to Coaster to propose a possible partnership. The parties agreed to collaborate and their joint venture began a small production run of a brick-based roller coaster. After a thousand kits were made and sold, Brickstructures alleged, Coaster remitted far less than Brickstructures was due, and then stopped communicating.  Coaster then launched a successful Kickstarter campaign for a nearly identical toy.

The allegedly false claims were that Coaster’s solo kit, the Cyclone, was the first commercially available kit combining the leading block system with the Coaster Dynamix track system, that it was the first brick-based roller coaster of its kind and the first commercially available brick compatible roller coaster construction toy, and that it was created by the Coaster Dynamix team.

It didn’t matter that the parties weren’t direct competitors, because of Lexmark.  However, what must be pleaded (and proven) is that plaintiff suffered an injury to its sales or business reputation, and the allegations of injury, all stated on information and belief, were too conclusory and superficial to sustain this complaint under Twiqbal. “[W]here something is alleged which should be within a plaintiff’s personal knowledge, an information and belief allegation thrusts the complaint into the realm of speculation.” Reputational injury wasn’t outside Brickstructures’ knowledge.  And without an adequate allegation of injury, there was an Article III problem.  (Brickstructures definitely alleged a contract-based injury, but it needed a Lanham Act-based one.) 

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