Friday, November 24, 2017

Allegedly outdated comparison not enough to justify TRO in sophisticated industry

NEXTracker, Inc. v. Array Technologies, Inc., 2017 WL 5625926, No. 17-cv-06582 (N.D. Cal. Nov. 22, 2017)

The parties (NX and ATI) compete in the market for solar tracking devices, which “adjust the positioning of solar increase the efficiency of their solar power capture.” In September 2017, TUV, “which appears to be a non-governmental testing and assessment organization,” issued a report comparing the operational costs of two different solar tracking architectures and concluding that “Architecture 1” -- a tracker “driven by a single motor linked by a rotating driveline to multiple tracker rows” -- is associated with lower lifetime operational costs than “Architecture 2” -- “a system where each row operates as a self-contained unit with...dedicated tracker system components.” NX alleged that “Architecture 1” is ATI’s technology and that “Architecture 2” shows an NX product.

Apparently in response to NX’s objections, TUV retracted the report, but NX alleged that ATI widely disseminated the report both before and after the retraction.  NX sought a TRO based on its false advertising, trade libel, and defamation claims, which the court denied.

First, NX didn’t show falsity or misleadingness; the TUV report didn’t mention NX or its products by name, and though it showed an NX product, NX didn’t provide evidence that the relevant claimed trade dress (NX’s “signature gold-colored paint” and “distinctive curve-shaped tube”) had acquired secondary meaning such that consumers would perceive a reference to NX systems in particular, rather than “Architecture 2” systems in general.  

Even assuming that the association existed, NX still failed to show likely success on the merits.  NX argued that the report was false or misleading because “Architecture 2” was a three-year-old NX design, whereas the system described as “Architecture 1” was ATI’s latest tracker.  But the report didn’t purport to compare systems of the same generation or age, and it wasn’t false or misleading just because it compared systems of two different vintages.  “Such a comparison may even be useful in the solar industry because, as NX itself argues, ‘Solar trackers are a long-term investment -- they can remain operational for many decades.’ It also seems possible that solar industry participants savvy enough to identify ‘Architecture 2’ as an NX system might also recognize that the featured device was not necessarily the latest model.”  Nor did the record justify a finding that the report falsely described the NX system, as NX alleged. NX claimed that the report made false statements about its gears, its positioning of solar modules, and its use of struts, but never clarified whether those statements were false only as to current NX products or as to the prior ones too.  ATI argued in opposition that the statements were true for the tested NX products, which was uncontested in NX’s reply brief.

Although TUV retracted the report, the evidence showed that NX’s objections, rather than independent concerns about the veracity of the report, drove the retraction, stating that TUV  “did not subjectively entertain any serious doubt about the truth of the statements in the report,” but still believed that it was “in the best interest of all parties to retract the Report and conduct a diligent investigation of NEXTracker’s allegations about the Report.”

The court also declined to find irreparable harm likely; much of the harm alleged by NX likely already occurred because of the report’s alleged wide dissemination.  Although NX argued that a TRO could help at the margins, NX “fail[ed] to quantify the reputational injuries it will suffer if ATI continues to distribute the report” and thus failed to show irreparable injury.

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