Board-Tech Electronic Co. v. Eaton Corporation, Cooper
Wiring Devices, Inc., --- Fed.Appx. ----, 2018 WL 2901336, No. 17-3829-cv (2d
Cir. Jun. 11, 2018)
Board-Tech and Eaton compete in the market for decorative
light switches. Underwriters Laboratories (UL) is an independent entity that
tests, verifies, and endorses the safety of various electronic products; its
imprimatur is commercially necessary for light switches in the US. UL licenses the “UL 20” certification mark to
products that meet its safety standards. Manufacturers must submit
“representative samples” of their product to UL; if the samples pass the tests,
UL authorizes the manufacturer to advertise and label its products as “UL 20”
compliant.
Eaton markets its light switches as UL 20 compliant. Board-Tech
alleged that its in-house engineers independently tested UL 20 compliance of
eight sets of six light switches and that each of the 48 light switch units
failed. Thus, it alleged false advertising, despite Eaton’s authorization from
UL to use “UL 20.” Board-Tech didn’t send its test results to UL, and UL has
taken no relevant action.
Board-Tech’s allegations couldn’t establish literal falsity,
because they didn’t negate the fact that the product was indeed certified by
UL. Board-Tech argued falsity by
necessary implication: UL 20 certification necessarily implies that the product
purchased will hold up to the UL 20 standard. But UL certification represents that a sampling
of products complied with UL standards when UL tested the products, not that
every single unit will perform the same way when tested by different entities. “To
satisfy literal falsity under a theory of necessary implication, Board-Tech
needs to allege sufficient facts to show that Underwriters Laboratories
considers Eaton’s products non-compliant—not just that someone else does…. Board-Tech’s
testing, absent additional indicia of non-compliance, does not render Eaton’s
use of the UL 20 mark literally false.” This
contrasted to a previous case where the competitor’s product was altered and
found on retesting by UL to be non-compliant.
In that case, “[h]olding [a product] out to be UL approved” after
materially changing it “constituted a false representation.” “Without any
indication that UL decertified the defendant’s product—or (perhaps) that the
defendant’s product had materially changed since certification—there would be
no plausible allegation of a false statement.” This has a Twiqbal twist: “To merit discovery into its competitor’s product
lines and tradecraft, Board-Tech must ‘raise a reasonable expectation that
discovery will reveal evidence’ tending to show UL would find Eaton’s products
non-compliant.”
[Query: would Volkswagen’s defeat devices for emissions
tests satisfy the court’s qualifications?
I can see it argued either way.
The problem is what it would mean for UL to “consider[]” (present tense)
products non-compliant. Is it literally
false once you allege facts that, if true, would establish that no reasonable
entity could consider its standards satisfied? That seems to be one reading of
the “additional indicia” line. Or do you have to allege that the entity has
come to a decision on the matter? I think the court wants to preserve space for
the Volkswagen situation to be literally false by necessary implication, but it’s
a bit tricky to do! Certainly the VW product didn’t materially change since
certification; it just acquired that certification through falsehood.]
What about misleadingness? That requires extrinsic evidence,
and the complaint didn’t offer other than conclusory allegations that consumers
had been misled or confused.
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