Wednesday, July 25, 2018

Allegations of "copycatting" in high tech industry plausibly accuse target of patent infringement

Global Tubing LLC v. Tenaris Coiled Tubes LLC, No. 4:17-CV-3299, 2018 WL 3496739 (S.D. Tex. Jul. 20, 2018)

The parties compete in the market for coiled tubing products for the oil and gas industry. They and one other company allegedly dominate the “highly competitive” coiled tubing marketplace in the U.S. (Id.) Global Tubing characterizes that market as “a small, close-knit community,” in which “[e]verybody knows everybody.” Tenaris launched BlueCoil and Global Tubing subsequently launched Duracoil, both using a similar manufacturing process.

Global Tubing alleged false advertising based on several statements: (1) at “the primary industry trade show in Houston,” a Global Tubing employee asked Tenaris’s Chief Technology Officer whether he had seen Global Tubing’s product launch. He said he had, but could not speak with the Global Tubing employee because, in his words, ‘I can tell you right now we’re probably going to court.’ ” (2) At the trade show, attended by nearly all the customer base, Tenaris allegedly represented to existing and prospective Global Tubing customers that Duracoil was a “copycat” of BlueCoil. (3) A Tenaris employee allegedly told a Tenaris customer that Global Tubing “stole” the Duracoil name from Tenaris, which considered Duracoil as a possible name for the product that it eventually chose to name BlueCoil. (4) Tenaris’s CTO allegedly told a “coiled tubing sales representative”−not identified by name or employer that Tenaris had a patent that covered Duracoil, which was allegedly false because the relevant patent had not yet been issued. The rep allegedly responded by asking whether Tenaris would be owed royalties. Global Tubing also alleged that Tenaris accused Global Tubing of copying in filings to the PTO in responding to non-obvoiusness issues raised by the examiner.

The court declined to dismiss the false advertising claim.  Tenaris argued that the statements weren’t made in “commercial advertising or promotion.”  The key was whether Tenaris’s alleged statements were disseminated sufficiently to the relevant purchasing public, and the Fifth Circuit has said that “[w]here the potential purchasers in the market are relatively limited in number, even a single promotional presentation to an individual purchaser may be enough to trigger the protections of the Act.” Given the allegations, the complaint passed, though more specificity would be needed for summary judgment.  (The statements to the PTO weren’t “commercial advertising or promotion,” though.)

Tenaris argued that “copycat” was just puffery, which is exaggerated or vague. For 12(b)(6) purposes, the court disagreed:

Made in relation to a high-technology product used by a high-dollar industry, the suggestion of ‘copying’ could quite reasonably be interpreted as an insinuation of patent infringement. That a third-party customer sales representative thought Global Tubing might owe royalties to Tenaris indicates as much…. [T]he claim made here−that one company copied another’s technology−is one resolved frequently through patent litigation. It is therefore more appropriate to view the statement as one admitting of falsification and verification, rather than as one amounting only to bluster or opinion.

Tenaris argued that Global Tubing didn’t adequately plead injury or causation, given that it alleged that has received “very positive” feedback from customers.  Nonetheless, “[t]hough general, Global Tubing’s allegations sufficiently assert a plausible reputational injury from Tenaris’s statements.”

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