Friday, April 12, 2019

Non-party video provides plausibility to falsify claim that hose is "tough enough to tow a truck"

Telebrands Corp. v. Ragner Technol. Corp., No. 16-3474 (ES) (MAH), 2019 WL 1468156 (D.N.J. Apr. 3, 2019)

“The dispute between these parties spans multiple lawsuits, multiple jurisdictions, and even multiple countries.” Ragner owns patents for expandable hoses.  Telebrands sells expandable hoses and is the exclusive licensee of another patent directed to expandable hose technology.  It filed for declaratory judgmeint that the patents-in-suit are invalid and that Telebrands has not infringed any of them, and Ragner counterclaimed for infringement, unfair competition, and false advertising.

Defendants alleged that one video falsely and misleadingly stated that the Telebrands product was “strong enough to pull this 5,000 pound SUV,” while another falsely and misleadingly stated that the product was “tough enough to tow a truck.” Defendants also alleged that Telebrands improperly obtained a Ragner prototype from a third party, and then used that prototype to develop its products.

Telebrands argued that Ragner didn’t plead literal falsity because “[i]t’s strong enough to pull this 5,000 pound SUV” and “[i]t’s tough enough to tow a truck” “only communicate a message that the hoses could pull the vehicles shown in the advertisements—not that the hoses could pull a vehicle generally.” The court disagreed; Ragner pled that “[e]ach of [the previous] statements is unequivocally false.” It provided a link to a non-party video purportedly demonstrating the falsity of the statement. “These pleaded facts, accepted as true and read in a light favorable to Defendants, lead to the reasonable inference that the statement in the video is unambiguous and false, or at least that it has a tendency to deceive.” [Note that consumers are often not treated nearly as well when submitting evidence that third parties have tested and disagreed with an advertising claim.]

Defendants adequately pleaded materiality by alleging that “[u]pon information and belief, [Telebrands’] false and misleading advertisements led to increased sales of Pocket Hoses, to the detriment of Defendants.” This led to the reasonable inference that the deception “is likely to influence purchasing decisions.” Telebrands argued that “[i]t is implausible that any customer is being induced to purchase the POCKET HOSE products to pull their vehicles,” but acknowledged that the video ads spoke generally to the high strength of the products, which could plausibly influence purchase decisions.

Likewise, the statements weren’t puffery as a matter of law. “The claims at issue appear specific (e.g., ‘[i]t’s strong enough to pull this 5,000 pound SUV”) and directed to a product attribute that the Court at this stage can only assume is measurable (i.e., strength).”

A counterclaim for tortious interference with prospective advantage also survived, based on the alleged improper taking of Ragner’s prototype, even though Telebrands argued that Ragner’s failure to identify a specific, interfered-with transaction was fatal. The court found this “meritless.”  Courts have found ‘a reasonable expectation of economic gain in as slight an interest as prospective public sales.’ ”  As to malice and causation, “[i]f anything constitutes the ‘luring away, by devious, improper and unrighteous means, of the customer of another,’ it is taking a confidential and proprietary prototype of another and selling your own version of it to their prospective customers.”

However, the counterclaim for misappropriation of intellectual property under New Jersey law failed. Allegedly, counsel at defendants’ law firm copied claim language from the patent exclusively licensed to Telebrands into patent applications that issued as Ragner patents; during prosecution, the inventors and Frost Brown did not disclose this conduct to the USPTO, in violation of their duty of candor; and because of this improper conduct, the patents were obtained fraudulently. “The Court is not aware of any New Jersey state court or federal court decision recognizing misappropriation of a patent, or the legal language contained in a patent claim, as a valid cause of action.” And as pled, it would be preempted by federal patent law anyway, despite Telebrands’ argument that there was an additional element of direct competition.  [Which wouldn’t seem to solve the conflict/field preemption problem anyway.]

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