Thursday, June 20, 2019

lack of specifics, even with certification involved, dooms falsity claim

Hydro-Blok USA LLC v. Wedi Corp., 2019 WL 2515318, No. C15-671 TSZ (W.D. Wash. Jun. 18, 2019)

Wedi and Hydro-Blok compete in the market for construction materials and sealants for use in bathroom systems, including showers. Wedi accused Hydro-Blok of infringing a patent in 2014; Hydro-Blok filed a declaratory judgment of non-infringement; this was dismissed after Wedi represented that it didn’t own and wasn’t a licensee under the patent.  Meanwhile, Wedi sued defendants for breach of contract and a variety of other claims. The parties were directed to arbitrate claims for breach of contract, breach of fiduciary duty, civil conspiracy, and unjust enrichment claims, and also arbitrated a claim under Washington’s Uniform Trade Secrets Act, which is, delightfully, known as WUTSA. The arbitrator mostly found against Wedi, and awarded it $1 in nominal damages on its contract claim.

What remained were tortious interference, Lanham Act, abuse of process, and Consumer Protection Act claims against various related defendants.  Wedi’s abuse of process claims failed.  Among other things, given its attorneys’ “repeated representations that wedi owned the ’900 Patent and intended to take legal action to protect ‘its patent rights,’ Hydro-Blok was not, as a matter of law, required to independently investigate whether wedi owned or was a licensee under the ’900 Patent before initiating the declaratory judgment action. Moreover, in asking wedi and wedi GmbH to identify the owners or licensees of the ’900 Patent, refusing to dismiss the declaratory judgment action in the absence of a covenant not to sue, and waiting until after wedi and wedi GmbH declared under oath that they did not own and were not licensees under the ’900 Patent to forego the litigation, Hydro-Blok did not, as a matter of law, engage in acts ‘to accomplish an end not within the purview of the suit.’” Gotta admit, none of that sounds even noticeably aggressive, much less an abuse of process. Nor was it abuse of process to counterclaim for abuse of process.  (This sounds like a fun litigation.)

False advertising under state and federal law:  The key issues here were puffery and falsity.  The following claims were puffery: “Cutting of product is dust free and quick”/“Environmentally friendly lightweight products with CFC-free XPS foam core”—both of which had to be understood as relative claims, since cutting mostly produces some dust or debris, and “environmentally friendly” implied a comparison as opposed to a promise to have no negative impact on the ecosystem.  [These seem like reasons to go for possible misleadingness over falsity, not reasons these claims are unprovable or even unbelievable.]  Also puffery because not measurable: “modified cement coating for maximum adhesion of tile & stone”/“When laid on a floor with your favourite tile or stone, it is commercially rated.”  I was a little surprised by the last—there was declaration testimony that “commercially rated” had meaning in the industry relating to specific ASTM standards and that the Hydro-Blok products were never tested using the relevant standard, which would indicate it’s not puffery, but the court concluded that more was required, since the claim didn’t say outright that it had passed ASTM testing and didn’t include the quantified rating language used by other competitors (indicating how many cycles of testing the tile survived), and there was no evidence that customers had been misled.

Other claims were puffery because they were general opinions of superiority: “the easiest, quickest and most user-friendly way to build a water-proof shower or tub surround at a price you can afford.”/ “the better, easier & more cost-effective way to build complete shower systems”/ “the most efficient, light-weighted [sic], 100% water-proof, tile-ready shower system, which can be installed within [sic] couple hours instead of days, by one person”/. “Speed and ease of installation for commercial applications can not [sic] be beat”/ “The BETTER Shower System.”

The remaining factual assertions, “All HYDRO-BLOK products are IAPMO tested & certified” and “100% WATERPROOF • HCFC-FREE XPS CLOSED-CELL FOAM CORE,” weren’t proven false. Although the IAPMO certification claim was made before the certification was officially issued, it did issue before any Hydro-Blok products arrived in the US.  Wedi didn’t show deception or injury associated with the premature announcement.  Nor did Wedi show that the IAPMO certification was either obtained or maintained improperly; the certification agreement barred Hydro-Blok from making any “substantial change” without prior written approval, which was defined as any change that would make any of the information on the IAPMO certification documents false or misleading, or would reasonably be deemed to cause the product to fail to conform to the applicable standards.  Wedi provided evidence of quality control issues and use of some different equipment and components, but didn’t show (or provide expert testimony) that they resulted in a “substantial change.”  With a later certifier, Wedi argued that it was false/misleading for the new certifier to rely on IAPMO testing and not its own independent testing, but the certification did in fact issue.  A “challenge to the method by which certification was granted does not form a basis for a false advertising claim under the Lanham Act or the CPA.”

HCFC-FREE XPS: Hydro-Blok products contain HBCD, a fire-retardant banned in Canada, but not in the United States, but HCFC seems to stands for hydrochlorofluorocarbons, substances composed of hydrogen, chlorine, fluorine, and carbon. HBCD or hexabromocyclododecane contains bromine and no chlorine or fluorine, and it is not an HCFC. Thus, the presence of HBCD didn’t make “HCFC-FREE XPS” false or misleading.  One test report did show testing for 62 CFCs and HCFCs; the test came back “not detected” for all but two, which had levels of 1.0 and 7.3 μg/g. “Although these levels are above the detection limit of 0.1 μg/g, they are nominal amounts,” and the testing entity concluded that the product had “—” ozone-depleting substance, making it “essentially ‘HCFC-free.’” 

There was still a triable issue on tortious interference, given that one individual concededly shared with some of the defendants confidential information, including financial data and customer lists, that he acquired while serving as Wedi’s sales agent.

No comments: