Monday, August 12, 2019

click tracking makes online false advertising harm reparable, preliminary injunction inappropriate

Carson Optical, Inc. v. Alista Corp., 2019 WL 3729460, No. 19-cv-1725 (SJF)(AKT) (E.D.N.Y. Aug. 8, 2019)

Carson sells three products on Amazon that have a magnifying mirror: a folding compact lighted mirror, a round lighted mirror with suction cup base, and a square lighted mirror with stand. According to defendant RQ’s principal Zheng, before February 2019, Carson didn’t advertise a cosmetic makeup mirror. RQ sells beauty products online, including the ten magnifying mirrors. Both parties buy magnifying products “from factories overseas—mostly in China—and brand them as their own for sale at wholesale (Carson) or direct-to-consumers (RQ).”

Carson alleged that the RQ defendants falsely advertised their products with “grossly overstated” magnifying powers. Though the complaint didn’t explain how Carson was harmed by RQ’s statements on its own website, RQ conceded that it predominantly “sell[s] mirrors and ... advertises on Amazon.” According to Zheng, “RQ received the magnification listed on its mirror products directly from its glass suppliers[,] ... simply uses the magnification given to it by its manufacturers and/or displayed in catalogs produced by the glass supplier for its manufacturer[,] ... [and] had no input on the magnification listed.” Defendant Alista sells the same mirrors as the RQ defendants and allegedly used the same false advertising claims.

Carson argued that it was harmed because, when the advertisements “are positioned on the product pages of Carson’s magnifying mirror products on[,] ... consumers are presented with the false [sic] choice of buying Carson’s product or buying the … falsely advertised product[,]”and (ii) they “falsely cause Carson’s products to appear technically inferior and over-priced, when compared to Fancii’s products.”

Carson’s attempt to get a preliminary injunction on its Lanham Act claims failed for want of irreparable harm. Under Salinger v. Colting, “the court must not adopt a ‘categorical’ or ‘general’ rule or presume that the plaintiff will suffer irreparable harm (unless such a ‘departure from the long tradition of equity practice’ was intended by Congress).” Salinger was a copyright case, but the Second Circuit found that eBay applies unless the relevant statute instructs otherwise; the Lanham Act does not, and indeed specifies that injunctions should be based on the principles of equity, and “eBay strongly indicates that the traditional principles of equity it employed are the presumptive standard for injunctions in any context.”

Still, though “general historical practices in comparative advertising cases do not necessarily entitle plaintiff to injunctive relief based upon a presumption of injury, they may be ‘helpful and instructive’ in discerning and applying the eBay standard for granting injunctive relief ‘when the circumstances of a case bear substantial parallels to litigation the courts have confronted before’” (citing Kennedy’s eBay concurrence). Although often “[i]t is virtually impossible to prove that so much of one’s sales will be lost or that one’s goodwill will be damaged as a direct result of a competitor’s advertisement[,]” that’s not true here. Even assuming that there’s way to track “the precise number of customers” within the Amazon marketplace who ultimately elected to buy defendants’ product over plaintiff’s product “after being confronted with the false … advertising on Carson’s product pages[,]” when a consumer clicks on one of defendants’ challenged ads appearing on the page listing Carson’s product, Amazon apparently does track at least the number of clicks. That maximum number means that “plaintiff’s losses are measurable and can be sufficiently remedied by an award of monetary damages.”

Carson’s “conclusory” assertions of irreparable harm to its goodwill and the value of its products in the minds of the consumer, without more, were insufficient. And its claim was further weakened “by the lack of any apparent causal connection between the advertisements and its own sales position,” since Carson only hired its optics expert because, three years ago, it discovered that RQ’s magnifying glasses were being sold with overstated magnifying power claims and it wanted to know whether the mirrors were doing the same. Although the expert opined in January 2019, Carson waited more than two months to sue, and sought injunctive relief a week later, suggesting a lack of irreparable harm.

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