Friday, August 23, 2019

failure to disprove other possible sources of sales defeats irreparable harm in false ad/patent case

Citrix Systems, Inc. v. Workspot, Inc., 2019 WL 3858602, No. 18-588-LPS (D. Del. Aug. 16, 2019)

Citrix sued Workspot for patent infringement as well as false advertising/unfair competition under the Lanham Act, the Delaware Deceptive Trade Practices Act, and common law. Here, the court denied a preliminary injunction.

Lanham Act: Four of the challenged statements characterized Workspot’s products as being significantly faster to “roll out” or having significantly less “time to value” than Citrix’s products – minutes versus months. Citrix argued that this was literally false because some Citrix products can be rolled out in minutes or hours. The court found no literal falsity; the statements “only vaguely refer to Citrix products (leaving it to the audience to determine which products are comparable) and use terms like ‘time to value’ and ‘roll-out’ that have no clear and unambiguous meaning (at least on the record developed to this point).” Citrix even admitted that these terms were “subjective and require the customer’s input, so there is no way to quantify them.”

Other challenged statements characterized Workspot as having a feature velocity (the pace of adding new features) of days, as against Citrix’s feature velocity of months or more. Citrix again argued literal falsity because some cloud-hosted Citrix products are updated on a daily to two-weekly basis, but admitted that at least some of its products were undisputedly on a 12-month release cycle when the statements were made, and the Citrix comparison didn’t specify, so there wasn’t literal falsity. [Note that if the statements had remained in the market, they could have become false without further action on Workspot’s part if Citrix had upped the feature velocity of all its products.] There were similar disputes about when Citrix acquired “automatic scaling.”

Anyway, there was no irreparable harm, either for the patent infringement or the false advertising. For patent, Citrix presented no evidence directly tying  demand for Workspot products to the allegedly infringing features. Citrix relied on Workspot marketing materials, which promoted allegedly infringing features of Workspot’s product. “At best, Citrix has demonstrated that Workspot considers the touted features important to customers. This, by itself, does not satisfy Citrix’s burden on the causal nexus requirement.”

For false advertising, too, Citrix failed to show a causal nexus between the allegedly false statements and the purported harm, such as evidence that a Citrix customer has or likely would switch to Workspot because of the allegedly false statements. Direct competition + comparative advertising + the fact that a majority of Workspot customers are Citrix customers + evidence that “Workspot has successfully pursued ‘Citrix refugeees’ and [has] taken ‘Citrix technology off the table’ through its use of ‘BS’ advertisements” wasn’t enough. None of this showed that it was the false ads, “as opposed to, for example, better prices or better non-patented technology,” that likely caused Citrix customers to switch to Workspot. Workspot didn’t characterize its own advertisements as “BS;” instead, the employee Citrix quoted stated that “no one has called BS on our [total cost of ownership] slides.”

To me, disregarding companies' own marketing materials and internal beliefs about what drives sales is pretty extreme--and note the contradiction with how it works in trademark, where bad faith (often quite broadly defined) will be presumed to have succeeded.

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