Thursday, September 26, 2019

chilling effect: competitor's name in text of keyword ad requires extreme care


TSI Prods., Inc. v. Armor All/STP Prods. Co., 2019 WL 4600310, Nos. 17-cv-01131, 18-cv-1682 (MPS) (D. Conn. Sept. 23, 2019)

TSI sued defendants for trademark infringement, unfair competition, and false advertising under the Lanham Act; for Sherman Act violations; and for violations of the Connecticut Unfair Trade Practices Act (CUTPA). Astonishingly, all claims survived a motion to dismiss.

The parties compete in the market for do-it-yourself refrigerant products and recharge kits, which permit car owners to recharge their vehicle air conditioning (AC) systems on their own. They’re sold in specialty automative stores and automotive departments of stores such as Walmart. “[T]he non-value-added refrigerant category consists mainly of cans of R-134a refrigerant, without any included additives, tools, gauges, or hoses.... [T]he category of value-added automotive AC recharge kits consist of cans of R-134a refrigerant that also typically contain some combination of additives, lubricants, hoses, gauges, or other tools.” The parties compete in both categories.

TSI sells its refrigerant and recharge kits under the brand names AVALANCHE, AC AVALANCHE, and BLACK DIAMOND AVALANCHE. TSI has registrations for AVALANCHE and BLACK DIAMOND AVALANCHE. It claims rights in the mountain logos used with its word marks.

Armor All bought “AC AVALANCHE” as a Google ad word, putting an Armor All ad at the top of the search results. Armor All allegedly “made no effort to distinguish themselves and their products from TSI, either in the Google ad itself or on the linked AC Pro Website webpage.”

Prior to 2017, Armor All allegedly did not “utilize any mountain imagery in its packaging of ARCTIC FREEZE products,” but started using one that allegedly “looks confusingly similar” to the mountain logo on TSI’s products and “causes customer confusion as to the source of the goods.”

TSI also alleged that Armor All made a number of misrepresentations about its own products, e.g. “Our kits come with everything you need to recharge your system with no additional tools or equipment,” “fast, easy and accurate recharging,” and “just three easy steps.” For its refrigerant, it claimed “#1 Rated Coldest Air” and “#1 Coldest Air,” “Formula with 2X cooling boosters vs. the next leading brand of AC recharge kits: independently tested to deliver the coldest air from your vehicle’s AC,” and “A/C PRO ultra synthetic refrigerant kit features a specially designed formula that helps a vehicle’s A/C produce the coldest air.”

In the smaller “market for value-added auto AC recharge kits in the United States,” Armor All had an estimated market share of 88% in 2017. TSI is Armor All’s largest competitor in terms of market share, with approximately 10% share , and prior to TSI’s entry into the value-added AC recharge kit market in 2015, Armor All did not face substantial competition in that market. Armor All allegedly paid off retailer Advance Auto “to renege on its agreement with TSI and refuse to allocate shelf space to TSI’s products,” and made a similar deal with Pep Boys. 

Armor All also sent TSI a letter alleging infringement of two patents. TSI hired a lawyer and responded. Neither Armor All nor its predecessor allegedly had a “good faith belief that TSI infringed” either patent. Armor All allegedly “notified retailers within the relevant market” about the companion lawsuit consolidated with this one, which Armor All filed against TSI in 2017.

Keyword ads: although this is worded broadly, Armor All used TSI’s mark as the beginning of its ad text in a way that wasn’t explicitly comparative, and that’s clearly vital.  Edible Arrangements, LLC v. Provide Commerce, Inc., No. 3:14-CV-00250 (VLB), 2016 WL 4074121, at *11 (D. Conn. July 29, 2016), adopted the “perspective of a user of the internet search engine at issue,” and focused particularly on “(i) the strength of the plaintiff’s mark as a unique search term related to a distinct line of products, ... (ii) the similarity of the marks and whether the defendant’s mark draws a clear distinction as a competing brand.... [and] (iii) what the consumer saw on the screen and reasonably believed, given the context.” Armor All contended that “the purchase of a competitor’s marks as keywords alone, without additional behavior that confuses consumers, is not actionable.” TSI alleged that the displayed ad looked like this:




To be clear, A/C Pro is the competing product.  Armor All argued that the result was prominently labeled as an ad, that it was only one of several ads, and that the webpage hosted at the link address didn’t “any reference to TSI or its AVALANCHE products.” Mot. to Dismiss, ECF No. 102 at 16. Armor All it argued that the structure of the advertisement itself (“AC Avalanche – A/C Pro Saves You Time & Money – acprocold.com”) separated the search term (“AC Avalanche”) from Armor All’s “comparative advertising slogan,” making confusion unlikely.

The court disagreed, and I do too. Drawing all reasonable inferences in favor of TSI, the combination of keyword purchases plus ad text was plausibly confusing. “AC Avalanche” and “A/C Pro” weren’t presented as competing brands in the context of the advertisement. This was not, as alleged, a clear “three-part structure: ‘[search keyword] – [advertising slogan] – [website address].’ ” As the court pointed out, in the example shown, other sponsored advertisements use hyphens but follow different structures: the other two sponsored ads didn’t use the “AC Avalanche” search term at all, and neither appeared to use two competing brands or companies. “Try Pepsi – It is Better than Coca-Cola” or “Stop Collection Calls—is Allied Interstate Calling You” have been found nonconfusing, but the ad here made no clear distinction between the terms. “The overall context makes it plausible that the hyphen implies association rather than disassociation.”


Avalanche mountain logos

Armor All Arctic Freeze
The mountain logo unfair competition/infringement claim also survived. This one is a harder sell for me on plausibility—I would think that absent more similarity in the words, the use of the mountain concept in very different forms isn’t plausibly confusing—but Armor All focused on ownership (not suitable for resolution on a motion to dismiss) and argued that its 2014 registered copyright on its “ARCTIC FREEZE Mountain Label” used a mountain logo and preceded TSI’s alleged first use of the mountain logos in 2015. That failed because owning a copyright isn’t a defense to infringement (though that’s not exactly the claim here, which is priority-based, not copyright-ownership-based; the copyright registration is judicially noticeable evidence of use preceding plaintiff’s claimed first use).  The court nonetheless accepted the factual pleading that Armor All did not use any mountain imagery on its refrigerant products until 2017.  (I wonder about whether there’s any exposure to fees if in fact the 2014 use really reflects what was on the market and TSI persists in this claim.)

False advertising: The court can kick claims based on clearly subjective opinions out on a motion to dismiss, but should dismiss false advertising claims only if the statements “fall comfortably within the category of non-actionable puffery.”

Recharge kit statements: Armor All’s kits consist of refrigerant, a hose and trigger dispenser, and a gauge that measures the “pressure on the low side of the AC system” and indicates a “suggested fill range.” TSI alleged that measuring the pressure only on the low side of a car’s AC system can “lead to unusable and inaccurate pressure readings” for the “[m]any AC systems [that] use a BLOCK or TXV valve [to] regulate the flow of refrigerant.” This can lead consumers to overcharge their systems, which is are costly to repair. Based on these allegations, TSI alleged that statements such as “Our kits come with everything you need to recharge your system with no additional tools or equipment,” “Extends A/C/ Life,” “fast and accurate recharging,” and “The trigger dispenser and measuring gauge make filling your system to the proper level fast and easy” were literally false and misleading.

Some of these statements—such as “Extends A/C Life,” “Protects [A/C] System,” “just three easy steps,” and “Easy as 1, 2 ... Squeeze”—were non-actionable puffery, as did use of the terms “fast,” easy,” “convenient,” and “a breeze.” However statements were specific enough to be actionable. “All-in-One Kit” and “Come with everything you need to recharge your system with no additional tools or equipment” implied and outright stated, respectively, that “no additional tools” were needed to recharge an AC system. Based on TSI’s allegations, these statements were false because “[a]dditional tools and equipment are required to safely recharge AC systems with BLOCK or TXV valves” using Armor All’s kit.  Likewise, claims to provide “accurate” recharging and “make filling your system to the proper level fast and easy” were statements of measurable fact that were allegedly false.

Refrigerant formula: Armor All’s products contain lubricants and additives in addition to refrigerant. TSI alleged that other AC recharging products sold in the United States contain only refrigerant (R-134a), and that a can containing only refrigerant will create colder air than a can of equal volume that contains refrigerant along with lubricant and/or additives. Thus, it alleged that the following statements were false: “#1 Rated Coldest Air” and “#1 Coldest Air,” “Formula with 2X cooling boosters vs. the next leading brand of AC recharge kits: independently tested to deliver the coldest air from your vehicle’s AC,” and “A/C PRO ultra synthetic refrigerant kit features a specially designed formula that helps a vehicle’s A/C produce the coldest air.”

Armor All argued that many courts have found “referring to a product or service as ‘#1’ with regard to an industry or quality” to be puffery. But not so here. “#1” advertising statements are non-actionable “when it is unclear how a property should be measured.” But “coldest” is a statement of superiority in a specific, measurable attribute. Courts have indeed been skeptical of superlatives, but “coldest” is not the same type of superlative as “best” etc.  It is objectively verifiable. Armor All’s claims that its products ave been “independently tested to deliver the coldest air from your vehicle” and contain “a specially designed formula that helps a vehicle’s A/C produce the coldest air” stated even more specifics; “claims of testing are typically actionable.”

The antitrust claims survived too—surprise!

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