Tuesday, January 14, 2020

confusion is not irreparable harm in false advertising case

AMETEK CTS US, Inc. v. Advanced Test Equipment Corp., No.19-cv-02348-H-AHG, 2020 WL 133888 (S.D. Cal. Jan. 13, 2020)

The parties operate in the market for “sophisticated electronic instruments in the automotive, telecommunications, energy, aerospace, power, research, medical and industrial markets.” AMETEK sells directly to consumers and also distributes its products through commercial partners, while defendant ATEC has been a distributor of AMETEK’s products. In late 2019, AMETEK informed ATEC that it would have to “decline the opportunity for non-warranty service requests on behalf of ATEC going forward.” “Defendant responded negatively to this development.” ATEC issued a press release titled “AMETEK CTS No Longer Calibrating or Repairing Equipment After The Warranty Expires,” disseminated through its website, social media, and email. AMETEK began to receive inquiries about this from various customers and distributors. Although ATEC offered to publish a retraction prepared by AMETEK, AMETEK instead sued and sought a TRO, which the court here denied. ATEC represented to the Court that “the press release with the allegedly false statements at issue in the complaint had been taken down from ATEC’s website and that ATEC would not disseminate similar statements” during the course of this litigation.

The court held that AMETEK failed to show both irreparable harm and likely success on the merits. “Although loss of goodwill may constitute irreparable injury, the loss must be based on factual allegations and not be purely speculative.” Here, the evidence offered by AMETEK showed, “at most, that some consumers were confused by ATEC’s press release. However, the Ninth Circuit has explained that customer confusion is not the same thing as irreparable harm.” None of the customers stated that they now had a negative impression of AMETEK or that they’d refuse to deal with it in the future—these weren’t like “numerous and persistent complaints from would-be customers” or actual product complaints as a result of the disputed conduct.  Likewise, a VP’s declaration asserting that “AMETEK’s reputation in the marketplace has been harmed by ATEC’s false statements” and that “AMETEK expects to lose future sales” as result of ATEC’s conduct was too conclusory.

Success on the merits: AMETEK argued that ATEC’s statements about the scope of AMETEK’s post-service warranty were literally false, because “AMETEK CTS No Longer Calibrating Or Repairing Equipment After The Warranty Expires” indicated that it was no longer calibrating or repairing equipment after the warranty for any purchaser. The body of the press release said that “AMETEK CTS has notified [ATEC] that they would no longer be supporting their products after the warranty period has expired.” In fact, AMETEK argued, it was still supporting these product lines after warranty as long as the relevant machines were not purchased by ATEC. ATEC argued that its contested statements were true in the context of the entire press release.  The court found numerous disputed issues of fact precluding a finding of likely success—both parties’ arguments were reasonable. The argument that the subject line was misleading was “not without merit,” but ATEC’s reference to the context of the full release was “also compelling.”

However, the case was not moot simply because ATEC removed the offending statements from public view. ATEC made no argument that its behavior “could not reasonably be expected to recur.”

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