Monday, March 23, 2020

Mislabeled image of competitor's LED screen as LG's gets LG in trouble

Sansi North America, LLC v. LG Electronics USA, Inc., 2019 WL 8168069, No. CV 18-3541 PSG (SKx) (C.D. Cal. Nov. 14, 2019)

LG used a picture of Sansi’s LED displays in an article for a trade publication and accidentally labeled it as LG displays. This lawsuit followed.

LG is currently the only manufacturerer of OLED displays, “a specific, advanced, version of LEDs that allow for flexibility and superior viewing angles to standard LED technology.” In 2017, LG hired Robin Dugan to create an eBook about developments in the digital signage industry, with a focus on LG OLED displays. “The eBook included pictures of non-LG displays, including a featured photograph of a display at Salesforce’s San Francisco headquarters, which was produced by Plaintiff Sansi; the caption did not mention Defendant LG or OLED.” LG did ask if it had permission to use all of the images. Roughly a year later, LG hired NewBay Media to prepare a similar article for a magazine, Digital Signage Magazine, with about 11,000 subscribers. NewBay based some of its work on the eBook, and believed that the Salesforce display was OLED. It mistakenly captioned the picture of the display as an OLED screen, and mistakenly updated the caption to read “LG OLED.”  

The text then said: “The Salesforce San Francisco office has a custom-built LG OLED screen in their lobby that is 12K resolution, with over 7 million pixels, and measures close to 107 feet long. The content ranges from amazing waterfall visuals to California’s Redwood National Park and is synced with the local weather to play content that matches the weather.”

Initial book, which just said Salesforce had a custom-built screen:

Second version with wrong attribution:

Downloadable eBook version with wrong attribution:

A few months later, Sansi informed LG and NewBay of the problem; NewBay took down the online version of the article, and LG agreed to take steps to correct the mistake, including asking NewBay to remove the publications, working with NewBay to draft a correction, and advising marketing staff of the error and to correct any misidentifications of the project. Sansi nonetheless sued for false designation of origin, false advertising, trade dress infringement, trade libel, and unfair competition.

The court treated false designation, trade dress infringement, and unfair competition as the same claim with different names.  “[C]laiming another’s accomplishments and history as one’s own” can be false designation of origin (or false advertising). LG argued that no claim for reverse passing off could succeed because no product was sold.  Sansi argued that no physical removal of a name from a physical product was required, particularly where the plaintiff sells a service. The court agreed that Sansi’s claim was tenable because LG published an article containing an image of Sansi’s service [???] and labeled it as its own. “Other courts have upheld claims under § 1125(a) where the defendant has taken credit for and represented as its own the service or accomplishments of the plaintiff.” [The court does not discuss Dastar, though I think this does constitute an explicit misrepresentation of the origin of the item depicted in the picture, as opposed to anything about the picture itself.]

Was confusion likely? Sansi identified four clients and four industry contacts who indicated confusion about the caption. Anyway, actual confusion isn’t required [for (a)(1)(A)].

False advertising: The caption was a false statement of fact, and the evidence of some consumers’ confusion plus literal falsity allowed a presumption of actual deception and materiality. There was a genuine dispute of fact on materiality and deception.

Trade dress: LG argued that all aspects of the Salesforce display were utilitarian in that was a video screen; according to LG the only way to tell who designed the display would be to pull off the panel, or ask someone, and that the emitting of light was the display’s only function. In addition, Sanci didn’t own the shape of the display and content displayed.

Sansi argued that its display had elements that, combined, could be “distinctive and aesthetic” [sigh, very much not the same things; consider how many of the adjectives in the description mean “works better”]:

Sansi’s Salesforce display consists of a unique arrangement of numerous elements intended to make it more spectacular, attention-grabbing, striking, and unusual, all of which are hallmarks of Sansi’s unique designs and high quality products. For example, it is 107 feet long, when it could have just as easily been shorter. It has a 4 millimeter pixel pitch, when it could have used a different pixel pitch. It has approximately 8 million pixels, when it could have had less (or more). It has a hundred layers of processing to give it a three-dimensional effect, which is unique and not essential to the function of a digital wall display. Its shape follows the architecture of the building in which it is installed and surrounds the elevator bank entrances, when it could have simply been a rectangular shape above the elevator banks. Numerous other elements of the design were subjective choices by Sansi in order to make this a standout design, such as the selection of PCB board widths, product supply widths, the pitch distinction between product, the streamlined assimilation of the display design with the building architecture, and countless other design elements.

So many problems. None of this indicates distinctiveness in the trademark sense, and it definitely doesn’t mean distinctiveness for Sansi instead of for Salesforce, any more than an ad agency has trademark rights in the successful campaigns it does for others. Nonetheless, the court decided that “the Salesforce display including its size, pixel pitch, number of pixels, layers of processing, unique shape, and other elements of its design, taken together,” could be found by a jury to be “aesthetic and not entirely functional.” 

LG did at least get monetary remedies kicked out of the case (at least pending Romag). In the Ninth Circuit, disgorgement requires willful infringement. LG provided evidence that the caption was a mistake, and that LG took action as soon as it was discovered. Sansi didn’t provide any evidence to the contrary.  And Sansi couldn’t show actual damages in the form of lost profits or otherwise. “[C]ompensatory damages are appropriate only where a plaintiff has shown that in fact it has been injured; it still must present non-speculative evidence that goodwill and reputation—that is, the value of its mark—was damaged in some way.” Sansi was unable to show lost customers, sales, or other injury. Sansi doesn’t sell OLED products, so it can’t claim to have missed out on any OLED sales. And none of the companies whose people downloaded the NewBay feature placed an order for an LG LED display; only one bought an OLED, and that company had been an LG customer for years. Sansi asked its dealers why they weren’t giving more business to Sansi, and none mentioned LG as the reason.

Sansi argued that it had shown instances of confusion, and a sales decrease concurrent with the article’s publication, which an expert calculated as $6.88 million in losses, which it argued should be enough to get to a jury. However, Sansi didn’t disclose any damages calculations to LG during discovery or before the dispositive motion deadline.  Thus, the court declined to rely on the expert report now.   Given how generous it was to Sansi’s theory of the case, one wonders if the court would have looked favorably even on a fairly implausible damages calculation if it had been properly disclosed.

Trade libel: requires actual malice; none shown.

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