Monday, December 07, 2020

false designation of origin that fools Customs, not consumers, is not actionable

Diamond Sawblades Manufacturers’ Coalition v. Diamond Tools Tech., LLC, 2020 WL 7028029, No. 1:19-cv-04674-TWP-TAB (S.D. Ind. Nov. 30, 2020)

Plaintiffs sued defendants for RICO and Lanham Act violations and for prohibited predatory pricing, tortious interference, and civil conspiracy under state law.  

In May 2005, DSMC petitioned the Commerce Department and the ITC “asserting that certain foreign manufacturers of diamond sawblades were selling their products in the United States at dumped prices.” In 2009, Commerce published an “Antidumping Order” on diamond sawblades and parts thereof from China, having determined that imports from China were being “dumped” at prices below fair value and that this actually threatened the U.S. industry for diamond sawblades with material injury. Commerce thus halted imports. The order was reissued five years later after a review.

Defendants allegedly circumvented the Antidumping Order, opening “shell facilities in Thailand and Canada—countries that are not subject to the Antidumping Order—through which to fraudulently ship Chinese goods to the United States as ‘Thai’ or ‘Canadian’ goods” after relabeling, and at times, minor labor on the sawblades. Commerce and DHS therefore “issued anticircumvention decisions and findings of wrongful evasion of the Antidumping Order.” Despite the Antidumping Order, domestic consumption of subject imports was even higher than during the original period of investigation; many domestic producers were simply forced to leave the industry. “Indeed, of the original nine members of the domestic Diamond Sawblades Manufacturers’ Coalition, only two remain.”

The RICO claims failed because they were RICO claims.

False designation of origin: the court indicated that this had to be a false advertising claim because §43(a) requires confusion over affiliation with/approval by another party. The claim failed because the allegedly fraudulent relabeling of origin deceived Customs, not consumers. (I don’t see why the precedents saying that deception doesn’t have to be of end consumers to count shouldn’t extend here, given a strong but-for causation argument that the end consumers could never have bought the products without the deception.)  The court reasoned that the complaint failed to allege “that any mislabeling regarding national origin would likely dupe the consuming public into buying the products of Defendants instead of those of its members.” This wasn’t a case of false US origin labeling—false designation as products of Thailand or Canada wasn’t relevant to consumers. The arguments that the materiality of literal falsity could be presumed, and that Chinese products might be especially unattractive to US consumers, failed, as did the argument that the “false labels enabled them to sell the products at issue well below fair value—i.e., at much cheaper prices—which plainly influences consumers’ purchasing decisions.” The complaint simply didn’t allege how these labels would materially affect a consumer’s purchase, even if the briefs argued for something special about Chinese origin labeling.

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