trolling over gnomes--no, really--on Amazon

Shenzhen Tange Li’an E-Commerce Co. v. Drone Whirl LLC, 2021 WL 3474007, No. 1:20-CV-00738-RP (W.D. Tex. Aug. 6, 2021) (R&R)

Shenzhen sought a declaratory judgment that a design patent for a toy gnome figurine was unenforceable and invalid, given that defendant/counter-plaintiff Tatiana Mironova allegedly purchased its stuffed gnome toys, then switched manufacturers and obtained a patent for an identical ornamental design without authorization. Mironova then allegedly filed intellectual property complaints against its storefront on Amazon.com fraudulently claiming infringement of her patent rights and copyrights. Amazon delisted Shenzhen’s products. Shenzen also brought claims under Texas law for unfair competition, tortious interference with existing business relationships, fraud, and business disparagement. (The parties agreed to judgment on the pleadings holding a key patent invalid. Nonetheless this is now a patent case.)

The defendants (collectively Drone Whirl) counterclaimed that Shenzhen retaliated after Drone Whirl stopped buying gnome dolls from Shenzhen by interfering with Drone Whirl’s business on Amazon.com. Shenzhen allegedly placed orders without paying for them to “lock up” Drone Whirl’s gnome inventory; bribed Shenzhen’s customers to submit bad reviews of Drone Whirl’s products; and distributed pamphlets to its customers containing false or misleading statements about Drone Whirl’s products. It counterclaimed for unfair competition under the Lanham Act, as well as Texas common-law claims of fraud, breach of contract, business disparagement, and tortious interference with existing and prospective business relations.

In relevant part, the Shenzen pamphlet began:

We are aware that there are a number of companies who are committing design infringements on our products. Producing versions of our products and selling them on the internet, particularly AMAZON. Using our products description, our pictures that we have taken of our own products even our brand to falsely exploit our reputation, in order to make quick sales. Then, they are manufacturing cheap imitations with the intent of selling them. There are only 3 shops (shop name: ITOMTE, ITOMTE INC., Hi Gnome) that are currently authorized to sell our products on AMAZON ....

Not discussed in the opinion, but relevant—the pamphlet offers various incentives for reviews of competitors. Is this legitimate, either under general advertising law, or Amazon policy?

Without discussion of the broader caselaw about legal claims, the magistrate concluded that stating that a company engaged “design infringements” to manufacture products that are “cheap imitations” of Shenzhen’s “authorized” products were all “statements of fact that are capable of being proved false or misleading.” Alleging that these statements disparaged Drone Whirl (not named, but implicated) and that they were likely to confuse consumers was sufficient for falsity/misleadingness, and alleging that the statements were in emails and a pamphlet sent to customers was sufficient to allege commercial advertising/promotion.