Competitor has standing to bring false association claims for false association w/3d party

FireBlok IP Holdings, LLC v. Hilti, Inc., 2021 WL 6049964, No. 3:19-cv-50122 (N.D. Ill. Dec. 12, 2021)

After Lexmark, can a competitor bring a false association claim when the false association is with an unrelated third party? This court answers yes, though limits the effect of that by applying what looks like ordinary false advertising analysis.

FireBlok owns a patent on a system and method for suppressing fire in electrical boxes using intumescent material. Through a licensing agreement, Hilti also markets and sells the Firestop Box Insert based in part on that same patent.

The labels of both products include the Underwriter Laboratories (UL) certification mark. Hilti claimed that it didn’t design the label, but that defendant RectorSeal did the final design.

RectorSeal also sells a product known as the Metacaulk Box Guard. Hilti was authorized to use the UL mark on its label through UL’s Multiple Listing service, which basically allows one product to piggyback off another identical product that is sold under another brand name. Through this process, the Firestop Box Insert was Multiple Listed with RectorSeal’s Metacaulk Box Guard, and thus—for a time—authorized to use the UL certification mark.

However, in 2008, “RectorSeal sent UL a letter withdrawing the Multiple Listing because it would no longer be manufacturing the Firestop Box Insert for Hilti, which was a requirement of the Multiple Listing program.” UL then allegedly withdrew the Multiple Listing, and therefore Hilti’s authority to use the UL mark on its labels. In 2019, RectorSeal requested that Hilti’s Firestop Box Insert be added back. Despite this, Hilti allegedly used the UL mark continuously during the period of noncertification.  FireBlok alleged that customers were likely confused into thinking that UL certified the Firestop Box Insert when it did not.

Illinois Uniform Deceptive Trade Practices Act: Plaintiff sought injunctive relief, which means that a “nonspeculative likelihood of future harm” is required under the statute (and, in federal courts, under Article III). It wasn’t enough to argue that RectorSeal withdrew the certification in the past and might do so again. Currently, the suggestion that the parties might mislabel the product was speculative.

Illinois Consumer Fraud Act: This requires that the relevant acts occur primarily and substantially in Illinois, but here they were nationwide, so that claim failed too.

Lanham Act claims did better. §43(a)(1)(A) false association with UL: FireBlok isn’t required to own the UL mark to bring a false association claim under Lexmark, since it established the relevant commercial interest and alleged proximate cause:

Nothing in the plain text of section 1125(a)(1)(A) requires trademark ownership. On the contrary, the text of the statute merely contemplates unfair competition that causes a likelihood that consumers will mistakenly believe the defendant’s product is sponsored by, affiliated with, or otherwise endorsed by another entity.

After all, Lexmark held that “the classic plaintiff in a Lanham Act case is one who is directly injured by a competitor’s false statements about its own goods or the goods of the plaintiff, and thereby induces customers to choose its goods over the plaintiff’s goods. That is precisely what FireBlok claims here.”

It was plausible that consumers would interpret the label to mean that the product was UL-certified and that this would cause them to purchase it instead of FireBlok’s product. This was literally false because the product was not UL-certified during the relevant period. “And literally false statements presumptively cause competitors harm.” [This is the ‘false advertising instead of likely confusion’ analysis I mentioned.]

§43(a)(1)(B): Same, without need to analyze materiality: “[B]ecause plaintiffs need not present evidence of actual consumer confusion in literal falsity cases, the only further requirement is that FireBlok has alleged that the literal falsity occurred in a commercial advertisement.” Materiality might have to be shown to avoid summary judgment, though.

RectorSeal argued that it couldn’t be liable for any false advertising on Hilti’s website, but the product label itself, which RectorSeal allegedly designed, also counts as a commercial advertisement. “Hilti and RectorSeal no doubt designed the label to entice customers into purchasing the product. Indeed, what other reason could they have for including the UL certification mark on the label?”