Friday, January 13, 2023

false advertising doesn't get around Dastar without some direct statements

Wolf Designs LLC v. Five 18 Designs LLC, --- F.Supp.3d ----, 2022 WL 10551564, No. CV-21-01789-PHX-ROS (D. Ariz. Oct. 18, 2022)

Wolf designs and installs “vehicle wraps,” large vinyl graphics or decals applied to car bodies. Five 18 is a direct competitor of Wolf that allegedly copied its designs and stole its customers in violation of copyright law and the Lanham Act, and engaged in tortious interference and unfair competition. The court kicked out some but not all of the claims.

Copyright: Three of Wolf’s customers allegedly opted to hire Five 18 to install vehicle wraps featuring designs Wolf owned. A stipulated preliminary injunction barred defendants from reproducing, preparing, distributing, or displaying specific vehicle wraps.

The complaint was partially time-barred with respect to one copyright, as to which Wolf alleged awareness of the infringement in early 2018; the three-year statute of limitations ran before Wolf sued. In general, a court won’t dismiss only a portion of a cause of action, but that requires a true single claim (e.g., defendant denies it distributed a work but the claim asserts violation of both reproduction and distribution rights as to that work). Here there were different claims, each premised on different works, creating “three entirely independent instances of alleged infringement.”

Statutory damages/attorneys’ fees: Five 18 argued that Wolf didn’t register any of the named copyrights within three months of publication, and that  the alleged infringements of the copyrights predated the effective dates of registration. But at least one copyright was allegedly timely registered as part of a group (the “at least one” signals why group registrations can be troubling—the court doesn’t yet know what was in the group). Five 18 argued that this registration was invalid because it erroneously stated all of the copyrights were unpublished, when, in fact, they had all already been published. The court, noting the lack of authority on this question, first held that a group registration “suffices to render the group registration effective for the purposes of assessing statutory damages.” And Five 18’s argument for invalidity failed at this stage, since whether the inaccuracy would have caused the Register to refuse registration was a fact question.

Lanham Act: Five 18 allegedly violated the Lanham Act by replicating and publishing Wolf’s designs while holding themselves out as the creators of the designs, confusing the public and consumers. Dastar barred a passing off claim. But what about false advertising? Wolf argued that defendants’ Instagram post touting their work was commercial speech, and the claim on the post that the vehicle wrap was “only available from Five 18 Designs” was made for the purpose of influencing a consumer to purchase Five 18’s goods and misrepresented that the design was not also available to purchase from Wolf. However, the phrase “only available from Five 18 Designs” was attached as a caption to a different post made the following day, not to the image of the allegedly infringing vehicle wrap. Thus, Wolf didn’t plead the requisite “false statement of fact” in a “commercial advertisement.” However, defendants’ request for fees was premature and the claim was dismissed with leave to amend; an amendment “must specifically allege what particular commercial speech made by the Defendants constituted a false statement such that Defendants might be liable under the Lanham Act.”

Tortious interference: Not sufficiently pled. Unfair competition: Not sufficiently pled in a way that avoided copyright preemption, because Wolf didn’t sufficiently plead passing off. (The court didn’t consider whether Dastar would also bar such a claim.) An amended complaint would have to allege “how Defendants advertised their vehicle wraps such that they intended to pass off their wraps as Plaintiff’s.” [This would seem to bring Dastar to the fore.]

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