False patent marking claims survive even when Dastar bars false advertising claims based on "innovation"

Lashify, Inc. v. Qingdao Lashbeauty Cosmetic Co., 2024 WL 629985, No. W-22-CV-00776-ADA-DTG, No. W-22-CV-00777-ADA-DTG (W.D. Tex. Jan. 30, 2024) (R&R)

Recommendation: Dastar should block Qingdao’s Lanham Act false advertising counterclaims based on Lashify’s claim to be the originator of lash technology, but false patent marking counterclaims should survive.

Accrual: There’s a five-year statute of limitations for false patent marking; Qingdao identified eight social media posts from Dec. 1, 2017 to Apr. 11, 2023 (claiming that various products were “patented”). It argued that, because all of the statements are currently still available on Lashify’s website, these were continuous violations. “[T]here must be a new or different false marking violation in order to properly apply the continuous violations theory, not merely a continuous posting of the same falsely marked article.” But there were four alleged false markings within the five-year limitations period.

Lashify argued that it held a European patent for one product at the time it promoted that product. But “to the extent there is a mismarking, it is actionable notwithstanding the existence of other valid patents.” And “the claim that the Fuse Control Wand was patented suggests Lashify held a U.S. patent, which it did not receive until” later. So false marking as to that was adequately pled. And an ITC determination that a claimed patent didn’t cover the marked product was sufficient to allege false marking, even if ITC determinations aren’t binding law. “[A]n alleged discrepancy between the defendant’s marking and its prior litigation history is sufficient to allege false marking.”

Qingdao also sufficiently pled the requisite intent to deceive. At the pleading stage, “the inference of intent to deceive may arise from evidence that a defendant knew or should have known the marking was false.” Sophistication also matters:

Lashify has repeatedly publicized its knowledge of the workings of the U.S. patent system and proclaims its sophistication in its knowledge of U.S. patent law. It is reasonable to believe Lashify would know which of their products are covered by patents, and which are not. Further, Lashify was marking products for the first time as patented, not failing to remove expired patents.

And there were sufficient allegations of competitive injury:

1)     by improperly and knowingly falsifying intellectual property rights, Lashify has impeded lawful market entry and competition including as it relates to Qingdao; 2) Lashify’s false representations have been accepted as true and proliferated by relevant consumers, creating a landscape that is prohibitive of competition and new market entrants like Qingdao; 3) The false reputation of legitimate intellectual property rights in the eyes of relevant consumers has harmed and tagged Qingdao and others as frauds and copycats; 4) Consumers who have internalized Lashify’s false messaging are primed to immediately dismiss competitors as “uncreative wrongdoers”; 5) Lashify sought to deceive potential customers into believing it is an innovator and that competitors were “copycats” with the express purpose of driving sales away from competitors; 6) Lashify was successful in driving sales away from competitors, including Qingdao, to Lashify based on its false representations; 7) Lashify’s customers believe and rely on Lashify’s representations when deciding what products to purchase; 8) consumers have commented that “I can not believe the amount of copycats out there I... refuse to try anything else” and “I would NEVER buy a knock-off brand”

However, there may be trouble ahead because the false patent marking is apparently only part of the Lashify campaign to position itself as the innovator.

The false marking statute didn’t preempt Lanham Act claims based on false statements about patents (as long as, unlike the strict liability for other false advertising claims, false statements about patents were made with bad faith). (Seems to me that the court should have addressed the continuing violation theory here as well: Although false marking may happen just once, we might want to treat the advertising differently under advertising law.)

But Dastar bars claims based on statements about inventorship and innovation: 1) Lashify’s principle is “the leading innovator worldwide when it comes to lash technology”; 2) they are “The Mother of Invention”; 3) Lashify invented “the first DIY lash extension” and “Underlash Technology”; 4) they are the inventor of the “worlds [sic] only” and the “worlds [sic] first DIY lash extension system”; 5) they “invented the most natural-looking false lash system in the industry.”

This isn’t a false statement of origin (but what about character or qualities?) because the “origin” of goods “refers to the producer of the tangible goods that are offered for sale, and not the author of any idea, concept, or communication embodied in those goods.”

However, the Noerr-Pennington doctrine didn’t apply to this case at this stage of the litigation. “The Noerr-Pennington doctrine serves to protect private parties from liability when they petition the government for laws or interpretations of existing laws favorable to them.” At this stage, there was no indication that the doctrine applied to the statements at issue.