On Feb. 13, the Federal Circuit reversed Western District Judge Marsha Pechman’s denial of judgment as a matter of law in Baden Sports, Inc. v. Kabushiki Kaisha Molten, 541 F.Supp.2d 1151 (W.D. Wash. 2008), relating to the jury’s award of $8,054,579 for false advertising under Section 43a of the Lanham Act. (Seattle Trademark Lawyer post on the jury’s award here.) Baden claimed that competing basketball maker Molten falsely advertised that its basketballs were “innovative.”
The Federal Circuit’s reversal was based on its application of Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), to this claim.
It found: “We agree with Molten that Dastar precludes Baden’s section 43a claim. The Supreme Court stated in Dastar that section 43a of the Lanham Act does not have boundless application as a remedy for unfair trade practices. Because of its inherently limited wording, section 43a can never be a federal codification of the overall law of unfair competition, but can only apply to certain unfair trade practices prohibited by its text. Section 43a of the Lanham Act does not create liability from Molten’s advertisements because those advertisements do not concern the “origin of goods,” to which section 43a1A is directed, nor do they concern the “nature, characteristics, [or] qualities” of the goods, which is what Ninth Circuit law has interpreted Section 43a1B to address.”
Of course the advertisements do concern “the nature, characteristics, [or] qualities” of the goods, which literally would encompass any adjective, including “innovative.” But the court explains, “No physical or functional attributes of the basketballs are implied by Molten’s advertisements. “Innovative” only indicates, at most, that its manufacturer created something new, or that the product is new, irrespective of who created it.”
Ouch. I thought they almost understood what they meant there, but it seems as if the Federal Circuit is itself mixing and matching incorrectly here, conflating the question of origin (“irrespective of who created it”) with the question of “physical or functional attributes.” Why? Explains the Circuit, “To find otherwise, i.e., to allow Baden to proceed with a false advertising claim that is fundamentally about the origin of an idea, is contrary to the Ninth Circuit’s interpretation of Dastar.” Those teases! A little more:
Section 43(a) of the Lanham Act does not create liability from Molten’s advertisements because those advertisements do not concern the “origin of goods,” to which section 43(a)(1)(A) is directed, nor do they concern the “nature, characteristics, [or] qualities” of the goods, which is what Ninth Circuit law has interpreted Section 43(a)(1)(B) to address. See Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1144 (9th Cir. 2008).
This is starting to sound circular to me. Later on the court walks through Dastar and explains that if “authorship” or “origin” were allowed to be the basis of a Lanham Act claim, it could cause trademark law to overlap (impermissibly?) with copyright or patent law. “Following Sybersound’s reasoning, we conclude that authorship, like licensing status, is not a nature, characteristic, or quality, as those terms are used in Section 43(a)(1)(B) of the Lanham Act.” The court concluded that “innovative” can mean nothing other than “original with us,” and denied the claim.
This is a disappointing outcome and seems overly technical or narrow-minded. The Federal Circuit explains, “No physical or functional attributes of the basketballs are implied by Molten’s advertisements. ‘Innovative’ only indicates, at most, that its manufacturer created something new, or that the product is new, irrespective of who created it.” This assertion is made, as so many trademark law pronunciamentos are, entirely upon this distinguished court’s ipse dixit. I believe this is a mistake. The reason to utilize claims of originality or authorship in marketing to consumers is to suggest to them the presence of a presently-existing, inherent quality of a good. “We innovated or invented this,” is how I read it; “Therefore ours is better because of our superior state of knowledge or command of the art.” Whether or not that message comes across is a fact question.
Evidently, as the opinion points out, some courts closer to my neighborhood agree, but the Federal Circuit, reviewing a District of Washington case, was bound by Ninth Circuit precedent. I am hard pressed, however, to see why the Federal Circuit believes the decision in Sybersound mandates the result here. Here is what that decision says:
Construing the Lanham Act to cover misrepresentations about copyright licensing status as Sybersound urges would allow competitors engaged in the distribution of copyrightable materials to litigate the underlying copyright infringement when they have no standing to do so because they are nonexclusive licensees or third party strangers under copyright law, and we decline to do so.
This seems to be a far more narrow holding than is suggested by Baden Sports. In Sybersound the Lanham Act claim was an add-on to a wide-ranging copyright dispute, and indeed most of that opinion is about copyright. In Baden Sports the unfair competition claim was, similarly, intertwined with a dispute over patent rights, so the court seized on the “innovative” language of Sybersound and construed the unfair competition claim as an inappropriate proxy for a patent claim.
I can see the similarity, but there is a difference in there that the court does not consider. Whereas consumers clearly could not care less about the licensing status of a musical work, it does not follow that they would not be interested in knowing which of two competing products is the “original” or which of two companies selling those products is the “originator” or “innovator” of it. The fact that there could be a conceptual “overlap” of patent and trademark law — and I am not sure this would be one — is not a basis on which to trim back an otherwise legitimate unfair competition claim.
This may be a slender reed, but it is one I believe is sufficiently strong on which to rest an unfair competition claim based on false representation of a good’s “nature, characteristics, [or] qualities.” Where there the other elements of unfair competition are sufficiently well developed at trial, this seems like a bona fide jury question.
I have no use for competition via intellectual property litigation; it’s the worst thing happening in the courts these days and it’s an almost constant theme on this blog. But Section 43(a)(1)(B) is what it is, and to the extent gauzy formulations that prohibit misrepresentation as to “nature, characteristics, [or] qualities” of goods are proscribed by the Lanham Act, the one Baden Sports should have gone to the jury.