Antitrust Law Daily Wrap Up, ADVERTISING—C.D. Ill.: Biofuel manufacturers failed to state Lanham Act claims against competitors, (Apr 30, 2014)

By Jody Coultas, J.D.

An action between competitors in the biofuel technology industry, alleging that the defendants falsely advertised their own business and disparaged the plaintiffs’ business, did not state claims under the Lanham Act and the Illinois consumer protection laws, the federal district court in Peoria, Illinois has held (Arvegenix, LLC v. Seth, April 29, 2014, McDada, J.). The court found that the plaintiffs stated an Illinois Deceptive Trade Practices Act claim against some of the defendants.

Pennycress Energy Company, LLC (PEC) and Arvens Technology, Inc. (ATI) develop technology to make biofuel out of a plant called pennycress. ATI and BioGenerator, a subsidiary of BioSTL, discussed a possible business agreement in order to begin commercial production of pennycress for biofuel. No agreement on the new business had been reached when BioGenerator and others formed a new company, Arvegenix, which was intended to compete with PEC and ATI. Arvegenix allegedly used ATI’s information and data to seek researchers and partners for its new company, and contacted PEC and ATI’s collaborators in the pennycress industry in an attempt to persuade them to cancel agreements with PEC and ATI and to instead work with Arvegenix. BioGenerator argued they it had not received confidential information from ATI.

Lanham Act. The court dismissed allegations of Lanham Act false advertising for failure to state a claim. PEC and ATI failed to allege that BioGenerator or the other defendants engaged in commercial advertisement. The companies also failed to show that the allegedly false statements caused consumer confusion.

Common law. The Illinois common law unfair competition claim was precluded as simply a reiteration of the tortious interference claim, according to the court. PEC and ATI failed to allege any cause of action distinct from their other claims.

State unfair trade practices claims. PEC and ATI stated an Illinois Deceptive Trade Practices Act (DTPA) claim against individual defendants that were involved in ATI’s proposed business association with BioGenerator, but not against BioSTL, according to the court. The only allegation that related to BioSTL was insufficient to state a claim. The claims only addressed three allegedly false representations, and did not address damages or injury caused by BioSTL. However, the allegations regarding the individual defendants were sufficient. The defendants allegedly made false or misleading statements disparaging ATI and PEC, and made specific false representations of their expertise, access to seed stock, and customer list. The allegations also adequately plead harm.

The court dismissed allegations of Illinois Consumer Fraud and Deceptive Business Practices Act (CFA) violations for failure to state a claim. The allegations were too generic and vague to state a claim. PEC and ATI did not allege that Defendants’ intended the companies to rely on the alleged deception. Also, the CFA did not apply to the facts of the case. The CFA protects consumers, borrowers, and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices. There was no evidence of any consumer protection concerns. None of the entities allegedly subject to false information were consumers.

The case is No. 13-cv-1253.

Attorneys: Allan J Sternstein (Lathrop & Gage LLP) for Arvegenix, LLC. Christopher P Ryan (The Law Office of Christopher P Ryan PC) for Sudhir Seth, Pennycress Energy Co. and Arvens Technology, Inc.

Companies: Arvegenix, LLC; Pennycress Energy Company, LLC; Arvens Technology, Inc.; Biogenerator; BioSTL

Cases: Advertising StateUnfairTradePractices IllinoisNews