Antitrust Law Daily Wrap Up, ADVERTISING—D. Conn.: Court rejects rivals’ cross-claims over ‘Made in USA’ labeling, use of ‘OEM’ and ‘epoxy’, (Sep 17, 2024)

By E. Darius Sturmer, J.D.

Each company’s Lanham Act false advertising claims against the other failed, either barred by laches or short on evidence of materiality or actual injury.

In a dispute between competing sellers of chemical bonding products marketed for home and automotive use, cross claims that one company’s use of “Made in USA” labeling and the other’s use of the terms “OEM” (short for “Original Equipment Manufacturer”) and “epoxy” amounted to false advertising in violation of the Lanham Act both failed as a matter of law, the federal district court in New Haven, Connecticut, has ruled. The plaintiff/counter-defendant, Illinois Tool Works Inc. (“ITW”), offered no genuine issue of fact to show that its rival’s Made in USA labeling was material to consumer purchasing decisions or caused injury to the rival, the court found. The defendant/counter-plaintiff, J-B Weld Co., LLC, likewise brought forth no genuine issue of fact to defeat the other’s laches defense as to the OEM counterclaim or to show that the alleged false advertising as to epoxy materially affected consumer purchasing decisions, added the court. Therefore, the court denied ITW’s motion for summary judgment on the Made in USA claim, instead granting J-B Weld’s cross-motion to dismiss that claim, and it denied J-B Weld’s counterclaims based on use of the terms OEM and epoxy, instead granting ITW’s motion for summary judgment to dismiss those counterclaims (Illinois Tool Works Inc. v. J-B Weld Co., LLC, No. 3:19-cv-01434-JAM (D. Conn. Sept. 9, 2024)).

Background. The two parties in the litigation each sell adhesives and silicone sealants for automotive and household use. Among J-B Weld’s goods is a line of automotive silicone products, made by and acquired from two suppliers, that it has sold since 2016 through national retailers and online bearing allegedly unqualified “Made in USA” claims. Its website and social media pages repeat these claims.

According to ITW, the products contain certain ingredients that the suppliers source from abroad. J-B Weld largely denies that. It contests the claim on the basis that ITW’s evidence of such labeling mattering to consumers—deposition testimony from ITW officers about their views of consumer preferences—is speculative and unsupported. Furthermore, it contends that same deposition testimony is insufficient to show that the advertising caused harm or injury to ITW.

On the other side, the parties agree that ITW has for decades advertised “the interchange between its products and the matching of OEM manufacturer products” in its materials, including product packaging. They agree, too, that ITW sometimes includes OEM interchanges for specific automotive brands in its package advertising and sometimes omits them, that it has used different OEM statements on the same product, and that the specific phrasing has changed based on marketing personnel. But they do not agree on whether ITW’s products marketed as epoxies fit the definition of the term. J-B Weld points out that they do not fit the chemical definition of an epoxy—“a polymer containing one or more epoxy or epoxide groups”—while ITW maintains that “from a marketing perspective, the definition of an epoxy is any two-part adhesive, regardless of its specific chemical composition.” J-B Weld contends that purchasers are aware of the chemical meaning of the word.

“Made in USA.” By presenting only its speculations and hearsay testimony concerning the impact of the “Made in USA” labels, ITW failed to establish that it is entitled to judgement as a matter of law or to raise a genuine dispute of material fact concerning a required element of its claim, the court decided. “Courts that have deemed ‘Made in USA’ claims material have offered much richer evidentiary records,” it added, citing several examples.

Furthermore, held the court, even if the record had shown the requisite materiality, the claim failed because ITW failed to point to any evidence of actual injury. The court rejected ITW’s argument that injury could be presumed based on the alleged literal falsity of the challenged statement. ITW had not shown the required direct competition for that presumption to apply in the Second Circuit, let alone shown that they were the only two competitors, such that by zero-sum principles it could be presumed that a false advertisement that helps one necessarily takes sales away from the other.

OEM counterclaim. ITW did, however, sufficiently show that J-B Weld’s OEM counterclaim under the Lanham Act is barred by the equitable doctrine of laches, the court determined. It satisfied each of the elements of a laches defense here—that J-B Weld knew or should have known of ITW’s misconduct, that it “inexcusably delayed in taking action,” and that the delay prejudiced ITW—through its averment that it has used OEM advertising since 2001 and J-B Weld’s acknowledgement that it has been in the market since 2014. J-B Weld offered no legitimate excuse for waiting six years to file its lawsuit, approximately three years beyond the statute of limitations. And the court was persuaded by ITW’s argument that it would be prejudiced by being forced to discontinue a marketing strategy it has relied on for nearly twenty years, at the risk of consumers assuming—in the absence of OEM labeling claims—that the formulations of ITW’s products have changed. There could be no reasonable dispute that ITW sustained at least some prejudice due to J-B Weld’s inexplicable delay, the court remarked. It therefore granted ITW’s motion for summary judgment on the counterclaim.

Epoxy counterclaim. ITW is entitled to summary judgment on J-B Weld’s epoxy counterclaim as well, the court continued, accepting ITW’s argument that the difference between chemical epoxides and non-epoxide two-part adhesives is not material to consumer purchasing decisions. The record here scarcely differed from that in another failed case brought by J-B Weld over the same issue, the court observed. No reasonable jury could conclude on the basis of J-B Weld’s sampling of Amazon reviews that ITW’s epoxy claim is likely to influence consumer purchasing decisions, concluded the court.

Damages. Finally, the court turned down J-B Weld’s request for disgorgement or nominal damages. It granted ITW’s motion for summary judgment on any attendant damages as to both the OEM and epoxy counterclaims.

The Case is No. 3:19-cv-01434-JAM.

Judge: Meyer, J.

Attorneys: Bradley L. Cohn (Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP) for Illinois Tool Works Inc. Ashley Summer (Nelson Mullins Riley & Scarborough, LLP) for J-B Weld Co., LLC.

Companies: Illinois Tool Works Inc.; J-B Weld Co., LLC

Cases: Advertising ConnecticutNews