Antitrust Law Daily Wrap Up, ADVERTISING—D. Mass.: Insecticide manufacturer enjoined from marketing product in violation of agreement with competitor, (Dec 5, 2014)

By Jody Coultas, J.D.

Rainbow Treecare Scientific Advancements, Inc. was enjoined from marketing, distributing, or selling a pest control product that allegedly breached an agreement with competitor Arborjet, Inc. by the federal district court in Boston. However, the court found that Arborjet was unlikely to succeed on the merits of its Lanham Act claims (Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc., December 3, 2014, Gorton, N.).

Arborjet and Rainbow manufacturer insect and pest control products for direct injection into trees. Rainbow was a distributor of Arborjet’s products, including Arborjet’s emamectin benzoate product known as TREE-age. As part of the distribution agreement, Rainbow agreed not to engage in affairs intended to replicate Arborjet’s products or processes. Rainbow then terminated the agreement and began distributing its own emamectin benzoate product ArborMectin.

Rainbow sent a marketing email to customers with the subject line “Improved TREE-age! NEW ArborMectin Speed VIDEO.” The body of the email stated that ArborMectin was an improved 4% emamectin benzoate (TREE-age®) tree injection that worked 30-70% faster than TREE-age. The email also included a link to a video on Rainbow’s website purporting to demonstrate the relative speeds of the two products. The website characterized ArborMectin as a replacement for TREE-age, and indicates that ArborMectin was “backed by science”, “proven to be effective” and treated trees “consistently faster than TREE-age.”

At the outset, Rainbow agreed to refrain from making representations that ArborMectin was an “improved TREE-age.”

In order to obtain a preliminary injunction, Arborjet needed to establish: (1) a substantial likelihood of success on the merits; (2) a significant risk of irreparable harm if the injunction is withheld; (3) a favorable balance of hardships; and (4) an injunction was in the public’s interest. Arborjet had a substantial likelihood of succeeding on the merits of its claims of breach of contract and of the implied covenant of good faith and fair dealing, according to the court.

However, Arborjet was unlikely to succeed on the merits of its Lanham Act claims, according to the court. To prove that an establishment claim is false or misleading under the Lanham Act, Arborjet needed to show that the tests or studies used to justify the advertising claims were insufficient. The court found that the advertising claims were supported by EPA approval and various scientific research field trials. Arborjet offered only mere speculation rather than industry or regulatory standards regarding peer review or sample size to establish product effectiveness. Arborjet also failed to show actual falsity of the claims because ArborMectin had lower toxicity and viscosity than TREE-age and such differences may be regarded as improvements.

The court also found that Arborjet was unlikely to succeed on its claim for violation of the Lanham Act based on false designation of origin.

The court found that Arborjet would likely suffer irreparable harm to its reputation and customer relationships absent an injunction. Irreparable harm is “a substantial injury that is not accurately measureable or adequately compensable by money damages.” Rainbow’s competition with Arborjet in violation of the distribution agreement affected Arborjet’s customer relationships. Although Arborjet could be compensated for lost profits, the effect on its goodwill and reputation were hard to quantify. Therefore, Rainbow was enjoined from marketing and selling Arbormectin during the pendency of the litigation.

The balance of equities tipped in favor of an injunction, according to the court. Arborjet invested time and money in researching and developing TREE-age, while Rainbow had a relatively minimal investment and had only recently begun to sell ArborMectin. The public interest was also in favor of an injunction in order to enforce Rainbow’s contractual obligations.

The case is No. 14-14129-NMG.

Attorneys: Kristen S. Scammon (Torres, Scammon & Day, LLP) for Arborjet, Inc. Kelly W. Hoversten (Gary, Plant, Mooty, Mooty & Bennett, PA), and Matthew P. Horvitz (Goulston & Storrs, PC) for Rainbow Treecare Scientific Advancements, Inc.

Companies: Arborjet, Inc.; Rainbow Treecare Scientific Advancements, Inc.

Cases: Advertising MassachusettsNews