Antitrust Law Daily Wrap Up, ADVERTISING—D. Md.: Amazon avoids false advertising claims in suit over Kindle e-book accessories, (Feb 2, 2015)

By Linda O’Brien, J.D., LL.M.

A manufacturer of accessories for mobile electronic devices failed to present sufficient evidence to pursue its Lanham Act false advertising claim against Amazon.com based on allegedly false statements regarding the availability of the manufacturer’s products and the approval required to sell accessories for Amazon’s Kindle e-book reader, the federal district court in Baltimore has ruled. Thus, its false advertising claims, as well as its unfair competition and patent infringement claims, were dismissed. However, the manufacturer could proceed with its patent infringement claim with respect to one of Amazon’s e-book covers (M-Edge Accessories LLC v. Amazon.com, Inc., January 29, 2015, Garbis, M.).

In 2007, Amazon launched its Kindle e-book reader. Manufacturer M-Edge Accessories produces accessories for mobile electronic devices, such as tablet computers and e-book readers. In 2008, M-Edge began manufacturing and selling through Amazon.com accessories for Amazon’s Kindle e-book readers, including a protective jacket and a book light.

After Amazon began selling similar accessories for its new version of Kindle in 2010, M-Edge filed suit against Amazon, alleging patent infringement, unfair competition, tortious interference, and Lanham Act false advertising claims. In January 2013, Amazon’s motion to dismiss the unfair competition, tortious interference, and false advertising claims was denied. Following discovery, Amazon moved for summary judgment on all claims.

False advertising. A claim of false advertising requires the plaintiff to demonstrate that the challenged advertisements tended to mislead or confuse consumers, the court explained. M-Edge failed to present evidence that Amazon’s direction of consumers using M-Edge keyword search terms on third-party online search engines to the Amazon accessories webpage was false or misleading to consumers. Statements on Amazon’s website that M-Edge products were no longer available on its website were literally true and did not indicate that M-Edge’s products were not available from another source. Furthermore, Amazon’s statements that M-Edge was not a preferred vendor were not literally false. Therefore M-Edge failed to establish a false advertising claim.

Unfair competition. The court determined that M-Edge failed to present sufficient evidence that Amazon’s conduct constituted unfair competition. According to the court, Amazon presented evidence of legitimate business purposes for its invitation-only “Made for Kindle” preferred vendor program that had nothing to do with unfair competition. M-Edge was given the opportunity to participate in Amazon’s program and made an informed business decision not to participate by weighing the benefits of such participation against the cost. Amazon was justified in charging royalties to manufacturers that benefited from the Amazon endorsement.

Moreover, Amazon’s use of its sales information of M-Edge products was not confidential information over which M-Edge has exclusive rights and Amazon’s pricing strategy of offering discounts on bundled products was insufficient to show that Amazon acted with intent to harm M-Edge. M-Edge’s contention that statements made by Amazon executives during contract negotiations for the preferred vendor program were “threats’ was also rejected. Amazon had a valid business reason to try to persuade M=Edge to be a part of its vendor program since M-Edge was a successful and popular third-party merchant. M-Edge’s evidence was insufficient for a reasonable jury to determine that such statements constituted actionable threats or unfair competition.

Patent infringement. M-Edge is the owner of U.S. Patent No. 8,047,670 (“the ’670 patent), entitled “Book light for a Protective Cover of an e-reader.” M-Edge asserted infringement claims against Amazon’s “Tequila” and “Shasta” e-reader covers. The “Tequila” cover has a rotating arm with a light at the end which is attached at the top of the device. M-Edge’s assertion that the “Tequila” cover infringed the ’670 patent was rejected, since Amazon presented evidence that the cover lacked a hard plastic base held within a pocket formed by the exterior covers as contended by M-Edge. Accordingly, Amazon was entitled to summary judgment regarding the “Tequila” cover.

The “Shasta’ cover includes a light at the end of a component that slides in and out of the top right corner of the open e-reader. However, Amazon’s contention that the “Shasta” cover did not have a slot at its base that held a “protrusion” and lacked a pocket between the covers that received the assembly base was rejected. The court noted that M-Edge presented expert testimony and accompanying photograph indicated that there were protrusions on a movable base and this evidence was sufficient for a reasonable jury to determine that Amazon’s “Shasta” cover had a slot and movable base with a protrusion that held the slot of the cover’s base. Since there were genuine issues of material fact, summary judgment was denied regarding this patent infringement claim.

The case is No. 1:11-cv-03332-MJG.

Attorneys: John Edward McCann, Jr. (Miles and Stockbridge PC) for M-Edge Accessories LLC. Scott Jeffrey Pivnick (Alston and Bird LLP) for Amazon.com Inc.

Companies: M-Edge Accessories LLC; Amazon.com, Inc.

Cases: Advertising StateUnfairTradePractices MarylandNews