Antitrust Law Daily Wrap Up, ADVERTISING—D.N.J.: Competitor employee emails not “commercial advertising” under Lanham Act, (Aug 8, 2014)

By Greg Hammond, J.D.

Innovasystems, Inc. was unable to state a Lanham Act claim against competing company Proveris Scientific Corp., based on emails a Proveris employee sent to potential Innovasystems clients. In partially granting Proveris’ motion to dismiss, the federal district court in Camden, New Jersey determined that the emails were not commercial advertisements under the Lanham Act (Innovasystems, Inc. v. Proveris Scientific Corp., August 6, 2014, Irenas, J.).

Background. Both Innovasystems and Proveris are manufacturers and designers of laboratory equipment used to test aerosol drug delivery products. After a number of patent infringement claims against Innovasystems, the company filed for Chapter 11 bankruptcy. Zachary Pitluk, a Proveris employee, sent multiple emails to prospective Innovasystems customers, stating—in part—that Innovasystems was going out of business and Innovasystems’ actuator infringed Proveris’ intellectual property. Innovasystems filed suit against Proveris for false advertising under the Lanham Act, unfair competition, and defamation. Proveris moved to dismiss.

Lanham Act. According to the court, Section 43 of the Lanham Act bans the use of any communication “in commercial advertising or promotion [that] misrepresents the nature, characteristics, qualities, or geographic origin of…goods, services, or commercial activities.” The court also noted that communications that target only particular individuals will not suffice as “commercial advertising.” Consequently, because it was only alleged that Proveris’ employee sent emails to particular individuals—potential Innovasystems clients—the emails did not constitute the type of advertisements or promotions covered under the Lanham Act. Innovasystems’ Lanham Act based claim was therefore dismissed.

Unfair competition. Innovasystems also brought an unfair competition claim under New Jersey common law. However, the court determined that such a claim has boundaries, as “it consists of the misappropriation of one’s property by another—or property which has some sort of commercial or pecuniary value.” Although Innovasystems attempted to state an unfair competition claim based on the misappropriation of prospective business relationships, the court concluded that such a theory could not constitute a claim for unfair competition. Instead, the court found that the company was merely attempting to advance a defamation/trade libel claim under the guise of a business tort.

Although most of Innovasystems’ claims were dismissed, the court did allow its defamation claim to survive the motion to dismiss. However, the court limited the claim so that it was based only on fallacious allegations of criminal liability or an inaccurate description of a previously ordered injunction.

The case number is 13-05077.

Attorneys: Samuel H. Israel (Fox Rothschild LLP) for Innovasystems, Inc. Alan J. Brody (Greenberg Traurig LLP) for Proveris Scientific Corp.

Companies: Innovasystems, Inc.; Proveris Scientific Corp.

Cases: Advertising StateUnfairTradePractices NewJerseyNews