Antitrust Law Daily Wrap Up, ADVERTISING—D.N.J.: Extent of confusion caused by use of competitor’s trademark in meta-tag left to factfinder, (Aug 18, 2016)

By Jody Coultas, J.D.

Smart Vent Products, Inc. stated Lanham Act unfair competition and trademark infringement claims against competitor Crawl Space Door System, Inc., the federal district court in Camden, New Jersey has held. However, claims that Crawl Space misrepresented that its products were patent protected and certified were dismissed. The court also denied Smart Vent’s motion for a preliminary injunction for failure to show an irreparable injury (Smart Vent Products, Inc. v. Crawl Space Door System, Inc., August 15, 2016, Simandle, J.).

In order to qualify for the federally subsidized flood insurance, regulations enacted by Federal Emergency Management Agency (FEMA) require that foundational spaces have flood vents that permit the automatic entry and exit of water. Crawl Space produces Engineered Flood Vents, which it advertises as compliant with the Flood Insurance Requirements of FEMA and the National Flood Insurance Program (NFIP).

Based on Crawl Space’s claims of FEMA, NFIP, and TB-1 compliance, a "patented" product, and alleged use of the registered SMART VENT trademark, Smart Vent filed claims for unfair competition and trademark infringement under the Lanham Act.

False advertising claims. Crawl Space’s approach to certification did not violate the Lanham Act because it complied with the facial requirements for certification under the NFIP regulations. Smart Vent’s complaint admitted that Crawl Space engaged engineers who certified that the Crawl Space flood vents met or exceeded the minimum net area requirements. Therefore, there was no question as to whether Crawl Space falsely advertised its product as "FEMA" and/or "NFIP" compliant.

However, the court declined to grant summary judgment on Smart Vent’s claims regarding Crawl Space’s TB-1 compliance advertising. FEMA Technical Bulletin (TB-1) specifies that "engineered openings" may be certified as NFIP-compliant through an "individual certification" or an "Evaluation Report issued by the Internal Code Council Evaluation Services, Inc." Crawl Space cited far-reaching aspects of its individual certification process and the various iterations of Crawl Space’s flood vent advertisements. Such a searching review of facts beyond the pleadings wais inappropriate for a Rule 12(c) motion and the narrow allegations by Smart Vent regarding non-compliance with TB-1 did not fairly open the door of inquiry into every facet of Crawl Space’s individual certification process.

Crawl Space’s motion for judgment on the "patent protection" allegations was granted by the court. Smart Vent alleged that Crawl Space misled consumers into believing that a "utility patent" covered the functional aspects of its products, despite the fact that its design patents only cover the "ornamental" aspects of its flood vents. When a Lanham Act plaintiff directs a claim against a patent holder for marketplace activity in support of its patent, the plaintiff must allege bad faith on the part of the patent holder. However, Smart Vent never alleged any bad faith by Crawl Space.

Trademark claims. Whether consumers were likely to be confused by Crawl Space’s use of the SMART VENT mark was best left to a fact finder, according to the court in justifying its denial of judgment on the pleadings. Smart Vent alleged that Crawl Space used its registered trademark SMART VENT as a "tag" or "meta-tag" in the coding of its website. In order to state a claim for trademark infringement and/or false designation of origin, Smart Vent needed to show it owned a valid and legally protectable mark and that Crawl Space’s use of the mark caused a likelihood of confusion. Crawl Space was not able to clearly establish the absence of any factual issue on the question of confusion. Also, numerous courts have found meta-tags infringing under the rubric of initial interest confusion. Therefore, dismissal was inappropriate.

Injunctive relief. The court declined to issue a preliminary injunction based on a lack of evidence that Smart Vent would be irreparably injured in the absence of an injunction. Smart Vent sought to enjoin Crawl Space from selling of its engineered flood vents and argued that Crawl Space’s purportedly weak financial position risked "the potential erosion or dissipation of a remedy." However, merely asserting dire economic effects did not meet the irreparable harm standard. Smart Vent’s claimed harm was merely an economic and reparable loss, and the availability of adequate monetary damages contradicted a claim of irreparable injury. Also, Smart Vent’s delay in seeking injunctive relief weakened the urgency that forms the cornerstone of preliminary injunctive relief.

The case is No. 13-5691 (JBS/KMW).

Attorneys: Anthony J. DiMarino and Emmett S. Collazo (A.J. DiMarino P.C.) for Smart Vent Products, Inc. Michael N. Onufrak and Siobhan K. Cole (White and Williams LLP) for Crawl Space Door System, Inc.

Companies: Smart Vent Products, Inc.; Crawl Space Door System, Inc.

Cases: Advertising NewJerseyNews