Antitrust Law Daily Wrap Up, ADVERTISING—D.N.J.: Manufacturer’s advertising of allegedly misappropriated technology as its own was deceptive, (Jun 28, 2013)

By Jody Coultas, J.D.

Steel manufacturer Nippon Steel & Sumitomo Metal Corp. stated a Lanham Act false advertising claim against competitor POSCO for allegedly misrepresenting the source and quality of its steel products, the federal district court in Newark has held (Nippon Steel & Sumitomo Metal Corp. v. POSCO, June 27, 2013, Cavanaugh, D.).

Nippon Steel alleged that POSCO’s grain-oriented electrical steel products were made using Nippon technology, and that POSCO misrepresented in its advertising that the technology was its own in violation of the Lanham Act.

False advertising claims under the Lanham Act require the plaintiff to allege that (1) the defendant made a false or misleading statement of fact in a commercial advertisement about a product; (2) the statement either deceived or had the capacity to deceive a substantial segment of potential consumers; (3) the deception is material, in that it is likely to influence the consumer’s purchasing decision; (4) the product is in interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the statement.

The facts alleged by Nippon Steel were sufficient to state a Lanham Act claim, according to the court. Nippon Steel alleged that POSCO advertised that its products were based on POSCO inventions, and had uniquely superior characteristics and qualities such as “excellent performance and high energy efficiency,” “superior electric and magnetic property,” and “consistent quality improvement,” such that “customers prefer products made by POSCO.” Nippon also argued that the statements were false because the products were actually manufactured using Nippon’s technology, the statements enhanced POSCO’s reputation, and influence the purchasing decisions of customers.

Although the statements made by POSCO regarding the superiority and customer preference did not name Nippon Steel or any other competitor, the use of such statements must necessarily be a comparison of POSCO’s product to those of competitors, including Nippon Steel.

Nippon Steel also stated New Jersey Fair Trade Act and common law claims against POSCO, according to the court. The analysis for the Lanham Act claim applied to the other claims.

The case is No. 12-2429 (DMC)(MF).

Attorneys: Thomas R. Curtin (Graham Curtin, PA) for Nippon Steel & Sumitomo Metal Corp. Jennifer A. Hradil (Gibbons, PC) for POSCO.

Companies: Nippon Steel & Sumitomo Metal Corp.; POSCO

Cases: Advertising NewJerseyNews