Antitrust Law Daily Wrap Up, ADVERTISING—D. N.J.: Showerhead distributor’s use of competitor’s product images, descriptions was false advertising, (Apr 4, 2016)

By Linda O’Brien, J.D., LL.M.

A marketer of healthcare products alleged sufficient facts to pursue Lanham Act false advertising and deceptive practices claims against a competitor regarding the competitor’s use of the marketer’s product images and descriptions, the federal district court in Trenton, New Jersey has ruled. The court also allowed the competitor’s false advertising and deceptive practices counterclaim to proceed (Interlink Products International, Inc. v. F & W Trading LLC, March 31, 2016, Shipp, M.).

Interlink Products International is a research and development company, specializing in the development, manufacturing, and marketing of healthcare products. F & W Trading LLC is a wholesale distributor of consumer household products.

Interlink is the owner or exclusive licensee of several federally registered trademarks for its showerhead brands—including AQUASPA®, AQUASTORM®, AQUADANCE®, and SPIRALFLO®—and sells its products through major retailers and websites. Interlink filed suit against F & W, asserting claims for false advertising/deceptive practices under the Lanham Act and New Jersey Consumer Fraud Act, unfair competition, federal trademark infringement, and federal trade dress infringement. Interlink claimed that F & W copied Interlink’s trademark, product designs, and product descriptions in order to pass off its goods as Interlink products; adopted the trademark AQUAFLOW for their showerheads to close resemble Interlink’s marks; copied Interlink’s trade dress; and used excessive professional product reviewers to inflate their product ratings and rankings on websites.

F & W responded by filing counterclaims against Interlink for false advertising/deceptive practices and unfair competition for falsely representing that its products complied with the flow rate and marking requirements of the federal Energy Policy Act. Before the court were F & W‘s motion to dismiss the complaint and Interlink’s motion to dismiss the counterclaims.

Complaint. Interlink alleged cognizable claims that F & W’s use of Interlink’s product images and descriptions constituted false advertising, the court determined. Interlink alleged that F & W used its pictures and product descriptions to misrepresent that its products were Interlink’s products or were of the same nature and quality as Interlink’s. The court noted that unfair competition exists when a competitor unfairly seeks to trade on a plaintiff’s reputation and goodwill by representing the plaintiff’s product as its own or creating the false impression that some association exists between the two products.

Additionally, Interlink’s allegation that F & W falsely used the trademark symbol next to AQUAFLOW was sufficient to plead a plausible claim for false advertising. Interlink contended that F & W falsely marked their AQUAFLOW products with the indicia of federal trademark registration when, in fact, AQUAFLOW was not a federally registered trademark. The use of the symbol ® adjacent to a mark that was not federally registered was a form of false advertising, in the court’s view.

Interlink also sufficiently stated a claim on implied falsity grounds that F & W manipulated product reviews through the excessive use of professional reviewers. Interlink alleged that F & W’s business practice was to enlist biased professional reviews to drive up its Internet product ratings and that consumers would rely on the misleading reviews when selecting a product for purchase. According to the court, the alleged business practice of using professional reviews to drive up product ratings was sufficient to state a claim for false advertising.

Counterclaims. The court also found that F & W sufficiently alleged that Interlink made false representations of compliance with the Energy Policy Act. F & W plausibly alleged that Interlink’s false statements about the flow rate of its showerheads were material to consumers and many of whom would not have purchased Interlink’s showerheads if they had known that those representations were false.

However, F & W’s counterclaim based on Interlink’s product instructions was not advertising under the Lanham Act. F & W argued that Interlink’s product instructions taught users how to make its showerheads non-compliant with the Energy Policy Act. To state a false advertising claim under the Lanham Act, a plaintiff must show that the false statement was material and likely to influence purchasing decisions. According to the court, advertising or promotion implied that the statements were made to influence a consumer to purchase a product. Statements made inside a product’s packaging, available to consumers only after the purchase has been made, do not affect the choice of consumers to purchase. Thus, an instruction manual or product insert that was provided to a purchaser of a product was not advertising or promotion.

New Jersey Consumer Fraud Act. Finally, both Interlink and F & W lacked standing to bring false adverting and deceptive practices claims under the New Jersey Consumer Fraud Act (NJCFA), the court determined. To establish a claim under the NJCFA, a consumer must plead an unlawful practice, an ascertainable loss, and a causal relationship between the alleged conduct and ascertainable loss. The NJCFA was not intended to protect competitors that did not suffer a consumer-like injury. In this case, both Interlink and F & W are competitors and neither alleged suffering any consumer-oriented injury. Instead, each party only purchased the other party’s products and assumed that the products contained some type of misrepresentation. Therefore, Interlink’s claim and F & W’s counterclaim under the NJCFA were dismissed, the court concluded.

The case is No. 3:15-cv-01340-MAS-DEA.

Attorneys: Jason B. Lattimore (Law Office of Jason B. Lattimore) for Interlink Products International, Inc. Lawrence D. Mandel (Gertner Mandel, LLC) for F & W Trading LLC.

Companies: Interlink Products International, Inc.; F & W Trading LLC

Cases: Advertising StateUnfairTradePractices NewJerseyNews