Antitrust Law Daily Wrap Up, ADVERTISING—D. Nev.: Real estate company falsely advertised origination of exchange business, (Feb 17, 2015)

By Greg Hammond, J.D.

A publicly-owned barter and exchange company demonstrated as a matter of law that a real estate development company engaged in false advertising by intentionally making false statements regarding its own exchange business and engaged in misleading advertising by misconstruing its exchange business’ origin and supposed relation to another company. The federal district court in Reno therefore granted the plaintiff exchange company’s motion for summary judgment, entered a permanent injunction against the defendants, and awarded attorney fees in favor of the plaintiff (ITEX Corp. v. Global Links Corp., February 11, 2015, Jones, R.).

Background. Plaintiff ITEX Corp. is a barter and exchange company that provides a marketplace for member businesses to trade products and services without exchanging cash. ITEX acquired BXI Exchange, Inc., formerly known as BX International, Inc., in 2005.

Defendant Global Links Corp. is a real estate development company that owns BXI Trade Exchange, Inc. (BTE Nevada), a company formed in 2006 for the purpose of transferring pre-existing real estate assets between privately held corporations. Finding that the trademark for the “BXI” word mark and logo were cancelled in 2010, Global Links filed an application to register “BXI Trade Exchange” as a federal trademark, which was registered in February 2014. Global Links then issued a press release and published statements on various websites, via social media, and through online promotional materials, stating that “Global Links Corp. Acquires BXI Trade Exchange, Inc.—The Original Barter Company”; that BXI was “back in business with plans to again become the premier marketplace for the barter industry”; that “if you were a previous BXI member, we are anxious to welcome you back”; and posting a “Short History” of BTE Nevada, stating that BX International, Inc. was founded in 1960 and originated the modern-day concept of computerized barter.

ITEX filed suit against Global Links and BTE Nevada, alleging that the companies’ statements were false and misleading advertising in violation of Section 43(a) of the Lanham Act. ITEX sought a permanent injunction to prohibit the defendants from making further statements that BTE Nevada was related in any way to the BXI exchange business, which ITEX owns, along with attorney fees. The case was before the court on ITEX’s motion for summary judgment on its false advertising claims.

False advertising. ITEX’s second cause of action alleged that Global Links and BTE Nevada engaged in false advertising by intentionally making false statements regarding BTE Nevada’s business. Similarly, its third cause of action alleged that the defendants engaged in misleading advertising by misconstruing BTE Nevada’s origin and its purported relation to the original BXI exchange business.

The court granted ITEX’s motion for summary judgment, first noting that the defendants admitted that BTE Nevada is not the original barter company. , the statements referring to BTE Nevada as the “Original Barter Company,” and referring to BXI as being “back in business” and “re-opening,” were literally false. The statements also were deemed misleading, because a consumer in the industry would “undoubtedly understand” the statements to mean that BTE Nevada is the successor-in-interest to—or at the very least, related to and affiliated with—BX International.

Second, the statements at issue constituted commercial advertisements, because they were related to the defendants’ barter trade business, which is in direct competition with ITEX; they were published on websites and social media; and they were made for the purpose of convincing potential members to be a part of the defendants’ exchange network.

Third, the court found that the statements had a tendency to deceive consumers concerning the relationship between BTE Nevada and the original BXI exchange business and that, in some cases, the statements caused actual deception. The statements also were deemed material because they raised a perceived relationship between the well-known and trusted original BXI exchange business and BTE Nevada’s new marketplace. Lastly, the statements at issue entered interstate commerce, as they were published on websites and social media, and were sent through emails in industry-specific newsletters. ITEX was not required to demonstrate that the false statements caused injury, for purposes of injunctive relief.

Permanent injunction. Because the undisputed evidence demonstrated that the statements made by Global Links and BTE Nevada violated the Lanham Act, the court found that a permanent injunction prohibiting the defendants from making further false or misleading statements was warranted. Consequently, Global Links and BTE Nevada were permanently prohibited from disseminating false or misleading statements implying that BTE Nevada’s new exchange business is related to, affiliated with, or the successor-in-interest of the original BXI exchange business that was owned and operated by BX International and ITEX. Specifically, the defendants may not represent or state that BTE Nevada is “back in business,” “re-opening,” or was “formerly the largest barter trade exchange.”

Attorney fees. The court found that this was an exceptional case, warranting reasonable attorney fees. Specifically, it determined that the defendants’ false statements were made with the deliberate intent to confuse consumers in order to benefit from the goodwill that the BXI exchange business has accrued over the past few decades. ITEX was therefore ordered to file the appropriate affidavits and documentation to determine an appropriate amount of attorney fees.

The case number is 2:14-cv-00057-RCJ-NJK.

Attorneys: Brian Chung Park (Stoel Rives LLP) for ITEX Corp. David R. Koch (Koch & Scow LLC) for Global Links Corp. and BXI Trade Exchange, Inc.

Companies: ITEX Corp.; Global Links Corp.; BXI Trade Exchange, Inc.

Cases: Advertising NevadaNews