Antitrust Law Daily Wrap Up, ADVERTISING—D. Or.: Medical rescue sled manufacturer states Lanham Act counterclaims, (Jun 5, 2014)

By Greg Hammond, J.D.

An emergency medical rescue sled manufacturer, charging that a competitor made misleading claims regarding its own medical rescue sleds, stated Lanham Act false advertising counterclaims, the federal district court in Portland, Oregon determined. The counterclaims were pled with sufficient particularity to place the competitor on notice of the nature of the claims (Skedco, Inc. v ARC Products, LLC, June 2, 2014, Haggerty, A).

Background. Skedco, Inc. manufactures and sells emergency medical rescue equipment, including the Sked® Rescue System, which is an evacuation sled designed to evacuate wounded individuals from confined spaces, high angles, and in technical and traditional land-based rescues. ARC Products, LLC also manufactures and sells emergency transportation and evacuation devices, including the Vertical Lift Rescue Sled, which is designed to transport non-ambulatory individuals in difficult rescue situations or in confined spaces. Skedco filed suit against ARC for allegedly false and misleading advertising that compared the VLR Sled to the Sked sled, in violation of the Lanham Act and Oregon unfair competition law. In response, ARC filed counterclaims against Skedco, alleging that Skedco violated the Lanham Act by advertising its sled product through false and misleading statements. Skedco filed a second motion to dismiss ARC’s counterclaims after ARC filed its amended answer.

Sled melting point counterclaim. In its amended answer, ARC counterclaimed that Skedco violated the Lanham Act by falsely advertising that its sled begins to melt at 450 degrees F to 500 degrees F, when its sled is composed of LDPE, which melts at 248 degrees F. Skedco argued that the counterclaim failed to meet the particularity requirements of FRCP 9(b), but the court disagreed. Instead, the court determined that ARC sufficiently pleaded its counterclaim by identifying the allegedly false statement, describing a theory as to why the statement was false, and attaching an advertisement that disclosed the purportedly false statement.

Rated strength counterclaim. ARC also counterclaimed that Skedco made the allegedly misleading statement that the Sked product’s strap system and lift rope system will hold 3,000 or 5,000 pounds of weight, but that the lift rope will fail at a lower weight where the rope and straps attach to the sled. Because ARC identified the allegedly false statement, provided reasons why they are allegedly misleading, attached an advertisement disclosing the statement, and disclosed that recipients and the timing of the advertisement’s distribution will be determined through discovery, the court concluded that it met its burden of pleading the counterclaim with sufficient detail. The court reasoned that it would be almost impossible for ARC to allege the specific customers who would receive the advertisement without discovery, and that FRCP 9(b) standards may be relaxed if the circumstances of the purported fraud are readily obtainable.

Loading speed counterclaim. The final counterclaim that Skedco attempted to dismiss involved statements Skedco’s officer made that were published in an article in Military Medical & Veterans Affairs Forum. Skedco argued that the article did not constitute “commercial advertising or promotion,” under the Lanham Act. However, in considering the four factors courts use to determine whether a statement is considered “commercial advertising or promotion,” the court determined that: (1) because it could not find an alternative purpose besides promoting his company’s product to potential customers, the officer’s statements constituted commercial speech; (2) both Skedco and ARC are commercial competitors; (3) because the statements describe the benefits of Skedco’s product, they were made to influence readers to purchase the Sked sled; and (4) the statements were distributed to the military’s top leadership, Skedco’s main customers, demonstrating sufficient dissemination to constitute promotion. Consequently, the court found that ARC’s third counterclaim was pled with sufficient particularity and Skedco’s motion to dismiss was denied.

The case number is 3:13-cv-00696-HA.

Attorneys: Nathan C. Brunette (Stoel Rives LLP) for Skedco Inc. Jeffrey D. Eberhard (Smith Freed & Eberhard) for ARC Products, LLC.

Companies: Skedco, Inc.; ARC Products, LLC

Cases: Advertising StateUnfairTradePractices OregonNews