Antitrust Law Daily Wrap Up, ADVERTISING—DMinn: False Advertising Claims Fail Against Traffic Preemption Systems Provider, (May 29, 2013)

By Tobias J. Gillett, J.D., LL.M.

Claims by a provider of traffic preemption systems (TPSs) that a competitor engaged in false advertising through an Internet video and an e-mail newsletter did not survive summary judgment because the provider did not show that the video or newsletter were literally false and because the provider did not proffer evidence of consumer deception, materiality, or injury, the federal district court in Minneapolis has ruled (Global Traffic Technologies, LLC v. Emtrac Systems, Inc., May 24, 2013, Montgomery, A.).

Global Traffic Technologies, LLC (GTT) manufactures and sells a TPS. KM Enterprises, Inc. (KME), STC, Inc, and Emtrac Systems, Inc. manufacture and sell a competing system. GTT sued KME, STC, Emtrac, and related individuals (collectively, “defendants”), alleging that their system infringed a patent held by GTT. The defendants filed counterclaims asserting that GTT violated the Lanham Act, the Minnesota False Statement in Advertising Act, and the Minnesota Deceptive Practices Act, among other claims.

The court explained that the defendants would have to establish five elements for its false advertising claims to survive summary judgment: “(1) GTT made a false statement of fact in a commercial advertisement about its own or another’s product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) GTT caused its false statement to enter interstate commerce; and (5) Defendants have been or are likely to be injured as a result of the false statement.” If a statement was literally false, the defendants would not have to prove consumer deception.

The defendants claimed that an instructional GTT Internet video was literally false because it displayed images of Minneapolis Metro Transit (MMT) buses when Minneapolis was a customer of the defendants, and GTT’s system had never been installed on MMT buses. The court observed that “GTT’s narrator never mentions Minneapolis and never touts [GTT’s system] as the system in use by Minneapolis buses.” The images of the MMT buses merely “serve[d] as stock images of buses and traffic where a TPS system may be useful,” and therefore the video was not literally false.

The court reached the same conclusion with respect to an e-mail newsletter stating that: “For more than 35 years [GTT], the innovator of Opticom priority control solutions, has provided reliable traffic management.” The defendants had asserted that the statement was literally false because GTT did not exist 35 years ago. However, the court observed that a business unit of Minnesota Mining and Manufacturing Company (3M) had been divested in 2007, and had become GTT. “[I]f GTT is a continuation of 3M’s Intelligent Transportation Systems unit, and if GTT retains the experience of 3M, than the ad is not literally false because GTT’s experience incorporates 3M’s,” the court noted.

Since the defendants did not provide any evidence of consumer deception as to either piece of alleged false advertising, and since they did not provide evidence of materiality or injury for either one, GTT was entitled to summary judgment on the false advertising claims, the court held.

The case is No. 10-4110 ADM/JJG.

Attorneys: Chad Drown (Faegre Baker Daniels LLP) for Global Traffic Technologies, LLC. Jonathan D. Jay (Leffert Jay & Polglaze, P.A. for KM Enterprises, Inc.

Companies: Global Traffic Technologies, LLC; Emtrac Systems, Inc.; KM Enterprises, Inc.; STC, Inc.

Cases: Advertising MinnesotaNews