Antitrust Law Daily Wrap Up, ADVERTISING—E.D.N.C.: Lack of injury dooms key cutting machine false ad claims, (May 10, 2016)

By Greg Hammond, J.D.

A designer of an electronic key cutting machine failed to demonstrate that he was injured by a competitor that falsely labeled two features of its own key cutting machine as “patent pending,” despite never filing an application for a patent for those two features. The federal district court in New Bern, North Carolina, granted the competitor’s motion for summary judgment, finding that the designer lacked standing to bring his Lanham Act false advertising claim (Gravelle v. Kaba Ilco Corp., May 9, 2016, Flanagan, L.).

The designer, doing business as CodePro Manufacturing, created and sold two electronic key cutting machines, the CodePro 4500 and the RapidKey 7000. CodePro asserts that competitor Kaba Ilco Corp. falsely labeled two features on its machine as “patent pending,” but never filed an application for a patent for those two features, purportedly resulting in diverted sales away from CodePro. Consequently, CodePro filed suit, claiming false advertising in violation of the Lanham Act, false marking in violation of the Patent Act, and violation of the North Carolina Unfair and Deceptive Practices Act (UDPA). The parties filed cross-motions for summary judgment.

False advertising. The plaintiff lacked standing to bring his Lanham Act false advertising claim, the court concluded, because he failed to demonstrate damages proximately caused by Kaba’s conduct. Specifically, the court concluded that CodePro failed to demonstrate harm to sales or that Kaba’s use of the false “patent pending” mark proximately caused him any harm. Although his CodePro 4500 sales did suffer, he conceded that CodePro 4500 was nearing the end of its life span. He also placed an additional, competing machine—RapidKey 7000—in the market, diluting his own market share.

UDPA. The court also granted Kaba summary judgment on CodePro’s UDPA claim, finding that CodePro failed to submit evidence sufficient to demonstrate that he suffered an injury proximately arising from Kaba’s false use of the “patent pending” mark in its advertisements.

False marking. Finally, the court concluded that because CodePro failed to submit evidence sufficient to demonstrate a “competitive injury,” as required under the Patent Act, he lacked statutory standing. In particular, CodePro submitted no documentary evidence to substantiate his claim that Kaba’s admittedly false “patent pending” marking harmed his business, according to the court. In addition, there was no evidence to establish a “causal connection” between Kaba’s use of the false mark and CodePro’s alleged injury. Testimony of poor sales, alone, was not evidence of competitive injury, the court found, particularly where other evidence reasonably explained the decline in sales, including that the plaintiff diluted his own market share by introducing another key cutting machine into the market.

The case is No. 5:13-CV-642-FL.

Attorneys: Gordon Gravelle, pro se. Albert P. Allan (Allan Law Firm, PLLC) for Kaba Ilco Corp.

Companies: Kaba Ilco Corp.

Cases: Advertising StateUnfairTradePractices NorthCarolinaNews