Antitrust Law Daily Wrap Up, ADVERTISING—E.D.N.Y.: Limited 5-hour ENERGY sales not ‘commercial advertising’ under Lanham Act, (Apr 6, 2016)

By Greg Hammond, J.D.

A wholesaler of 5-hour ENERGY did not engage false advertising, in violation of the Lanham Act, by selling another company nearly 875,000 counterfeit bottles of the product. The federal district court in Brooklyn, New York, granted the wholesaler’s motion for summary judgment with regard to the false advertising claim, finding that the limited offering and sale of 5-hour ENERGY to other wholesalers did not rise to a widespread, organized, and public “commercial advertising” campaign under the Lanham Act (Innovation Ventures, LLC v. Ultimate One Distributing Corp., March 31, 2016, Matsumoto, K.).

Living Essentials, LLC, Innovation Ventures, LLC, and International Holdings, LLC filed suit against a number of businesses and individuals that were purportedly involved in the manufacture, sale, and distribution of counterfeit 5-hour ENERGY. Defendants Quality King Distributors, Inc. and Food Distributors International, Inc. were wholesalers of 5-hour ENERGY in 2012. However, Quality King purchased more than 875,000 bottles of 5-hour ENERGY from FDI, which FDI does not dispute were counterfeit. Before the court were Quality King’s motion for summary judgment on its cross-claims against FDI for false designation of origin and false advertising, in violation of the Lanham Act and FDI’s motion for summary judgment on Quality King’s cross-claims.

False advertising. FDI was entitled to summary judgment on the Lanham Act false advertising claim. The court reasoned that FDI’s limited offering and sale of 5-hour ENERGY to other wholesalers did not rise to a widespread, organized, and public “commercial advertising” campaign under the Lanham Act.

False designation of origin. In addition, FDI was granted summary judgment on Quality King’s false designation of origin claim because Quality King did not own, or have any property interest in, a trademark at issue in this case. Quality King therefore could not satisfy the first element of its false designation of origin claim—that it had a valid mark that was entitled to protection under the Lanham Act.

Warranty of non-infringement. The court, however, concluded that Quality King was entitled to summary judgment on its claim for breach of warranty of non-infringement. In particular, the court found no dispute that Quality King established all four elements of a warranty of non-infringement claim, in that: (1) Quality King and FDI were merchants that regularly dealt in 5-hour ENERGY; (2) Quality King was subject to a rightful claim of trademark infringement by Living Essentials for selling counterfeit 5-hour ENERGY purchased from FDI; (3) Quality King did not furnish specifications for 5-hour ENERGY to FDI; and (4) neither the purchase orders nor vendor agreement eliminated the UCC warranty against infringement.

Quality King was also entitled to summary judgment on its breach of contract claim against FDI and was awarded nearly $800,000.

The case is No. 12-CV-5354 (KAM) (RLM).

Attorneys: Alexander Michaels (Patterson Belknap Webb & Tyler LLP) for Innovation Ventures, LLC and Living Essentials, LLC. Darin J. Lebeau (Oakland Law Group, PLLC) for International IP Holdings LLC. Todd D. Greenberg (Addabbo & Greenberg Law) for Ultimate One Distributing Corp. Stephen J. Kressel (Kressel, Rothlein, Walsh & Roth LLC) for Excel Wholesale Distributors, Inc. Randi Wolkenbreit Singer (Weil, Gotshal & Manges, LLP) for Core-Mark International, Inc. Jennifer Lee Taylor (Morrison & Foerster LLP) for Pittsburg Wholesale Grocers Inc. and Pacific Groservice Inc.

Companies: Quality King Distributors, Inc.; Food Distributors International, Inc.; Innovation Ventures, LLC; Living Essentials, LLC; International IP Holdings LLC; Ultimate One Distributing Corp.; Excel Wholesale Distributors, Inc.; Core-Mark International, Inc.; Pittsburg Wholesale Grocers Inc.; Pacific Groservice Inc.

Cases: Advertising NewYorkNews