Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Pa.: Lanham Act claims over marketing of laboratory apparel survive motion to dismiss, (Dec 2, 2013)

By Jody Coultas, J.D.

Alpha Pro Tech, Inc. (APT) stated Lanham Act false advertising and false designation of origin claims against VWR International LLC for allegedly falsely advertising that APT no longer manufactured its products and that VWR’s products were APT’s products under a different name, the federal district court in Philadelphia has held (Alpha Pro Tech, Inc. v. VWR International LLC, November 25, 2013, Pratter, G.).

APT manufactures disposable protective apparel for use in scientific laboratories and medical settings and sells its products through distributors such as VWR. One of APT’s product lines was CRITICAL COVER®. APT entered into a relationship with a Chinese company, which was to become APT’s new CRITICAL COVER® manufacturer. VWR then agreed with the Chinese company to manufacture products for VWR using APT’s proprietary formula and methods. APT alleged that VWR marketed this new product line as replacements for, but nonetheless continuations of, APT’s CRITICAL COVER® products.

APT alleged that VWR’s advertisements caused consumers to believe that VWR’s products were CRITICAL COVER® products under a different brand name, and that VWR’s promotion, advertisement, distribution, sale, and/or offering for sale of its products misrepresented that the CRITICAL COVER® products had been discontinued.

To prevail on a Lanham Act false advertising claim, a plaintiff must show (1) that the defendant made false or misleading statements about its own product or the plaintiff’s products; (2) actual deception or at least a tendency to deceive a substantial portion of the intended audience; (3) the deception was material; (4) the advertised goods traveled in interstate commerce; and (5) a likelihood of injury. Liability for false advertising arises if the advertising is either literally false or literally true or ambiguous, but has the tendency to deceive consumers.

False advertising. The court held that APT stated a Lanham Act false advertising claim. APT claimed that VWR made both literally false statements and true but misleading statements in its advertising. VWR argued that APT’s claim must fail because APT cannot claim that it was the manufacturer because the Chinese company actually manufactured the product. APT’s partnership with the Chinese company did not mean that APT was not also a manufacturer. CRITICAL COVER® was one of APT’s trademarks, and any statements, even if true, that led customers to believe that VWR’s products were CRITICAL COVER® products would be actionable. APT’s allegations that VWR convinced a substantial amount of the relevant customers that VWR’s products were APT’s CRITICAL COVER® products with a new name was confirmed by APT sales representatives’ conversations with purchasers. Although APT’s claim survived the motion to dismiss, the court noted that a large and potentially dispositive issue of fact may be whether VWR’s products were identical, or even superior, to APT’s CRITICAL COVER® products. If the products were identical or superior, the advertising would be immaterial as the deception would be unlikely to influence purchasing decisions.

False designation of origin. To state a false designation of origin claim, APT needed to show (1) that VWR used a false designation of origin; (2) that such use of a false designation of origin occurred in interstate commerce in connection with goods or services; (3) that such false designation was likely to cause confusion, mistake, or deception as to the origin, sponsorship, or approval of APT’s goods and services; and (4) that APT was or was likely to be damaged. Express passing off occurs when a company labels goods or services with a mark identical to that of another company, or otherwise expressly misrepresents that the goods originated with another company. Implied passing off occurs when a company uses a competitor’s advertising material to impliedly represent that the product it is selling was produced by the competitor.

At this stage, APT’s factual allegations, if proven true, would make out a claim for false designation of origin/implied passing off, according to the court. VWR argued that there were no APT designations of origin and even if there were, VWR had not used such designations falsely, but used them fairly and referentially to provide truthful and accurate information to consumers. However, there was a potential false designation of origin issue based on the CRITICAL COVER® trademark itself. VWR’s marketing materials were likely to confuse consumers as to whether VWR’s new products were simply CRITICAL COVER® products by another name. APT correctly noted that such a claim was proper under the Lanham Act because otherwise a defendant could escape liability for passing off simply by using another’s mark to establish the equivalency of the other’s mark and the defendant’s new mark, and then shift to using only its new mark. Whether the advertising was likely to confuse customers could not properly be determined at the motion to dismiss stage.

The case is No. 12-1615.

Attorneys: James J. Rodgers (Dilworth Paxson) for Alpha Pro Tech, Inc. Michael W. McTigue, Jr. (Drinker Biddle & Reath LLP) for VWR International LLC.

Companies: Alpha Pro Tech, Inc.; VWR International LLC

Cases: Advertising PennsylvaniaNews