Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Va.: Consulting business proceeds with Lanham Act claims against former owner, (Jan 21, 2016)

By Greg Hammond, J.D.

A technology consulting company could move forward with claims that a once-affiliated company misrepresented its experiences and used the consulting company’s trademarks as its own, in violation of the Lanham Act. In denying the defendants’ motion to dismiss, the federal district court in Alexandria, Virginia, concluded that the consulting company adequately identified the allegedly false statements and sufficiently claimed that the statements were likely to deceive the public, were used in interstate commerce, and have inflicted competitive and commercial injury (Software Consultants, Inc. v. Rachakonda, January 19, 2016, O’Grady, L.).

Software Consultants, Inc. (SCI)—a technology consulting company—claimed that a former owner unilaterally decided to start dividing SCI’s assets by diverting them to the former owner’s companies—SCI IT Solutions Private Ltd. and Radiant Creative Group, LLC. The defendants moved to dismiss the Lanham Act claims.

False advertising. Rejecting SCI’s claim that the defendants only alleged a trademark infringement claim, the court concluded that SCI adequately alleged a Lanham Act false advertising claim. In particular, SCI identified three specific misrepresentations: (1) SCI IT “touts” the experiences of SCI as its own; (2) SCI IT’s “Industries” page on its website lists companies with which only SCI has contracted; and (3) SCI IT asserts that it “works in close concert” with SCI, despite the termination of any affiliation between the two companies. The complaint also alleged that the statements are likely to deceive the public; that SCI IT uses the representations in interstate commerce via its website; and that SCI IT’s actions have inflicted competitive and commercial injury on SCI.

Trademark infringement. The defendants also moved to dismiss the trademark infringement claims, arguing: (1) the use of a jointly owned mark cannot give rise to liability under the Lanham Act; and (2) the claim was time-barred because SCI IT has been using the SCI mark for more than two years.

The court rejected both arguments, finding first that that SCI pleaded sufficient facts to give rise to a plausible claim of implied license because the complaint painted a picture of two closely related companies whose affiliation was terminated in 2014; however, SCI IT continued to use SCI’s mark in a way that deceives the public. There was no basis for a finding of joint ownership, the court found. In addition, the court concluded that a ruling on the statute of limitations defense at the current stage of litigation would be premature.

The case is No. 1:15-cv-1145.

Attorneys: Thomas Francis Murphy (Friedlander Misler PLLC) for Software Consultants, Inc. William Bernard Schroeder (Shulman, Rogers, Gandal, Pordy & Ecker PA) for Shankar Rachakonda.

Companies: Software Consultants, Inc.; SCI IT Solutions Private Ltd.; Radiant Creative Group, LLC

Cases: Advertising VirginiaNews