Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Ala.: Aircraft arresting systems manufacturers’ Lanham Act claims proceed against foreign competitor, (Apr 8, 2015)

By Linda O’Brien, J.D., LL.M.

A domestic aircraft arresting systems manufacturer alleged sufficient facts to pursue claims against a competing Swedish-based aircraft arresting system manufacturer for making misrepresentations to the U.S. Air Force that it could provide the domestic manufacturer’s brand name systems in order to successfully bid an aircraft products contract, the federal district court in Birmingham, Alabama has held (Engineered Arresting Systems Corporation v. Atech, Inc., April 7, 2015, Haikala, M.).

Engineered Arresting Systems Corporation (ESCO) manufactures, distributes, and sells aircraft arresting systems for military and commercial aircraft. ESCO has the trademark PORTARREST for its aircraft arresting systems. Atech, Inc., the Alabama-based subsidiary of Swedish company SCAMA AB, also manufactures arresting systems.

In October 2012, the U.S. Air Force (USAF) published a solicitation for products for the Polish Air Force, including PORTARREST brand mobile hood cable systems and parts. ESCO and Atech submitted proposals in response to the USAF solicitation, and the contract was ultimately awarded to Atech. ESCO filed suit against Atech and SCAMA, alleging trademark infringement, false designation of origin, and false advertising under the Lanham Act. ESCO asserted that the defendants used ESCO trademarks in an attempt to mislead the USAF into believing that they could provide ESCO brand name systems. Atech and SCAMA moved to dismiss the complaint for lack of personal jurisdiction and failure to state a claim.

Personal jurisdiction. The court determined there was sufficient evidence that SCAMA—led by its president, Harald Ahagen—purposefully affiliated itself with Atech in Alabama in order to bid for and profit from the USAF contract. Evidence included emails from Ahagen to the Alabama company that it could not win the contract on its own and recommended the formation of a “bid team.” The bid represented that the team’s focus would be to provide a U.S. platform for manufacturing SCAMA arresting systems.

Moreover, SCAMA purchased Atech after it was awarded the USAF contract and named Ahagen’s son as president. SCAMA was closely involved in the day-to-day operations of Atech, including lease negotiations and employee hiring and training. Since winning the USAF contract was the primary goal of SCAMA’s affiliation with Alabama, the defendants could reasonably anticipate being pulled into an Alabama court on issues related to the USAF contract.

Failure to state a claim. Additionally, ESCO plausibly stated a claim for false advertising. To sustain a claim for false advertising, ESCO must show (1) the advertisements were false and misleading; (2) the advertisements deceived consumers; (3) the deception had a material effect on purchasing decisions; (4) the misrepresented product affected interstate commerce; and (5) the plaintiff was injured as a result of the false advertising.

In this case, ESCO alleged that the defendants made misleading representations to the USAF that they could manufacture ESCO’s trademarked products. Those misleading statements led the USAF to mistakenly award the Polish Air Force contract to Atech rather than ESCO. Thus, the allegations were sufficient to state a claim and the defendants’ motion to dismiss should be denied, the court concluded.

The case is No. 5:14-cv-00518-MHH.

Attorneys: Daniel Kaufmann (Bradley Arant Boult Cummings LLP), and Dean Wall Russell (Kilpatrick Townsend & Stockton LLP) for Engineered Arresting Systems Corporation. Christopher Lea Lockwood (Wilmer & Lee PA) for Atech, Inc.

Companies: Engineered Arresting Systems Corporation; Atech, Inc.

Cases: Advertising AlabamaNews