Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: False advertising claims regarding software product dismissed, (Feb 13, 2014)

By Jody Coultas, J.D.

The federal district court in San Francisco granted Foray Technologies, LLC summary judgment of Kwan Software Engineering, Inc.’s false advertising claims under the Lanham Act, California Unfair Competition Law, and California False Advertising Law (Kwan Software Engineering, Inc. v. Foray Technologies, LLC, February 11, 2014, Illston, S.).

Kwan Software, doing business as VeriPic, Inc., and Foray both sell evidence-related software to law enforcement agencies. Foray allegedly misled the public about certain industry standards, the capabilities of its own software, and by implication, the capabilities of VeriPic’s software.

Specifically, the advertising stated that Foray’s Authenticated Digital Asset Management System (ADAMS) software was the only software that complied with Scientific Working Group on Imaging Technologies (SWGIT) requirements. Foray also stated that “its ADAMS software complied with SWGIT guidelines that state that the use of a hash function is the best way to authenticate digital assets” and that its software authenticated digital assets. According to VeriPic, Foray misled consumers in naming its software “Authenticated Digital Asset Management System.”

The U.S. District Court of Appeals in San Francisco previously denied VeriPic’s request for an injunction barring Foray from claiming it produced the only software that complied with industry guidelines.

VeriPic failed to show a genuine dispute of fact as to whether the challenged statements were likely to mislead consumers, according to the court. VeriPic argued that its expert market survey of the law enforcement community shows that there was a material dispute of fact as to whether Foray’s advertising was deceptive. To assess the validity and reliability of a survey, courts look at whether: (1) the proper universe was examined and the representative sample was drawn from that universe; (2) the survey’s methodology and execution were in accordance with generally accepted standards of objective procedure and statistics in the field of such surveys; (3) the questions were leading or suggestive; (4) the data gathered was accurately reported; and (5) persons conducting the survey were recognized experts. The survey did not examine proper universe of consumers, as the survey did not actually focus on potential users of Foray’s software. VeriPic also failed to show that potential users of the software saw the advertising.

No reasonable jury could conclude that Foray’s representation that its ADAMS software authenticated digital evidence was unambiguously false, according to the court. Foray’s software could verify the time the digital evidence was placed in the system until its retrieval. VeriPic argued that the term “authentication” in the digital asset management context referred to the process of determining whether an image had been altered since the time it was originally captured. However, the evidence showed that in the digital asset management system industry, it was common to use the term “authentication” when referring to “integrity” processes, including specifically the use of hash values. The SWGIT guidelines also did not support VeriPic’s contention that Foray’s statements regarding authentication were literally false. Purchasers of digital asset management software use the term “authentication” to refer to the process of ensuring that an image was unaltered from the time it was entered into the software system. Therefore, using the term authentication when referring to the integrity process was common practice, and not literally false.

The court also held that Foray’s statements about workflow were not literally false. VeriPic alleged that Foray falsely stated that “[w]hile some vendors may claim they are ASCLD or SWGIT compliant, no other digital evidence management system vendor complies with the SWGIT workflow shown above. ONLY the Foray ADAMS solution meets this requirement!” Based on the evidence presented by Foray and Veripic, no reasonable jury could find that Foray’s statement was literally false.

The case is No. C 12-03762 SI.

Attorneys: George Grellas (Grellas Shah LLP) for Kwan Software Engineering, Inc. Chip Cox (Greenan Peffer Sallander & Lally LLP) for Foray Technologies, LLC.

Companies: Kwan Software Engineering, Inc.; Foray Technologies, LLC

Cases: Advertising StateUnfairTradePractices CaliforniaNews