Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Lanham Act claim dismissed for lack of standing, (Mar 26, 2014)

By Jody Coultas, J.D.

Think Computer Corporation could not state Lanham Act and California Unfair Competition Law (UCL) claims against companies that allegedly made false statements about Think Computer and engaged in unfair business practices, the federal district court in San Jose has held (Think Computer Corporation v. Dwolla, Inc., March 24, 2014, Davila, E.).

Think Computer is a money service business and developer of a mobile payment system platform called FaceCash. The defendants are companies Think Computer claimed are direct competitors that hold and transmit funds on behalf of third parties, while another group included venture capital funds and individual investors.

Lanham Act false advertising claim. The court held that Think Computer lacked standing to assert Lanham Act claims against the defendants. Think Computer alleged that statements made by Dwolla, Inc. in three publications and statements made by Stripe, Inc. and Coinbase, Inc. in their terms of service were false and caused injury to Think Computer in violation of the Lanham Act. To establish standing under the Lanham Act, Think Computer was required to show a commercial injury caused by the companies’ misrepresentations, and that the injury was harmful to Think Computer’s ability to compete with the companies. Although Think Computer alleged that its sales and customers were directly diverted to Dwolla as a result of Dwolla’s statements, all contested statements were made after Think Computer already shut down its allegedly competing business and no longer had any sales or paying customers. Therefore, Think Computer could not show that it competed with the companies or that it suffered a commercial injury.

UCL claim. The UCL claim did not contain substantial questions of federal law, according to the court. Because the court dismissed the federal law claim, the court was required to determine whether the state law claims may properly remain in federal court. Although the UCL allows for remedies based on violations of state and federal laws, federal courts may not entertain a claim that depends on the presence of federal question jurisdiction unless there is a federal private right of action. The federal statutes on which the UCL claim was based did not create a private right of action. Therefore, the court lacked jurisdiction over the UCL claim.

The case is No. 5:13-CV-02054-EJD.

Attorneys: Michael James Aschenbrener (Aschenbrener Law PC) for Think Computer Corp. Thomas Patrick Brown (Paul Hastings LLP) for Dwolla, Inc., Airbnb, Inc. and Pound Payments Escrow Services, Inc. Ivo Michael Labar (Kerr & Wagstaffe LLP) for ActBlue, LLC. Judith Bond Jennison (Perkins Coie LLP) for Coinlab, Inc.

Companies: Think Computer Corporation; Dwolla, Inc.; Stripe, Inc.; Coinbase, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews