Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Technology firm’s use of competitor’s “HyperCloud” mark was misleading, (Sep 3, 2015)

By Greg Hammond, J.D.

A developer of customized semiconductor memory chips was denied its renewed motion for judgment as a matter of law concerning Lanham Act claims for trademark infringement and false advertising. The federal district court in Oakland, California, determined that there was sufficient evidence for a jury to conclude that the developer intentionally used a competitor’s registered “HyperCloud” mark to gather customers for its own product and that consumers would have been misled by the omission of the competitor’s name in connection with the mark (Netlist, Inc. v. Diablo Technologies, Inc., September 1, 2015, Rogers, Y.).

Netlist, Inc., a company that was in the business of creating high performance memory chips for the computer industry, brought trademark infringement and false advertising claims to trial against Diablo Technologies, Inc.—a developer of customized semiconductor memory chips—alleging: (1) Diablo intentionally and without authorization used Netlist’s HyperCloud® trademark on its website, without adding any explanation or reference that the memory module was Netlist’s product, and implying that HyperCloud was Diablo’s product; and (2) Diablo used the trademark to gather information about customer interest in HyperCloud for purposes of marketing a competing product. After a jury found in favor of Netlist, Diablo renewed its motion for judgment as a matter of law.

False advertising. Diablo argued that the use of the HyperCloud name on its website, without reference to Netlist, was not a false statement. This argument was rejected, however, because the jury was presented with evidence from which it could reasonably conclude that a consumer who viewed Diablo’s webpage would have been misled by the omission of Netlist’s name in connection with the HyperCloud mark, and that the substitution of the words “a proprietary design,” could lead a consumer to incorrectly believe that HyperCloud was Diablo’s technology. There was consequently an actionable false or misleading representation of fact.

Trademark infringement. Diablo also argued that Netlist failed to provide any evidence of likelihood of confusion. The argument was not persuasive, the court determined, because Diablo did not meet its burden in showing that no reasonable jury could find Diablo’s use of the HyperCloud mark was likely to cause confusion. Rather, the evidence was sufficient for a jury to conclude that Diablo intentionally omitted reference to Netlist and used potential interest in HyperCloud, as well as confusion about its ownership, to gather potential customers for its own product. There was consequently no basis to set aside the jury’s decision with regard to the trademark infringement claim.

The case is number 13-cv-5962 YGR.

Attorneys: Benjamin Kneeland Riley (Bartko, Zankel, Bunzel & Miller), Erin Paige Gibson (DLA Piper LLP), and Gregory C. Schodde (McAndrews Held and Malloy Ltd) for Netlist Inc. Fabio Elia Marino (McDermott Will & Emery) for Diablo Technologies Inc.

Companies: Netlist, Inc.; Diablo Technologies, Inc.

Cases: Advertising CaliforniaNews