Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Ky.: Auto accessories provider states sufficient Lanham Act claims against distributor, (Mar 3, 2016)

By Greg Hammond, J.D.

An aftermarket automobile accessories provider has adequately alleged false advertising, product disparagement, and trademark infringement claims against two former distributors, based on the distributors’ continued advertising and sales of similar products under the provider’s “Eagle Flight” mark. The former distributors’ motion to dismiss the Lanham Act and state law claims was therefore denied by the federal district court in Paducah, Kentucky (Jae Enterprises, Inc. v. OxGord Inc., March 2, 2016, Russell, T.).

Jae Enterprises, Inc. provides aftermarket automobile accessories, including products under the “Eagle Flight” mark. OxGord, Inc. and Day to Day Imports, Inc. entered into a distribution agreement with Jae, under which OxGord and Day to Day purchased Eagle Flight products from Jae and then re-sold the products to end customers. After the distribution agreement terminated, however, OxGord and Day to Day allegedly continued to advertise and sell non-Eagle Flight products under the “Eagle Flight” mark. Jae filed suit, alleging false advertising, product disparagement, and trademark infringement, in violation of the Lanham Act, as well as other claims. The defendants moved to dismiss.

False advertising, product disparagement. The court determined that Jae sufficiently pleaded facts that, when accepted as true, state claims for false advertising and product disparagement under the Lanham Act. In particular, Jae claimed that: (1) the defendants’ past and continued sale, offer to sell, distribution, and advertisement of non-Eagle Flight automobile accessories under the “Eagle Flight” mark misrepresents the nature, characteristics, qualities, and geographic origin of the defendants’ non-Eagle Flight automobile accessories and Jae’s “Eagle Flight” products; (2) the defendants purposefully altered Jae’s product listings on Amazon to state “incorrect information, including that a particular product only fits a certain style of truck, that a listing is only for a single product as opposed to an entire set, and changed the model years with which a particular product is compatible; and (3) the defendants’ allegedly made phone calls offering incentives to customers to change their positive reviews about “Eagle Flight” products to negative ones and reporting to customers that shipping delays were due to quality issues with the manufacturer, Jae.

The court also found that by allegedly listing themselves as an authorized seller of Eagle Flight products and then selling non-Eagle Flight products to customers who believed they were purchasing the advertised Eagle Flight products, the defendants effectively made a false statement in a commercial advertisement. The motion to dismiss the false advertising and product disparagement claims was therefore denied.

Trademark infringement. In support of their motion to dismiss the trademark infringement claim, the defendants first argued that they did not “use” the Eagle Flight mark in commerce because Jae created a product detail page on Amazon, through which the defendants allegedly advertised and sold non-Eagle Flight products, and the defendants’ products were clearly identifiable as non-Eagle Flight products and did not bear the Eagle Flight Mark. The court rejected this argument, noting that the defendants rely on a “technicality that ignores the practical effect of their decision to allegedly list themselves as a seller on an Eagle Flight product detail page and consequently, to advertise and sell products using the Eagle Flight mark to consumers.” The allegations were therefore sufficient to demonstrate “use” under the Lanham Act.

Allegations that the defendants passed off generic and even competitor automobile accessories as Eagle Flight automobile accessories, because customers thought they were ordering the advertised Eagle Flight product and instead received a non-Eagle Flight product, were sufficient to demonstrate a likelihood of consumer confusion.

Lastly, the “first sale” exception was inapplicable in the instant action because Jae adequately alleged facts that supported the conclusion that the defendants advertised and sold products under the Eagle Flight mark that were materially different from genuine Eagle Flight products. The motion to dismiss the trademark infringement claim was therefore denied.

The case is No. 5:15-CV-228-TBR.

Attorneys: Lisa Catherine Dejaco (Wyatt, Tarrant & Combs LLP) for Jae Enterprises, Inc. R. Kenyon Meyer (Dinsmore & Shohl LLP) for OxGord, Inc. and Day To Day Imports, Inc.

Companies: Jae Enterprises, Inc.; OxGord, Inc.; Day To Day Imports, Inc.

Cases: Advertising FranchisingDistribution KentuckyNews