Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Va.: Software company’s Lanham Act claims proceed against competitor, (Nov 12, 2013)

By Jody Coultas, J.D.

Software company AvePoint, Inc. stated Lanham Act and state law false advertising claims against competitor Power Tools, Inc. for allegedly disseminating false statements about AvePoint’s products and services, the federal district court in Roanoke, Virginia has held (AvePoint, Inc. v. Power Tools, Inc., November 7, 2013, Conrad, G.).

AvePoint and Power Tools provide infrastructure management and governance software platforms for Microsoft SharePoint products and technologies. AvePoint alleged that Power Tools made false, defamatory, and deceptive claims in online networking services and direct communications with customers and prospective customers concerning AvePoint. Power Tools also allegedly created a LinkedIn account for a fictitious AvePoint employee. The profile encouraged viewers to contact the employee for “business deals,” “new ventures,” and “consulting offers.” Power Tools then contacted consumers that contacted the fake employee.

To state a false advertising claim under the Lanham Act, AvePoint was required to allege that Power Tools made false statements in a commercial advertisement about AvePoint’s product, the misrepresentation was material, the misrepresentation actually deceived or had the tendency to deceive, Power Tools placed the false statement in interstate commerce, and AvePoint was injured. A commercial advertisement is defined as commercial speech by a defendant who is in commercial competition with plaintiff for the purposes of influencing consumers to buy defendant’s goods or services and is disseminated to the relevant purchasing public.

Some of the statements made by Power Tools on Twitter, misrepresenting the geogrpahic origin of AvePoint’s goods and services and impugning the quality of AvePoint’s goods and services, constituted commerical speech and were actionable under the Lanham Act, according to the court. Power Tools used Twitter to falsely brand AvePoint as a Chinese company when it is actually an American company. The statements also falsely claimed that AvePoint’s products were of such poor quality that customers were dropping AvePoint for Power Tools. These false statements allegedly caused AvePoint to lose customers from the government sector. Although the Twitter statements did not actually refer to AvePoint, they were directed towards AvePoint. Twitter is a commonly used means of advertising in the industry, and the messages reached hundreds of customers and potential customers.

AvePoint stated a Virginia Consumer Protection Act claim against Power Tools, according to the court. Virginia law prohibits advertising that is untrue, deceptive, or misleading if the advertisement was made with the intent to sell or to induce the public in any manner to enter into any obligation. The statute applies only to non-oral advertisements. The allegations regarding the Twitter postings were sufficient to show that Power Tools made misstatements about AvePoint’s products and geographic origin.

The court held that AvePoint stated a false association claim against Power Tools, according to the court. False association or false endorsement under Section 43(a)(1)(A) of the Lanham Act provides liability for false representations concerning the origin, association, or endorsement of goods or services through the wrongful use of another’s distinctive mark, name, trade dress, or other device. Power Tools argued that AvePoint failed to plead likelihood of confusion as to AvePoint’s association with the LinkedIn profile. At this stage, the allegations were sufficient despite the LinkedIn profile not contaiing statements telling viewers that AvePoint sponsored, approved of, or endorsed it.

Power Tools could not be held liable under the Lanham Act for false designation of origin, according to the court. A claim for false designation of source or origin requires proof of the same elements as a claim for trademark infringement. Section 43(a)(1)(A) did not extend to misrepresentations regarding geographic origin or another’s goods. Rather, it only applies to making misreprentatiosn regarding origin of one’s own goods.

The case is No. 7:13CV00035.

Attorneys: Robert Michael Tyler (Spotts Fain, PC) for AvePoint, Inc. Wyatt B. Durrette, Jr. (DurretteCrump, PLC) for Power Tools, Inc.

Companies: AvePoint, Inc.; Power Tools, Inc.

Cases: Advertising VirginiaNews