Antitrust Law Daily Wrap Up, ANTITRUST—M.D. Fla.: Lantern distributor’s claims fail over alleged attempt to coerce trademark transfer through termination of supply, (Oct 14, 2013)

By Tobias J. Gillett, J.D., LL.M.

A distributor of lanterns failed to assert claims that a marketer of the lanterns violated the antitrust laws by reaching an agreement with the manufacturer of the lanterns to cut off the distributor’s supply of lanterns unless it agreed to transfer a trademark and a domain name to the marketer, the federal district court in Tampa has ruled (Clifton-Draper v. Pelam International, Ltd., October 11, 2013, Merryday, S.).

BriteLyt, Inc. resold lanterns, cook stoves, and lantern parts manufactured by Silver-Ray Kaiping, a Chinese corporation. In October 2006, BriteLyt applied to the U.S. Patent and Trademark Office (PTO) to register the mark “Petromax,” the registration of which Pelam International, Ltd. had inadvertently allowed to expire. Pelam opposed the application at the PTO, and sent BriteLyt a letter informing it that “Pelam has the right and ability to control its manufacturer Kaiping and the distribution of the authorized product.” Kaiping then sent BriteLyt a letter notifying BriteLyt that future sales of its products would be made exclusively through Pelam, and that BriteLyt should contact Pelam about future purchases. Pelam later withdrew its opposition, and the PTO issued the Petromax mark to BriteLyt. However, Pelam sent BriteLyt an e-mail stating that Pelam “would be pleased to negotiate the details of a contract with you,” but only after “transfer of the U.S. Petromax trademark and the Petromax.com domain name.”

BriteLyt and its principals filed suit against Pelam and its principal, alleging patent infringement and Sherman Act antitrust claims. BriteLyt alleged that “Pelam enjoys a substantial market share in the sale of lanterns such as those which had been sold by BriteLyt,” and that there were “no other competitors of Kaiping or Pelam who produce a lantern which is the same or similar to that which BriteLyt had purchased from Kaiping,” and sought an injunction against “engaging in activities including vertical anti-competitive contracts, which would suppress competition.” The defendants filed a motion for summary judgment.

The court observed that the plaintiffs’ response to the motion for summary judgment contended “for the first time that the complaint alleges a horizontal restraint, a group boycott, and price fixing.” The court found this argument to be “directly contrary to a fair reading” of the complaint’s Sherman Act allegations, including the “specific invocation of the term ‘vertical restraint’ in the ad damnum clause,” allegations that could only be understood to describe a vertical restraint, the request for an injunction to halt “activities including vertical anti-competitive contracts,” and the lack of any reference to horizontal restraints, price fixing, or group boycotts. The court “disallowed” the plaintiffs’ “last-minute, evasive ‘pivot’” to assert a per se unlawful horizontal restraint in response to the motion for summary judgment, without amending the complaint.

Moreover, the plaintiffs failed to allege the necessary predicates for their Sharman Act claims, according to the court. The plaintiffs’ “complete omission” of allegations establishing a relevant market and an adverse effect on that market precluded the plaintiffs’ claims.

“Apparently, the plaintiffs equate a supplier’s discontinuing them (however miniscule the effect in the relevant market), a loss of economic opportunity to them (however miniscule the effect in the relevant market), and the unavailability to them of a product (however miniscule the effect in the relevant market) as a ‘restraint of trade’ within the prohibition of the Sherman Act,” the court stated. “About that, the plaintiffs are fatally wrong.”

The court rejected the plaintiffs’ assertion that”[t]he agreement between Pelam and Kaiping is not about competition. It is about extortion, and it is about revenge.” The court noted that “the Sherman Act prohibits neither extortion nor revenge,” and concluded that the plaintiffs’ failure “to plead, and offer evidence of, both the relevant market and an unlawful effect on that market” doomed their claims.

The case is No. 8:10-cv-822-T-23AEP.

Attorneys: Edward P. Dutkiewicz (Law Office of Edward P. Dutkiewicz) for Julia D. Clifton-Draper. John L. Urban (Urban, Thier, Federer & Chinnery, PA) for Pelam International, Ltd.

Companies: Pelam International, Ltd.; BriteLyt, Inc.

Cases: Antitrust FloridaNews