Antitrust Law Daily Wrap Up, FALSE ADVERTISING—DOr: “IP Theft” Charge Must Be Made In Bad Faith to Be Lanham Act False Advertising, (Jan 22, 2013)

By Tobias J. Gillett, J.D., LLM.

A manufacturer of photovoltaic paste, claiming that E.I. Du Pont de Nemours and Company had committed false advertising under the Lanham Act by implying that the manufacturer had engaged in “intellectual property theft,” must allege that DuPont made its statements in bad faith, the federal district court in Portland, Oregon has ruled (E.I. Du Pont de Nemours and Co. v. Heraeus Precious Metals North America Conshocken LLC, January 18, 2013, Hubel, D.).

DuPont had brought a lawsuit against the manufacturer, Heraeus Precious Metals North America Conshocken LLC, and SolarWorld Industries America, Inc., alleging that Heraeus had infringed a DuPont patent on a conductive metallization paste used in the production of photovoltaic solar cells, and that SolarWorld had infringed the patent by using Heraeus’s paste in manufacturing solar cells.

In July 2012, DuPont allegedly issued a press release on the Internet and through e-mail to customers of DuPont and Heraeus, describing remarks made by its Electronics & Communications Managing Director for Greater China, Walt Cheng, at a photovoltaics industry conference in Shanghai, China. The press release quoted Cheng as claiming that “intellectual property theft” was “widespread” in the photovoltaic industry, and mentioned that DuPont had filed the present patent infringement lawsuit against Heraeus and SolarWorld.

Heraeus filed several counterclaims, including one alleging that DuPont’s press release had violated the Lanham Act’s prohibition on false or misleading advertising. DuPont filed a motion to dismiss that counterclaim.

DuPont first contended that Heraeus had failed to identify the particular statement it believed constituted false advertising. Heraeus argued that it had identified the statement that “Heraeus has allegedly engaged in intellectual property theft.” Although the court observed that the statement “Heraeus has allegedly engaged in intellectual property theft” did not appear in the press release, the court determined that the combination of the discussion of intellectual property theft with the mention of the present patent infringement lawsuit did lead to a “reasonable inference” that Heraeus had engaged in intellectual property theft.

Heraeus had argued that DuPont’s statements were false because DuPont had not “allege[d] any copying, misappropriation, willfulness or other conduct that could be reasonably characterized as ‘IP Theft.’” The court found this to be a “distinction . . . without a difference,” finding that “patent infringement is, in fact, a form of IP theft.”

Nonetheless, the court found that Heraeus had adequately pled the elements of a Lanham Act false advertising claim under Ninth Circuit precedent, including (1) a false statement of fact, (2) actual deception or the tendency to deceive, (3) materiality, (4) that “the defendant caused its false statement to enter interstate commerce,” and (5) injury or likelihood of injury.

Heraeus had alleged that DuPont had “publicly misrepresented the legitimacy of [Heraeus’s] products by falsely representing in a widely distributed press release that Heraeus has engaged in intellectual property theft,” that DuPont had distributed the press release via the internet and e-mail, and that DuPont’s allegedly false statements “are likely to cause confusion and have in fact caused confusion and mistake as to the characteristics of Heraeus’s products.”

However, the court found that Heraeus also had to allege that DuPont had made its statements “in bad faith.” As Heraeus had not alleged that element, the court granted DuPont’s motion to dismiss the counterclaim. The court ordered dismissal without prejudice, to permit Heraeus to amend its counterclaim to allege DuPont had acted in bad faith “if it can make such an allegation in good faith.”

The case is No. 03:12-cv-01104-HU.

Attorneys: Peter E. Heuser (Schwabe, Williamson & Wyatt, P.C.) for E.I. Du Pont De Nemours and Co. Steven K. Blackhurst (Ater Wynne LLP) for Heraeus Precious Metals North America Conshocken LLC.

Companies: E.I. Du Pont De Nemours and Co.; Heraeus Precious Metals North America Conshocken LLC; SolarWorld Industries America, Inc.

Cases: Advertising OregonNews