Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—1st Cir.: Insecticide maker properly granted injunction against tree care company, (Jul 17, 2015)

By Greg Hammond, J.D.

An insecticide manufacturer was properly granted preliminary injunctive relief where it could likely show that a tree care company breached its distribution agreement by contributing to the creation of a competing insecticide. The U.S. Court of Appeals in Boston partially affirmed the lower court’s order granting preliminary injunction, finding that, given the evidence, it was plausible for the court to infer that the tree care company played a role in creating the competing product and the lower court did not err in its interpretation of the contractual language (Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc., July 16, 2015, Souter, D.).

Arborjet, Inc. manufactures and sells TREE-age, an emamectin benzoate solution used to protect trees. In 2008, Arborjet granted Rainbow Treecare Scientific Advancements, Inc. an exclusive right to distribute TREE-age, but the contract stated that Rainbow would not engage in affairs intended to replicate Arborjet’s products or processes. After the agreement terminated, Rainbow began marketing and distributing ArborMectin, an emamectin benzoate combination meant to compete directly with TREE-age. Arborjet sued Rainbow, seeking to enjoin the sale of ArborMectin and claiming breach of contract, breach of implied covenant of good faith and fair dealing, false advertising under the Lanham Act and Massachusetts law, false designation of origin under the Lanham Act, and common law unfair competition.

The district court granted preliminary injunction, finding Arborjet would likely succeed on the breach of contract and implied covenant of good faith and fair dealing claims, because it would likely be able to prove that Rainbow engaged in research and development to create a product very similar to TREE-age. Rainbow was therefore ordered to immediately cease and desist selling, distributing and/or marketing ArborMectin.

Contract claims. In support of its appeal, Rainbow first argued that it was clear error to find a likely showing that it contributed to the creation of ArborMectin. The court rejected this argument, noting two emails from a Rainbow sales representative describing ArborMectin as Rainbow’s own product, and that Rainbow conducted at least ten studies across the United States on the effectiveness of ArborMectin. It was consequently plausible for the court to infer that Rainbow played a role in the product’s creation.

Rainbow additionally argued that the lower court erred in interpreting the contractual language that Rainbow would not engage in affairs intended to replicate Arborjet’s products or processes. Specifically, Rainbow argued that the contractual language did not apply to ArborMectin, because it differs from TREE-age in toxicity and other details. The court, however, applied Massachusetts contract law that the words of a contract must be considered in the context of the entire contract rather than in isolation. It consequently found that the prohibition was probably aimed at preventing efforts by Rainbow to place Arborjet at a competitive disadvantage, reflecting a concern broader than the mere creation of an exact copy. The lower court therefore did not abuse its discretion in entering the portion of the preliminary injunction based on Arborjet’s contract claim.

Trademark. Rainbow also challenged a second term of the injunction, which stated that Rainbow “and those acting in concert with it shall properly attribute Arborjet’s trademarks ‘Arborjet’ and ‘TREE-age’ by appending the ® symbol to those marks and a footnote stating ‘Registered Trademark of Arborjet, Inc.’” The court agreed with Rainbow’s argument that ordering proper attribution of “Arborjet” and “TREE-age” was improper given the district court’s rulings on the Lanham Act claims.

Specifically, the court noted that the grant of preliminary injunctive relief, with regard to ordering Rainbow to attribute Arborjet trademarks properly, responded to the allegedly false designation of origin claim. The lower court, however, concluded that Arborjet was not likely to succeed on this claim. It found that the evidence weighed against a finding of a likelihood of confusion, which was fatal to the request for an injunctive order for trademark designation. The trademark designation portion of the preliminary injunction was therefore reversed.

The case number is 14-2324.

Attorneys: Scott P. Lopez (Lawson & Weitzen, LLP) for Rainbow Treecare Scientific Advancements, Inc. Kristen S. Scammon (Torres, Scammon & Day, LLP) for Arborjet, Inc.

Companies: Arborjet, Inc.; Rainbow Treecare Scientific Advancements, Inc.

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