Lanham Act

In Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), the Supreme Court considered the overlap of copyright and trademark/unfair competition law, concluding that a company did not commit false advertising under '43(a) of the Trademark Act (15 U.S.C. '1125(a)) by representing that it was the author of a previously copyrighted work it had not actually created, as long as its identity as the source of the copied work was clear to the public. The Supreme Court determined that where an accused copyright infringer truthfully represented that it had published the alleged copy, it was not making a “false designation of origin” under '43(a). The Federal Circuit has now concluded that Dastar is similarly applicable to the overlap between patent and trademark/unfair competition law, where an accused patent infringer makes false claims that it originated a third party's patented technology. Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009).

The Baden Sports Case

Baden Sports (“Baden”), a company that manufactures and sells inflatable sports balls, including high-end, game-quality basketballs, owns U.S. Patent No. 5,636,835 (“the '835 patent”) for a ball with raised seams and a layer of padding underneath the outer covering. Baden markets its embodiment of that invention as containing “cushion control technology.”

Baden sued its competitor, Molten USA, Inc. (“Molten”), for infringing the '835 patent and making a '43(a) false designation of origin concerning Molten's basketball with an inner, padded layer. Molten advertised its ball as containing “proprietary,” “exclusive,” and “innovative” “dual-cushion technology.” Baden obtained a summary judgment of patent infringement against Molten from the U.S. District Court for the Western District of Washington, but the court denied Baden's request for injunctive relief at that time and also denied Molten's motion for summary judgment of patent invalidity. However, the court granted Molten summary judgment that it had not committed false advertising by claiming that its balls were “proprietary” and “exclusive.” Interpreting those terms to convey the idea that Molten invented and owned the advertised basketball technology, the district court found them to be equivalent to a claim of authorship under Dastar. As it was clear to the public that Molten was the source of the Molten basketball, Baden could not pursue a cause of action for false designation of origin against Molten based on Molten's claims that its technology was “proprietary” and “exclusive,” even if those statements were false.

The district court, however, allowed the false advertising action to proceed against Molten's claim that its ball was “innovative.” The court concluded that “innovative” was not a claim of inventorship, but a claim about the “nature, characteristics, [or] qualities” of Molten's goods, an alternative ground for relief under '43(a). At trial, Baden's proof of false advertising concentrated on evidence that Molten falsely advertised its “dual cushion technology” to be a Molten innovation, rather than focusing on whether Molten's goods were actually innovative. The district court, however, excluded Molten's evidence that there were differences between the companies' basketballs that would support the “innovative” claim because the prior summary judgment of patent infringement precluded Molten from contending that its basketballs were different from Baden's basketballs. The jury awarded more than $8 million to Baden under '43(a) for Molten's intentional false advertising, but only about $38,000 in damages for patent infringement. The district court enjoined Molten from further infringement of the '835 patent and from advertising in the United States that its “dual-cushion technology” was innovative.

The Federal Circuit Decision

Applying Ninth Circuit law, the Federal Circuit reversed the false advertising verdict, concluding that “innovative” was also a claim of inventorship/authorship barred by Dastar. To prevail on its false advertising claim, Baden had to demonstrate that Molten's advertisements: 1) “cause[d] confusion ' as to the origin” of Molten's balls, or 2) concerned the “nature, characteristics, [or] quality” of those goods. Because the Supreme Court in Dastar interpreted the '43(a) language “origin of goods” to mean “the producer of the tangible goods that are offered for sale, and not ' the author of any idea, concept, or communication embodied in those goods,” the Federal Circuit determined that Molten had not committed false advertising by stating that its technology was “innovative.” Rather, Molten's advertising referred to the author of the creative idea or concept behind its balls, not the producer of those physical balls. As Baden did not claim or introduce any evidence that someone other than Molten produced the infringing balls, Baden had no claim for false advertising under '43(a).

Although the district court had decided that “innovative” referred to the nature, characteristics or qualities of the Molten basketballs, the Federal Circuit disagreed, applying the Ninth Circuit's reasoning that such a claim must refer to “the characteristics of the good itself,” not to the status of the goods. Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1144 (9th Cir. 2008) (holding that claim that technology of goods was licensed does not refer to nature, characteristic, or quality of goods). As Baden had not challenged any physical or functional attribute of Molten's basketballs, only a false designation of authorship was implicated. At most, the Federal Circuit determined, “innovative” meant that Molten created something new or that the product was new (whoever created it), which was not a characteristic of the balls themselves. Baden wanted Molten to stop advertising that Molten created the innovative technology at issue. Baden did not argue that Molten's innovation claims were false for any reason other than authorship of the innovation. Its claims were fundamentally about the origin of an idea and, therefore, barred under Dastar by Ninth Circuit law.

Baden also argued that Molten continued to advertise falsely that its balls contained dual-cushion technology and that Molten falsely advertised that its balls were designed by a prominent Italian designer, causing a likelihood of consumer confusion. Because Baden did not raise that argument in its complaint or the pre-trial order, at trial or in the jury instructions, the Federal Circuit found that it was waived on appeal. Thus, the Federal Circuit reversed the $8 million award to Baden.

Although Baden also asked the district court to enjoin Molten's use in the United States of certain of Baden's model numbers on balls that did not infringe the '835 patent to prevent consumer confusion, the Federal Circuit affirmed the district court's refusal to do so. The injunction, requiring Molten to inform consumers that balls employing the dual-cushion technology were not available in the United States, sufficiently prevented potential consumer confusion.

Result Might Have Been Different

The Federal Circuit indicated that if this case had been decided in another circuit, the result might have been different. In particular, the First Circuit has taken the view that Dastar left open the possibility that some false authorship claims could constitute false advertising, where the false attribution was made in advertising or commercial promotions. See Zyla v. Wadsworth, 360 F.3d 243, 252 n.8 (1st Cir. 2004).

Baden might have succeeded in its false advertising claim if it had introduced evidence that Molten's balls did not actually contain an advertised dual-cushion design or that its balls were not designed by an Italian designer. Moreover, if the claim that the balls were “innovative” was interpreted to mean that they were of a new design, Baden might have been able to make use of the suggestion by the Federal Trade Commission that a claim that a product is “new” cannot be made for more than six months after the product is introduced into the market. In at least one advisory opinion, the FTC suggested that it is generally necessary to provide exceptional circumstances to explain why a claim that a product is “new” should exceed that six-month period. Moreover, a product cannot be represented to be a “new design” if it was converted, reconstructed, or restyled from a previous product, unless that fact is prominently disclosed to the consumer.

Of course, Baden would also have had to prove that the alleged false or misleading advertising claim was material (likely to influence a purchasing decision). William H. Morris Co. v. Group W, Inc., 66 F.3d 255, 257 (9th Cir. 1995). If consumers do not attach any significance to the accused statement, it will not be actionable. In some cases, if an advertiser misrepresents an inherent quality or characteristic of its product, courts will presume the misrepresentation to be material. POM Wonderful LLC v. Purely Juice, Inc., 277 Fed. Appx 744 (C.D. Cal. 2008) (unpublished). Although in some cases materiality is presumed where the statement is false on its face, in others a plaintiff must establish materiality even when the accused advertisements are literally false. Johnson & John Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242, 1250 (11th Cir. 2002).

Judith L. Grubner is a partner in Arnstein & Lehr LLP.

In Dastar Corp. v. Twentieth Century Fox Film Corp. , 539 U.S. 23 (2003), the Supreme Court considered the overlap of copyright and trademark/unfair competition law, concluding that a company did not commit false advertising under '43(a) of the Trademark Act (15 U.S.C. '1125(a)) by representing that it was the author of a previously copyrighted work it had not actually created, as long as its identity as the source of the copied work was clear to the public. The Supreme Court determined that where an accused copyright infringer truthfully represented that it had published the alleged copy, it was not making a “false designation of origin” under '43(a). The Federal Circuit has now concluded that Dastar is similarly applicable to the overlap between patent and trademark/unfair competition law, where an accused patent infringer makes false claims that it originated a third party's patented technology. Baden Sports, Inc. v. Molten USA, Inc. , 556 F.3d 1300 (Fed. Cir. 2009).

The Baden Sports Case

Baden Sports (“Baden”), a company that manufactures and sells inflatable sports balls, including high-end, game-quality basketballs, owns U.S. Patent No. 5,636,835 (“the '835 patent”) for a ball with raised seams and a layer of padding underneath the outer covering. Baden markets its embodiment of that invention as containing “cushion control technology.”

Baden sued its competitor, Molten USA, Inc. (“Molten”), for infringing the '835 patent and making a '43(a) false designation of origin concerning Molten's basketball with an inner, padded layer. Molten advertised its ball as containing “proprietary,” “exclusive,” and “innovative” “dual-cushion technology.” Baden obtained a summary judgment of patent infringement against Molten from the U.S. District Court for the Western District of Washington, but the court denied Baden's request for injunctive relief at that time and also denied Molten's motion for summary judgment of patent invalidity. However, the court granted Molten summary judgment that it had not committed false advertising by claiming that its balls were “proprietary” and “exclusive.” Interpreting those terms to convey the idea that Molten invented and owned the advertised basketball technology, the district court found them to be equivalent to a claim of authorship under Dastar. As it was clear to the public that Molten was the source of the Molten basketball, Baden could not pursue a cause of action for false designation of origin against Molten based on Molten's claims that its technology was “proprietary” and “exclusive,” even if those statements were false.

The district court, however, allowed the false advertising action to proceed against Molten's claim that its ball was “innovative.” The court concluded that “innovative” was not a claim of inventorship, but a claim about the “nature, characteristics, [or] qualities” of Molten's goods, an alternative ground for relief under '43(a). At trial, Baden's proof of false advertising concentrated on evidence that Molten falsely advertised its “dual cushion technology” to be a Molten innovation, rather than focusing on whether Molten's goods were actually innovative. The district court, however, excluded Molten's evidence that there were differences between the companies' basketballs that would support the “innovative” claim because the prior summary judgment of patent infringement precluded Molten from contending that its basketballs were different from Baden's basketballs. The jury awarded more than $8 million to Baden under '43(a) for Molten's intentional false advertising, but only about $38,000 in damages for patent infringement. The district court enjoined Molten from further infringement of the '835 patent and from advertising in the United States that its “dual-cushion technology” was innovative.

The Federal Circuit Decision

Applying Ninth Circuit law, the Federal Circuit reversed the false advertising verdict, concluding that “innovative” was also a claim of inventorship/authorship barred by Dastar. To prevail on its false advertising claim, Baden had to demonstrate that Molten's advertisements: 1) “cause[d] confusion ' as to the origin” of Molten's balls, or 2) concerned the “nature, characteristics, [or] quality” of those goods. Because the Supreme Court in Dastar interpreted the '43(a) language “origin of goods” to mean “the producer of the tangible goods that are offered for sale, and not ' the author of any idea, concept, or communication embodied in those goods,” the Federal Circuit determined that Molten had not committed false advertising by stating that its technology was “innovative.” Rather, Molten's advertising referred to the author of the creative idea or concept behind its balls, not the producer of those physical balls. As Baden did not claim or introduce any evidence that someone other than Molten produced the infringing balls, Baden had no claim for false advertising under '43(a).

Although the district court had decided that “innovative” referred to the nature, characteristics or qualities of the Molten basketballs, the Federal Circuit disagreed, applying the Ninth Circuit's reasoning that such a claim must refer to “the characteristics of the good itself,” not to the status of the goods. Sybersound Records, Inc. v. UAV Corp. , 517 F.3d 1137, 1144 (9th Cir. 2008) (holding that claim that technology of goods was licensed does not refer to nature, characteristic, or quality of goods). As Baden had not challenged any physical or functional attribute of Molten's basketballs, only a false designation of authorship was implicated. At most, the Federal Circuit determined, “innovative” meant that Molten created something new or that the product was new (whoever created it), which was not a characteristic of the balls themselves. Baden wanted Molten to stop advertising that Molten created the innovative technology at issue. Baden did not argue that Molten's innovation claims were false for any reason other than authorship of the innovation. Its claims were fundamentally about the origin of an idea and, therefore, barred under Dastar by Ninth Circuit law.

Baden also argued that Molten continued to advertise falsely that its balls contained dual-cushion technology and that Molten falsely advertised that its balls were designed by a prominent Italian designer, causing a likelihood of consumer confusion. Because Baden did not raise that argument in its complaint or the pre-trial order, at trial or in the jury instructions, the Federal Circuit found that it was waived on appeal. Thus, the Federal Circuit reversed the $8 million award to Baden.

Although Baden also asked the district court to enjoin Molten's use in the United States of certain of Baden's model numbers on balls that did not infringe the '835 patent to prevent consumer confusion, the Federal Circuit affirmed the district court's refusal to do so. The injunction, requiring Molten to inform consumers that balls employing the dual-cushion technology were not available in the United States, sufficiently prevented potential consumer confusion.

Result Might Have Been Different

The Federal Circuit indicated that if this case had been decided in another circuit, the result might have been different. In particular, the First Circuit has taken the view that Dastar left open the possibility that some false authorship claims could constitute false advertising, where the false attribution was made in advertising or commercial promotions. See Zyla v. Wadsworth , 360 F.3d 243, 252 n.8 (1st Cir. 2004).

Baden might have succeeded in its false advertising claim if it had introduced evidence that Molten's balls did not actually contain an advertised dual-cushion design or that its balls were not designed by an Italian designer. Moreover, if the claim that the balls were “innovative” was interpreted to mean that they were of a new design, Baden might have been able to make use of the suggestion by the Federal Trade Commission that a claim that a product is “new” cannot be made for more than six months after the product is introduced into the market. In at least one advisory opinion, the FTC suggested that it is generally necessary to provide exceptional circumstances to explain why a claim that a product is “new” should exceed that six-month period. Moreover, a product cannot be represented to be a “new design” if it was converted, reconstructed, or restyled from a previous product, unless that fact is prominently disclosed to the consumer.

Of course, Baden would also have had to prove that the alleged false or misleading advertising claim was material (likely to influence a purchasing decision). William H. Morris Co. v. Group W, Inc. , 66 F.3d 255, 257 (9th Cir. 1995). If consumers do not attach any significance to the accused statement, it will not be actionable. In some cases, if an advertiser misrepresents an inherent quality or characteristic of its product, courts will presume the misrepresentation to be material. POM Wonderful LLC v. Purely Juice, Inc. , 277 Fed. Appx 744 (C.D. Cal. 2008) (unpublished). Although in some cases materiality is presumed where the statement is false on its face, in others a plaintiff must establish materiality even when the accused advertisements are literally false. Johnson & John Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242, 1250 (11th Cir. 2002).

Judith L. Grubner is a partner in Arnstein & Lehr LLP.