Consumer Law

We all float: single letter suffices for 43(a) in small industry

By Rebecca Tushnet

International Technologies Consultants, Inc. v. Stewart, 2008 WL 4378095 (E.D. Mich.)

The parties compete in a small industry, float glass (a type of flat glass with alleged advantages over plate and sheet glass). Nearly twenty years ago, they signed an accord with a confidentiality agreement, the scope of which became a matter of dispute over time, and a key element of which?a list of specific confidential information?has been lost. Defendants argued that the agreement covered all technical information dealing with float glass, including that which was generally known in the industry; plaintiff (and the court) disagreed; for purposes of the preliminary injunction motion here, at least, the agreement was a nullity. There were also a couple of other relevant instances of cooperation, in which plaintiff?s records tended to show that plaintiff had complied with all relevant conditions and owned the necessary technology, while defendant couldn?t produce contradictory documentary or testimonial evidence.

The parties competed for a job with the Arabian United Float Glass Company; the plaintiff won the contract. Defendants sent a nasty letter to Arabian about plaintiff, questioning plaintiff?s reliability and its ownership of relevant float glass technology rights. They sent a similar letter to the financing company for the project. Plaintiff sued for unfair competition, intentional interference, and trade libel.

The court found that preliminary relief on the false advertising claim was justified. The claim in the letter was false. Plaintiff?s ?damage control? expenses sufficed as harm. Moreover, the letter (here, two letters if you count the one to the financing company; the court did, though I?m not sure that counts as advertising or promotion, because defendants weren?t seeking to divert purchases by the financing company) was sufficient to count as ?commercial advertising or promotion.? A single letter can violate the Lanham Act in cases of direct competition in very small industries such as this one; defendants were clearly trying to get Arabian to terminate its business relationship with plaintiff.

Likewise, plaintiff succeeded in showing a likelihood of success on its tortious interference claim because of the attempt to disrupt an existing business relationship; Michigan law does not require that a breach actually occur for a tortious interference claim to succeed.

In Michigan, trade libel requires fairly blatant falsity, whether explicitly, by ?direct[]? implication, or by ?selective omission of crucial relevant facts.? Here, the only factual assertion concerned ownership of the technology. The court found that plaintiff could prove all the necessary elements, including that defendants were at least negligent.

The question was whether all this constituted irreparable harm. Given that plaintiff had to do damage control when Arabian forwarded the letter to it, the court found that the aspersions on its business integrity were damaging enough to constitute irreparable harm. There was also, however, a question of harm to the defendants, who have consistently argued that they are justified in expressing their concerns over technology ownership, and that an inability to state their position would cause them competitive harm. They argued that they didn?t send the letter to Arabian in order to induce a breach, but merely to ?raise its awareness? and ?urge it to take certain precautions against imprudent business decisions.? They claimed to be defending ??float bath industry as a whole, such that its reputation is not torpedoed by the bad actions of a single participant [in] the industry outlined in the letter.?? The court was unimpressed by defendants? supposed altruism, and found that defendants wouldn?t suffer harm from a perliminary injunction.

As a result, the court preliminarily enjoined defendants from communicating with any nonparties who have or may have an actual or prospective business relationship with plaintiff about the ownership of float glass technology. Plaintiff?s request for an order that defendants retract their earlier letters, however, was rejected as premature.

Full post as published by 43(B)log on October 02, 2008 (boomark / email).