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Are you experienced? Doesn't matter, Dastar bars the claim

By Rebecca Tushnet

Sidem, S.A. v. Aquatech Int?l Corp., 2010 WL 2573882 (W.D. Pa.)

Per the court?s summary of the complaint: Sidem makes large desalination (MED) units for water treatment, and successfully developed MED units that could treat larger amounts of water than previous MED units could. Defendant Desportes was an employee of a company that became a Sidem subsidiary, and allegedly had access to trade secrets relating to the large MED units. Then he left for Aquatech, which shortly submitted a bid for a project that required constructing a large-scale MED unit of a size previously reserved for Sidem.

Sidem alleged that Aquatech falsely represented that it had expertise and experience in designing and building large MED units, that Aquatech independently developed and designed such units, and that increasing the size of a MED unit is ?easy and does not require specialized knowledge.?

Aquatech moved to dismiss the Lanham Act claims pursuant to Dastar. Sidem argued that Dastar only applies to §43(a)(1)(A), which Dastar itself actually says. Only problem: many courts apply the reasoning of Dastar to bar §43(a)(1)(B) claims that an ad misrepresents that the defendant originated, developed, or created the goods or services. (I think this is wrong, because the extra requirements of §43(a)(1)(B)?competition, materiality, and ?advertising or promotion??address all the Supreme Court?s concerns in Dastar, providing a way to protect consumers when a misrepresentation of origin really would matter to them. Overreading by some courts, for example, makes a misrepresentation that a product is ?new? not actionable, no matter how false it is. However, the court is clearly right that this is the dominant trend.) A defendant?s misrepresentations that it was the author/creator of some good/service are not actionable under the Lanham Act.

Sidem argued that this case concerned ?services? or ?commercial activities? and not ?goods.? The court disagreed. The allegations in the complaint related to large-scale MED units, and in any event Dastar was concerned with ?origin? and potential conflict with patent/copyright law, not with goods specificially. Sidem pointed to its allegation of misrepresentation that increasing the size of a unit is easy and doesn?t require specialized knowledge, and argued that there was no conflict with patent law in alleging misrepresentation of experience with designing and constructing large-scale units. The court found, however, that the ?gist? of the allegations was passing off Sidem?s design and experience as Aquatech?s work. Under these circumstances, Dastar barred the Lanham Act claim.

Full post as published by 43(B)log on July 04, 2010 (boomark / email).