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Accusation of Infringing Patent Known to be Invalid Could be False Advertising

Posted by James Juo | Oct 11, 2023 | 0 Comments

Section 43(a)(1)(B) of the Lanham Act prohibits false advertising about the nature, qualities, characteristics, or geographic origin of any person's goods or services. 15 U.S.C. § 1125(a)(1)(B); see also Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340, 1347-48 (Fed. Cir. 1999); Fisher Tooling Co. v. Gillet Outilliage, 2006 WL 5895307, at *5 (C.D. Cal. June 6, 2006) (“Section 43(a) serves as the basis for claims generally known as ‘false advertising,' ‘trade libel,' and ‘product disparagement.'”) (citation and quotation omitted).

“When a defendant harms a plaintiff's reputation by casting aspersions on its business, the plaintiff's injury flows directly from the audience's belief in the disparaging statements.” Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 138 (2014).

False advertising may include allegations of patent infringement or other statements about patent rights that are made in “bad faith.” See Zenith, 182 F.3d at 1353; see also Fisher Tool Co. v. Gillet Outillage, 530 F.3d 1063, 1068 (9th Cir. 2008).

Patenting the Bed-in-a-Box of Another

In Cap Export, LLC v. Zinus, Inc., 2023 WL 6381821, No. 2:21-cv-07148-JWH-MRWx (C.D. Cal. Sept. 28, 2023), Zinus allegedly obtained a patent after Zinus used the prior art Woody bed-in-a-box sets as the basis for its patent application. In other words, Zinus intentionally obtaining a patent on something they did not invent and previously sold by others.

Zinus had disparaged Cap Export and its products as infringing this bed-in-a-box patent. Among other things, Zinus's counsel sent a letter to Cap Export's customer 4Moda Corp. and to Amazon. Amazon responded by shutting down 4Moda's Amazon webpage, which allegedly caused Cap Export to lose sales of its bed-in-a-box products.

Additionally, Cap Export alleges that Zinus acted in bad faith by bringing a sham patent lawsuit. This lawsuit induced Cap Export to enter into a $1.1 million consent judgment, which Zinus touted in a press release and advertised on Zinus's website.

Cap Export later learned through documents produced in a different lawsuit—Zinus, Inc. v. Classic Brands, LLC, 2019 WL 8226076 (C.D. Cal. Oct. 3, 2019)—that Zinus's patent was based upon the prior art Woody's bed-in-a-box product. Cap Export's further investigation showed that Woody's beds had been purchased at least three years before Zinus's patent application was filed.

The stipulated judgment was later vacated. But Zinus continued to tout the judgment against Cap Export on its website. Zinus eventually gave Cap Export a covenant not to sue with respect to Cap Export's bed-in-a-box products.

For its subsequent false advertising claim against Zinus for accusations of patent infringement made in bad faith, Cap Export claimed millions of dollars in lost sales as a result of the sham patent litigation and damage to Cap Export's reputation with its customers.

In denying Zinus's motion to dismiss, the Court held that Cap Export sufficiently pled disparagement in bad faith, knowing the patent was invalid.

Fair Reporting Privilege

Comments regarding legal proceedings may be protected by California's fair report privilege, which “confers an absolute privilege on any fair and true report in, or a communication to, a public journal of a judicial proceeding, or anything said in the course thereof.” Gallagher v. Philipps, 563 F. Supp. 3d 1048, 1082 (S.D. Cal. 2021) (citation and quotation omitted).

“To be ‘fair and true,' the report must [capture] the substance, the gist or sting, of the subject proceedings as measured by considering the natural and probable effect [of the report] on the mind of the average reader.” Id. (quoting Argentieri v. Zuckerberg, 8 Cal. App. 5th 768, 787–88 (2017)). “The defendant is entitled to a certain degree of flexibility/literary license in this regard, such that the privilege will apply even if there is a slight inaccuracy in details—one that does not lead the reader to be affected differently by the report than he or she would be by the actual truth.” Id. (quoting Argentieri, 8 Cal. App. 5th at 431).

“When [the privilege] applies, the reported statements are absolutely privileged regardless of the defendants' motive for reporting them.'” Id. (quoting Healthsmart Pac., Inc. v. Kabateck, 7 Cal. App. 5th 416, 431 (2016), as modified (Jan. 10, 2017)).

Zinus's assertion of the litigation/fair report privilege, however, was unsuccessful because their press releases, publications, and communications deviated from the parties' court proceedings. Zinus's attacks on Cap Export's product quality exceeded what was reported in the court proceedings.

Thomas P. Howard, LLC is experienced in patents and trademarks nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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