Supreme Court Denies Cert in Basketball Case

Dec 4, 2009

The U.S. Supreme Court has denied certiorari in a case involving a basketball manufacturer’s claim of false advertising, brought under § 43 of the Lanham Act, 15 U.S.C.S. § 1125. The appeal was made the Federal Circuit for the U.S. Court of Appeals.
The opinion from the Federal Circuit, which had vacated a multi-million jury award against the defendant basketball manufacturer, is summarized below.
In vacating the award, the Federal Circuit concluded that the “alleged infringer was in fact the producer of its balls. Nothing more was alleged than false designation of authorship. The claims did not go to the nature of the goods.”
Plaintiff Baden Sports, Inc., is a manufacturer of inflatable sports balls, including high-end, game-quality basketballs. In 1997, it obtained U.S. Patent 5,636,835 (835 patent), which discloses a ball with “raised seams” and a “layer of padding underneath the outer covering.” Baden sells basketballs embodying the invention of the 835 patent and markets those balls as containing “cushion control technology.”
Molten USA, Inc., competes with Baden in the high-end basketball business. In 2002 or 2003, Molten began selling basketballs with an inner, padded layer. Molten advertised its new basketballs as containing “dual-cushion technology.” According to Molten’s advertisements, dual-cushion technology combines two different cushioning layers: one layer, made of foam, that surrounds the core of the ball, and a second layer of soft rubber seams.
On February 13, 2006, Baden filed a complaint alleging that Molten’s sales and offers to sell basketballs in the United States constituted infringement of the 835 patent. In March of that year, Baden filed a complaint alleging that Molten’s advertising of its “dual-cushion technology” basketballs violated Section 43 of the Lanham Act, 15 U.S.C. § 1125.
On July 16, 2007, the district court ruled on Baden’s motion for summary judgment of patent infringement, finding that Baden had “shown that every element in Claim 3 of the ‘835 patent is present in Molten’s basketball.” In a separate opinion entered the same day, the district court granted in part and denied in part Molten’s motion for summary judgment on the false advertising claims.
On one hand, it granted Molten’s motion for summary judgment on Baden’s false advertising claims based on advertisements that used the terms “proprietary” and “exclusive.” It found that “proprietary” and “exclusive” were terms that conveyed the idea that “Molten invented and owns the basketball technology.” Those terms, the court held, were precluded from Lanham Act liability by the Supreme Court’s decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 123 S. Ct. 2041, 156 L. Ed. 2d 18 (2003). 2007 U.S. Dist. LEXIS 51252.
However, the court denied Molten’s motion for summary judgment on Baden’s false advertising claims based on advertisements that used the word “innovative.” The court reasoned that “innovative” does not necessarily connote the inventor of the technology, and can describe “the nature, characteristics, or qualities of the basketballs themselves.” Such claims of basketball characteristics, the court reasoned, were permissible in light of Dastar. Thus, the court allowed Baden to proceed to trial with its false advertising claim, but only insofar as that claim was based on Molten’s allegedly false use of “innovative.”
The jury returned a verdict awarding Baden $38,031 for patent infringement and $8,054,579 for intentional false advertising under the Lanham Act.
The appeal centered on the aforementioned Dastar, which involved a television series about World War II. The owners of the series allowed its copyright to expire, thus placing the series in the public domain. Dastar, 539 U.S. at 26. Dastar Corporation copied and edited the series, added new narrations, repackaged and renamed the series, and began selling the modified video as its own product. Id. at 26-27. A number of media companies brought suit against Dastar Corporation alleging that sales of the video violated section 43(a) of the Lanham Act.
The panel wrote that “Section 43(a)(1)(A) of the Lanham Act makes actionable any commercial misrepresentation that is likely to cause confusion ‘as to the origin’ of goods. 15 U.S.C. § 1125(a)(1)(A); see also Dastar, 539 U.S. at 29-30. The Supreme Court held that ‘origin of goods,’ as that term is used in Section 43(a), does not refer to ‘the person or entity that originated the ideas or communications that goods embody or contain.’ Dastar, 539 U.S. at 32. Instead, the Court read ‘origin of goods’ as referring ‘to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods.’ Id. at 37. Because Dastar Corporation was the ‘origin,’ or producer, of the products it sold, the Court held that Dastar was not liable for false advertising under the Lanham Act. Id. at 38.
“Applying the Supreme Court’s interpretation of section 43(a)(1)(A) to this case entails an evaluation of whether Molten’s advertising refers to the ‘producer of the tangible goods’ in which case a claim under section 43(a)(1)(A) would be proper, or whether it refers to ‘the author of’ the idea or concept behind Molten’s basketballs, in which case the claim would be foreclosed by Dastar. Looking at the case in this light, it is apparent that Dastar does not permit Baden to claim false advertising under section 43(a)(1)(A). Baden has not argued that someone other than Molten produces the infringing basketballs, and nothing in the record indicates that Molten is not in fact the producer of the balls. Thus, Baden’s claims are not actionable under section 43(a)(1)(A) because they do not ‘cause confusion . . . as to the origin’ of the basketballs.”
The panel went on to note that “while Baden agrees that Dastar precludes finding liability in this case under section 43(a)(1)(A), it argues that its Lanham Act claims are permitted under Section 43(a)(1)(B). That subsection creates liability for any commercial advertising that ‘misrepresents the nature, characteristics, qualities, or geographic origin’ of goods. 15 U.S.C. § 1125(a)(1)(B). Baden argues that its claims survive Dastar’s holding by pointing to dictum at the end of the Dastar opinion:
‘If, moreover, the producer of a video that substantially copied the Crusade series were, in advertising or promotion, to give purchasers the impression that the video was quite different from that series, then one or more of the respondents might have a cause of action–not . . . under the ‘confusion . . . as to the origin’ provision of § 43(a)(1)(A), but for misrepresentation under the ‘misrepresents the nature, characteristics [or] qualities’ provision of § 43(a)(1)(B).’ Dastar, 539 U.S. at 38. This language, according to Baden, permits Baden to bring its false advertising claim because Molten’s ‘innovation’ claims misrepresent the ‘nature, characteristics, or qualities’ of its basketballs.”
The panel disagreed with the district court’s reasoning “that the Supreme Court left open the possibility of a claim arising from a misrepresentation concerning the qualities of certain goods.” Rather, “it does not necessarily suggest that claims based on false designation of authorship are actionable under Section 43(a)(1)(B). Such a holding could create overlap between the Lanham and Patent Acts.”
Next up for the panel was to “determine whether Baden has alleged anything more than false designation of authorship. We conclude that Baden has not. No physical or functional attributes of the basketballs are implied by Molten’s advertisements. ‘Innovative’ only indicates, at most, that its manufacturer created something new, or that the product is new, irrespective of who created it. In essence, Baden’s arguments in this case amount to an attempt to avoid the holding in Dastar by framing a claim based on false attribution of authorship as a misrepresentation of the nature, characteristics, and qualities of a good.
“Baden has repeatedly alleged that Molten falsely claimed that Molten, not Baden, created the innovation known as dual-cushion technology. Throughout the trial, Baden steadfastly argued that Molten’s advertisements were false precisely because Molten was not the source of the innovation.”
This falls short of an actionable claim, since it does “not go to the ‘nature, characteristics, [or] qualities’ of the goods, and are therefore not actionable under section 43 (a)(1)(B). To find otherwise, i.e., to allow Baden to proceed with a false advertising claim that is fundamentally about the origin of an idea, is contrary to the Ninth Circuit’s interpretation of Dastar. Thus, we reverse the district court’s denial of judgment as a matter of law on Baden’s Lanham Act claims.”
Attorneys of Record: (for plaintiff-cross appellant) Bruce A. Kaser, Vantage Law PLLC, of Issaquah, Washington. With him on the brief was James L. Phillips, Miller Nash LLP, of Seattle, Washington. (for defendants-appellants) Richard P. Bress, Latham & Watkins LLP, of Washington, DC. With him on the brief were Erica Goldberg; and Daiske Yoshida, of Tokyo, Japan. Of counsel were Arthur S. Beeman, DLA Piper US LLP, of San Francisco, California; and M. Elizabeth Day, DLA Piper LLP, of East Palo Alto, California.
Baden Sports, INC. v. Molten USA, INC. and Kabushiki Kaisha Molten; Fed Cir.; 2008-1216, -1246 556 F.3d 1300; 2009 U.S. App. LEXIS 2915; 89 U.S.P.Q.2D (BNA) 1878; 2009-1 Trade Cas. (CCH) P76,553; 2/13/09


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