Manufacturer That Sold Copied Goods Not Liable for Reverse Passing Off

On August 5, 2015, the Sixth Circuit held that a manufacturer selling copied goods was not liable for false designation of origin under a reverse passing off theory.

Best Lighting Products designed and sold exit signs and emergency lighting products for commercial buildings, and Pace Electronic Products manufactured fully assembled products for Best.  Because Pace had never manufactured emergency lighting products before, Best expended significant effort teaching Pace how to manufacture the tooling necessary to make the products according to Best’s specifications.  However, as it filled orders for Best, Pace began using the same tooling to manufacture thousands of additional cloned units, which Pace then sold under its own name, often to Best’s established customers. 

The district court concluded as a matter of law that Pace had, among other things, violated the Lanham Act both with respect to false designation of origin (reverse passing off) and false advertising.  Pace appealed, and the Sixth Circuit reversed.

Reverse passing under Lanham Act Section 43(a) occurs when a person falsely designates the “origin” of someone else’s goods or services, misrepresenting them as its own.  The district court concluded that Pace falsely designated the cloned products’ “origin” by failing to represent to its customers that the products stemmed from ideas or intellectual property that originated with Best.

The problem with the district court’s finding, according to the Sixth Circuit, is that the Lanham Act protects the ability to control one’s brand, not one’s inventions or innovations.  Thus, in the context of a reverse passing off claim, the Act’s use of the term “origin” refers only to the product’s physical origin, not its intellectual ancestry.  Here, it was undisputed that Pace manufactured the cloned products.  Because the physical products themselves originated with Pace, Pace never made a false designation of the products’ “origin” within the meaning of Section 43(a), even though the ideas and initial design may have originated with Best.

Ultimately, protection against imitation of product design is found in copyright and patent law.  The Sixth Circuit did not allow Best to use a false-designation Lanham Act claim as a substitute for failing to have a protectable intellectual property right in the products:  “Regardless of whether Pace’s conduct was prohibited under other legal regimes, it was not prohibited by the Lanham Act.”