March 2009 Issue

Civil Cases

Baden Sports, Inc. v. Molten USA, Inc.,
2009 WL 349358 (Fed. Cir. Feb. 13, 2009)

ABSTRACT
Because of the limited wording of Section 43(a) of the Lanham Act, the Federal Circuit held that Baden’s claim that Molten’s advertisements falsely claimed authorship of an idea through use of the term “innovative” must fail.   Relying on the Supreme Court’s decision in Dastar, the Federal Circuit explained that Section 43(a) of the Lanham Act does not have boundless application as a remedy for unfair trade practices.  Section 43(a) does not create liability from Molten’s advertisements because those advertisements do not concern the “origin of the goods,” to which Section 43(a)(1)(A) is directed, nor do they concern the “nature, characteristics, [or] qualities” of the goods, which is what the Ninth Circuit has interpreted Section 43(a)(1)(B) to address.

CASE SUMMARY

FACTS
Both Baden Sports, Inc. (“Baden”) and Molten USA, Inc. (“Molten”) sell high-end basketballs.  Baden sued Molten for patent infringement and false advertising under Section 43(a) of the Lanham Act, based on Molten’s sale of basketballs allegedly containing Baden’s propriety technology, and the advertising associated with these balls.

The district court ruled on Baden’s motion for summary judgment for patent infringement, finding Molten had infringed Baden’s patent regarding the proprietary “dual cushion technology” used in the parties’ competing basketballs.  The parties proceeded to trial on Baden’s false-advertising claims based on Molten’s use of the term “innovative” in its advertisements for basketballs utilizing Baden’s patented technology, which Baden claimed falsely implied that the dual cushion technology was a Molten innovation. 

Molten moved for judgment as a matter of law on Baden’s false-advertising claims, arguing that Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), precluded Lanham Act claims based on authorship of an idea.  The U.S. District Court for the Western District of Washington denied the motion.  Molten appealed from a final judgment of the district court denying Molten’s motions for a new trial and judgment as a matter of law relating to an $8M jury award for false advertising under Section 43(a). 

On appeal, Molten argued that the district court erred by failing to dismiss Baden’s Lanham Act claim in light of the Supreme Court’s holding in Dastar, claiming that Dastar prohibits Lanham Act claims based on advertisements that falsely claim authorship of an idea.  Molten also claimed that the district court erred in excluding evidence relevant to the element of falsity regarding the “innovation” language in its advertisements, and that the $8M damage award was excessive.

ANALYSIS
The Federal Circuit first considered Baden’s Section 43(a) claim and agreed with Molten that Dastar does preclude Baden’s false-advertising claim.  The Supreme Court in Dastar 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.”  Instead, the Supreme 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.”  Because Dastar Corporation (“Dastar”) was the “origin,” or producer, of the products it sold, the Supreme Court held that Dastar was not liable for false advertising under the Lanham Act.  Because of its inherently limited wording, the Dastar court noted that Section 43(a) can never be a federal codification of the overall law of unfair competition, but can only apply to certain unfair trade practices prohibited by its text.

The Federal Circuit then evaluated whether Molten’s advertising referred to the “producer of the tangible goods,” in which case a claim under Section 43(a)(1)(A) would be proper, or whether it referred to “the author of” the idea or concept behind Molten’s basketballs, in which case the claim would be foreclosed by Dastar.  The court found that Dastar does not permit Baden to claim false advertising under Section 43(a)(1)(A).  Baden did not argue that someone other than Molten produced the infringing basketballs, and nothing in the record indicated that Molten was not in fact the producer of the balls.  Thus, Molten’s statements were not actionable under Section 43(a)(1)(A) because they do not “cause confusion . . . as to the origin” of the basketballs.  The term “innovative” as used by Molten in its advertisements only indicates, at most, that its manufacturer created something new, or that the product is new, irrespective of who created it. 

The Federal Circuit then explained that Section 43(a)(1)(B) does not apply to Baden’s claims, as the Ninth Circuit (the applicable circuit law) does not interpret this Section to apply to false designation of authorship.  The Federal Circuit noted that under the Ninth Circuit’s interpretation in Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1144 (9th Cir. 2008), to read Section 43(a)(1)(B) otherwise would create an overlap between the Lanham and Patent Acts.  Section 43(a)(1)(B) applies to the characteristics of the goods, the Federal Circuit explained, and authorship is not a nature, characteristic, or quality of the goods as those terms are used in Section 43(a)(1)(B). 

Accordingly, the Federal Circuit reversed the district court’s denial of judgment as a matter of law on Baden’s Lanham Act claims and vacated the $8M damages award.  The Federal Circuit was careful to note, however, that in a different circuit, this case may well have had a different result.

CONCLUSION
This case clarifies the limited nature of Section 43(a) claims, particularly in those circuits that follow Sybersound, to those claims regarding either the origin of the goods or the nature, characteristics, or qualities of the goods, and does not create a federal cause of action for claims regarding authorship of an idea embodied in any goods.