Tuesday, May 17, 2011

Drop a camera, pick up a lawsuit

Post 2011 in 2011, Blogger tells me.

FLIR Systems, Inc. v. Sierra Media, Inc., 2011 WL 1832806 (D. Or.)

FLIR sued Fluke Corp. and its media consultant, Sierra, for false advertising under the Lanham Act, trade libel/commercial disparagement, intentional interference with prospective economic relations, and related claims.

FLIR and Fluke compete in the market for thermal imaging cameras, and Sierra and Fluke have worked together for 15 years. In 2009, they created a video showing a “drop test” of cameras, including three manufactured by FLIR, showing a two-meter drop. The Fluke equipment bounces, but appears to remain intact. The other products appear to either break or have battery covers come off and batteries eject, or both. The text reads: "Fluke thermal imagers. Rugged. 5 thermal imagers. 2 meter drop. Solid concrete floor. All products subjected to identical tests by third party. Fluke Ti32--17 drops and counting ... The ONLY rugged thermal imager. Why waste money on tools that break? ..." Below the video, there’s a link to the test methodology marked as such and stating that “Fluke Thermography contracted a 3rd party to perform and film this drop test video.” The methodology stated that it was an independent, third party test executed under controlled conditions with new or like-new imagers never used in commercial or industrial environments, and supplied further details. (This is the first time I’ve seen a court rely on a YT link, let alone a bit.ly link, to show material incorporated by reference into a complaint.  Might be better practice for the court to host it itself, or maybe create its own YT channel, though I understand those have to be negotiated with YT when the government does it.)

FLIR alleged that defendants knew the representation of independence was false because Fluke controlled and revised the design of the test and participated in selectively editing the video. FLIR alleged that it lost a sale to a Fortune 100 company after a supervisor watched the video and stated that “FLIR's cameras are 'way too sensitive if they get dropped.'” FLIR alleged difficulties with two other potential customers because of the video.

Trade libel requires that the defendant (1) published (2) one or more false allegations (3) pertaining to plaintiff, (4) with malice, and (5) as a result, (6) the plaintiff suffered damages. FLIR identified the false statements as (1) Sierra conducted an independent, third party test, and (2) “17 drops and counting …The ONLY rugged thermal imager,” conveying that FLIR cameras break immediately by contrast. Defendants argued that failing to state how many times the FLIR cameras were actually dropped before they broke was just a nonactionable omission. But trade libel claims can be based on words, pictures, or a combination. A bare omission typically can’t serve as the basis of a trade libel claim, but the complaint alleges that the video and the methodology document taken together make affirmatively false statements by comparison.

FLIR also alleged that an email from Fluke's marketing manager stated the "Intent is to create the atmosphere of an independent testing lab" and "to load these Videos to YouTube so it looks like its coming from a user or independent source." Moreover, at oral argument, counsel for Fluke “stated that in at least some of the video of FLIR imagers, the footage showing some damage occurring was not on the first drop, but after multiple drops.” FLIR sufficiently alleged trade libel to survive a motion to dismiss.

Intentional interference with economic relations requires: (1) the existence of a professional or business relationship, (2) intentional interference with that relationship, (3) by a third party, (4) accomplished through improper means or for an improper purpose, (5) a causal effect between the interference and damage to the economic relationship, and (6) damages." Fluke argued that there wasn’t a sufficient relationship between FLIR and its unnamed potential customers and that FLIR didn’t allege that Fluke knew about the alleged relationship.

In Oregon, the tort aims to protect both parties to a prospective business relationship from a third party who would interfere. “This is different from inducing a potential customer who has had no contact with the plaintiff, whether initiated by the customer or the plaintiff, to purchase a competing product rather than plaintiff's product…. [S]ome kind of relationship must exist prior to the action that allegedly interferes and causes a third person to discontinue that relationship.” Even if FLIR is a large player in the thermal imager market, that doesn’t mean that anyone who buys one from any supplier has a sufficient relationship with FLIR to support the tort.

The allegations were insufficient with respect to the Fortune 100 company, as well as the other two potential customers (who allegedly stated that "the 'Drop Test' has got me sold on Fluke unless you can convince me otherwise" and "We … were impressed by its ruggedness and large screen. [Fluke’s rep] showed us a video of drop tests of the FLIR and Fluke products, where the Fluke bounced and the FLIR's broke ... very impressive"). They did not establish an existing business relationship with FLIR before the customers saw the video. Likewise, there was no allegation that Fluke knew about such a relationship. FLIR argued that the general existence of direct competition between the parties was sufficient, but the court disagreed.

Because the trade libel claim survived, the allegations of civil conspiracy/aiding and abetting against Sierra also survived.


Anonymous said...

Any updates on the trial? (Btw, there is a bug in the mobile version; I wasn't able to type the human verification characters).

Rebecca Tushnet said...

This magistrate judge opinion is the last I've seen. Unfortunately I have no control over Blogger software; you may wish to send a bug report to Blogger.

Anon said...

Didn't this go to trial? See: http://www.ord.uscourts.gov/en/court-calendar/all-courts/icalrepeat.detail/2012/12/19/4242/70%7C71/-

Anonymous said...

Hello. Here's an update on the case (apologies in advance for typos; posting this quickly). Would be interesting to get your take on the outcome, Rebecca; I'm told the parties are engaged in further briefing now, that a final judgement is due in in March or so, and that both sides plan to appeal:

(Note: Sierra is out of the case; not sure how that came about exactly).

The case went to trial (3:10-cv-00971) and the jury reached a verdict on December 19, 2012. The jury found:

1. False Advertising Claims:
a. Fluke engaged in false advertising by creating and publishing the drop-test video.
b. FLIR suffered damages as a result, which the jury determined to be $103,000.
c. FLIR falsely advertised its E Series cameras.

2. Trademark claims:
a. IR Fusion is a valid TM.
b. FLIR infringed on the IR Fusion TM; engaged in unfair competition; and engaged in false advertising.
c. Fluke was damaged in the amount of $1.3M for TM infringement, and FLIR gained profits from its infringement in the amount of $2.8M.
d. No punitive damages were awarded.

3. Fluke's remaining false ad claims:
a. FLIR's use of high-res images in ads for low-res cameras was not false advertising.
b. FLIR engaged in false advertising for its reps in "Why FLIR for Architectural Testing" ads.
c. FLIR falsely advertised regarding comparing its T-Series cameras to Fluke's Ti32 cameras.
d. FLIR did not falsely advertise in its "Drop Proof -- I cannot Measure, But You Can Drop Me" or its "12 Things to Know Before Buying an Infrared Camera" ads.