Friday, April 23, 2010

Court Has Dark View of Lanham Act Claims Brought by Design Company

Judge Forrester of the Northern District of Georgia recently granted summary judgment against claims brought by a lighting design company against a former employee.  PHA Lighting Design, Inc. v. Kosheluk, 2010 WL 1328754 (N.D. Ga.), Decided March 30, 2010.  Lighting design is a specialized aspect of architecture that involves the creation of lighting plans for commercial buildings.  Defendant Kosheluk worked for PHA from 2000-2007, and then left to form his own company, Archiluce International.  After leaving PHA Kosheluk created a Power Point marketing presentation that was sent to potential customers.  The introduction stated that "The selected project images herein were all designed and/or completed under his direction while at PHA Lighting Design."  The hundred page presentation went on to displays photos of lighting in many different buildings.  Kosheluk admittted copying from PHA's server some of the photos in the presentation, PHA's master contact list, lighting cut sheets, expense reports, a shop drawing stamp template, lighting fixture specifications, and proposals.  PHA brought claims for Lanham Act violations, Georgia Uniform Deceptive Trade Practices Act, unjust enrichment, and statutory interference with property. 

PHA's Lanham Act claims were two-pronged:  (1) a claim for false designation of origin, also known by the unwieldy term "reverse passing off", and (2) false advertising.  Reverse passing off  happens when the party misrepresents the victim's goods or services as his own.  The elements of the claim are (1) the item at issue originated with the plaitniff, (2) the defendant falsely designated the origin of the work, (3) the false designation was likely to cause consumer confusion, and (4) the plaintiff was harmed.    PHA alleged several falsehoods.  PHA claimed that the statement that the selected project images were "all designed and/or completed under his direction while at PHA Ligthing Design" was false.  PHA argued that none of the projects were "under his direction" because the design is a collaborative process, and that Kosheluk did minimal work on a few of the projects.   Also, PHA complained that the fact that Archiluce's logo was on every photo but that not all of them made specific reference to PHA created a false impression of origin.  Finally, PHA argued that a few of the items were false because not all of the designers that contributed to some of the projects were listed, only some of them. 

The court rejected PHA's argument, holding that PHA had adduced no evidence that, even though the representations in the presentation may have been somewhat inaccurate, PHA had not come forward with any actual evidence that there was a likelihood of confusion.  Plaintiff had merely asserted that the defendant had passed off PHA's services as his own.  Secondly, the court threw out the claims because it stated that PHA had not come forward with any evidence that it was harmed by the presentation at issue.  PHA argued that the fact that ten recipients of the presentation had hired Archiluce was enough to infer harm, but the court disagreed, noting that there was no reference to the presentation by these customers in the record. 

Citng the same alleged inaccuracies in the presentation, PHA also claimed false advertising.  False advertising occurs under the Lanham Act when the following elements are satisfied:  (1) the advertisements of the defendant were false or misleading; (2) the advertisements deceived, or had the capacity to decieve, consumers; (3) the deception had a material effect on purchasing decisions; (4) the misrepresented product or service affects interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false advertising.  Under the first element, the plaintiff must show that a statement is literally false, or if literally true, conveyed a false impression, is misleading in context, or likely to deceived consumers.  If literally false, deception is assumed.  PHA claimed that all of the inaccuracies pointed out were literally false and thus deception was automatic.  The court disagreed, finding that at most, the claims made in the presentation were ambiguous as to Kosheluk's role in the projects at issue.  Because some evidence was presented that Kosheluk was not involved at all in some of the projects, the court found some evidence of one literal falsehood.  However, the court stated that, even if deception is presumed, the plaintiff has to present evidence of materiality to maintain a claim.  The court found that PHA had not provided any evidence that the possible falsity of some of the claims made in the presentation would affect the consumer decision.  Therefore, the court granted Kosheluk summary judgment on all of PHA's claims. 

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