Monday, May 01, 2017

Lost sales as irreparable harm

Epson America, Inc. v. USA111, Inc., No. 17-cv-00129, 2017 WL 1484400 (D.S.C. Apr. 26, 2017)

Let's admit it: the case law is a mess on this.  Epson sued its competitor, d/b/a iRULU, for falsely advertising its portable consumer projectors, specifically its BL20 model. The court granted a preliminary injunction.  Quality and price for these projectors are “largely determined based on the resolution and brightness of the projector,” the latter of which is measured in lumens and which is important to consumers. iRULU sells about 30 different models, with advertised lumen ratings between 800 to 2800 lumens.  The BL20 was advertised on Amazon and other online retailers as having 2600 lumens and was designated as an Amazon “Best Seller” in the Fall of 2016.

Epson commissioned an independent technology consulting company to test the BL20 projector, and the results showed lumen output of approximately 80 lumens instead of the 2600 advertised.  iRULU argued that it reasonably relied on test reports from Chinese labs showing a “luminous flux” of “3714.568 lm” on one test and “3869.0 lm” on the other, but it didn’t provide other evidence or show that those tests were accurate.  It ceased advertising its BL20 projector as having 2600 lumens, at least on some websites, but didn’t  provide a lumen rating.  The court found that Epson showed falsity.

Epson also showed injury due to loss of sales and market share: iRULU’s market share was 24% since it entered the market, and Epson’s loss in sales was estimated at approximately $16 million.  iRULU argued that no injunction was necessary because it removed the offending ads, but Epson still showed irreparable harm. iRULU’s claims of 2600 lumens were still present on some websites, including iRULU’s own website, even after iRULU represented to the court that the claims had been removed. Also, the BL20 still comes up when searching for “2600 lumen projector,” “apparently as a result of prior advertisements or customer comments.” Thus, cessation of the challenged conduct didn’t stop irreparable injury.

iRULU also argued that Epson’s loss of projector sales could be compensated by money damages if proven at trial, and therefore an injunction is not appropriate. But injunctive relief is allowed even if money damages are available, if a remedy at law is inadequate. Epson showed a decline in sales; the court was not persuaded that iRULU wasn’t responsible for at least part of that decline.  Also, money damages would not prevent iRULU from “infecting the marketplace with the same or similar claims in different advertisements in the future,” so there was irreparable harm.

The court granted a preliminary injunction requiring iRULU to cease false advertisements of inflated lumen ratings, and ordering it to provide a lumen rating of either “undetermined” or Epson’s independent test result of 80 lumens on all advertising. However, the court didn’t require corrective notices to be sent to consumers at this point in the case.  iRULU could also arrange for court-approved testing, whose results could be used in ads once a validated lumen rating was produced.

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