*NEWS*ACRA FAILS TO PROVE ADV. CLAIM

[Anonymous]

United States: ACRA Fails to Prove State Law False Advertising Claim
The U.S. Court of Appeals
for the Ninth Circuit upheld a district court’s grant of summary
judgment in a shrink-wrap license case, finding the plaintiff had not
produced sufficient evidence to raise a triable issue of fact. Arizona
Cartridge Remanufacturers Ass’n. v. Lexmark Int’l. Inc., Case No.
03-16987, 2005 U.S. App. LEXIS 18753 (9th Cir.) (Fisher,
J.).
The Arizona Cartridge Remanufacturers Association (ACRA) represents
wholesalers that sell remanufactured printer toner cartridges. ACRA
members compete against Lexmark in the market for remanufactured toner
cartridges for Lexmark printers. Lexmark offers to sell toner
cartridges under a “prebate” program whereby Lexmark discounts the
cartridge price and asks the purchaser to return the empty cartridge to
Lexmark (and no one else) for remanufacturing. The terms of the prebate
“shrink-wrap license” are printed on the cartridge box. ACRA claimed
Lexmark’s promotion of its prebate program violates California state
false advertising and unfair competition laws. ACRA argued Lexmark
misleads consumers when it claims the license is an enforceable
agreement and when it promises consumers they will pay less for the
cartridge when Lexmark cannot control retail prices charged by
resellers. Lexmark was granted summary judgment, and ACRA appealed.
The Ninth Circuit first addressed the issue of whether Lexmark could
enforce post-sale conditions on use of the cartridges. The Court agreed
with the district court that ACRA had failed to show Lexmark had no
legal basis for the restriction. The lower court applied the Federal
Circuit’s holding in Mallinkrodt v. Medipart that a post-sale
restriction on a patented good may be permissible if it is within the
scope of the patent grant and does not stray into behavior having an
unreasonable anticompetitive effect. ACRA did not challenge either the
Mallinkrodt holding or that the use of a patented good can be
constrained but contended the prebate terms did not create a valid
contract with the consumer. However, the Court found Lexmark presented
sufficient unrebutted evidence showing the prebate license was facially
valid under California law. In light of unrebutted evidence that
competition compelled resellers to pass discounts from Lexmark to
consumers, the Court also agreed Lexmark’s representations were not
false. Because the Court found ACRA had not produced sufficient
evidence to present a triable issue of fact on either issue, the Court
affirmed.

[Author]

October 11, 2005 at 11:54 AM