*NEWS*ACRA FAILS TO PROVE ADV. CLAIM

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*NEWS*ACRA FAILS TO PROVE ADV. CLAIM

 user 2005-10-11 at 11:54:00 am Views: 61
  • #14079

    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.