Porous Media Corp. v. Pall Corp.

• Decision Date: 05 June 1997
• Docket Number: No. 96-1552,96-1552
• Citation: 110 F.3d 1329
• Parties: 1997-1 Trade Cases P 71,768, 42 U.S.P.Q.2d 1359 POROUS MEDIA CORPORATION, Plaintiff--Appellee, v. PALL CORPORATION, Defendant--Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1329

110 F.3d 1329

1997-1 Trade Cases P 71,768, 42 U.S.P.Q.2d 1359

POROUS MEDIA CORPORATION, Plaintiff--Appellee, v.PALL CORPORATION, Defendant--Appellant.

No. 96-1552.

United States Court of Appeals,Eighth Circuit.

Submitted Dec. 9, 1996.

Decided April 8, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied June

5, 1997. ^*

John H. Hinderaker, Minneapolis, MN, argued (Scott W. Johnson, John D. French, on the brief), for defendant-appellant.

Robert Tansey, Jr., Minneapolis, MN, argued (Randall Tietjen, on the brief), for plaintiff-appellee.

Before BOWMAN and LAY, Circuit Judges, and SMITH¹, District Judge.

LAY, Circuit Judge.

Porous Media Corporation(Porous) and Pall Corporation(Pall) are manufacturers of industrial filters.They produce competing products for certain applications in various industries, including the oil and natural gas markets (oil/gas markets) and the paper and power generation markets (paper/power markets).

Porous claims that in 1985 and 1986 it began penetrating the market for filters in the paper/power markets and the oil/gas markets.Porous contends that Pall then began a concerted effort to disparage Porous's products and make false comparisons of Pall's products and Porous's products.Among other things, Porous suggests that Pall distributed false anecdotal statements that Porous's filters had collapsed in the field and caused major problems, that Pall made false and disparaging statements about Porous's filters which were not supported by Pall's own testing data, and that Pall made false comparisons of its own filters for certain applications with Porous filters that Porous had never recommended as interchangeable for those applications.²

Porous brought this action against Pall for common-law product disparagement and for false misrepresentation under Lanham Act § 43(a),15 U.S.C. § 1125(a)(1982); Pall counterclaimed for trademark and trade dress infringement and unfair competition.Following a nearly two-month trial, the jury returned a verdict in favor of Porous and against Pall on all of the claims and counterclaims.The jury found that Pall made false statements about Porous's products, that Porous had proven special damages, and awarded Porous $5.5 million on the common-law product disparagement claim.On the Lanham Act claim, the jury found that Pall made false or misleading statements about its own products in its comparative advertising, that Pall had acted willfully and in bad faith, and awarded $1.5 million in damages.In addition, the district court³ awarded Porous its attorneys' fees in the amount of $560,564 and costs in the amount of $261,712.39.⁴

Pall filed post-trial motions for judgment as a matter of law or in the alternative for a new trial.The district court denied the motions, and Pall appeals.Pall challenges the judgment under both the Lanham Act and the common-law disparagement claim.We affirm.

I. LANHAM ACT

The district court allowed Porous to proceed with its claim under the pre-1988 version of the Lanham Act⁵ for relief based on false or misleading statements made by Pall about Pall's own products alone and in comparison to Porous's products.The claim encompassed statements made in both the oil/gas and paper/power markets.

Pall argues that the judgment on the Lanham Act claim must be reversed because the district court improperly instructed the jury regarding causation and injury, and because Porous failed to prove an element of the claim by failing to offer extrinsic evidence of customer confusion to show that Pall's statements were misleading.We reject both arguments.

A.Jury instruction

The trial court instructed the jury as to the elements of Porous's Lanham Act claim:

To establish its claim that Pall violated the Lanham Act, Porous Media must prove by a preponderance of the evidence the following elements.Those elements are:

Pall made false or misleading statements of fact which misrepresented the nature, characteristics or qualities of Pall's own filter products, alone or in comparison with Porous' products;

Any such false or misleading statements actually deceived or had the tendency to deceive a substantial segment of their audience;

Such statements were material because they were likely to influence buying decisions; and

Pall caused its advertised products to enter interstate commerce; and

Porous has been injured as a result of those activities either by direct diversion of sales to Pall or by a lessening of its goodwill.

To prove its claim under the Lanham Act, any false statements made by Pall must concern Pall's, not Porous Media's, products.Pall need not produce any evidence to show that the statements made are true.

The court then read to the jury InstructionNo. 19:

If you should find that Pall made any false or misleading statements in its representations concerning its filter products alone or in comparison to Porous' filter products deliberately--that is with knowledge of their false or misleading nature--and you find that Pall engaged in making any such deliberately false statements as an important part of its marketing efforts, then you may presume that customers and prospective customers were deceived by any such statements and that Porous has suffered damages as a result of such deception.

The effect of this instruction is, of course, to transfer the burden of proof to Pall regarding false deception of Porous's customers and the fact of harm Porous incurred by reason of the deception.The court further instructed:

You are instructed that Pall may overcome the presumption by proof that customers and/or prospective customers were not deceived by any such statements and/or by evidence that Porous has not suffered any damages as a result of any such statements.

In Instruction 20, the district court directed the jury:

Porous Media has the burden of proving damages by a preponderance of the evidence.Damages, for purposes of this claim, means the amount of money which will reasonably and fairly compensate Porous Media for any injury you find was caused by Pall's misrepresentations of fact concerning Pall's filter products or concerning Pall's filter products as compared to Porous' filter products.

Porous Media may recover any damages which it proves it sustained as a result of Pall's false and misleading representations of fact which misrepresented the nature, characteristics and qualities of filters manufactured by Pall.Porous Media may recover past and future profits lost by Porous Media as a result of lost sales attributable to Pall's wrongful acts.⁶

This instruction also told the jury that "[i]n determining Porous' damages, you should not include any amounts for the purpose of punishing Pall, but you are to fully compensate Porous for the damages, if any, that it has sustained."(our emphasis).Thus, the jury was instructed that upon a finding that Pall had engaged in deliberate deception in its comparative advertising, as a major part of its marketing effort, Porous was entitled to a presumption that Pall's statements had caused injury.However, in order to recover any damages, Porous had the burden of proving both the loss sustained and that it was caused by Pall's statements.In other words, Porous still had to prove an evidentiary basis, showing actual harm caused by Pall, for any damages award.

InstructionNo. 19 contains two separate rebuttable presumptions.The first, which we refer to as a presumption of deception, allowed the jury to assume actual deception, the second element of the cause of action, upon a finding that the defendant acted deliberately to deceive.The second, which we refer to as a presumption of causation and injury, instructed the jury that upon a finding that the defendant deliberately deceived the public it could assume that the defendant's statements caused harm to the plaintiff, satisfying the fifth element of the cause of action.The presumption of deception, which was not objected to and not appealed herein, has been approved by several courts.SeeU-Haul Int'l., Inc. v. Jartran, Inc., 793 F.2d 1034, 1041(9th Cir.1986)(Jartran II)("The expenditure by a competitor of substantial funds in an effort to deceive consumers and influence their purchasing decisions justifies the existence of a presumption that consumers are, in fact, being deceived.");Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197, 209(9th Cir.1989)(approving the presumption of deception from Jartran II upon a jury's finding that the defendants engaged in intentional deception);Resource Developers, Inc. v. Statue of Liberty-Ellis Island, 926 F.2d 134, 140(2d Cir.1991)(approving the use of the presumption of deception once plaintiff establishes that defendant acted with intent to deceive).

At the charging conference, Pall objected to the presumption of causation and injury arguing that it improperly collapses two separate presumptions and that Porous must be required to prove that any deceptive advertising caused damage to Porous.Here, Pall argues that the presumption of causation and injury improperly relieved Porous of its burden to prove causation and injury, an essential element of its Lanham Act claim.

Pall relies primarily on the Ninth Circuit opinion in Harper House.There a producer of personal organizers sued a competitor for copyright infringement and violation of the Lanham Act.The jury found for Harper House on all claims and awarded substantial damages on both claims.Harper House, 889 F.2d at 201.Harper House's claim for deceptive advertising under the Lanham Act was that "defendants deceived consumers by showing Time Maker I in its promotion and advertisements and then selling Time Maker II,"id. at 208, where "many changes" were made between the advertised Time Maker I and the production version, Time Maker II.Id. at 200.The court approved the presumption of deception from Jartran II, provided that the jury found that defendants engaged in...