NIPPON STEEL CORPORATION v. POSCO et al

Filing 113

OPINION. Signed by Judge Dennis M. Cavanaugh on 6/27/2013. (nr, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

NIPPON STEEL & SUMITOMO METAL:
CORP..

Hon. 1)ennis M. Cavanaugh
OPINION

Plaintiff.
Civil Action No. 12-2429 (DMC)MF)
v.
POSCO and POSCO AMERICA CORP.,
Defendants.

DENNIS M. CAVANAUGH. U.S.D.J.:
This matter comes before the Court upon

Motion

otDefendants POSCO and POSCO

America Corporation (collectively ‘POSCO”) to Dismiss counts five, six, and seven of Plaintiff
Nippon Steel & Sumitomo Metal Corporation’s Amended Complaint pursuant to F[D. R. Civ. P.
12(b)(6). (Nov. 9, 2012. ECF No. 49). After carefully considering the parties’ submissions, and
based upon the following, it is the finding of this Court that POSCO’s Motion to Dismiss the
Complaint is denied,

I. BACKGROUND
1
This action is part of a global intellectual property dispute between Plaintiff Nippon Steel
& Sumitomo Metal Corporation (“Nippon”) and POSCO, related to grain-oriented electrical steel

‘The facts set forth in the Background are taken from the Amended Complaint (October
26, 2012, ECF No. 46). On this Motion to Dismiss, the Court will accept the factual allegations
in the Amended Complaint as true and construe all facts in Plaintiff’s favor.

(“GOES”). GOES is specialized steel used in the cores of power and distribution translbrmers.
The claims in this action are for patent infringement, false advertising and unfair competition.
There are also other proceedings involving the parties pending in foreign jurisdictions, including
a thetl of trade secrets case filed by Nippon in Japan, and two proceedings in Korea—a declaratory
judgment action filed by POSCO, and an appeal pending in the Korean Supreme Court that
involves access to evidence in certain Korean criminal proceedings. The overarching issue in all
of these proceedings is Nippon’s contention that POSCO has engaged in a multi-year program of
corporate espionage, including theft and bribery, directed toward Nippon’s GOES technology.
and that POSCO has incorporated Nippon’s GOES technology into its own GOES manufacturing
process.
The original Complaint in this case was filed on April 24, 2012 (ECF No. 1) and
contained claims for willful infringement of four patents: (1) U.S. Patent No. 5,261,972 (“the
‘97 patent”): (ii) U.S. Patent No. 6. 61 3.l6() (‘the 160 patent”): U.S. Patent No. 7.442.260
(“the ‘260 patent”): and U.S. Patent No. 7.976,644 (“the ‘644 patenT.”).
Nippon’s Amended Complaint, tiled on October 26, 2012, added a
claim and claims for unfair competition under both

§ 56:4-1

§ 43

Lanham Act

of the New Jersey Fair Trade Act

(‘N.J.S.A.”) and the common law, (Am. Compl., ECF No. 46). Nippon bases these claims on the
allegation that POSCO’s GOES products are made using Nippon technology. which POSCO
wrongfully represents to customers in advertising, as technology that it created and owned.
POSC() tiled the instant Motion to Dismiss and an accompanying Moving Brief (“Del
Br.”) on November 9, 2012. (ECF No, 49), POSCO contends thai counts five, six and seven of
the Amended Complaint should be dismissed because, based on Supreme Coui’t precedent and
2

other supporting case law, no cause of action exists under

§

43(a) of the Lanham Act or under the

parallel New Jersey statute and common law unfair competition claims. Thus, POSCO contends,
Nippon fails to state a claim upon which relief can be granted. Plaintiff filed an Opposition Briel
(“Pl.’s Opp’n. Br’) on I)ecember 3, 2012. (ECF No. 58). POSCO filed a Reply Brief (Def’s
Reply”) on December 10, 2012. (ECF No. 62). The matter is now before this Court.
II. STANDARD OF REVIEW
In deciding a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). all allegations in the
complaint must be taken as true and viewed in the light most favorable to the plaintiff. $,g
Warth v. Seldin, 422 U.S. 490. 501 (1975): Trump Hotels & Casino Resorts. Inc.. v. Mirage
Resorts Inc.. 140 F.3d 478. 483 (3d Cir. 1 998). If. after viewing the allegations in the complaint
in the light most favorable to the plaintiff, it appears beyond doubt that no relief could be granted
“under any set of facts which could prove consistent with the allegations,” a court shall dismiss a
complaint for failure to state a claim.

$ Hishon v.

King & Spalding, 467 U.S. 69, 73 (1984). In

Bell Atl. Corp. v. Twombly, the Supreme Court clarified the Fed, R. Civ. P. l2(b)(6) standard.
e 127 S.Ct. 1955 (2007). Specifically. the Court “retired” the language contained in Conley v.
Gibson. 355 U.S. 41 (1957). that “a complaint should not he dismissed tbr failure to state a claim
unless it appears beyond doubt that the plaintiff can prove no set of facts in support ol his claim.
which would entitle him to relief.” Twombly, 127 S.Ct. at 1968 (citing Conley, 355 U.S. at 4546). Instead, the Supreme Court instructed that “[f]actual allegations must be enough to raise a
right to relief above the speculative level.’ Twombly, 127 S.Ct. at 1965.
III, DISCUSSION
A. Count Five: Violation of Lanham Act

§ 43(a)(i)(B)

Nippon alleges that POSCO has violated Lanham Act
62), False advertising is prohibited under

§ 43(a)(1)(B). (Am.

Compi. ¶jj57-

§ 43(a)(1)(B), which reads in relevant part:

(1) Any person who, or in connection with any goods or services, uses in commerce
any word, term, name, symbol, or device, or any combination thereof or any false
designation of origin, false or misleading description of fact, or false or misleading
representation of fact, which...

(B) in commercial advertising or promotion, misrepresents the nature, characteristics.
qualities, or geographic origin of his or her or anther person’s goods. services, or
commercial activities, shall be liable in a civil action by any other person who
believes that he or she is or is likely to be damaged by such act.
15 U.S.C.

§

1125(a)(1)(B).

To establish a Lanham Act claim based on false or misleading representations in
commercial advertising a plaintiff must allege:
1) that the defendant has made false or misleading statements as to his own product or
another’s; 2) that there is actual deception or at least a tendency to deceive a
substantial portion of the intended audience; 3) that the deception is material in that it
is likely to influence purchasing decisions: 4) that the advertised good traveled in
interstate commerce; and 5) that there is a likelihood of injury to the plaintiff in terms
of declining sales, loss of good will, etc.
Warner Lambert Co v BreathAsure Inc 204 F 3d 87, 91-92 (3d Cii 2000) 1 he plaintiff neLd
,

not prove element two if the advertisement is false: If an advertisement is literally false, the
plaintiff does not have to prove actual consumer deception.” Highmark. Inc. v. UPMC Health

Plan, Inc.. 276 F.3d 160, 171 (3d Cir. 2001).
Here. Nippon’s allegations in the Amended Complaint are sufficient to state a claim
under

§

43(a)( I )(B).

Nippon has alleged that POSCO used illicit means to build its GOES

business on the back of Nippon’s technology. (Am. Compl.

¶

12). Nippon asserts that POSCO

obtained scores of internal Nippon documents that detailed Nippon’s GOES specifications,

4

strategic plans and advanced manufacturing techniques, and that POSCO further copied and

implemented Nippon’s GOES technology into its own GOES manufacturing and began
importing GOES products embodying such technology into the United States, (Amended Compi.

¶

12, 16).
Nippon has alleged that POSCO’s statements about its own GOES products are false or

misleading because POSCO represents to customers that because of POSCO’s own innovation,
POSCO’s GOES products have uniquely superior characteristics and qualities, such as excellent

performance and high energy efficiency,” “superior electric and magnetic property,” and
“consistent quality improvement,” such that “customers prefer products made by POSCO.” (Am.
Cornpl.

¶JJ

16-17). Nippon maintains that such statements cannot be true, as POSCO’s GOES

products are actually manufactured using Nippon’s technology. As a result, Nippon claims that it
is forced to sell its own GOES products in competition with POSCO’s GOES products made
using technology that POSCO misappropriated from Nippon. (Opp’n. Br. 3. 7). Nippon further
pleads that the statements enhance POSCO’s reputation and influence the purchasing decisions
of GOES customers worldwide. (Am. Compl.

¶J

17, 20, 59). Nippon also sufficiently pleads that

the advertised goods traveled in interstate commerce and that there is a likelihood of injury to
Nippon. (Am. Compi.

¶ 6, 20,

58, 62). Accordingly, the facts plead by Nippon sufficiently meet

the requirements of the test espoused in Warner Lambert Co.
POSCO maintains that its advertisements made no comparison as to the superiority of its
own GOES products versus either Nippon’s GOES products or any other GOES products in the

marketplace. (Defs Reply Br, 3). POSCO argues that such allegations were only added by
Nippon in its Opposition Brief in an attempt to broaden its Lanham Act claim beyond a false

attribution of authorship claim under

§ 41(a)(1)(A).

(Defs Reply Br. 3). The Court disagees.

First. Nippon makes these same allegations in its Amended Complaint as well as it Opposition
Brief $g Amended Compi.

¶

17. Second, while any statements made by POSCO regarding the

superiority and customer preference may not directly name any specific GOES competitor. use o
such statements in advertising must necessarily be a comparison of POSCO’s GOES product to
those of competitors, including Nippon. g Castrol Inc. v. Penzoil Co., 987 F.2d 939, 945-48
(3d Cir. 1993) (affirming a violation of § 43(a)(1)(B) where a company advertised that its motor
oil provided longer engine life and better engine protection, finding that such a statement, by
necessary implication, compared the company’s products to those of its competitors). Thus, the
Court finds that Nippon has properly plead a false advertising claim under §43(a)(l)(B), not a

false attribution of authorship claim under

§ 43(a)(1 )(A).

POSCO’s reliance on Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23
(2003) and Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009) is misplaced.
First, Dastar arose in the context of a summary judgment motion, after the parties were allowed
to develop a factual record, Second, Dastar involved a “false statement of origin” claim under

43(a)(1)(A), as opposed to the

§ 43(a)(1)(B) claim that Nippon asserts in Count Five,

§

Nippon’s

allegations go further than simply claiming that POSCO “substantially copied” Nippon’s
technology, as was the case in Dastar. 539 U.S. at 38. Nippon also alleges that POSCO falsely
promoted its products as the customer choice based on calse statements of uniquely superior
characteristics and qualities.
Baden Sports is also distinguishable from the present matter, as it arose in the context of
post-trial motions. Again, the parties in Baden were afforded the

6

opportunity to

conduct

discovery as to the Lanharn Act claim, in order to fully develop the factual record, Further, and
more importantly, the Federal Circuit considered “whether Baden ha[d] alleged anything more
than false designation of authorship.” 556 F.3d at 1307. The court found that Baden had limited
its arguments to [defendant’s] claims to be the innovator of [the underlying] technology.” Id. The
court found that “[n]o physical or functional attributes

.

.

.

are implied b y [defendant’s

advertisements.” Id. 1-lere as the Court has discussed supra. Nippon has alleged that POSC() has
made false statements pertaing to the “physical or functional attributes” of its products.
Thus, the Court finds that Nippon has alleged a plausible claim for relief against POSCO
as to Count Five, POSCO’s motion to dismiss Count Five, violation of § 43(a)(l)(B) of the
Lanham Act. will be denied.
B. Counts Six and Seven: New Jersey Fair Trade Act Violation and common law
unfair competition
Nippon also asserts claims for common law unfair competition and violation ol the New
Jersey Fair Trade Act and N.J.S.A.
.

§

56:4-1 codifies New Jersey’s “common

law authority

of

unfair competition’ Nat 1 Football League Props Inc v New Jerscy Giants Inc 637 F Supp
,

507. 519 (D.N.J. 1986). The statute proscribing unfair competition provides: “No merchant, firm
or corporation shall appropriate for [its] own use a name. brand, trademark. reputation or
goodwill of any maker in whose product such merchant, firm or corporation deals.” N.J.S.A.

§

56:4-1.
The elements of unfair competition under N.J.S.A.

§

56:4 and New Jersey common law

are the same as those required under the Lanham Act, The Third Circuit stated “except for the
interstate commerce requirement [of the Lanham Act], the elements of the unfair competition
7

torts proscribed by New Jersey law and by section 43(a) of the Lanham Act are the same” SK &
F Co v Premio Pharm Laboratories Inc 625 F 2d 1055, 156 (3d Cir 1980) 1 heieforc the.
Court “need not repeat the factual discussion as to the likelihood of success on the merits,” Cf

R. (the court held that it need not repeat the analysis for the Lanham Act claim when it already
conducted the same analysis for the state unfair competition claim).
As discussed above, Nippon’s Lanham Act claim against POSCO will stand, Because the
analysis is the same for the New Jersey Fair Trade Act and common law claims, POSCO’s
motion to dismiss Count Six and Seven shall also be denied.
IV. CONCLUSION

For the foregoing reasons, POSCO’s Motion to Dismiss counts five, six, and seven of the
Amended Complaint is denied. An appropriate Order accompanies this Opinion.

Cavanaugh,
I)ate:
Original:
cc:

June?2013
Clerk
All Counsel of Record
Honorable Mark Falk, U.S.M.J.

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