Epson America, Inc. v. USA111, Inc.

Filing 36

OPINION AND ORDER granting in part and denying in part 9 Motion for Preliminary Injunction Signed by Honorable Cameron McGowan Currie on 4/26/2017.(mdea )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
ROCK HILL DIVISION
Epson America, Inc.,

CA No. 0:17-cv-00129-CMC

Plaintiff,
v.

Opinion and Order Granting
Motion for Preliminary Injunction

USA111, Inc., d/b/a iRULU,
Defendant.
On January 17, 2017, Plaintiff Epson America, Inc. (“Epson”) filed a Complaint alleging
Defendant USA111, Inc., d/b/a iRULU (“iRULU”) made false statements in advertising its
consumer projectors, specifically a model called the BL20. Epson seeks, inter alia, injunctive
relief restraining iRULU from engaging in false advertising and ordering removal of false
advertisements from iRULU’s projector product listings. Entry No. 1, Compl. ¶ 44. The central
allegation is iRULU’s claimed lumen rating is vastly overstated in advertisements and has resulted
in injury to Epson. Id. at ¶¶ 27-28, 35.
On January 19, 2017, Epson filed a motion for preliminary injunction asking the court to
enjoin iRULU from engaging in further false advertising regarding its products’ lumen rating,
order removal of all infringing iRULU products from Amazon.com (“Amazon”) and other
websites until iRULU can substantiate any new proposed lumen claims through appropriate
testing, and order iRULU to send corrective notices to retailers and customers disclosing the prior
false claims regarding the projectors’ lumen output. ECF No. 9. For the reasons stated below, the
motion for preliminary injunctive relief is granted as to some but not all of the relief requested.

BACKGROUND
It is undisputed Epson and iRULU both sell portable consumer projectors online through
websites such as Amazon.1 Quality and price for such projectors are largely determined based on
the resolution and brightness of the projector. ECF No. 9-2 ¶ 5. Projector brightness is measured
and described in lumens, and lumen ratings are often listed in the projector’s description or
specifications on sites such as Amazon. Id. at ¶ 6-8. Some product listings include lumen ratings
in the product name itself. Id. at ¶ 8. Such ratings are an important piece of information used by
consumers when selecting a projector appropriate for their needs. Id. at ¶ 7.
Many online marketplaces, such as Amazon, identify best-selling products with a “best
seller” or similar label. Id. at ¶ 10. These products are often at the top of the results when
consumers run searches, which can influence customer selection. Compl. ¶ 36.
iRULU sells approximately 30 different models of projector with advertised lumen ratings
between 800 to 2800 lumens. ECF No. 28-2 ¶ 4; ECF No. 1-3. One such projector is the BL20,
advertised on Amazon and other online retailers as having 2600 lumens. Compl. ¶ 21, Answer ¶
21. The BL20 was designated as an Amazon “Best Seller” in the Fall of 2016, although it currently
does not hold that designation. ECF No. 28-2, ¶ 18.
Epson manufactures and sells many electronic devices, including projectors which fall into
the same category as the BL20. ECF No. 9-2 ¶ 3. In July of 2016, Epson commissioned an

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Epson sells products other than portable consumer projectors, and offers its products in brick and
mortar stores as well. However, these differences are not relevant to the motion at hand.
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independent technology consulting company to test the brightness of iRULU’s BL20 projector.
ECF No. 9-3 ¶ 6. The results showed each projector tested had lumen output of approximately 80
lumens instead of the 2600 advertised. Id. at ¶¶ 7, 10-14.
Epson filed suit in this court on January 17, 2017, seeking injunctive relief and damages
against iRULU. ECF No. 1. Epson requested iRULU be enjoined from falsely advertising its
projectors’ lumen ratings, and the court order iRULU to remove all false advertisements of the
BL20 and all misrepresented iRULU products. Id. at ¶ 44. On January 19, 2017, Epson filed a
motion for preliminary injunction pursuant to Federal Rule of Civil Procedure 65.2 ECF No. 9.
iRULU filed a response in opposition on March 1, 2017. ECF No. 28. Epson filed its reply on
March 8, 2017. ECF No. 30. The parties declined an evidentiary hearing after agreeing the issues
before the court consist of legal claims and inferences to be drawn from the facts submitted in their
respective briefs.
STANDARD
A preliminary injunction is “an extraordinary remedy . . . which is to be applied only in
[the] limited circumstances which clearly demand it.” Direx Israel, Ltd. v. Breakthrough Med.
Corp., 952 F.2d 802, 811 (4th Cir. 1991) (internal quotation marks omitted) (citation omitted).

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Epson also seeks injunctive relief under S.C. Code § 39-5-50. However, that section refers to
injunctive relief for misappropriation of trade secrets, which is not alleged in the Complaint. Epson
did allege a violation of the South Carolina Unfair Trade Practices Act (“SCUPTA”), § 39-5-10,
et seq. While SCUPTA provides a private right of action for damages, the injunctive portion of
the statute, § 39-5-50, is limited to actions brought by the Attorney General. It is not necessary
for the court to rely on the South Carolina statute for the relief requested in this motion.
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The traditional purpose of a preliminary injunction is to “protect the status quo and to prevent
irreparable harm during the pendency of a lawsuit ultimately to preserve the court’s ability to
render a meaningful judgment on the merits.” In re Microsoft Corp. Antitrust Litig., 333 F.3d 517,
525 (4th Cir. 2003). To qualify for injunctive relief, a plaintiff must show (1) likelihood it will
succeed on the merits; (2) likelihood it will suffer irreparable harm in the absence of a preliminary
injunction; (3) the balance of equities tips in its favor; and (4) the injunction is in the public interest.
Winter v. NRDC, Inc., 555 U.S. 7, 20 (2008); Real Truth About Obama v. FEC, 575 F.3d 342, 346
(4th Cir. 2009), vacated on other grounds, 559 U.S. 1089 (2010).
The Winter-Real Truth standard requires the party seeking the injunction to make a “clear
showing” it is likely to succeed on the merits. Real Truth, 575 F.3d at 345; see also Winter, 555
U.S. at 22. This standard compels the moving party to show it is likely to prevail. Regardless of
the balance of hardships, it is insufficient for the party to show only “grave or serious questions
are presented” in the litigation. Compare Real Truth, 575 F.3d at 346 with Blackwelder Furniture
Co. of Statesville v. Seilig Mfg. Co., 550 F.2d 189, 196 (4th Cir. 1977).
Second, the moving party must make a clear showing it is likely to be irreparably harmed
if preliminary relief is denied. To meet this test, the party must show more than a mere possibility
of harm. Winter, 555 U.S. at 21. Third, the moving party must show the balance of equities tips
in its favor. Id. at 21, 26. Fourth, the court must consider whether grant or denial of the injunction
is in the public interest. The court must give “particular regard” to the public consequences of
granting a preliminary injunction. Id. at 24; Real Truth, 575 F.3d at 347. The Fourth Circuit no

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longer recognizes a “flexible interplay” among these criteria. Instead, each requirement must be
fulfilled as articulated. Real Truth, 575 F.3d at 347 (quoting Blackwelder, 550 F.2d at 196).
DISCUSSION
1. Likelihood of Success on the Merits
Epson alleges iRULU violated the Lanham Act, 15 U.S.C. § 1051, et seq., by falsely
advertising the lumen output of its projectors, specifically the BL20. The Lanham Act creates a
private right of action for corporate victims of “false or misleading” descriptions or
representations. 15 U.S.C. § 1125(a). Section 1125(a)(1)(B) of the Lanham Act provides:
Any person who, on or in connection with any goods or services, or any container
for goods, 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 another person's
goods, services, or commercial activities, shall be liable in a civil action by any
person who believes that he or she is or is likely to be damaged by such act.
§ 1125(a)(1)(B). A plaintiff asserting a false advertising claim under the Lanham Act must
establish:
(1) the defendant made a false or misleading description of fact or representation
of fact in a commercial advertisement about his own or another’s product; (2) the
misrepresentation is material, in that it is likely to influence the purchasing
decision; (3) the misrepresentation actually deceives or has the tendency to deceive
a substantial segment of its audience; (4) the defendant placed the false or
misleading statement in interstate commerce; and (5) the plaintiff has been or is
likely to be injured as a result of the misrepresentation, either by direct diversion of
sales or by a lessening of goodwill associated with its products.

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Design Res., Inc. v. Leather Indus. of Am., 789 F.3d 495, 501 (4th Cir. 2015) (quoting PMB Prods.,
Inc. v. Mead Johnson & Co., 639 F.3d 111, 120 (4th Cir. 2011)). To establish liability under the
false advertising provisions of the Lanham Act, “the contested statement or representation must
be either false on its face or, although literally true, likely to mislead and to confuse consumers
given the merchandising context.” C.B. Fleet Co. v. SmithKline Beecham Consumer Healthcare,
L.P., 131 F.3d 430, 434 (4th Cir. 1997).
i. False or Misleading Description of Fact
The contested lumen advertisements at issue here are false on their face. iRULU proffers
evidence supporting an inference it had a factual basis for its representation the BL20 had
“luminous flux of more than 2600 lumens.” ECF No. 28 at 12. iRULU depends on test reports
from Chinese labs showing a “luminous flux” of “3714.568 lm” on one test (ECF No. 28-3 at 6)
and “3869.0 lm” on the other (ECF No. 28-4 at 6).3 It does not, however, proffer evidence or argue
these tests accurately report a lumen output of 2600 for the BL20.4 iRULU has ceased advertising
its BL20 projector as having 2600 lumens, at least on some websites, but has not provided a lumen
rating for this projector. In contrast, Epson offers an affidavit from a consultant at an American

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The reports are proffered without any supporting affidavit by a representative of the testing
company or indicia of validity. ECF No. 28-3, 28-4. They are, moreover, offered only to show
reasonableness of iRULU’s original belief. ECF No. 28 at 3 (“[A]s set forth in the two independent
test reports . . . iRULU had a factual basis for this representation.”); ECF No. 28-2 ¶ 13 (“Based
on the Test Reports of Shezhen Anbotek and Gold Metal, I thought that the iRULU was safely
able to represent in its online listings that the BL-20 was at least a 2600-lumen projector.”).
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No testing shows 2600 lumens; the Chinese tests in fact show more. However, that does not
mean the 2600 lumen designation is not false.
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independent testing laboratory who measured the lumen output to be much lower, around 80
lumens. ECF No. 9-3, ¶¶ 10, 14.
In sum, Epson has provided evidence the challenged advertising significantly overstates
the BL20’s lumen output. iRULU offers only evidence of the reasonableness of its prior belief,
not of the true lumen rating of the BL20. A factual basis for the advertisement is not what is
required by the Lanham Act – actual truth is required. Therefore, Epson has demonstrated falsity
in iRULU’s advertisements.
ii. Material Misrepresentation
Brightness is one characteristic customers rely on in determining what projector may best
fit their needs. Projectors are often listed and compared on commercial websites by their lumen
output. Therefore, statements about lumen output are “likely to influence the purchasing decision”
and are material. See Design Res., 789 F.3d at 501.
iii. Actually Deceives or has Tendency to Deceive
It follows that a false representation the BL20 has a 2600 lumen output actually deceives
buyers who purchase a BL20 projector. iRULU does not dispute that a false lumen rating would
deceive buyers. As the court has determined the representation to be false, it is one that actually
deceives or has a tendency to deceive buyers.
iv. Interstate Commerce
iRULU placed its advertisements for the BL20 projector on internet websites such as
Amazon, eBay.com, Newegg.com, and irulu.com. Consumers from every state in the United
States are able to purchase its projectors on any of those websites. Therefore, because the internet
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is an “instrumentality of interstate commerce,” false advertisements on such sites are in interstate
commerce. Verisign, Inc. v. XYZ.com, LLC, No. 1:14-cv-01749, 2015 WL 7430016, at *4 (E.D.
Va. Nov. 20, 2015); AvePoint, Inc. v. Power Tools, Inc., 981 F. Supp. 2d 496, 512 (W.D. Va.
2013); see also Bros. of Wheel M.C. Executive Council, Inc. v. Mollohan, 909 F. Supp. 2d 506,
538 (S.D.W.Va. 2012) (“The defendant’s internet activity is a use in commerce”), aff’d 609 F.
App’x 149 (4th Cir. 2015).
v. Injury
The Fourth Circuit has “made clear that the indispensable fifth element of a Lanham Act
claim is that the plaintiff has been or is likely to be injured as a result of the [alleged]
misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with
its product.” Verisign, Inc. v. XYZ.COM LLC, 848 F.3d 292, 300 (4th Cir. 2017). Epson has
shown injury due to loss of sales and market share. ECF No. 9-2 ¶¶ 16-18 (noting iRULU’s market
share as 24% since it entered the market, and Epson’s loss in sales estimated at approximately $16
million). As discussed more fully in the section below on Irreparable Harm, Epson has met its
burden as to this element of the Lanham Act.
Having shown a likelihood of success on the merits on its Lanham Act claim, Epson has
satisfied the first prong for a preliminary injunction.
2. Irreparable Harm
Epson argues it has suffered irreparable harm in the form of lost sales and lost customers
as a result of iRULU’s false advertisement of a projector with 2600 lumens for a lower price than
Epson’s 2600 lumen projector. iRULU argues an injunction is not necessary because it has
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removed the offending advertisements, thus eliminating the risk of future harm. However, in
response, Epson has demonstrated iRULU’s claims of 2600 lumens are still present on some
websites, including iRULU’s own website, after iRULU represented to the court the claims had
been removed. See ECF No. 30-2. Even where removed from product specifications, the BL20
comes up when searching for “2600 lumen projector,” apparently as a result of prior
advertisements or customer comments. ECF No. 30-6. Therefore, iRULU’s arguments of
mootness or lack of irreparable injury based on removal of the false advertising fail.
iRULU also argues Epson’s loss of projector sales can be compensated by money damages
if proven at trial, and therefore an injunction is not appropriate. However, the Fourth Circuit
standard clearly allows injunctive relief even if money damages are available, if a remedy at law
is inadequate. PBM Prods., 639 F.3d at 127 (“[T]he mere fact that a plaintiff may recover damages
does not negate his right to injunctive relief.”). Although irreparable harm may be difficult to
prove, “a Lanham Act plaintiff who can prove actual lost sales may obtain an injunction even if
most of his sales decline is attributable to factors other than the competitor’s false advertising.”
Id. at 126-27.
In this case, Epson has shown its sales of consumer projectors have declined since iRULU
began selling its BL20 projectors on sites such as Amazon. ECF No. 9-1 at 16; ECF No. 9-2 ¶¶
16-18. iRULU questions the extent of the correlation between its sales and Epson’s monetary loss,
but fails to persuade the court it is not responsible for at least part of Epson’s decline in sales.
Further, money damages would not prevent iRULU from “infecting the marketplace with the same

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or similar claims in different advertisements in the future.” PBM Prods., 639 F.3d at 127.
Therefore, Epson is able to show irreparable harm.
3. Balance of Equities
The court finds the balance of equities weighs in Epson’s favor. iRULU “simply has no
equitable interest in perpetuating the false and misleading claims” in its advertisements.5 PBM
Prods., 639 F.3d at 127. In contrast, Epson has an equitable interest in a fair and level playing
field regarding specifications for consumer projectors. Epson is unable to compete fairly when
iRULU is misleading customers with false lumen claims. See id. The balance of equities favors
Epson.
4. Public Interest
Finally, there is a strong public interest in preventing false or misleading advertisements.
PBM Prods., 639 F.3d at 127. Although iRULU contends it has removed the false claims of 2600
lumens, some still exist. Further, iRULU has failed to replace its 2600 lumen claim with an
accurate lumen rating. Therefore, confusion likely continues as to the lumen capacity of the BL20
projector and how it compares to other consumer projectors. The public interest is served by
advertisements that accurately reflect the product offered for sale. This factor also favors granting
an injunction.

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iRULU’s only argument as to balance of equities is that Epson can be compensated through
money damages, and therefore the balance of equities does not tip in Epson’s favor. The court,
having found irreparable harm, finds this claim unpersuasive.
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RELIEF
Epson asks this court to enter an injunction ordering that iRULU:
1) Immediately cease and desist from engaging in further false or misleading advertising
with respect to its products’ lumen capacities; 6
2) Immediately recall all iRULU products that contain unsubstantiated lumens ratings
from Amazon and other webpages until such a time as iRULU can substantiate its
new proposed lumen claims through appropriate testing; and
3) Immediately send corrective notice to all its retailers and customers disclosing that it
made literally false claims regarding its products’ lumen capacity.
ECF No. 9. While the court finds a preliminary injunction to be appropriate, not all relief requested
is warranted at this time. At this stage, requiring iRULU to cease false advertisements of inflated
lumen ratings, along with providing a lumen rating of either “undetermined” or Epson’s
independent test result of 80 lumens on all advertising is required. However, the court will not
require corrective notices to be sent to consumers at this time.
CONCLUSION
All four requirements for a preliminary injunction are met by Epson. The court, therefore,
grants Epson’s motion for a preliminary injunction against iRULU as to some, but not all, of the
relief requested.

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Epson appears to argue the lumen ratings of other iRULU projectors may not be accurate.
However, the only evidence presented to the court relates to the BL20 projector; therefore, the
court’s ruling is limited to that model projector.
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It is hereby ORDERED:
Defendant USA111, d/b/a iRULU, is enjoined from advertising its BL20 projector as
having 2600 lumens. iRULU, in all existing and new advertisements, may not merely remove the
lumen rating altogether. iRULU must list the lumen rating as “undetermined lumens,” or list
Epson’s testing result of 80 lumens for the BL20. iRULU’s online advertisements for the BL20
projector shall be revised as set forth herein within fourteen (14) days of entry of this order.
In addition to amending its advertisements, iRULU may also arrange for court-approved
testing of its BL20 projectors by an independent laboratory in the United States. If iRULU chooses
further testing, it must submit a proposal regarding the laboratory at which the testing will take
place along with testing procedures for the court’s approval within twenty-one (21) days of the
entry of this order. Once court-approved testing reveals a validated lumen rating, iRULU may
petition the court to utilize that rating in its advertisements on an ongoing basis.
IT IS SO ORDERED.
s/ Cameron McGowan Currie
CAMERON MCGOWAN CURRIE
Senior United States District Judge
Columbia, South Carolina
April 26, 2017

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