United States: Elcometer, Inc. v. TQC-USA, Inc.
2013 WL 1433388 (E.D. Mich. Apr. 9, 2013)

This article previously appeared in Incontestable Trademark Newsletter - June 2013.

CASE SUMMARY

FACTS

Plaintiff Elcometer, Inc. ("Elcometer") manufactures handheld coating-thickness gauges and related testing equipment. Elcometer alleged that Defendant TQC-USA, Inc. ("TQC"), a direct competitor, encouraged and facilitated the infringement of Elcometer's trademark by encouraging or allowing its authorized dealers to use ELCOMETER as a search-engine keyword trigger and in the header of their paid Google advertisements next to their website address, "paintmeter.com," as seen below.

TQC moved to dismiss for failure to state a claim.

ANALYSIS

TQC argued that Elcometer "impermissibly lumped" TQC together with its distributors, Thoren and PaintMeter.com, and failed to establish an agency relationship between the parties sufficient to support its liability for the actions of the other defendants. The court disagreed, finding that Elcometer sufficiently alleged that TQC and its distributors acted as agents of one another and that the infringing acts were within the scope of that agency relationship. Elcometer provided evidence that the distributors were authorized dealers of TQC's products and that TQC continued to provide the distributors with TQC's competing products after being notified of the infringement. TQC argued its agency relationship was restricted to the distribution of thickness gauges and should not be found to extend to distributor advertising.

In rejecting TQC's motion to dismiss, the court disagreed, finding that Elcometer sufficiently stated a claim for trademark infringement under federal and state law. To state a claim under the Lanham Act, Elcometer was required to allege facts establishing that: (1) it owns the registered trademark; (2) TQC used the mark in commerce; and (3) such use was likely to cause confusion. In addition to its allegations that it had continuously used the registered trademark ELCOMETER for over sixty years, Elcometer alleged that TQC allowed or encouraged its authorized dealers to use the ELCOMETER mark as a Google AdWord so that consumers and potential consumers searching for ELCOMETER were directed to its distributors' "paintmeter.com" website. Elcometer also alleged that "when consumers arrive[d] at the Paintmeter website, they [were] deceived into believing they [were] on a website of an authorized dealer or seller of Elcometer's products." The court found these allegations, together with the agency allegations, sufficient to state a claim.

TQC argued that it did not infringe Elcometer's trademark because it did not personally purchase the Google advertisements. In response, the court emphasized that "liability for trademark infringement can extend beyond those who actually mislabel goods with the mark of another." Manufacturers, the court held, can be responsible for others in its chain of distribution by "intentionally inducing another to infringe a trademark" or by continuing to "supply its product to one whom it knows or has reason to know is engaging in trademark infringement." Elcometer provided evidence that TQC continued to supply its products to the distributors, despite TQC's knowledge of the distributors' infringement of Elcometer's mark. This evidence was sufficient to defeat the motion to dismiss.

CONCLUSION

This case is of interest because it is one of only a few cases in the Sixth Circuit dealing with keyword advertising, and it highlights the potential liability of manufacturers whose distributors engage in keyword-advertising infringement.

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