Last week, a North Carolina federal jury charged Blueworks Corp., a swimming pool equipment manufacturer, with $14.7 million in damages arising from false claims that its replacement parts are compatible with plaintiff Hayward Industries' salt water pool chlorination systems.
Occasionally, as with most things, the parts in Hayward's salt water pool chlorination systems need to be replaced. Enter Blueworks, which advertises its replacement parts on Amazon and elsewhere as "compatible with," "the same as," "equivalent to," and "direct replacements for" Hayward's system. Blueworks also uses Hayward's trademarks in the product listing, touts its products as coming from the "same cell supplier as the original," and claims that a portion of its replacement parts are made by a U.S. manufacturer. Samples of the offending ads from the amended complaint include (emphasis in original):
Hayward alleges that these ads, and others like them, constitute trademark infringement, as well as false advertising and unfair business practices under North Carolina Unfair and Deceptive Practices Act. In particular, Hayward claims that any statement that Blueworks' products are "compatible with," "the same as," or "equivalent to" Hayward's products is false and misleading because Blueworks' products do not work as well as Hayward's replacement parts.
Although the jury denied the first claim, deciding that Blueworks' use of Hayward's marks is fair use, it agreed with Hayward on the false advertising claims and awarded Hayward $4.9 million in lost profits. Under the UDTPA, this amount is automatically trebled, making the total damages for false advertising $14.9 million.
Without a crystal ball, we can't know which of Blueworks' statements the jury found to be misleading or false. Regardless, the outcome is a reminder to advertisers to consider carefully how statements about their products will be understood by everyday consumers, and to take into account the context or cumulative impact of multiple statements in the same advertisements.
Hayward Industries, Inc. v. BlueWorks Corp., No. 3:20-cv-00710 (W.D.N.C.)
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