Confusing Tweets And Fake LinkedIn Profile Land Software Company In Hot Water
By IT-Lex Intern Matt GilbertSoftware manufacturer AvePoint is suing competitor Axceler for various causes of action, of which a couple are of particular interest to us. The defamation claim comes from comments made by Burns, an Axceler executive, on his Twitter feed. From last month’s opinion:
AvePoint alleges that Axceler and Burns have attempted to confuse customers into falsely believing: (1) that AvePoint is a Chinese company rather than an American company; (2) that AvePoint’s software is not made, developed, or supported in the United States; (3) that AvePoint’s software is maintained in India; (4) that Axceler’s ControlPoint Software is “Microsoft recommended” over AvePoint’s DocAve software; (5) that AvePoint’s customers are “dumping out of 3 year deals in year 2 to buy Axceler’s ControlPoint; and (6) that Axceler uses its maintenance revenue to improve its customers’ existing products whereas AvePoint uses its maintenance revenue to develop new products to which its customers have no access.
Axceler sought a motion to dismiss on the defamation claims, and this was denied by the court. Based on another alleged statement, concerning maintenance fees:
Axceler argues that the statement is not actionable, since some customers might prefer AvePoint’s alleged approach to maintenance fees. Construed in the light most favorable to AvePoint, however, the statement implies that AvePoint is misusing revenue from customers and, thus, could be considered defamatory. Because of this, and because the statement allegedly caused AvePoint to lose a sale to Fairpoint Communications, the court concludes that this statement also supports a plausible claim for relief.
The court used the same rationale on all the statements to determine that there was a possible claim for defamation, so the motion to dismiss was denied.
Next, there was a trademark infringement claim. AvePoint alleged that Axceler and Burns created an account on LinkedIn for a nonexistent AvePoint employee named Jim Chung, who identifies as a Software Engineer in Xinjiang, China. The LinkedIn profile encourages people to contact Jim for business deals, new ventures, and consulting, relating to AvePoint. According to 15 U.S.C. § 1114(1)(a), plaintiff had to prove:
(1) that it possesses a mark; (2) that the defendant used the mark; (3) that the defendant’s use of the mark occurred “in commerce”; (4) that the defendant used the mark “in connection with the sale, offering for sale, distribution, or advertising” of goods or services; and (5) that the defendant used the mark in a manner likely to confuse consumers.
Lanham Act jurisdiction extends to the limit of Congress’s power to regulate interstate commerce. The court says that other courts have repeatedly held that the unauthorized use of a trademark on the internet satisfies the “in commerce” requirement because the internet is an “instrumentality of interstate commerce.” In trying to dismiss, Axceler argued that using AvePoint’s name and creating a fictitious employee was not in connection with a sale of goods or services. This is what the opinion said on this matter:
The defendants set up the fictitious LinkedIn account to fortify Axceler’s position in the marketplace and reap competitive, commercial benefits. The plaintiffs allege that the defendants used the AvePoint mark to create the false and misleading impression that Jim Chung is an official AvePoint representative, and that the fictitious profile encourages users to contact Jim Chung regarding “business deals, new ventures and consulting offers” with AvePoint…..plaintiffs further allege that by fielding inquiries through the imposter account, and that they have been used the account divert business to Axceler and to otherwise cause competitive harm to AvePoint.
The court found that rest of the elements were sufficiently met to survive a motion to dismiss.
The breach of contract claim stems from Axceler creating a fake e-mail account and downloading a trial copy of AvePoint software for competitive, commercial purposes. When downloading the software, a page pops up with a browsewrap agreement, terms and conditions that must be agreed to before the downloading starts. The court hearing the motion to dismiss hesitated to declare browsewrap agreements unenforceable but said it was something to be argued in the case. Because these types of agreements have become so commonplace it will be interesting to see the court’s take on them. So, in sum, none of Axceler’s motions to dismiss were granted, and the lawsuit will wage onwards.
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