letter referenced availability of Millennium 1-ply, 2500 count
and 2-ply, 1250 count rolls and their prices, and offered
samples if needed. According to Laura L. Morris, the Treasurer
of both defendants, the September 12, 2000, letter was sent to
one and only one of its customers, one Barry Goldman. (Morris
Aff. ¶ 11-12.) Morcon sent one additional letter to one
distributor in which Millennium was touted as "equivalent" to
Valay, and did not make equivalence claims in any other manner.
Id. ¶ 15. However, Morcon offered to sell Millennium in
response to invitations for bids for "Valay-equivalent" toilet
Morcon asserts that it marketed Millennium as comparable or
similar to Valay, but did not intend the use of the word
equivalent to mean "exactly the same." Essentially Morcon posits
that it was and is selling Millennium as a substitute for or
alternative to Valay to be used in Valay dispensers.
On December 6, 2000, SQP sent a letter to its customers noting
that a Temporary Restraining Order had been granted against
Morcon, listing sheet counts from its tests of Millennium, and
indicating that it would protect its products from false and
misleading advertising and non-equivalent knock-off products.
SQP obtained some rolls of Millennium and undertook testing of
those rolls. SQP retained an independent testing laboratory and
a statistician to evaluate the sheet counts of Millennium.
According to SQP's experts, whose testimony was proffered via
affidavit, Millennium rolls consistently fall below 2500 and
1250 sheet counts, while Valay consistently meets the optimum
2500 and 1250 sheets per roll. The SQP results are described in
more detail below.
Morcon also tested both its Millennium and SQP's Valay.
Contrary to the findings set forth by SQP, Morcon sets forth,
via its expert's affidavit, testing results showing that
Millennium consistently meets its advertised sheet counts,
whereas Valay rolls consistently contain fewer sheets than
advertised. The determinations made by Morcon's expert are also
more fully described below.
A. Preliminary Injunction Standard/False Advertising Claim
A preliminary injunction should issue only where the party
seeking such relief shows "that it is likely to suffer
irreparable injury if relief is denied [and] also that there is
either (1) a likelihood of success on the merits or (2)
sufficiently serious questions going to the merits to make them
a fair ground for litigation, with a balance of hardships
tipping decidedly in the [movant's] favor." Procter & Gamble
Co. v. Chesebrough-Pond's Inc., 747 F.2d 114, 118 (2d Cir.
1984); Otokoyama Co. v. Wine of Japan Import, Inc.,
175 F.3d 266, 270 (2d Cir. 1999). In order to succeed on the merits of a
false advertising claim under the Lanham Act, a party must show
either literal falsity of the advertising under scrutiny or that
the advertising is literally true but likely to mislead or
confuse.*fn1 Johnson & Johnson * Merck Consumer Pharm. Co.
v. Smithkline Beecham Corp., 960 F.2d 294, 297 (2d Cir. 1992).
Thus, in order to establish a likelihood of success on the
merits on an application for a preliminary injunction, a party
must establish the likelihood that advertising is literally
false, or if literally true then likely to mislead or confuse.
If a showing is made that advertising is literally false, the
irreparable harm prong of the inquiry may be met by a showing of
specific, nonspeculative, injury and causation. See McNeilab,
Inc. v. American Home Prods. Corp., 848 F.2d 34, 38 (2d Cir.
Where the allegedly false advertising claims comparison to a
specific competing product, however, irreparable harm is
presumed. Id. Accordingly, where the falsity of a comparative
advertising claim is shown likely to be proven, fulfilling the
success-on-the-merits prong of the injunctive relief inquiry,
the irreparable harm prong is necessarily established and
injunctive relief should be granted.
B. Analysis of False Advertising Claim
SQP contends that Morcon's advertising that Millennium is
equivalent to Valay is literally false. The sole basis for SQP's
claim is that Millennium sheet counts are less than Valay sheet
counts and therefore any claim of equivalence is false. SQP
proffers a September 12, 2000, letter stating that Morcon was in
production "of the equivalent to the Valay bath tissue," which
SQP alleges was an advertising campaign to distributors. (See
Compl. Ex. B.)
To establish a likelihood of success on the merits of this
false comparative advertising claim SQP submitted the affidavits
of two experts, and an SQP executive, purporting to show the
literal falsity of defendants' statements of equivalency. Again,
SQP's claim is based solely upon sheet counts. Thus, SQP
attempts to show literal falsity by establishing that Millennium
sheet counts are lower than Valay sheet counts.
SQP sets forth the following facts, in order to establish that
its Valay sheet counts are accurate. Richard Bonaker, Executive
Vice-President of SQP, explains the internal quality monitoring
undertaken in order to maintain accuracy of Valay sheet counts.
(Bonaker Aff. filed 11-20-2000.) Sample rolls are pulled from
the production line and the number of sheets are manually
counted. Id. ¶ 8. If the sheet count is acceptable then the
sample rolls are weighed. Id. Thereafter every two-hundredth
roll on the production line is weighed to ensure that rolls with
proper sheet counts are being produced. Id.
In order to establish that, in contrast to Valay, Millennium
sheet counts are consistently below 2500 and 1250, SQP submitted
the affidavits of Robert P. Hayner ("Hayner") and William Howe,
PhD. ("Howe"). Hayner, the Quality Manager for an independent
materials testing laboratory retained by SQP, conducted testing
of Valay and Millennium. Hayner obtained Valay samples from the
SQP warehouse and Millennium samples through the ordinary stream
of commerce. Hayner explained how a direct correlation between
sheet count and weight was established, then how random samples
could be evaluated according to those criteria to determine
sheet counts for Valay and Millennium. (See generally, Hayner
Aff.) Hayner concluded that Valay 1-ply rolls contained an
average of 2513.37 sheets while Millennium 1-ply rolls contained
an average of 1933.75 sheets. Hayner further determined that
Valay 2-ply rolls contained an average of 1298.37 rolls while
Millennium 2-ply rolls contained only 1008 on average. These
Millennium sheet counts represent 22.6% and 19.4%, respectively,
under the advertised 2500 and 1250 sheet counts.
In further support of SQP's position, Howe, a statistician,
evaluated testing data provided by Hayner. Howe opined that
applying the one-sided non-parametric tolerance limit formula, a
standard statistical technique, to the Hayner data resulted in
95% confidence that at least 68.8% of Millennium rolls contain
less than the labeled number of sheets. (Howe Aff. 1 ¶ 7, 10,
SQP argues that the foregoing testing and statistical analysis
of test results
shows that Morcon's advertising is false, thus SQP has
established a likelihood of success on the merits of its unfair
competition claim, entitling it to preliminary injunctive
In opposition, Morcon first argues that Millennium sheet
counts were not lower than Valay sheet counts. Thus, according
to Morcon, any claim it may have made as to equivalence was not
false based upon a comparison of the sheet counts of the two
Morcon submitted the affidavit of its expert, John W.
Walkinshaw ("Walkinshaw"), a consultant to the paper industry.
Walkinshaw conducted tests of Valay and Millennium with regard
to sheet count, roll width, roll diameter, roll weight, sheet
basis weight, and paper thickness. (Walkinshaw Aff. ¶ 5.) This
testing resulted in a finding that Valay sheet counts were
consistently low, while Millennium sheet counts were
consistently higher than the labeled amounts. Id. ¶ 7.
Moreover, Walkinshaw criticized Hayner's use of weight as a
correlation to sheet count, opining that such a correlation
would be "suspect and unreliable". Id. ¶ 12. Walkinshaw
continued by setting forth specific deficiencies in the methods
used by SQP's experts, such as Hayner's failure to document
In short, the expert testimony proffered by SQP to establish a
likelihood of success on the merits is refuted by the expert
testimony proffered in opposition by Morcon. Determination of
whether SQP is likely to succeed in proving that Millennium's
claim of equivalence to Valay is literally false would require
evaluation of the credibility of the parties' experts, which
cannot be done without a full hearing on the matter. Notably,
plaintiff did not request an expedited hearing at which expert
testimony could be presented, as is often done in circumstances
such as this. See, e.g., Johnson & Johnson * Merck, 960 F.2d
at 296 (explaining that the trial court consolidated an
application for a preliminary injunction with an expedited trial
on the merits); I.T.S. Industria Tessuti Speciali v. Aerfab
Corp., 280 F. Supp. 581, 590 n. 2 (S.D.N.Y. 1967) (noting that
applicant for preliminary injunction may forego opportunity when
relying upon affidavits rather than requesting live testimony).
The differing views of each expert about the reliability of the
sampling and testing methods used by the respective adversaries
creates questions of fact as to the sheet counts of Valay and
Millennium. A disputed question of fact such as this need not be
resolved on an application for a preliminary injunction. See
I.T.S. Industria Tessuti Speciali, 280 F. Supp. at 589-90
(citing Dymo Indus., Inc. v. Tapeprinter, Inc., 326 F.2d 141,
143 (9th Cir. 1964)). Rather, determination of disputed facts
should be made at trial.
SQP has failed to make the requisite showing that Millennium
sheet counts are lower than Valay sheet counts in support of its
false comparative advertising claim. Preliminary injunctive
relief must be denied.
Second, Morcon contends that letters, mentioning equivalence
sent to only two distributors did not constitute dissemination
of advertising or promotion, so that SQP fails to state a claim
under the Lanham Act. See, e.g., Garland Co. v. Ecology Roof
Sys. Corp., 895 F. Supp. 274, 275 (Kan. 1995) (finding that a
single letter fails to meet the dissemination of advertising
requirement under the Lanham Act). But see Mobius Mgmt. Sys.,
Inc. v. Fourth Dimension Software, Inc., 880 F. Supp. 1005,
1020-21 (S.D.N.Y. 1994) (finding that a single comparison letter
sent to what was in effect the sole potential purchaser for the
product constituted dissemination of advertising for Lanham Act
purposes). In order to meet the commercial advertising or
promotion requirement under the Lanham Act, a misrepresentation
must "constitute commercial speech; . . . be made by a defendant
who is in commercial competition with plaintiff; . . . for the
purposes of influencing the purchase of its
goods and services;" and be made either in a classic advertising
campaign or in informal promotions "disseminated sufficiently to
the relevant purchasing public to constitute advertising or
promotion within that industry." Mobius Mgmt. Sys. Inc.,
880 F. Supp. at 1019-20 (internal quotations omitted).
SQP argues in response that the letters sent by Morcon
constituted advertising and were disseminated for Lanham Act
purposes. It is unnecessary to resolve this question, however,
as a determination favorable to SQP would not be helpful to its
application for a preliminary injunction, as set forth in the
above analysis of the factual evidence presented by SQP. In
other words, even assuming arguendo that Morcon did engage in an
advertising campaign (for Lanham Act purposes), SQP failed to
make the requisite success-on-the-merits showing that would
entitle it to preliminary injunctive relief.
SQP additionally argues that the Millennium labeling and
packaging reflecting 2500 and 1250 sheet counts for 1-ply and
2-ply rolls, respectively, constitute false advertising because
the actual roll sheet counts consistently fall below 2500 and
1250. Assuming arguendo that labeling and packaging constitute
advertising for Lanham Act purposes, such advertising (labeling
and packaging) makes no reference to Valay. In that case, the
advertising (labeling and packaging), if in fact false, would
enure detriment to all competitors. SQP is no more likely to
suffer harm from such advertising than would any other
competitor. SQP did not adduce evidence indicating that it would
suffer actual harm from any such false labeling and packaging,
and therefore has not made the requisite showing for preliminary
injunctive relief relating to any falsity of Millennium labeling
and packaging. See McNcilab, Inc., 848 F.2d at 38 (specific,
non-speculative injury and causation required where advertising
makes no comparison to a competing brand).
C. Attorneys Fees and Costs
A prevailing party in an unfair competition action may be
entitled to an award of attorney's fees upon a clear and
convincing showing of exceptional circumstances. See
15 U.S.C. § 1117(a). In light of the foregoing determination that SQP is
not entitled to preliminary injunctive relief, SQP's request for
attorneys fees and costs must be denied.
SQP has not established a likelihood of success on the merits
of its false advertising claim. Thus, preliminary injunctive
relief is not warranted.
Accordingly, it is
1. SQP's application for a preliminary injunction and an award
of attorney's fees and costs is DENIED; and
2. The Temporary Restraining Order issued on November 22,
2000, is VACATED.
IT IS SO ORDERED.