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FLIR Systems, Inc. v. Sierra Media, Inc.

United States District Court, D. Oregon

August 8, 2013

FLIR SYSTEMS, INC., an Oregon corporation, Plaintiff,
v.
SIERRA MEDIA, INC., a Washington corporation, and FLUKE CORPORATION, a Washington corporation, Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Devon Zastrow Newman, Schwabe, Williamson & Wyatt P.C., Portland, Oregon, for Plaintiff FLIR Systems, Inc.

William A. Brewer III, John W. Bickel II, Michael J. Collins and Robert M. Millimet, Bickel & Brewer, Dallas, Texas, for Plaintiff FLIR Systems, Inc.

Kenneth R. Davis II and Parna A. Mehrbani, Lane Powell P.C., Portland, Oregon, for Defendant Fluke Corporation.

Dane H. Butswinkas and Matthew V. Johnson, Williams & Connolly LLP, Washington, District of Columbia, for Defendant Fluke Corporation.

Benjamin N. Souede and David H Angeli, Angeli Law Group LLC, Portland, Oregon, for Defendant Sierra Media, Inc.

OPINION

Page 1188

OPINION AND ORDER

DENNIS J. HUBEL, United States Magistrate Judge.

If ever there were a case where the Court hoped that the " parties [would just decide] to chill," Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 908 (9th Cir. 2002), this would be it. Indeed, it is an understatement to say that this case has been hotly contested, or that there is some animosity between the two business competitors involved. The parties have had a multitude of disagreements long before this case, and their contentious relationship resulted in protracted litigation here and acrimonious discovery disputes. Tit-for-tat arguments were raised at every conceivable opportunity. Conferral did not always occur. At one point, the Court was compelled to remind counsel to be courteous and professional in their dealings with one another. And the kitchen-sink approach to trial, offering every conceivable piece of evidence and raising as many objections as possible, led to laborious, seemingly never-ending pretrial sessions to resolve the raft of unfocused issues raised by the parties. To adapt an old saying, " Too many lawyers spoil the case."

In December 2012, the Court conducted a nine-day jury trial on Plaintiff FLIR System, Inc's (" FLIR" ) claim of false advertising and on Defendant Fluke Corporation's (" Fluke" ) counterclaims of false advertising (six counts), trademark infringement, and unfair competition. The jury returned a verdict in favor of FLIR on its false advertising claim and awarded $103,000 in damages. The jury also returned a verdict in favor of Fluke on all but three counts of false advertising and awarded $4,136,975 in damages. In January and February 2013, the parties filed the following post-trial motions which are now before the Court: (1) Fluke's redaction request; (2) Defendant Sierra Media's (" Sierra" ) motion for an award of attorney's fees pursuant to 15 U.S.C. § 1117(a); (3) Fluke's motion re: post-trial issues; and (4) FLIR's motion for post-trial relief, judgment as a matter of law, or alternatively, for a new trial.

I. LEGAL STANDARD

A. Judgment as a Matter of Law

Under Federal Rule of Civil Procedure (" Rule" ) Rule 50(b), a party who has moved for judgment as a matter of law (" JMOL" ) at the close of all the evidence may renew the motion after entry of judgment. Fed.R.Civ.P. 50(b). However, " [a] party cannot raise arguments in its post-trial motion for judgment as a matter of law under Rule 50(b) that it did not raise in its pre-verdict Rule 50(a) motion."

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Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003).

When considering a Rule 50(b) motion, the court must view the evidence in the light most favorable to the nonmoving party, and all reasonable inferences must be drawn in favor of that party. Horphag Research, Ltd. v. Pellegrini, 337 F.3d 1036, 1040 (9th Cir. 2003). " Judgment as a matter of law is proper when the evidence permits only one reasonable conclusion and the conclusion is contrary to that reached by the jury." Ostad v. Oregon Health Scis. Univ., 327 F.3d 876, 881 (9th Cir. 2003). Because the court may not substitute its view of the evidence for that of the jury, it neither makes credibility determinations, nor weighs the evidence. Costa v. Desert Palace, Inc., 299 F.3d 838, 859 (9th Cir. 2002), aff'd, 539 U.S. 90, 123 S.Ct. 2148, 156 L.Ed.2d 84 (2003). Indeed, the court must " disregard all evidence favorable to the moving party that the jury is not required to believe." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 151, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).

B. New Trial

The court may grant a new trial " for any of the reasons for which new trials have heretofore been granted." Fed.R.Civ.P. 59. Those reasons include when " the verdict is contrary to the clear weight of the evidence, or is based upon evidence which is false, or to prevent, in the sound discretion of the trial court, a miscarriage of justice." Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir. 2001) (quoting United States v. 4.0 Acres of Land, 175 F.3d 1133, 1139 (9th Cir. 1999)). " While the trial court may weigh the evidence and credibility of the witnesses, the court is not justified in granting a new trial 'merely because it might have come to a different result from that reached by the jury.'" Roy v. Volkswagen of Am., Inc., 896 F.2d 1174, 1176 (9th Cir. 1990) (quoting Wilhelm v. Associated Container Transp. (Australia) Ltd., 648 F.2d 1197, 1198 (9th Cir 1981)).

II. DISCUSSION

A. Sierra's Entitlement to Fees

Sierra has moved for an award of attorney's fees based on the Court's conclusion--at the summary judgment stage--that FLIR lacked prudential standing to sue Sierra for false advertising under the Lanham since they are not competitors. FLIR opposes Sierra's motion for attorney's fees on the grounds that (1) Sierra is not entitled to fees under the applicable legal standard, (2) FLIR had substantial legal and factual support for claiming that Sierra was jointly and severally liable with Fluke for false advertising, and (3) it would be inequitable to award Sierra attorney's fees because Sierra failed to raise its contention that FLIR lacked prudential standing prior to summary judgment and Sierra admitted during discovery that Fluke voluntarily agreed to, and did in fact, pay Sierra's attorney's fees in this case.

Section 35 of the Lanham Act permits an award of attorney's fees to a " prevailing party" in " exceptional cases." 15 U.S.C. § 1117(a). The Ninth Circuit has held that the exceptionality " requirement is met when the case is either groundless, unreasonable, vexatious, or pursued in bad faith." Cairns v. Franklin Mint Co., 292 F.3d 1139, 1156 (9th Cir. 2002) (citation and internal quotation marks omitted). Under § 1117(a), an award of attorney's fees is " never automatic and may be limited by equitable considerations." Adidas Am., Inc. v. Payless Shoesource, Inc., No. 01-1655-KI, 2009 WL 302246, at *1 (D. Or. Feb. 9, 2009) (quoting Rolex Watch, U.S.A., Inc. v. Michel Co.,

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179 F.3d 704, 711 (9th Cir. 1999)).

Sierra proceeds on the theory that FLIR's Lanham Act false advertising claim against it was groundless. As Sierra points out, FLIR opposed its motion for summary judgment by relying primarily, either directly or indirectly, on Second Circuit case law. In an Opinion and Order dated October 9, 2012, this Court agreed with Sierra's argument that FLIR's reliance on such cases was misplaced and tantamount to ignoring Ninth Circuit precedent in favor of the Second Circuit's directly conflicting standard. That decision was based upon the Court's reading of Jack Russell Terrier Network of Northern California v. American Kennel Club, Inc., 407 F.3d 1027 (9th Cir. 2005), where the Ninth Circuit stated that " different causes of action alleged pursuant to the different subsections of 15 U.S.C. § 1125(a) have different standing requirements. Id . at 1037. Under the false association" prong of § 43 of the Lanhan Act, 15 U.S.C. § 1125(a)(1)(A), the parties are not required to be competitors " in the traditional sense." Jack Russell, 407 F.3d at 1031. By contrast, for standing pursuant to the " false advertising" prong of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), " a plaintiff must show: (1) a commercial injury based upon a misrepresentation about a product; and (2) that the injury is 'competitive,' or harmful to the plaintiff's ability to compete with the defendant." Jack Russell, 407 F.3d at 1037; Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995) (explaining that standing under the " false advertising" prong requires a " commercial injury based upon a misrepresentation about a product, and also that the injury was 'competitive,' i.e., harmful to the plaintiff's ability to compete with the defendant." )[1]

This dichotomy is not present in the Second Circuit because, under its reasonable interest approach, " a plaintiff asserting a false advertising claim under § 43(a) need not be a 'competitor.'" Phoenix of Broward, Inc. v. McDonald's Corp., 489 F.3d 1156, 1166 (11th Cir. 2007) (citing PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1111 (2d Cir. 1997)). Indeed, as the district court stated in Grant Airmass Corp v. Gaymar Industries, Inc., 645 F.Supp. 1507 (S.D.N.Y. 1986), a case heavily relied upon by FLIR at the summary judgment stage, " [o]ur Court of Appeals has held that competitive injury is not required for recovery under section 1125(a)." Id . at 1511 (citation and internal quotation marks omitted).

FLIR claims that its reliance on Second Circuit case law was merely a good faith attempt to extend the law of this circuit, which should preclude a finding of exceptionality under the Lanham Act. The district court's decision in Cairns v. Franklin Mint Co., 115 F.Supp.2d 1185 (C.D. Cal. 2000), and the Fifth Circuit's decision in Procter & Gamble Co. v. Amway Corp., 280 F.3d 519 (5th Cir. 2002), are instructive in this regard. In Cairns, the court concluded

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that the plaintiffs' false endorsement claim was not " exceptional" under § 1117(a) of the Lanham Act, stating: " Although it is clear that this case was well outside the bounds of any previous decision, plaintiffs' claim could be considered an attempt to extend existing law." Cairns, 115 F.Supp.2d at 1188. The Amway court vacated and remanded the district court's award of attorney's fees under § 1117(a) on similar grounds: " The question of standing under the Lanham Act to sue for an illegal pyramid scheme was difficult and novel. A party that predicates its legal claim on a controversial and unsettled legal theory should not face sanctions under . . . § 1117(a) when the court ultimately rejects the claim." Amway, 280 F.3d at 531-32.

In a recent decision from the Central District of California, the district court explained that a Lanham Act claim " is considered legally groundless where there is 'no legal basis' for the claim itself, which instead rests on 'absurd' or 'just short frivolous' contentions of law." Brown v. Elec. Arts, Inc., 722 F.Supp.2d 1148, 1152 (C.D. Cal. 2010) (quoting Cairns, 115 F.Supp.2d at 1188-89). " [W]hen the Ninth Circuit has affirmed a denial of attorneys' fees based on a finding that the case was not exceptional, the key factors appear to be that the party against whom attorneys' fees are sought 'raised debatable issues' and had a legitimate reason for bringing its claims." Icebreaker Ltd. v. Gilmar S.p.A., No. 3:11-cv-00309-BR, 2013 WL 638926, at *3 (D. Or. Feb. 20, 2013) (collecting cases).

Here, in addition to the contention that FLIR had no legal basis to pursue its claim, Sierra argues that FLIR's false advertising claim was factually groundless because FLIR knew Sierra was not its competitor. In the Court's view, however, it is apparent FLIR was attempting to rely on a legal theory that the Court determined was not sufficient to survive summary judgment (i.e., that Sierra was jointly and severally liable with Fluke), not assert that Sierra was in fact its competitor. Nor does the Court believe that FLIR engaged in bad faith or unreasonable conduct in pursuing its claim against Sierra. The Court will therefore limit its analysis to whether FLIR's Lanham Act claim was legally groundless.

Certainly the language used in this Court's October 9, 2012 Opinion and Order suggests a strong endorsement of Sierra's position. This was based, in large part, on FLIR arguing that " the principle on which Sierra relie[d]" --the competitive prong of Jack Russell --did not apply " where, as here, a co-defendant is jointly and severally liable with [the] plaintiff's competitor for false advertising," (FLIR's Resp. Opp'n Sierra's Mot. Summ. J. [Docket No. 194] at 7), and then proceeding to direct the Court's attention to Second Circuit case law without acknowledging that the Second Circuit and Ninth Circuit analyze the standing of commercial plaintiffs by applying differing standards (e.g., the reasonable interest approach versus the Ninth Circuit's so-called dichotomous approach).

Nevertheless, the Court cannot say that FLIR's Lanham Act false advertising claim was legally groundless or that it rested on " absurd" or " just short of frivolous" contentions of law. In fact, at the summary judgment stage, FLIR cited several cases that provided some support for its position, even though the cases were distinguishable from the present case. See Coastal Abstract Serv., Inc. v. First Am. Title Ins., Co., 173 F.3d 725, 734 (9th Cir. 1999) (concluding that injury was competitive under the Lanham Act since the defendant's corporate officer sought by his statements to divert business from the plaintiff to the defendant--which is type of

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injury the Lanham Act was intended to remedy--and was not entitled to hide behind the corporation where he is an actual participant in the tort); see also Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1021 (9th Cir. 1985) (" A corporate officer or director is, in general, personally liable for all torts which he authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the corporation and not on his own behalf." ) (internal quotation marks omitted). Accordingly, the Court denies Sierra's request for attorney's fees under § 1117(a) because this was not an exceptional case.

B. FLIR's False Advertising Claim

In its motion for post-trial relief, Fluke asks the Court to adopt the jury's factual findings relating to Fluke's unclean hands defense and enter judgment for Fluke dismissing FLIR's false advertising claim.

1. Unclean Hands

FLIR sued Fluke for false advertising under the Lanham Act, alleging that a drop test video published by Fluke falsely depicted the abilities of both the FLIR and Fluke cameras to withstand a two-meter drop onto a concrete floor. The jury found for FLIR on that claim, but also found that FLIR falsely advertised its E-series cameras' ability to pass a two-meter drop test.[2] (Special Verdict Form [Docket No. 394] Interrog. No. 4 at 2.) Fluke requests that the Court adopt the jury's factual finding and hold that FLIR's false advertising claim with regard to the drop test video is precluded by its unclean hands. See generally Bartee v. Michelin N. Am., Inc., 374 F.3d 906, 912-13 (10th Cir. 2004) (" Pursuant to the Seventh Amendment to the Federal Constitution, in fashioning equitable relief, a district court is bound by a jury's explicit findings of fact and those findings that are necessarily implicit in the jury's verdict. . . . [T]he subsequent findings by the trial judge in deciding the equitable claims [cannot] conflict with the jury's [explicit and implicit] determinations." ) (internal quotations omitted).

As an initial matter, the parties dispute which evidentiary standard applies in evaluating an unclean hands defense. In the joint proposed jury instructions, FLIR's instruction on unclean hands did not reference any evidentiary standard, while Fluke's indicated that unclean hands must be proved by a preponderance of the evidence. See Kelley Blue Book, 802 F.Supp. 278, 292 (C.D. Cal. 1992) (applying a preponderance of the evidence standard to unclean hands); see also Fuddruckers, Inc. v. Doc's B.R. Others, Inc., 826 F.2d 837, 847 (9th Cir. 1987) (not referencing any evidentiary standard). The instructions that went to the jury with respect to the evidentiary standard for unclean hands referenced the preponderance of the evidence. Ultimately, however, the Court decided that

the best thing to do on th[e] issue [wa]s to . . . present a [special interrogatory] to the jury about whether the E-Series ad is false or not, and if they determine it is not, we don't have an unclean hands issue to worry about. If we do, we can unravel the[] arguments and make a decision about what it means with respect to the ultimate outcome of FLIR's claim . . . .

(Trial Tr. vol. 8b [Docket No. 415], 1853:11-18, Dec. 18, 2012.) In other words, it was ultimately determined that the equitable defense of unclean hands would be decided by the Court, and if the jury determined that FLIR did not falsely

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advertise its E-series cameras' ability to pass a two-meter drop test, a finding of unclean hands would clearly be inappropriate because FLIR did not act inequitably.

After thoroughly reviewing the relevant case law post-trial, the Court has confirmed that it should apply the " clear, convincing evidence" standard enunciated in TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 833 (9th Cir. 2011), in deciding whether the unclean hands defense was established and should result in the loss of FLIR's damages award. A finding by the jury that FLIR's Eseries advertisements were false by a preponderance of the evidence leaves the Court to decide if that conduct was sufficiently inequitable to support an unclean hands defense. Had Fluke brought a false advertising claim based on FLIR's E-series advertisements, a preponderance of the evidence decision by the jury on the falsity of the advertisements would be enough. To block FLIR's claim, however, this conduct must be sufficiently egregious by clear and convincing evidence. This determination the Court reserved for itself.

Unclean hands " closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may have been the behavior of the defendant." Adler v. Fed. Republic of Nigeria, 219 F.3d 869, 877 (9th Cir. 2000) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814, 65 S.Ct. 993, 89 L.Ed. 1381, 1945 Dec. Comm'r Pat. 582 (1945)).[3] The doctrine " bars relief to a plaintiff who has violated conscience, good faith or other equitable principles in his prior conduct, as well as to a plaintiff who has dirtied his hands in acquiring the right presently asserted." Seller Agency Council, Inc. v. Kennedy Ctr. for Real Estate Educ., Inc., 621 F.3d 981, 986 (9th Cir. 2010) (internal quotation and citation omitted); see also Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1097 (9th Cir. 1985) (stating that " what is material is not that the plaintiff's hands are dirty, but that . . . the manner of dirtying renders inequitable the assertion of such rights against the defendants." ) (internal quotation marks omitted; brackets deleted).

In order to prevail on an unclean hands defense, " the defendant must demonstrate that the plaintiff's conduct is inequitable and that the conduct relates to the subject matter of its claims." [4] Fuddruckers, 826 F.2d at 847. The defense should only be applied " where some unconscionable act of one coming for relief has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation." U-Haul Int'l, Inc. v. Jartran, Inc., 522 F.Supp. 1238, 1254 (D. Ariz. 1981), aff'd, 681 F.2d 1159 (9th Cir. 1982) (citing Ames Publ'g Co. v. Walker-Davis Publ'ns, Inc., 372 F.Supp. 1, 13-15 (E.D. Pa. 1974)). In an action for false advertising, the unclean hands of the plaintiff must relate to the same type of product the defendant allegedly falsely advertised.

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Healthpoint, Ltd. v. Ethex Corp., 273 F.Supp.2d 817, 849 (W.D. Tex. 2001). " [W]hile the Ninth Circuit has recognized that the extent of the harm caused by the plaintiff's misconduct is a highly relevant consideration, it has not held that a defendant asserting an unclean hands defense is required to demonstrate prejudice." Lenz v. Universal Music Corp., No. C 07-3783 JF, 2010 WL 702466 *7 (N.D. Cal. 2010) (internal quotation marks omitted) (emphasis added).

Fluke argues that the sufficiency of the relation between FLIR's conduct and its claim is demonstrated by the case law. To support its argument, Fluke relies primarily on Stokely-Van Camp, Inc. v. Coca-Cola Co., 646 F.Supp.2d 510 (S.D.N.Y. 2009), and Emco, Inc. v. Obst, No. CV03-6432-R (RZX), 2004 WL 1737355 (C.D. Cal. July 29, 2004). In Stokely-Van, the court concluded, at the preliminary injunction stage, that the maker of Gatorade--who complained about Coca-Cola's claims regarding the presence of calcium and magnesium in Powerade--had unclean hands because it marketed the advantage of adding calcium and magnesium to its product first, only later to disavow that claim and assert that Coca-Cola must follow suit. Stokely-Van, 646 F.Supp.2d at 533-34. Similarly, in Emco, the court concluded that a Lanham Act claim was barred by unclean hands, where the counterclaimant-seller of industrial cutting tools, who used the brand name " Americut" and American symbols in advertisements for products that were not manufactured in the United States, alleged that its competitor misled its customers as to the geographic origin of its goods by removing country-of-origin labels. Emco, 2004 WL 1737355, at *4-5.

FLIR advances several arguments as to why an unclean hands finding would be inappropriate, including one that relates to Fluke's counterclaim concerning FLIR's practice of superimposing higher resolution images onto the liquid crystal display (" LCD" ) of lower resolution cameras in its advertisements. At the hearing on the parties' motions in limine, the Court made clear that FLIR's unclean hands defense could only pertain to Fluke's use of superimposed images in order to be sufficiently related to the subject matter of Fluke's counterclaim. In FLIR's view, a determination that it has unclean hands would be inconsistent with that ruling.

What FLIR neglects to mention, and what the Court addressed in denying one of FLIR's motions to compel discovery, is that many (if not all) of these advertisements " referred to both higher and lower resolution cameras." (Op. & Order on Mots. to Compel [Docket No. 190] at 12.) This is important because Fluke's false advertising claim based on FLIR's use of images in its advertisements was predicated almost exclusively, if not entirely, on advertisements where FLIR superimposed images produced by higher resolution cameras onto the view finder of lower resolution cameras that could not produce the images depicted on their view finders. The display of high resolution images (predominantly stand-alone images) in advertisements for cameras, some of which are capable of producing images of that resolution and some which are not, is quite different from superimposing high resolution images onto the view finders of only low resolution cameras incapable of producing the image. Indeed, the vast majority of the advertisements challenged by Fluke did not include any camera capable of producing the superimposed images.[5]

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FLIR also argues that (1) its conduct was not inequitable because it acted in good faith when it believed, more than six months in advance of its new E-series cameras being offered for sale to the public, that it could meet the two-meter drop test specification that it submitted for inclusion in the 2011 Grainger catalog; and (2) the advertisement of its E-series cameras in the 2011 Grainger catalog is not " related in any way, much less directly," to the drop test video and accompanying methodology because FLIR did not falsely depict the results of a particular drop test, deceptively compare FLIR's and Fluke's thermal imaging cameras, or deliberately include the " stamp of approval" of a purportedly " independent, third party" like Sierra. (FLIR's Resp. Opp'n Fluke's Mot. at 5, 7.)

The Court is not persuaded by FLIR's arguments. In this case, there is " clear, convincing evidence that [FLIR's] conduct was inequitable and related to the subject matter of [its] false advertising claims." TrafficSchool, 653 F.3d at 833 (internal citation and quotation marks omitted; brackets deleted). The jury was only asked and indeed found that FLIR falsely advertised the ability of its E-series cameras to pass a two-meter drop test, and that finding was supported by the evidence. Indeed, it was uncontroverted. ( See Trial Ex. 1015 at 1) (email dated March 18, 2010, stating " [i]t will take some time before our complete volume line can do 2m drop." ); (Trial Ex. 1126 at 4) (results from September 2010 drop test conducted by FLIR, indicating " [s]erious failures in every drop" ); (Trial Ex. 1129 at 1) (internal email among high-ranking FLIR employees dated October 12, 2010, stating " at launch we don't we think we can have [a] camera that withstand[s] [a] 2m drop." )

At trial, FLIR attempted to explain the problem away by presenting evidence that it had developed a rubber boot that resolved any issues with the E-series' ability to withstand a two-meter drop test.[6] This boot was supplied to customers even though they were never informed prior to purchase of an E-series camera that the boot was necessary to survive a two-meter drop. However, FLIR's vice president of product management, Torbjö rn Hamrelius (" Hamrelius" ), testified that, even with the rubber boot, the E-series still failed its two-meter drop test. (Hamrelius Dep. 47:3-11.) This removes any doubt that FLIR's advertisement of its E-series cameras in the 2011 Grainger catalog (published in both print and online versions) falsely represented that they could withstand a two-meter drop test. And these false statements were disseminated to millions of potential customers, including two million individuals who received the catalog in hard copy form. (Trial Tr. vol. 2b [Docket No. 401], 415:6-8, 415:23-25, 416:1-15, Dec. 10, 2012.) Thus, FLIR falsely advertised its camera's ability to withstand a two-meter drop just as it alleged Fluke did with respect to various cameras' ability to withstand such a drop.

FLIR claims its good faith handling of this situation is demonstrated by its efforts to correct the print version of the 2011 Grainger catalog. " Grainger, however, informed

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FLIR that it was too late to remove the two-meter drop test specification because th[e] catalog had already gone to print." (FLIR's Resp. Opp'n Fluke's Mot. at 8-9.) As Fluke points out, " notably absent from the record is any evidence that FLIR ever attempted to ask Grainger to remove the two-meter drop specification from the Grainger website, which, presumably, would have been possible even if the catalog already had gone to print." (Fluke's Reply Mem. at 8); (Hamrelius Dep. 49:15-17) (" Well, at least we said we should [attempted to correct the online version]. I haven't checked that we actually did it." ); (Trial Tr. vol. 2b, 427:25-428:3) (" Yeah, I don't think [Grainger] changed the . . . language [on the website] because I think at that point we felt . . . comfortable, with the [rubber boot] as a solution, that it met the requirements that were printed." ) In fact, the two-meter drop specification was still available online in November 2011. (Trial Tr. vol. 2b, 422:25-423:20.)

The fact that the FLIR's advertisement in the 2011 Grainger catalog was not comparative does not make it any less related to subject matter of Fluke's drop test video. Both concerned the same product (a thermal imaging camera) and its ability to withstand a two-meter drop test. See Stokely-Van, 646 F.Supp.2d at 533 (applying unclean hands even though one advertisement was comparative and one was not); see also Pom Wonderful LLC v. Welch Foods, Inc., 737 F.Supp.2d 1105, 1110 (C.D. Cal. 2010) (" [T]he crux of [plaintiff's] Lanham Act claim is that [defendant] misleads consumers to believe that its [white grape pomegranate] product contains more pomegranate juice than it actually does, and that the [white grape pomegranate] product in fact contains very little pomegranate juice. Thus, to prove unclean hands, [Defendant] must demonstrate that [plaintiff] misleads consumers into believing its juice products contain more pomegranate juice than they actually do, or that its products misrepresent the amount of juice(s) in them." ), aff'd, 468 F. App'x 688 (9th Cir. 2012).

Perhaps most importantly, FLIR's advertisement was in response to the advantage FLIR perceived Fluke to have in ruggedness, and which it expected Fluke to try and capitalize on. Fluke's capitalization was the drop test video. (Trial Ex. 1015 at 1) (" I've always felt the drop test exposes a vulnerability in our camera design and I have been surprised it has taken Fluke this long to expose this weakness. . . . Fluke is trying to play hardball and I would like to make them regret they ever made this [drop test] video." ); (Trial Ex. 1027 at 1) (" Almost all tradeshows Fluke's distributor has no other sales pitch except the droop proof ability." ); (Trial Ex. 1027 at 2) (" Seems that product management is also aware of [the drop test video] and that our cameras are indeed not built to withstand a 2 meter drop test." ) Indeed, the FLIR advertisement came out after the false drop test video.

Moreover, the Court is not persuaded by FLIR's argument pertaining to the timing of its inequitable conduct. This is not a case where Fluke is attempting to " dredge up inequitable conduct of [FLIR] which has been discontinued for some time prior to the suit." Pom Wonderful, 737 F.Supp.2d at 1109 (quoting 6 McCarthy on Trademarks & Unfair Competition § 31:55 (4th ed. 2010)). FLIR made a representation to a major distributor in August 2010--the same month that this suit was filed--knowing at the time that it was not yet true. The failure of FLIR to ensure that its E-series cameras' could withstand the two-meter drop test led to the publication of a statement in the 2011 Grainger catalog that the jury determined was false--a finding that is consistent with

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the testimony provided by Hamrelius--and for which FLIR offered no evidence the statement was ever true.

FLIR also suggests that the events related to its Grainger advertisements " were rectified prior to entry of judgment." (FLIR's Resp. Opp'n Fluke's Mot. at 12) (citing McCarthy on Trademarks & Unfair Competition § 31:55 (4th ed. 2012)). Setting aside the fact that neither party has cited, nor has research revealed, a case from the Ninth Circuit where an unclean hands defense was deemed unavailable based on contemporaneous conduct that ceased prior to entry of judgment, FLIR fails to cite evidence in the record showing this actually occurred. FLIR only points to: (1) a chain of emails from May 2011 (i.e., in the midst of this litigation), wherein FLIR's vice president of sales and marketing, Arpineh Mullaney, asked a Grainger representative for an opportunity to " refine" its catalog pages and FLIR's products manager, Mats Ahlströ m (" Ahlströ m" ), drew a line through " drop proof (6.5 ft)," (Trial Ex. 1075 at 1, 4); and (2) trial testimony provided by FLIR's president of commercial sales, Andrew Teich (" Teich" ), where he discussed a drop apparatus developed in 2010 and concluded by stating that the E-series continued to function throughout the drops, although " early prototypes sustained some damage." (Trial Tr. vol. 7b [Docket No. 410], 1566:6-1569:19, Dec. 17, 2012.)

Even if the Court assumes Grainger altered FLIR's pages in the 2012 catalog in accordance with Ahlströ m's email, this still says nothing about the two million hard copy versions of the 2011 catalog that are presumably still in circulation. Nor does it explain why the drop test specification was still present on the Grainger website as late as November 2011. (Trial Tr. vol. 2b 422:25-423:1-20); (Trial Ex. 1084) (August 31, 2011 email indicating that FLIR did " d[id]n't know when" the E-series would be able to pass the two-meter drop test).[7]

In summary, the jury concluded that Fluke's drop test video constituted false advertising and awarded FLIR $103,000 in damages. Nevertheless, FLIR is not entitled to any damages in light of its false advertising related to the same subject matter. See U-Haul Int'l, 522 F.Supp. at 1254 (unclean hands should be applied " where some unconscionable act of one coming for relief has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation." ) In other words, FLIR's false advertising claim based on Fluke's drop test video being false regarding the ruggedness of various ...


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