3:18-cv-03134-JMC Date Filed 03/22/19 Entry Number 25-1 Page 1 of 40 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA COLUMBIA DIVISION Epson America, Inc.) Civil Action No. 3:18-cv-03134-JMC) Plaintiff,)) vs.) PLAINTIFF'S MEMORANDUM OF) LAW IN SUPPORT OF ITS MOTION Curtis International Ltd. and) FOR PRELIMINARY INJUNCTION Technicolor SA d/b/a Technicolor USA,) Inc.)) Defendant. Plaintiff Epson America, Inc. ("Epson") respectfully submits this Memorandum of Law in Support of its Motion for a Preliminary Injunction seeking to prohibit Defendants Curtis International Ltd. ("Curtis") and Technicolor SA d/b/a Technicolor USA, Inc.'s ("RCA," and together with Curtis, "Defendants") from further engaging in unlawful false advertising. INTRODUCTION Curtis and RCA have engaged in an ongoing campaign to purposefully deceive the public by grossly overstating the brightness of their projectors. Through independent testing, Epson has conclusively established that Curtis' RPJ116 projector, which it advertised as producing 2000 lumens, actually only produces 32 lumens. Through independent testing, Epson has also conclusively established that Curtis' RPJ129 projector, which it advertised as producing 3100 lumens, actually only produces 190 lumens. And Defendants' latest model, the RPJ136, a projector recently released in February 2019, is advertised as having 2200 lumens. Epson, through independent testing, has confirmed that the RPJ136 only emits 38 lumens. Although deceived consumers have made Defendants aware of their grossly inaccurate lumen claims, Defendants refuse to remove their literally false advertisements from the marketplace and 3:18-cv-03134-JMC Date Filed 03/22/19 Entry Number 25-1 Page 2 of 40 instead, continue to create confusion in the marketplace. Blatantly false advertising of this magnitude calls for swift injunctive relief to protect consumers and to promote fair competition in the projector marketplace. The Supreme Court recently spoke of the Lanham Act's reliance upon competitors to police and cure false advertising to consumers. The Supreme Court explained: Competitors who manufacturer or distribute products have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies. Their awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators…. Lanham Act suits draw upon this market expertise by empowering private parties to sue competitors to protect their interests on a case-by-case basis. POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228, 2234 (2014). Accordingly, Epson now seeks to protect its interests as well as those of the consuming public. Epson seeks a preliminary injunction prohibiting Defendants from engaging in further false or misleading advertising with respect to their products' lumen capacities and ordering Defendants to send corrective notice to their retailers and customers to alleviate and mitigate the confusion in the marketplace caused by their false advertising. In the related case, Epson Am., Inc. v. USA111, Inc., 259 F. Supp. 3d 387 (D.S.C. 2017) (Currie, J.)1, this Court recently granted Epson's Motion for Preliminary Injunction against another competitor under a nearly identical set of facts. The Court held that Epson met all four requirements for a preliminary injunction and required defendant to revise its online advertisements to reflect the true lumens rating of its projectors. Epson requests the Court to do the same here. 1 For the convenience of the Court, a copy of Judge Currie's ruling is attached as Exhibit A. 2 3:18-cv-03134-JMC Date Filed 03/22/19 Entry Number 25-1 Page 3 of 40 FACTS The facts set forth in this section are supported by the Verified Complaint (ECF No. 1) ("Compl."), Verified Amended Complaint (ECF No. 22) ("Am. Compl."), the Affidavit if Michael Isgrig (Exhibit B), and the Affidavit of Karl Lang (Exhibit C). A. Portable Consumer Projectors While traditionally associated with movie theaters, projectors have become an increasingly common video display product for consumers used in home, business, and educational settings. Compl. ¶ 9, Am. Compl. ¶ 10. Today, consumers use digital projectors in the same way as television or computer screens. Digital projectors receive video signals from external devices, such as DVD players or computers and "project" those signals onto a screen. Compl. ¶ 10, Am. Compl. ¶ 11. Consumers can purchase projectors in a variety of sizes ranging from the size of a cell phone to larger, permanently-mounted projectors for home theaters. Compl. ¶ 11, Am. Compl. ¶ 12. Within a particular projector category, such as portable consumer projectors, the quality and corresponding price of a specific projector is largely determined by its resolution and brightness. Compl. ¶ 12 Am. Compl. ¶ 13. Projector brightness is typically measured and described in lumens. Compl. ¶ 13, Am. Compl. ¶ 14. The brighter the projector, the higher the lumen rating, and, all else being equal, the more it will likely cost. Compl. ¶ 13, Am. Compl. ¶ 4. The lumen rating for a projector is one of the most important and immediately recognizable projector features for consumers and one that necessarily impacts consumer choice. Compl. ¶ 14, Am. Compl. ¶ 15. The American National Standards Institute developed and approved an objective standard for measuring the lumen output of projectors, known as the 3 3:18-cv-03134-JMC Date Filed 03/22/19 Entry Number 25-1 Page 4 of 40 "ANSI Standard." Compl. ¶ 15, Am. Compl. ¶ 16. The ANSI Standard establishes minimum protocols for measuring and communicating important performance attributes for projectors and is widely used by projector manufacturers to standardize how lumen ratings are communicated to customers. Compl. ¶ 15, Am. Compl. ¶ 16. For this reason, lumen ratings are used to create sub-groups of portable consumer projectors, and serve as a measuring stick for consumers to compare projectors. See infra Sec. I.A.3. Due to the importance of a projector's brightness levels, manufacturers prominently display and advertise a projector's lumen rating on its packaging and advertising. See Compl. ¶¶ 24-40. B. Epson Projectors Epson is recognized throughout the world and the United States as a leading projector manufacturer. Compl. ¶ 16, Am. Compl. ¶ 18. As a market leader, Epson continues to set standards for image quality, performance, and innovation with its line of multimedia projectors. Compl. ¶ 17, Am. Compl. ¶ 19. Epson's commitment to delivering quality products is recognized by the industry through various product awards and industry recognition. Compl. ¶ 17, Am. Compl. ¶ 19. Epson has spent millions of dollars and significant time and effort in advertising, promoting, and developing its brand and establishing substantial goodwill in the portable consumer projector market. See generally Compl. ¶¶ 16-17. Epson prides itself on achieving the highest customer satisfaction ratings, accomplished in large part by using the most precise testing equipment and procedures available to ensure accurate product descriptions and specifications. Compl. ¶ 18, Am. Compl. ¶ 20. In addition, Epson's projector service and support is industry-leading. Compl. ¶ 19, Am. Compl. ¶21. Epson offers its projectors with a two-year standard limited warranty, including Epson's Road Service, which provides a replacement projector with next day delivery and free shipping. Compl. ¶ 19, Am. Compl. ¶ 21. 4 3:18-cv-03134-JMC Date Filed 03/22/19 Entry Number 25-1 Page 5 of 40 C. Defendants' False Advertising of Their Projectors 1. Defendants' Projectors Defendants are a direct competitor of Epson in the portable consumer projector market. Compl. ¶ 20, Am. Compl. ¶ 22. Defendants sell and offer for sale projectors to consumers throughout the United States on various online commerce sites including, but not limited to, Amazon.com and Walmart.com, as well as various brick and mortar retail stores. Compl. ¶ 20, Am. Compl. ¶ 22. Defendants sell their projectors under various brand names, including, but not limited to, "RCA." Compl. ¶ 21, Am. Compl. ¶ 23. Defendants supply their projectors to other companies under different brand names. Compl. ¶ 21, Am. Compl. ¶ 23. The Curtis/RCA RPJ116 projector, advertised as projecting 2000 lumens, is a top-selling Curtis projector. Compl. ¶ 22, Am. Compl. ¶24. Curtis/RCA sell several other projectors, including the RPJ129, which it advertises has a lumen rating of 3100. Compl. ¶ 30, Am. Compl. ¶ 31. 2. Defendants' Launch of the RPJ136 Projector After this lawsuit was filed, counsel for the parties engaged in extensive settlement discussions beginning in December 2018. See ECF 13, 16, 18, 20 (four motions by the parties to extend deadlines to allow for settlement discussions). While settlement negotiations were ongoing, on February 28, 2019, Epson learned that Defendants launched a new projector at Walmart — the Curtis/RCA RPJ136. Am. Compl. ¶ 37. As follows is a picture of the newly launched RPJ136 and how it is displayed to Walmart customers: 5 3:18-cv-03134-JMC Date Filed 03/22/19 Entry Number 25-1 Page 6 of 40 Am. Compl. 38. As shown from the picture, the Curtis/RCA RPJ136 is advertised as a "Super Bright" 2200 lumens projector. 3. Independent Testing Epson commissioned Lumita, Inc. ("Lumita"), an independent technology consulting company that specializes in product testing involving light and color measurement, to test the actual brightness of Defendants' projectors. Ex. C. Lumita tested the RPJ116 projector, which Defendants represent as having a 2000 lumen rating. Compl. ¶ 22. The results showed that the projector actually has a 32 lumen output, which is nearly 98 percent less than Defendants' advertised rating. Ex. C at ¶ 13. Accordingly, the RPJ116's actual light output is materially smaller than the 2000 lumens Defendants represent to consumers in their advertising and product description. Ex. C at ¶ 20. Lumita also tested the RPJ129 projector. While Defendants represent that the RPJ129 has a 3100 lumen rating, Lumita's testing revealed that each projector actually has a 190 lumen output, which is nearly 93 percent less than Defendants' advertised rating. Compl. ¶ 30; Ex. C at ¶ 12. Accordingly, the actual light output of the RPJ129 is materially smaller than the 3100 lumens Defendants represent to consumers in their advertising 6 3:18-cv-03134-JMC Date Filed 03/22/19 Entry Number 25-1 Page 7 of 40 and product description. Ex. C at ¶ 20. While Defendants represent that the RPJ136 has a 2200 lumen rating, Lumita's testing revealed that the projector actually has a 38 lumen output, which is nearly 98 percent less than Defendants' advertised rating. Am. Compl. ¶ 42; Ex. C at ¶ 14. Accordingly, the actual light output of the RPJ136 is materially smaller than the 2200 lumens Defendants represent to consumers in their advertising and product description. Ex. C at ¶ 20. 4. Defendants Deceive Consumers Beyond the independent testing, which conclusively establishes that Defendants' lumen representations are literally false, purchasers of Defendants' projectors throughout the United States have voiced serious concerns regarding Defendants' projector brightness representations, in many cases calling Defendants' claims wholly false and unsupported. Compl. ¶ 25, Am. Compl. ¶ 28. For example, customer feedback for Defendants' projectors on Walmart.com contains, inter alia, the following comments: • "It says 2000 lumens, but I suspect the one I took home was barely 1000. Even in a dark room, it missed the mark. I thought it was a little too good to be true…" • "The ones that rated high are completely incorrect…. This product all together is horrible. Horrible picture quality, color, brightness!" • "The packaging shows the projector being used in bright light, but you'd better have pitch dark to use this.