Opinion
Civil Action No. 00-5523
December 30, 2002
MEMORANDUM AND ORDER
In the instant case, the plaintiff, The Gallup Organization ("Gallup"), is suing the defendant, Kenexa Corporation ("Kenexa"), for five federal and state law claims. Two summary judgment motions are presently before the Court. First, Gallup seeks summary judgment (Docket No. 40) on the issue of whether Kenexa violated Section 43(a) of the Lanham Act, 15 U.S.C. § 1125, and the Nebraska Unfair and Deceptive Trade Practices Act, Neb. Rev. Stat. § 87-301, et seq. ("Nebraska UDTPA"). Kenexa cross-moves (Docket No. 43) for summary judgment on the same issues. As discussed below, the parties' motions are granted in part and denied in part.
I. BACKGROUND
The facts are set forth more fully in this Court's November 13, 2001 Memorandum. Gallup, Inc. d/b/a The Gallup Organization v. Talentpoint, Inc., No. CIV.A. 00-5523, 2001 WL 1450592, at *1-2 (E.D.Pa.) (Reed, S.J.).
Gallup and Kenexa are competitors in the field of employee satisfaction surveys. Gallup is, among other things, a management consulting firm. As such, it provides measurement, consulting, and education services to corporate clients. As part of this business, Gallup developed the survey at issue in this case, the Q12. Kenexa provides human resource services, including employee engagement surveys, to corporate clients.
The focus of this dispute is Gallup's employee engagement survey, the Q12. This survey consists of twelve questions relating to specific aspects of an employee's workplace and one overall employee satisfaction question. On October 19, 1999, Gallup received a copyright certificate for the survey. The copyright certificate states that the Q12 was first published in 1992. In its complaint, Gallup alleges that Kenexa copied ten of the twelve Q12 survey questions and the overall satisfaction question for use in Kenexa's own employee engagement survey.
This U.S. District Court has issued two earlier opinions in this case regarding Gallup's copyright infringement claim. On November 13, 2001, in a memorandum opinion by Senior Judge Lowell A. Reed, Jr., denied, inter alia, a motion for summary judgment on Gallup's copyright infringement claim. Gallup, Inc. d/b/a The Gallup Organization v. Talentpoint, Inc., No. CIV.A. 00-5523, 2001 WL 1450592, at *14-15 (E.D.Pa.) (Reed, S.J.). On October 9, 2002, this Court issued another memorandum opinion, filed under seal, denying Gallup's renewed motion for summary judgment on its copyright infringement claim.
In addition to its copyright infringement claim, Gallup also brought several other claims, which are the subjects of the instant motions. Specifically, Gallup claims that Kenexa is violating Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), by engaging in false advertising and false designation.
A claim that Defendant engaged in an "unlawful raid" of Gallup's employees was dismissed by the Court in an unreported opinion dated November 13, 2001. Gallup, Inc. d/b/a/ The Gallup Organization v. Talentpoint, Inc., No. CIV.A. 00-5523, 2001 WL 1450592 (E.D.Pa.) (Reed, S.J.). The Court found no such cause of action existing under Nebraska law.
In its November 13, 2001 Memorandum, this Court determined that the Nebraska UDTPA and Section 43(a) of the Lanham Act share the same elements and are equivalent for the purposes of this case. Gallup, 2001 WL 1450592, at *14. Accordingly, the Court will refer only to Section 43(a) of the Lanham act throughout the remainder of this memorandum.
II. LEGAL STANDARD
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment has the initial burden of showing the basis for its motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant adequately supports its motion pursuant to Rule 56(c), the burden shifts to the nonmoving party to go beyond the mere pleadings and present evidence through affidavits, depositions, or admissions on file showing a genuine issue of material fact for trial. Id. at 324. The substantive law determines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the evidence is such that a reasonable jury could return a verdict for the nonmoving party, then there is a genuine issue of fact. Id.
When deciding a motion for summary judgment, all reasonable inferences are drawn in the light most favorable to the non-moving party. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993). Moreover, a court may not consider the credibility or weight of the evidence in deciding a motion for summary judgment, even if the quantity of the moving party's evidence far outweighs that of its opponent. Id. Nonetheless, a party opposing summary judgment must do more than just rest upon mere allegations, general denials, or vague statements. Trap Rock Indus., Inc. v. Local 825, 982 F.2d 884, 890 (3d Cir. 1992).
III. DISCUSSION The Lanham Act and Nebraska UDTPA Claims
Gallup claims that Kenexa is violating Section 43(a) of the Lanham Act in two ways. First, Gallup claims that Kenexa is falsely designating Gallup's Q12 employee engagement survey as a Kenexa product — a prohibited practice known as "reverse passing-off" or "reverse palming-off." Second, Gallup claims that Kenexa is making literally false statements about Kenexa's own survey products in violation of the Lanham Act's false advertising provisions. Each of these claims is discussed in turn below.
1. False Designation of Origin
Section 43(a) of the Lanham Act prohibits misrepresentations that are likely to cause confusion about a product's origin. 15 U.S.C. § 1125(a)(1)(A). This provision has been construed to prohibit misrepresenting the origin of a product by either (a) "passing off" one's own product by selling it under another's name or (b) "reverse passing-off" another's product as if it is your own. Attia v. Soc'y of the New York Hosp., 201 F.3d 50, 59 (2d Cir. 1999); Jerome Gilson, Trademark Protection and Practice § 7.02[5][b] (2002) ("Gilson"). In the instant case, Gallup claims that Kenexa committed reverse passing-off by using Gallup's Q12 survey questions in Kenexa's survey products.
Although not specifically addressed in this circuit, other circuits recognize an action for reverse passing-off. See, e.g., Lipton v. The Nature Company, 71 F.3d 464, 473 (2d Cir. 1995); Waldman Publ'g Corp. v. Landoll, Inc., 43 F.3d 775, 780-84 (2d Cir. 1994); Cleary v. News Corp., 30 F.3d 1255, 1261 (9th Cir. 1994). To establish a reverse passing-off claim, a plaintiff must prove: "(1) that the work at issue originated with the plaintiff; (2) that the origin of the work was falsely designated by the defendant; (3) that the false designation was likely to cause consumer confusion; and (4) that the plaintiff was harmed by the defendant's false designation of origin." Lipton v. The Nature Company, 71 F.3d 464, 473 (2d Cir. 1995).
Gallup argues that no genuine issues of material fact exist as to any of these elements and that it is entitled to judgment as a matter of law. Kenexa counters that it is entitled to summary judgment in its favor on the reverse passing-off claim. As this Court noted in an earlier memorandum opinion, dated October 9, 2002 and filed under seal, triable issues of fact exist as to the Q12's originality under copyright law. Because originality is also an element of a reverse passing-off claim, neither party can sustain its burden under Rule 56 and both motions for summary judgment must be denied as to the reverse passing-off claim.
In order to state a valid reverse passing-off claim, a plaintiff must prove that the product, which was allegedly "passed off" by the defendant, originated with the plaintiff. In Waldman, the Second Circuit looked to the copyright law concept of "originality" to define the trademark law concept of "origin." Waldman, 43 F.3d at 781-82. This Court and the parties agree that these two concepts are identical. Pl.'s Summ. J. Mem. at 11; Def.'s Summ. J. Mem. at 22.
As this Court explained in its earlier memorandum opinion, triable issues of fact exist as to the Q12's originality. In this Circuit, once a plaintiff offers evidence of originality, the burden shifts to the defendant to provide evidence showing that the plaintiff copied the work in question from earlier works. Masquerade Novelty, 912 F.2d at 668-69. Judgment as a matter of law is proper only if the defendant, Kenexa in this case, fails to do so. Id.; 3 Nimmer § 12.11[B][1] at 165-66 ("If, however, defendant offers proof of lack of originality by plaintiff through evidence that plaintiff copied from prior works . . . the burden shifts [back] to plaintiff to overcome the evidence.").
What follows is a brief discussion of the originality issue. For a more thorough discussion, see the October 9, 2002 sealed memorandum at pp. 4-13.
In its October 9, 2002 memorandum opinion, the Court found that Kenexa offered sufficient evidence of copying to raise a triable issue of fact as to the Q12's originality. Accordingly, as the requirements for originality and origin are identical, a triable issue of fact also exists regarding the Q12's origin. As a result, both parties' motions must be denied for the reverse passing-off claim.
2. False Advertising a. Procedural Posture
This is Kenexa's second summary judgment motion on Gallup's false advertising claims. In an earlier opinion by Senior Judge Lowell A. Reed, Jr., dated December 5, 2001, the Court denied Kenexa's first summary judgment motion on this issue as not fully ripe for decision. Gallup, Inc. d/b/a/ The Gallup Organization v. Talentpoint, Inc., No. CIV.A. 00-5523, 2001 WL 1450592, at *14 (E.D.Pa.) (Reed, S.J.). In that opinion, Judge Reed found that, although Gallup failed to provide a Rule 56(f) affidavit, Kenexa's motion should not be granted at that time. The Court found that Gallup needed additional discovery in order to fully develop its claims. Id. The Court based this decision on Gallup's averments that Kenexa had not allowed it to depose Kenexa customers to determine whether they were mislead by Kenexa's advertisements. Id.
b. Legal Framework
Section 43(a) of the Lanham Act prohibits false advertising in interstate commerce. 15 U.S.C. § 1125(a)(1)(B). Two types of advertising claims are barred by the Act: (1) literally false representations or (2) literally true or ambiguous representations that have the tendency to deceive consumers, also known as "misleading" statements. Novartis Consumer Health, Inc. v. Johnson Johnson-Merck Consumer Pharm. Co., 290 F.3d 578, 586 (3d Cir. 2002) (citing Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 943 (3d Cir. 1993)). If the plaintiff proves that the advertising claims in question are literally false, then a court may grant relief without considering consumer reaction, i.e. whether consumers were actually or potentially mislead by the claims. Warner-Lambert Co. v. BreathAsure, Inc., 204 F.3d 87, 92 (3d Cir. 2000) ("BreathAsure") (citing Johnson Johnson-Merck Consumer Pharm. Co. v. Rhone-Poulenc Rorer Pharm., Inc. 19 F.3d 125, 129 (3d Cir. 1994) ("Rorer")).
In contrast, if the plaintiff is unable to prove the literal falsity of a particular claim, then the plaintiff may still state a valid Lanham Act cause of action by proving that the claim is "misleading." To establish that a statement is misleading, the plaintiff must prove the following five elements by a preponderance of the evidence:
(1) that the defendant has made false or misleading statements as to his own product [or another's]; (2) that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience; (3) that the deception is material in that it is likely to influence purchasing decisions; (4) that the advertised goods traveled in interstate commerce; and (5) that there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc.
Kenexa argues that even if the advertising claims are found literally false, Gallup is only excused from proving consumer deception. Under Kenexa's view, Gallup would still be required to prove the remaining Rorer elements. While the Court notes that, prior to Novartis, the law was not entirely clear on this issue, any confusion was cleared up by the Novartis court. That court specifically stated that "[a]bsent a finding that an advertising claim is literally false, a plaintiff may still allege a successful Lanham Act cause of action by proving the [Rorer] elements by a preponderance of the evidence." Novartis, 290 F.3d at 590 (emphasis added). Accordingly, a Lanham Act plaintiff need not prove all the Rorer elements if the claim in question is found literally false.
Novartis, 290 F.3d at 590 (citing Rorer, 19 F.3d at 129 (alteration in original)).
In this case, Gallup challenges several of Kenexa's advertising claims solely on the ground that they are literally false. Gallup does not argue that the claims were misleading under the Act. Accordingly, Gallup is not required to offer any evidence that consumers were actually deceived by the allegedly false statements.
In order to be found literally false under the Lanham Act, Kenexa's advertising claims must meet several criteria. First, each claim must be a "commercial advertisement or promotion" in order to fall within the scope of the Act. 15 U.S.C. § 1125(a)(1)(B). Second, the claims must be statements of fact, not opinions or puffing. 15 U.S.C. § 1125(a)(1). Third, the claims must unambiguously state the allegedly false message such that potential consumers "necessarily and unavoidably" receive that message. Novartis Consumer Health, Inc. v. Johnson Johnson Consumer Pharm. Co., 290 F.3d 578, 588 (3d Cir. 2002). Fourth, the claims at issue must be either false or completely unsubstantiated. Id. at 589. Finally, Gallup must demonstrate a reasonable likelihood of injury from the allegedly false claims. Warner-Lambert Co. v. BreathAsure, Inc., 204 F.3d 87, 97 (3d Cir. 2000) ("BreathAsure"). Each of these criteria is discussed in turn below.
Section 43(a) of the Lanham Act prohibits false or misleading claims in "commercial advertising or promotion." 15 U.S.C. § 1125(a)(1)(B). Although the essential terms "advertising" and "promotion" are not defined, there is "no indication that Congress . . . intended to extend Lanham Act coverage to every isolated alleged misrepresentation made to a potential customer by a business competitor." Synygy, Inc. v. Scott-Levin, Inc., 51 F. Supp.2d 570, 576 (E.D.Pa. 1999) (quoting Garland Co. v. Ecology Roof Sys. Corp., 895 F. Supp. 274 (D.Kan. 1995)). To determine whether a claim is considered commercial advertising or promotion under the Act, several circuit courts and courts of this district have adopted the test set forth by the Fifth Circuit Court of Appeals in Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1384 (5th Cir. 1996). See, e.g., Proctor Gamble, Co. v. Haugen, 222 F.3d 1262, 1273 (10th Cir. 2000); Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 735-36 (9th Cir. 1999); Allen Neurosurgical Assoc., Inc. v. Lehigh Valley Health Net., No. CIV.A. 99-4653, 2001 WL 41143, at *8 (E.D.Pa. Jan. 18, 2001) (collecting cases); See also Gordon Breach Science Publishers S.A. v. Am. Inst. of Physics, 859 F. Supp. 1521, 1536 (S.D.N.Y. 1994).
Under the Seven-Up test, commercial advertising and promotion consists of: (1) commercial speech; (2) by a defendant who is a commercial competitor of the plaintiff; (3) for the purpose of influencing consumers to buy defendant's products or services; and (4) that is sufficiently disseminated to the potential purchasing public. Seven-Up, 86 F.3d at 1384. Regarding the fourth prong of the test, "`[t]he level of circulation required to constitute advertising and promotion may vary from industry to industry and from case to case.'" J M Turner, Inc. v. Applied Bolting Tech. Prods., Inc., No. CIV.A. 96-5819, 1997 WL 83766, at *16 (E.D.Pa. Feb. 24, 1997) (quoting Am. Needle Novelty, Inc. v. Drew Pearson Mktg., Inc., 820 F. Supp. 1072, 1077-78 (N.D.Ill. 1993). Isolated statements are generally not sufficient to meet this requirement. Synygy, 51 F. Supp.2d at 577.
Second, only statements of fact capable of being proven true or false are actionable under the Lanham Act. Presidio Enters., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d 674, 679 (5th Cir. 1986) (applying test to determine factuality under Texas Deceptive Trade Practices Act); Schmidt, Long, Assoc., Inc. v. Aetna U.S. Healthcare, Inc., No. CIV.A. 00-3683, 2001 WL 856946, at *11 (E.D.Pa. July 26, 2001) (citing Licata Co., Inc. v. Goldberg, 812 F. Supp. 403, 408 (S.D.N.Y. 1993). Under the Presidio test, a statement is factual if it (1) may be proven true of false (2) in a way that admits of empirical verification. Id. at 679.
Two types of statements are not considered statements of fact under the Lanham Act. First, opinions on unverifiable matters are not within the scope of the Act because the recipients of such messages are not likely to believe their truth. Schmidt, 2001 WL 856946 at *11. Second, "puffing" is also not covered under the Act. U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 925-26 (3d Cir. 1990) ("Blue Cross"). For Lanham Act purposes, puffing includes the kinds of "innocuous" comparisons that are common to advertising, as compared to claims regarding a specific aspect of the product's performance. Compare Blue Cross, 989 F.3d at 925-26 (finding puffery in defendant's claim of providing "better" health insurance than HMO) with Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 943 (3d Cir. 1993) (finding specific performance claims more than mere puffery).
Third, only advertising claims that unambiguously convey the allegedly false message are literally false under the Act. Novartis, 290 F.3d at 587 ("[O]nly an unambiguous message can be literally false.") (emphasis in original). Accordingly, "[t]he greater the degree to which a message relies upon the viewer to integrate its components and draw the apparent conclusion . . . the less likely it is that a finding of literally falsity [is] supported." Id. at 587.
For example, in Novartis, the defendant, Johnson and Johnson, was accused of making false claims regarding its "Mylanta Night Time Strength" ("MNTS") antacid product. Id. at 583-85. The plaintiff, Novartis, argued that MNTS's name, packaging, and advertising falsely lead consumers to believe (1) that MNTS was superior to other antacids at providing nighttime relief and (2) that MNTS was "specially formulated" for nighttime use. Id. Regarding the first argument, the court found that the "Night Time Strength" designation did not unambiguously convey the message that the product was superior at relieving nighttime heartburn. Id. at 588. The court found that consumers would receive such false messages of superiority only if they "assumed that a product providing `Night Time' relief is more effective than a product that provides `Extra Strength' or `Maximum' relief." Id. In contrast, regarding the second argument, the court found that the MNTS name unavoidably conveyed the false message that MNTS was specially formulated to work at night. Accordingly, the court found the MNTS name was literally false in this way. Id.
Fourth, a literally false advertising claim must either be proven false or be completely unsubstantiated. Id. at 589. Gallup does not offer evidence as to the falsity of any claim, but relies instead upon a new rule recently announced in Novartis. In Novartis, the Third Circuit altered the burden of proof in literal falsity cases. Under prior Third Circuit precedent, the plaintiff bore "the burden of showing that a challenged advertisement [was] false or misleading, not merely . . . unsubstantiated by acceptable tests or other proof." Sandoz Pharm. Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 228 (3d Cir. 1990). In Novartis, however, the court held that a defendant's completely unsubstantiated advertising claim is per se false without any further evidence of falsity from the plaintiff. Novartis, Novartis, 290 F.3d at 590 ("We hold that, although the plaintiff normally has the burden to demonstrate [falsity] . . . a court may find that a completely unsubstantiated advertising claim by the defendant is per se false without additional evidence from the plaintiff to that effect."). In short, if a defendant offers absolutely no support for its advertising claims, then a court may find those claims barred by the Lanham Act without any evidence from the plaintiff as to their falsity.
Finally, a Lanham Act plaintiff, Gallup in this case, must demonstrate a reasonable likelihood of harm from the allegedly false message in order to obtain an injunction. BreathAsure, 204 F.3d at 97. In BreathAsure, the court held that a plaintiff must not only show a subjective belief of injury, but also must demonstrate "some basis" for that belief. Id. at 95-96. A plaintiff seeking damages must show actual harm caused by the allegedly false statements. Id.
d. The Parties' Arguments
Gallup argues that Kenexa has made numerous literally false statements regarding Kenexa's survey products. Pl.'s Summ. J. Mem. at 8-9. A statement may be literally false in one of two ways: (1) explicitly literally false or (2) literally false by necessary implication. Novartis, 290 F.3d at 586-87. In this circuit, district courts must evaluate each allegedly false claim to "determine, first, the unambiguous claims made by the advertisement or product name, and second, whether those claims are false." Id. at 586 (citing Clorox Co. v. Proctor Gamble Comm. Co., 228 F.3d 24, 34 (1st Cir. 2000)). Accordingly, this Court will examine each of the challenged claims to determine: (1) whether the claim is a "commercial advertisement or promotion" with the meaning of the Lanham Act; (2) whether the claim is a statement of fact within the scope of the Act; (3) whether the claim unambiguously states the allegedly false message; (4) whether the message itself is false or completely unsubstantiated under Novartis; and (5) whether Gallup has demonstrated a reasonable likelihood of injury from the false message.
Explicit, Literally False Statements
First, Gallup points to 15 statements, gleaned mostly from Kenexa's advertising and promotional materials, that Gallup claims are explicit literally false statements "relating to Kenexa's experience in employee engagement, as well as the research and backup underlying Kenexa's employee engagement product." Pl.'s Summ. J. Mem. at 9. As noted above, Gallup does not offer evidence as to the falsity of any claim. Instead, Gallup relies on the rule announced in Novartis that completely unsubstantiated advertising claims are per se false.
Additionally, Gallup offers the expert reports of Drs. Timothy A. Judge ("Judge Rept.") and David V. Day ("Day Rept.") to support its claim that Kenexa's claims are literally false. In their reports, Drs. Judge and Day essentially reiterate each of the allegedly false statements and state that they can find no evidence to support them. Gallup also claims that these expert reports demonstrate that Kenexa has "cavalierly" used terms with defined meanings within the survey industry. Pl.'s Sur-Reply at 2. For its part, Kenexa responds by providing information regarding the context of each statement and citations to depositions and other evidence that it says support the claims.
The statements challenged as being explicitly literally false are as follows:
Statement #1
We [Kenexa] have had extensive experience comparing alternative survey items with the Gallup Q12. We [Kenexa] feel that we can create a survey process that will be more inclusive, totally efficient and better meet your needs.
Gallup argues that this statement is unsubstantiated, and therefore false under Novartis, because there is no evidence that Kenexa has conducted any studies comparing its survey items to Gallup's Q12. Day Rept. at Ex. H; Judge Rept. at 6. Gallup's expert states that there is no evidence that a "more inclusive" survey is somehow better than Gallup's survey product. Judge Rept. at 6-7.
For its part, Kenexa does not dispute that it has failed to conduct any statistical comparison between its items and the Q12 items. Def.'s Summ. J. Mem. at App. p. 1. Instead, Kenexa argues that Statement #1 falls outside the scope of the Lanham Act because it is not a "commercial advertisement or promotion" within the scope of the Act. Id.
Applying the Lanham Act criteria discussed above, it is clear that Kenexa is entitled to summary judgment as to Statement #1 because it is not a commercial advertisement or promotion under the Act. Specifically, Statement #1 fails the fourth prong of the Seven-Up test because it was not widely disseminated to potential Kenexa customers. Seven-Up, 86 F.3d at 1384. Statement #1 was made only one once in an electronic mail ("e-mail") message sent by a Kenexa sales representative to a potential customer, Raddison Hotels. Def.'s Summ. J. Mem. at App. p. 1.
Under similar circumstances, other courts of this district have found such statements outside the scope of the Act. Synygy, 51 F. Supp.2d at 577. In Synygy, the defendant's sales representative sent a one-time e-mail to a customer containing a disparaging remark about the plaintiff's products. Id. at 573-75. The court found that such isolated comments do not fall under the purview of the Lanham Act. Id. at 577. Similarly, the e-mail in this case was a one-time message sent from a Kenexa sales representative to a potential customer. This Court agrees with the Synygy court that such isolated, individualized comments are not within the scope of the Act. Accordingly, Statement #1 cannot be found literally false under the Act. As a result, summary judgment is granted for Kenexa as to Statement #1.
Statement #2
Project Team Biography indicates that Ame Creglow [a Kenexa employee] "completed a Meta-analytic study which includes over 2500 business units with more than 105,000 employee that related their perception of management to business outcomes."
Gallup argues that this statement is false because it "implies that, because Ms. Creglow is a Kenexa employee . . . this research was conducted under the auspices of Kenexa." Judge Rept. at 6. Kenexa, however, has never completed a meta-analysis. Id. Instead, Ms. Creglow, who is a former Gallup employee, assisted Dr. James Harter when he conducted a meta-analysis for Gallup. Def.'s Summ. J. Mem. at App. p. 2. Gallup argues that, by describing Ms. Creglow's experience in this manner, Kenexa has violated "the widely accepted scientific cannon that one must acknowledge the sources of information one uses." Judge Rept. at 6.
Kenexa responds that Statement #2 is truthful. Def.'s Summ. J. Mem. at 2. Kenexa admits that it has never conducted a meta-analytic study for a client. Id. Kenexa argues, however, that Statement #2 does not unambiguously convey the message that Kenexa itself conduct such a meta-analysis. Id. Instead, Kenexa argues that the only unambiguous message that can be gleaned from Statement #1 is that Ms. Creglow has conducted such an analysis at some point. Id. Because this message is true, Kenexa claims that it is entitled to summary judgment as to statement #2.
Applying the Lanham Act jurisprudence to Statement #2, it is clear that Kenexa is entitled to summary judgment as to this claim. First, the Court finds that Statement #2 is commercial advertising under the Seven-Up test because it is a commercial statement made by a Gallup competitor designed to entice customers to use Kenexa's products. Seven-Up, 86 F.3d at 1384. Additionally, unlike Statement #1, this statement was disseminated in sales proposals to eight potential Kenexa customers. Pl.'s Summ. J. Mem. at Ex. 1. p. 9. n. 4. Second, Statement #2 is a statement of fact under the Presidio test because one can empirically prove whether or not Ms. Creglow has conducted a meta-analysis. Presidio, 784 F.2d at 679.
Statement #2 does not, however, unavoidably lead consumers to the allegedly false message that Gallup ascribes to it. On its face, the statement never indicates that Ms. Creglow completed this meta-analysis at Kenexa. To the contrary, it only states that she has conducted this work at some point in the past. Gallup's arguments regarding this statement are akin to Novartis's argument that the MNTS name lead to an inference of superiority as an antacid. The Novartis court rejected this claim because the name "Night Time Strength" did not unavoidably convey a message of superiority. Novartis, 290 F.3d at 588. Any consumers inferring such a message from the MNTS name had to somehow assume the superiority message on their own. Id. Similarly, any consumer inferring that Ms. Creglow conducted a meta-analysis at Kenexa is assuming that on their own and not coming to that conclusion based on the statement itself. While it may be true that Kenexa's statement violates an important scientific canon, that does not make the statement literally false under the Lanham Act. Accordingly, Kenexa's motion for summary judgment is granted as to this statement.
Statement #3
Proven Model: The foundation of our survey service is the Employee Engagement Survey. Our model has consistently led to organizational improvement and profitability, employee retention, consumer satisfaction, and employment productivity.
This statement comes from Kenexa's website, www.kenexa.com. Gallup argues that this statement is unsubstantiated and literally false because "there is no evidence that Kenexa's employee engagement survey led to the outcomes identified in the statement." Judge Rept. at 7. Gallup's expert also opines that this statement "suggests that there is validation data demonstrating empirical relationships with the stated outcomes." Day Rept. at Ex. H. Gallup's experts conclude that, because they can find no evidence of any validation data, Kenexa's claims are unsubstantiated and false. Id.; Judge Rept. at 7.
Kenexa responds that the statement does not convey the message that any survey items have been linked to any particular business outcomes. Def.'s Summ. J. Mem. at App. p. 3. Instead, Kenexa argues that Statement #3 merely conveys the message that its customers have experienced year-over-year improvement by using Kenexa's services. Id. As proof that this claim is substantiated, Kenexa offers examples of positive customer experiences from its promotional materials. Id. at Ex. A.
Applying the Lanham Act principles discussed above to this statement, it is clear that summary judgment must be granted for Kenexa. First, Statement #3 qualifies as a commercial advertisement under Seven-Up because it is (1) a commercial statement (2) made by Kenexa, a Gallup competitor, (3) for the purpose of influencing potential customers and (4) was widely disseminated as part of Kenexa's website. Seven-Up, 86 F.3d at 1384. Second, Statement #3 is a statement of fact under the Presidio test because the statement that Kenexa's survey model has benefitted its customers is one that can be proved true or false by empirical means. Presidio, 784 F.2d at 679.
This statement does not, however, unambiguously convey the message that Gallup assigns to it. In order for an advertising claim to be literally false, the claim must unambiguously convey the allegedly false message. Novartis, 290 F.3d at 588. For example, in Novartis, the court was faced with two challenges to the MNTS name. The court found that the name "Mylanta Night Time Strength" conveyed the unambiguous message that the product was formulated to work better on nighttime heartburn. Id. at 590. In contrast, the court rejected the argument that the MNTS name implied a message of superiority over other brands because consumers had to assume on their own that "Night Time Strength" was somehow superior to "Maximum Strength." Id. at 588-89.
Similarly, the broad statement that Kenexa's products have "consistently lead" to certain business outcomes does not unavoidably lead the consumer to think that Kenexa has performed statistical analysis linking specific survey items to any of these specific outcomes. At most, the claim conveys the unambiguous message that Kenexa's customers benefit from its products. Kenexa has supported this assertion with its own promotional materials and deposition testimony. Def.'s Summ. J. Mem. at Exs. A K. Thus, Statement #3 cannot be proved literally false by Gallup. Moreover, Gallup has not attempted to argue that it is misleading under the Act. Accordingly, summary judgment is granted for Kenexa as to Statement #3.
Statement #4
Historically, companies have measured employee (associate) "satisfaction." However, when researchers have tried to establish a relationship between an employee's satisfaction level and other business measures (absenteeism, productivity, etc.) the link was weak at best. At RKA [Kenexa] we have pioneered the concept of "engagement" as opposed to "satisfaction" when measuring organization effectiveness. . . . Our research has revealed that when properly measured, employee engagement can be an excellent predictor of key business outcomes.
Gallup argues that Statement #4 is false in two ways. First, Gallup argues that there is no evidence to support the claim that Kenexa "pioneered" the employee engagement concept. Judge Rept. at 9. Second, Gallup argues that Kenexa has offered no proof showing that employee engagement levels predict business outcomes. Id.
For its part, Kenexa responds to these arguments in two ways. First, Kenexa argues that the word "pioneered" is used ambiguously such that the first part of Statement #4 is not a factual statement within the scope of the Act. Def.'s Summ. J. Mem. at App. p. 4. Second, Kenexa argues that the term "research" does not unambiguously lead consumers to conclude that Kenexa has conducted any statistical analyses on its survey items. Id. Instead, Kenexa points out that the term "research" can also refer to the results of Kenexa's own experience in designing employee surveys. Id. Because Kenexa and its employees have substantial experience in linking survey items to business results, Kenexa argues that Statement #4 is substantiated and true under the Lanham Act. Id.
Kenexa's summary judgment motion must be granted as to Statement #4. First, Kenexa's statement that it "pioneered" employee engagement is not a statement of fact within the scope of the Act. Under the Presidio test, only statements that can be proven true or false by empirical means are deemed statements of fact under the Act. Presidio, 784 F.2d at 679. In Presidio, the plaintiffs argued that the defendant's description of its movie as a "blockbuster" was false advertising. Id. The Fifth Circuit, applying the Texas UDTPA, found the term "blockbuster" too vague to allow defendant's claim to be judged true or false. Similarly, Kenexa's claim that it "pioneered" employee engagement research is inherently vague and cannot be judged true or false by any empirical measure.
Morever, even if Kenexa's pioneering claim is a factual statement implying that they were an early leader in the field, then the statement has been adequately substantiated under Novartis. As Gallup's own expert concedes, the pioneering claim "could in theory be supported by a reference list Kenexa provided on several occasions." Judge Rept. at 8. Although Dr. Judge assails this reference list as too "diverse" to support Kenexa's claim, this Court finds it more than adequate under Novartis. The Novartis court was clear that only completely unsubstantiated claims are per se false. 290 F.3d at 589. In Novartis, Johnson and Johnson offered absolutely no proof showing that MNTS was specially formulated to work at night. In contrast, Kenexa has not only offered some evidence of substantiation, but Gallup's own expert acknowledges that this evidence supports Kenexa's claim. Accordingly, Gallup cannot prove that this claim was unsubstantiated under Novartis.
Second, Kenexa is also entitled to summary judgment regarding its statement that its "research has revealed" how employee engagement predicts business outcomes. Initially, the Court finds that Statement #4 is a commercial advertisement under the Seven-Up test. Seven-Up, 86 F.3d at 1384. Moreover, this part of statement #4 is a factual statement under Presidio because the claim that Kenexa's research shows the predictive power of employee engagement can be proven true or false. Presidio, 784 F.2d at 679.
Statement #4 does not, however, unambiguously convey the false massage pinned to it by Gallup. Gallup's expert argues that this statement is false because he can find no published article or internal statistical analysis linking engagement to outcomes. Judge Rept. at 9. This argument fails because it assumes that potential customers read the phrase "our research has revealed" to unambiguously mean that Kenexa has conducted statistical analyses to determine the strength of the claimed linkages.
A comparison between Kenexa's statement and the statements at issue in Novartis demonstrates why Gallup's argument fails. As noted above, the Novartis court found that MNTS's name unavoidably led to the false conclusion that MNTS was specifically designed for nighttime heartburn. Novartis, 290 F.3d at 589. In contrast, the Novartis court found that the MNTS name did not unavoidably imply a message of superior nighttime relief because consumers would only receive this message if they assumed on their own that a "Night Time Strength" product was superior to another product. Id. at 588. Similarly, Kenexa customers will receive the false message that Kenexa conducted these types of statistical analysis only if they assume this on their own. Kenexa's broad statement that its "research has revealed" these linkages does not unavoidably lead to Gallup's allegedly false message. As Kenexa correctly points out, the term "research" is not limited to certain kinds of statistical studies, but can also include Kenexa's own internal experience in designing effective employee surveys. Def.'s Summ. J. Mem. at App. p. 4. As a result, this statement cannot be found literally false under the Lanham Act, and therefore, Kenexa's summary judgment motion is granted as to this statement.
Statement #5
Through over a million surveys and years of experience linking employee survey results to business outcomes, Kenexa has developed an Employee Engagement Index. The index is a three-question composite that is the best overall measure of employee engagement.
Gallup attacks this statement as follows: "[t]o support a claim that the three question composite . . . is the best measure of employee engagement, one would expect to see construct validity evidence." Judge Rept. at 10 (emphasis added). See also Day Rept. at Ex. H. ("This would entail data analysis results that document the reliability and validity of the Kenexa employee management index."). Gallup argues that this claim unambiguously states that Kenexa has conducted research to prove that its product is somehow the "best."
Kenexa responds that the first sentence of Statement #5 truthfully details its experience as a company. Def.'s Summ. J. Mem. at App. p. 5. Additionally, Kenexa argues that the claim that its survey model is the "best overall measure of employee engagement" is merely puffing that is outside the scope of the Act.
Applying the Lanham Act criteria discussed above to Statement #5, Kenexa's summary judgment motion must be granted as to this statement. First, the Court finds that Statement #5 is a commercial advertisement under the Seven-Up test because (1) it is a commercial statement (2) made by a Gallup competitor (3) for the purpose of inducing customers to buy Kenexa products and (4) it was disseminated to potential customers of both parties. Seven-Up, 86 F.3d at 1384. Statement #5, however, is not a statement of fact within the scope of the Act. As noted above, two types of statements — opinion and puffing — are not covered by the Lanham Act. 15 U.S.C. § 1125(a)(1)(B); U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 925-26 (3d Cir. 1990).
A comparison between two recent Third Circuit cases demonstrates how puffing differs from actionable false advertising claims. In Blue Cross, the defendant's advertisements featured the slogan "Better than HMO." Id. The Court found that these types of "innocuous" comparisons are common to advertising and do not give rise to a cause of action under the Lanham Act. Id. In contrast, in Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 943 (3d Cir. 1993), the defendant's advertisements specifically claimed that engine failure was cause by motor oil viscosity breakdown and that its product was the best at stopping viscosity breakdown. The Court found that these types of specific performance claims are more than puffing and are actionable under the Act. Id.
In the instant case, Kenexa's bald claim that its survey product is the "best overall measure" is more akin to the type of puffing found in Blue Cross. Statement #5 merely touts Kenexa's product. It is not a specific performance claim designed to mislead consumers, but rather an innocuous comparison to other unnamed competitors. Because Statement #5 is outside the scope of the Act, Gallup cannot prove that it is literally false. Accordingly, Kenexa is granted summary judgment as to Statement #5.
Statement #6
Through previous research, [Kenexa] has identified questions that predict business outcomes.
Gallup attacks this statement as "imply[ing] that Kenexa . . . has conducted empirical research resulting in significant correlations between survey items (i.e., questions) and business outcomes." Day Rept. at Ex. H. Gallup argues that this statement is unsubstantiated because no such empirical research exists. Id. One of Gallup's experts, however, acknowledges that Kenexa has offered three case studies as evidence of its prior research, as well as "alluded" to other studies. Judge Rept. at 11. The expert attacks these studies as "information [that] certainly could not be reasonably viewed as scientific evidence." Id.
Gallup's arguments fail because the claim in question is not completely unsubstantiated under Novartis. Kenexa claims only that "prior research" validates its claim. Kenexa has provided some evidence to support its claim, and the existence of this evidence is acknowledged by Gallup's own expert. As noted above, in Novartis, Johnson Johnson provided no evidence whatsoever to substantiate its claim that MNTS was formulated to relieve nighttime heartburn. In contrast, Kenexa, and indeed Gallup's own expert, points to studies that support Kenexa's claims. As a result, the claim at issue here is not the kind of unsubstantiated claim considered in Novartis.
Moreover, like the superiority claims at issue in Novartis, Kenexa's claim that "prior research" supports its claim does not necessarily lead consumers to believe that Kenexa has undertaken the type of statistical analysis that Gallup argues must be present. As Kenexa notes, research can also refer to its own prior experience conducting survey research for its clients. Def.'s Summ. J. Mem. at App. p. 10. Accordingly, this claim cannot be found literally false under the Lanham Act. Because Gallup offers no evidence of consumer reaction to this claim, it also cannot be considered "misleading" under the Act. As a result, summary judgment is granted for Kenexa as to this statement.
Statement #7
[Kenexa] has extensive experience in linkage research. . . . By applying previous research, [Kenexa] has identified questions that predict business outcomes.
Initially, Gallup attacks Kenexa's statement that it has "extensive experience in linkage research." Judge Rept. at 13. Gallup's expert points to deposition testimony by three of Kenexa's key employees and criticizes that testimony as presenting "serious concerns about the scientific foundation of what [is] being practiced in this organization." Id. Dr. Judge's opinion about Kenexa's expertise level is not relevant to determining whether Kenexa's statements are completely unsubstantiated, and therefore, false.
At most, Kenexa' statement describing its experience as "extensive" is a statement of opinion, not a statement of fact actionable under the Lanham Act. Presidio, 784 F.2d at 679. Under the Presidio test, a statement of fact is one that can be proven true or false by empirical means. Id. Here, Kenexa's description of its experience as "extensive" is too ambiguous to be proven true or false, much like the Presidio defendant's claim that it film was a "blockbuster." Accordingly, this claim cannot be found literally false under the Act.
Regarding the second sentence of this statement, Gallup makes almost identical arguments concerning this statement as those made against statement #6, above. Gallup argues that these statements "imply that Kenexa has conducted empirical research resulting in significant correlations between survey items (i.e., questions) and business outcomes." Day Rept. at Ex. H. As with statement #6, Kenexa's claims in statement #7 do not unavoidably lead to the conclusion that Kenexa has conducted any particular kind of statistical analysis on its survey items. Consumers reading this broad statement can come to many different conclusions about exactly what the phrase "applying previous research" means. Accordingly, this is not the kind of unambiguous statement that can be found literally false under the Lanham Act. Summary judgment is granted for Kenexa as to this statement.
Statement #8
Research has shown that fully engaged employees tend to be more productive, conscientious, and have higher levels of organizational commitment. In addition, research has shown that an engaged work force tends to stay employed longer, miss work less, have higher levels of customer satisfaction and service quality, attain and surpass organizational goals more regularly, require training less frequently, and have comparatively lower workers' compensation and accident claims. Kenexa has developed an item index that measures employee engagement.
Gallup attacks these statements because they "imply that Kenexa has developed an item index of employee engagement that has been shown through their previous research to predict the various business outcomes that are listed." Day Rept. at Ex. H. Essentially, Gallup is arguing that, taken together, these statements mislead consumers into thinking that Kenexa has done the research in described in the statement.
Kenexa counters that this statement does not claim that Kenexa conducted this research described, only that such research exists. Def.'s Summ. J. Mem. at App. p. 8. In support of its statements, Kenexa points to a list of books and journal articles that it says supports the view that a fully engaged workforce is more productive. Id. at Ex. G. In its filings and expert reports, Gallup does not appear to challenge the validity of this list. Accordingly, Kenexa has substantiated this claim by pointing to evidence that supports its statements. As a result, this claim is not completely unsubstantiated under the test articulated in Novartis. Kenexa's summary judgment motion is granted as to this statement.
Statement #9
These items have been designed, developed, and adjusted over time to specifically elicit a strong and meaningful response from employees. The items are designed to increase the distribution of scores — better differentiating between groups — rather than to ensure high scores. This enhanced distribution of scores produces a much more reliable and valid index of employee attitudes.
Gallup argues that Statement #9 is unsubstantiated, and therefore false under Novartis, because the statement "suggests there is a scientific rationale [for Kenexa's survey model] when . . . there is none." Judge Rept. at 15. Gallup's experts aver that it is unclear how increasing the distribution of scores would improve survey validity. Id.; Day Rept at Ex. H (arguing that random variability would not increase validity). Essentially, Gallup argues that Statement #9 gives the false impression that Kenexa has developed a more reliable survey method than Gallup's.
In response, Kenexa argues that Statement #9 is merely a description of the method used to design its employee surveys. Def.'s Summ. J. Mem. at App. p. 9. First, Kenexa states that the first two sentences of Statement #9 describe its survey model. Id. Kenexa's survey items are expressed in extreme form such that a survey taker must choose from strongly worded answer choices such as "all" or "best" rather than weaker ones such as "some" or "good." Id. Kenexa points to language that immediately followed Statement #9 in its customer proposals as providing proof that this was the intended message. Second, Kenexa argues that the last sentence of Statement #9 merely states a true principle, namely that surveys are more accurate when they are designed to measure an employee's actual feelings not just to produce inflated scores. Id. at Ex. I p. 110-17.
The customer proposal language immediately following Statement #9 is as follows:
We accomplish this in two different ways.
1. Through the use of extreme adjectives such as extremely, gladly, and rarely. Respondents are less likely to strongly agree with extreme items. When respondents do rate these items as strongly agree, they tend to truly mean it.
2. From the respondent's perspective or frame of reference. Consider this referral item — I would gladly refer a good friend or family member to this organization for employment. An item designed like this allows the respondent to think of a good friend or loved one. We have learned from survey and focus group analysis that respondents tend to answer this type of item with a perspective similar to — `Do I really want my son/daughter to work here.'
Def.'s Summ. J. Mem. at 9.
Summary judgment is granted for Kenexa as to Statement #9. First, the Court finds that Statement #9 is a commercial advertisement for Lanham Act purposes under the Seven-Up test. Seven-Up, 86 F.3d at 1384. Second, the statement is also a statement of fact under Presidio. 784 F.2d at 679. Third, Statement #9 does not unambiguously convey the message that Kenexa has conducted any type of scientific analysis on its survey model.
To be literally false under the Act, an advertising claim must lead consumers directly to the allegedly false message without the consumer making any independent assumptions about that message. Novartis, 290 F.3d at 588. Advertising claims that "suggest" false messages cannot be found literally false. Id. Statement #9 makes no claim that Kenexa conducted any scientific studies validating its survey model. Any consumer receiving such messages would have to make independent assumptions about the phrase "more reliable model." Accordingly, Kenexa's summary judgment motion is granted as to Statement #9.
Statement #10
Step 5: Review Item Bank. After all data sources have been reviewed and previous research has been taken into account, [Kenexa] will draw upon its item bank to design the survey. The item bank provides a past history of how well the items have performed and how they have correlated to business outcomes in other organizations.
This statement comes from proposals sent to prospective Kenexa customers, under a section outlining the seven steps Kenexa uses to develop its surveys for its customers. Gallup says that this statement "suggests that the item bank contains information on the correlation between each item in the bank and business outcomes." Judge Rept. at 15. Gallup's expert examined the item bank and found no such information. Id. Gallup argues that, as a result, the statement is unsubstantiated and false. Id.
Kenexa's "Item Bank" is a listing of all the potential survey items used by Kenexa. The Item Bank also contains the client name and year that a particular item was used, along with the number of employees used in the sample.
For its part, Kenexa states that it keeps such correlation data, but it is stored separately from the item bank. Def.'s Summ. J. Mem. at App. p. 10. Kenexa points to deposition testimony by three of its employees as proof that it conducts such correlation studies. For example, Mr. William Erickson, a founder of Kenexa, testified that Kenexa has conducted linkage studies for several clients, including Marriott, Bell South, and Tandy-Radio Shack. Def.'s Summ. J. Mem. at Ex. I p. 128-49. Erickson also stated that Kenexa does not "tout" linkage studies as highly as Gallup because Erickson feels that such studies are not always a useful tool for clients. Id. at 136-39.
Applying the Lanham Act tests, it is clear that summary judgment must be granted for Kenexa regarding this statement. First, this statement qualifies as a commercial advertisement under Seven-Up because it is (1) a commercial statement (2) made by a Gallup competitor (3) with the purpose of influencing potential customers and (4) was disseminated to approximately 30 such customers. Seven-Up, 86 F.3d at 1384. Second, the Court finds that this is a statement of fact, and as such, falls within the scope of the Lanham Act. Under the Presidio test described above, the statement that Kenexa has data showing how well its survey items have fared over time is one of fact because it may be proved true or false by looking at the data itself. Presidio, 784 F.2d at 679. Third, the statement unambiguously conveys the message that Kenexa has data linking its survey items to business outcomes. Novartis, 290 F3.d at 588.
Statement #10 fails to meet the fourth criteria, however, because Kenexa has adequately substantiated this statement under Novartis. As noted above, only completely unsubstantiated advertising claims are per se false. Id. at 589. In Novartis, Johnson and Johnson made absolutely no attempt to substantiate its claim that MNTS was specially formulated for nighttime relief. Id. In contrast, Kenexa points to deposition testimony describing linkage studies that it has conducted for past clients, including Marriott and Tandy-Radio Shack. Def.'s Summ. J. Mem. at Ex. I p. 128-49. It is not necessary that Kenexa conduct linkage studies for each and every one of its clients. Instead, evidence of some correlation data is enough to substantiate this claim under Novartis. Accordingly, Statement #10 is not unsubstantiated and false. Kenexa's summary judgment motion is granted as to this statement.
Statement #11
We have true national norms that accurately represent the level of engagement of employed Americans. These norms are gathered annually through a study of randomly selected working Americans.
Gallup argues that this statement is unsubstantiated and false because there is no evidence that Kenexa has such a national normative database. Judge Rept. at 16. Moreover, Gallup's expert argues that, even if such a database exists, there is no proof that it has been tested to ensure its accuracy. Id.
In response, Kenexa points to deposition testimony showing that it commissioned such studies by the Fairfield Organization. Def.'s Summ. J. Mem. at Ex. J. p. 228-29. In his testimony, William Erickson stated that such studies were completed in 1996, 1997, and 1999. Id.
Applying the Lanham Act to Statement #11, Kenexa is entitled to summary judgment as to this claim. First, this statement qualifies as commercial advertising under the Seven-Up test. Second, Statement #11 can be proven true or false by empirical means. Seven-Up, 86 F.3d at 1384. Therefore, it is a factual statement within the scope of the Lanham Act. Presidio, 784 F.2d at 679. Third, Statement #11 unambiguously conveys the message that Kenexa has data representing engagement levels of American Employees. Statement #11 clearly states this message and potential customers unavoidably receive such a message from it.
Fourth, despite Gallup's claims to the contrary, Statement #11 has been adequately substantiated under Novartis. In Novartis, the Third Circuit was clear that only completely unsubstantiated claims are per se false without any additional falsity evidence from the plaintiff. Novartis, 290 F.3d at 589. In that case, Johnson and Johnson made absolutely no attempt to demonstrate that MNTS was specially formulated to work at night. Id. In contrast, Kenexa offers testimony from its founder that Kenexa commissioned three such studies in the late 1990's. Although Gallup complains that Kenexa has not produced the studies themselves, it appears that Gallup did not make these arguments before the Magistrate Judge during discovery. Accordingly, Statement #11 is adequately substantiated under Novartis. Therefore, summary judgment must be granted for Kenexa as to this statement.
Statement #12
We maintain a large item bank of validated and experimental items that we continually research and make additions. [sic] From this item bank has emerged a `core' set of items that we know are particularly critical in measuring and understanding employee engagement and the impact of various employee attitudes on business outcomes.
Gallup argues that this statement is unsubstantiated, and therefore false, because there is no evidence that Kenexa maintains correlation coefficients linking their survey items to specific business results. Judge Rept. at 16; Day Rept. at Ex. H (opining that these statements "convey the impression" that Kenexa keeps such statistics). Gallup's expert argues that by using the term "validated," which has a specific scientific meaning, Kenexa is implying that it conducted correlation studies on its survey items. Id.
Kenexa responds that the statement is truthful and substantiated. First, Kenexa notes that it has produced a copy of its item bank. Def.'s Summ. J. Mem. at App. p. 12. Second, Kenexa states that it continually updates this item bank as new survey items are developed. Id. Third, Kenexa points out that it uses the term "validated" to distinguish older survey items from those that are experimental. Id. It notes that the term "validated" does not connote only one meaning. Finally, Kenexa points out that this statement, like many of the others at issue, only represents that Kenexa developed its core items on the basis of research. It does not represent that any specific kind of research was done.
Applying the Lanham Act jurisprudence to this statement, it is clear that summary judgment must be granted for Kenexa as to Statement #12. First, the statement is one of fact and, as such, is within the scope of the Lanham Act. Presidio, 784 F.2d at 679. Second, this statement is considered commercial advertising under the Seven-Up test because it is a business statement by a Gallup competitor that was widely disseminated to lure potential clients to use Kenexa services. Seven-Up, 86 F.3d at 1384.
This statement does not, however, convey the unambiguous message that Kenexa has conducted any particular type of statistical analysis on its core items. As noted above, in order for a statement to considered literally false, it must unavoidably lead consumers to a false message about the product. Novarits, 290 F.3d 568-89. Kenexa's broad statement — that its core survey items are "particularly critical" in measuring and understanding the impact of employee attitudes on business — does not unavoidably lead to the conclusion that Kenexa has conducted any particular type of analysis on its survey items. Any consumer finding such a message in this statement must make additional assumptions about the statement, just as a consumer would have to make extra assumptions to read a message of superiority into the name "Mylanta Night Time Strength." Novartis, 290 F3.d at 588.
The only unambiguous message that can be gleaned from Statement #12 is that Kenexa has, over time, learned which of its core survey items work best. Kenexa has substantiated this claim with deposition testimony by William Erickson showing that it conducts linkage studies and has extensive experience in designing studies for its clients. Def.'s Summ. J. Mem. at Ex. I at p. 111-17. Accordingly, this statement is not completely unsubstantiated under Novartis. 290 F3.d at 588-89. As Gallup has not offered any evidence of falsity or consumer confusion, the statement cannot be considered "misleading" under the Act. Accordingly, summary judgment is granted for Kenexa as to Statement #12.
Statement #13
A rapidly growing body of research is establishing linkages between employee engagement, or attitudes, and business outcomes. Employees' attitudes are measurable and our research and experience show that performance improves with employee engagement measurement. When these measurements are used to create well defined, actionable and measurable goals to work toward, employee effort and effectiveness almost always increase.
Gallup argues that Statement #13 is unsubstantiated and false. Gallup attacks Kenexa's claim that its "research and experience" has shown that employee engagement improves performance. In an argument similar to that used in contesting earlier statements, Gallup's experts argue that Kenexa has not provided statistical support for this claim. Judge Rept. at 17; Day Rept. at Ex. H.
Kenexa responds by arguing that Statement #13 truthfully describes the results of Kenexa's experience in the survey business. Def.'s Summ. J. Mem. at App. p. 13. Kenexa argues that the phrase "research and experience" is not limited to the kinds of statistical studies that Gallup claims do not exist. Id. In Kenexa's view, this phrase also includes its own experience in designing surveys, which it argues supports its claim that performance improves with engagement. Id. Kenexa points to deposition testimony from its employees indicating that, in their experience, employee engagement does increase performance. Def.'s Summ. J. Mem. at Exs. I J.
Kenexa is entitled to summary judgment as to statement #13. First, the Court finds that Statement #13 is a commercial advertisement under Seven-Up and a statement of fact under Presidio. Statement #13 does not, however, unambiguously convey the false message that Kenexa has statistical evidence to link its survey items to certain business outcomes. The only unambiguous message delivered by Statement #13 is that Kenexa has, over time and experience, learned which of its items are more effective than others. Kenexa has offered deposition testimony that it has conducted linkage research for several clients indicating which items work best. Def.'s Summ. J. Mem. at Ex. I p. 127-49 264-67. Accordingly, Kenexa has provided adequate substantiation for the only unambiguous message that can gleaned from this claim. Therefore, Kenexa is granted summary judgment as to statement #13.
Statement #14
Survey Design: Items Criteria . . . Predict business outcomes. [Slides showing results of study that ostensibly linked selected items to business outcomes. No Kenexa Core Items are listed. The following items, which are virtually identical to Gallup's Q12 are listed: [1] At work, my suggestions and ideas seem to count. [2] My superior encourages my development. [3] At my company, I have the opportunity to learn and grow.
These statements are taken from a slide show given by Kenexa representatives on May 19, 2000. Pl.'s Summ. J. Mem. at Ex. 1 p. 10 n. 18; Def.'s Summ. J. Mem. at Ex. G. The exact nature of Gallup's argument about these slides is not clear. One of Gallup's experts describes the slide presentation as "curious" because it contains items that Gallup contends are similar to the Q12. Judge Rept. at 18. The expert also criticizes the slide show for not describing the methodology Kenexa used to predict business outcomes. Id. From this statement, the expert concludes that Kenexa's slide presentation "would not be accepted as scientific evidence in the research community." Id.
This, however, is not the test to determine if a statement is unsubstantiated and literally false under the Lanham Act. As noted above, under the Lanham Act jurisprudence, the advertising claim at issue must be (1) a commercial advertisement; (2) that is a "false or misleading description of fact";(2) that unambiguously leads to a false message; and (3) is false or "completely unsubstantiated." Novartis, 290 F.3d at 589. It is unclear from Gallup's filings and expert reports exactly what factual statement is being challenged. Moreover, without having an unambiguous factual statement to examine, the Court cannot determine whether the statement has any support. Accordingly, summary judgment must be granted for Kenexa regarding this statement.
Statement #15
In a Fortune 50 service firm, the employee engagement model accounted for over 70 percent of the variance in employee absenteeism.
This statement comes from proposals Kenexa sent to approximately 29 of its prospective customers. Pl.'s Summ. J. Mem. at Ex. 1 p. 10 n. 19. Gallup argues that this statement is unsubstantiated, and therefore per se false, because Kenexa produced no evidence supporting its claim that its survey accounted for the 70% variance in absenteeism at the client, Sara Lee Corporation. Judge Rept. at 18-19; Day Rept. at Ex. H.
Kenexa responds by arguing that Statement #15 truthfully reports the results achieved at Sara Lee. Kenexa, however, points to no evidence to support this claim. Instead, Kenexa offers the sworn affidavit of its Executive Vice President, Tory Kanter, who swears only that the client named in the statement is Sara Lee. See Kanter Aff.
Although Statement #15 is literally false under the Lanham Act, Gallup is not entitled to an injunction because it has not shown a reasonable likelihood of injury resulting from the false claim. First, the Court finds that Statement #15 is both a commercial advertisement under Seven-Up and a statement of fact under Presidio. Second, Statement #15 unavoidably leads consumers to the conclusion that Kenexa's services led to the 70% variance claimed. The Novartis court found that only advertising claims that "necessarily and unavoidably" lead consumers to false message can be found literally false. Novartis, 290 F.3d at 588. Unlike the other claims Gallup challenges, many of which require consumers to make their own assumptions before reaching a false message, Statement #15 unambiguously states a specific claim. Accordingly, if Kenexa's claim that its survey model led to a 70% reduction in absenteeism at Sara Lee is either false or unsubstantiated, then the statement is literally false under the Act.
Third, Kenexa has not provided any evidence to substantiate the claims made in Statement #15. Kenexa's only supporting evidence is the Kanter affidavit. See Kanter Aff. This affidavit, however, does not attest to the result achieved at Sara Lee. Id. Instead, it only states that the unnamed client in the Statement #15 is Sara Lee. Id. As a result, the statement is unsubstantiated and literally false under Novartis.
Finally, although Statement #15 is literally false, Gallup's motion still must be denied because it has not demonstrated a reasonable likelihood of harm from the false message. BreathAsure, 204 F.3d at 97. As noted above, to obtain an injunction against a false advertising claim, a plaintiff must demonstrate a subjective fear of injury that has "some basis" in fact. Id. Despite its myriad filings, Gallup fails to allege injury resulting from the allegedly false message. Moreover, the Court finds that Statement #15, which is only a small part of a much larger customer proposal, cannot reasonably be seen as threatening any injury to Gallup. Accordingly, Gallup's request for an injunction barring Kenexa from continuing to use Statement #15 in its promotional materials is denied.
Implicitly False Statements
In addition to the 15 statements that Gallup claims are explicit literally false statements, Gallup also lists four Kenexa claims that Gallup argues are literally false by necessary implication. Pl.'s Summ. J. Mem. at Ex. 2. As noted above, there are two kinds of literally false statements. First, explicit literally false statements, like those discussed above, directly state facts that are false. Gilson at § 7.02[6][b][i][A]. Second, statements are also literally false "if the false representation is implied by context and not directly stated." Id.
It should be noted, however, that although these statements are to be examined in context, the false message still must be "necessarily" implied from the advertising. Novartis, 290 F.3d at 588. Messages that "`play upon' or `reinforce' consumer perceptions" cannot be found to be literally false, but may be considered "misleading" if the plaintiff produces evidence that consumers were actually or potentially mislead by the claims. Id.
Gallup argues that following statements are literally false by necessary implication:
Statement #1a
[Kenexa] conducts item analysis on virtually every employee survey project completed. This has given us an extremely broad exposure to a wide range of survey items. This has, in turn, allowed [Kenexa] to narrow the field to those items that are most closely related to overall employee engagement leadership, or management effectiveness and to business outcomes such as employee retention, productivity and service quality.
This statement comes from proposals sent to potential Kenexa customers in a section describing how Kenexa designs its surveys. Def.'s Summ. J. Mem. at App. p. 16. Gallup argues that these statements, taken together, "convey the impression" that Kenexa has conducted empirical studies to determine the relationship between its core items and the desired business outcomes. Day Rept. at Ex. H. It follows, Gallup argues, that these statements are unsubstantiated, and therefore false under Novartis, because Kenexa has not produced such scientific studies. Id.
This argument fails because these statements, even when taken together, do not "necessarily and unavoidably" lead consumers to the false conclusion that Kenexa has undertaken such statistical analyses. As noted above, in order for an advertising claim to be considered literally false, the claim must relate an unambiguously false message to consumers — regardless of whether it is explicitly literally false or literally false by implication. Novartis, 290 F3.d at 587. For example, in Warner-Lambert Co. v. BreathAsure, Inc., 204 F.3d 87, 89 (3d Cir. 2000) ("BreathAsure"), the defendant claimed that its capsules were more effective at relieving bad breath than mouthwash or gum because the capsules worked in the stomach, which the defendant claimed was "the source" of bad breath. The case revealed, however, that bad breath originates in the mouth, not the stomach. Id. at 90. Accordingly, the court found that the name "BreathAsure" directly lead to the literally false implication that the capsules could help remedy bad breath. Id. at 96-97. As a result, the court enjoined use of the name "BreathAsure" due to its literally false implications. Id. at 97.
In contrast, the same kind of unambiguously false message cannot be implied from Kenexa's statements. Unlike the BreathAsure name, which directly implies that it fights bad breath, Kenexa's broad statements about "narrow[ing] the field of . . . items" based on "item analysis" does not unavoidably imply that Kenexa has engaged in any sophisticated statistical studies linking its core survey items to certain results. A potential customer could just as easily come to the conclusion, as Kenexa points out, that this process is based on Kenexa's general experience in the survey industry. Def.'s Summ. J. Mem. at App. p. 16. Because Gallup cannot point to an unambiguously false message in this statement, it cannot be considered literally false under the Lanham Act. Novartis, 290 F.3d at 578-88. Moreover, Gallup has not produced any evidence as to the effects this statement had on consumers. Therefore, the statement also cannot be considered misleading under the Lanham Act. As a result, Kenexa is entitled to summary judgment as to this statement.
Statements #2a3a
[#2]When sample sizes are sufficient, [Kenexa] recommends testing and refining hypothesized relationships using Structural Equations Modeling, which is an advanced type of Regression Analysis.
[#3][Kenexa] would recommend that a meta-analysis be conducted. Meta-analysis is a statistical technique that allows the unreliable influences and/or idiosyncrasies of any one study to be factored out in order to determine the true relationship between business metrics such as profitability, productivity, turnover, customer satisfaction, and survey results. More importantly, different metrics can be utilized across studies and the results can be generalized to the broader population.
Because statements #2a and #3a are so similar in content, they are discussed together. Like many of the other statements Gallup challenges, these statements come from proposals sent to Kenexa's prospective customers. Pl.'s Summ. J. Mem. at Ex. 2 p. 3. Gallup argues that these claims imply that Kenexa has conducted structural equations modeling and meta-analysis, respectively. Day Rept. at Ex. H. Because there is no evidence that Kenexa has ever conducted such analyses, Gallup argues that these claims are unsubstantiated, and therefore false, under Novartis.
For its part, Kenexa admits that, as an entity, it has never undertaken either a meta-analysis or a structural equations modeling study for a client. Bergram Tr. at 204 250. Kenexa argues, however, that these statements are better read as recommendations that Kenexa would make to a client who was in need of these services. Def.'s Summ. J. Mem. at App. p. 17-18. Moreover, Kenexa claims that two of its employees, Mr. Robert Bergman and Ms. Ame Creglow, have the talent to perform structural equations modeling and meta-analysis, respectively, should any client need these services. Id. It follows, Kenexa argues that, even if these statements are seen as somehow implying facts, Kenexa has substantiated the claim that it can perform these analyses. Id.
As noted above, only misleading or false statements of fact are actionable under the Lanham Act. 15 U.S.C. § 1125(a)(1). The statements at issue here, however, are better read either as recommendations to potential customers or as statements that Kenexa can perform the required analyses, rather than as a statement that Kenexa has done them in the past. To establish a misrepresentation of fact, Gallup must show that the statement may be adjudged true or false in a way that (admits of empirical verification. Presidio, 784 F.2d at 679. Applying that test to the statements above, Kenexa's recommendations cannot be adjudged true or false in any empirical way. Accordingly, Gallup cannot show that these statements are literally false by implication under the Lanham Act. As Gallup has offered no consumer survey evidence to show that the statements are misleading, Kenexa is entitled to summary judgement on these statements.
Statement #4a
Once you have data on the most critical attitudes and perceptions of your employees, the opportunities for making important discoveries about your business are nearly endless. By utilizing sophisticated forms of "linkage" research, you can learn more about what drives business results in your organization. Furthermore, you will gain insight and awareness about how to better manage these factors, and therefore, be better equipped to develop effective strategies for improving results.
Gallup's arguments regarding this statement are similar to many of its earlier arguments. Gallup argues that these statements, taken together, imply that Kenexa itself has conducted statistical analysis to show that its survey items correlate with specific business outcomes. Day Rept. at Ex. H. Specifically, Gallup's expert avers that this statement "propose[s] a causal path from employee perceptions to . . . work behaviors." Id. Dr. Day concludes that such a causal model could only be supported by statistical tests such as "path analysis, partial least squares, or structural equation modeling." Id. Because there is no evidence that Kenexa has conducted these kinds of tests, Gallup argues that Statement #4a is unsubstantiated, and therefore, false. Id.
Kenexa responds that Statement #4a makes no representations that it has performed any kind of statistical analyses on its survey items. Def.'s Summ. J. Mem. at App. p. 19. Kenexa argues that this statement merely informs consumers of the value of linkage research in general. Id. It follows, Kenexa argues, that no evidentiary support is need for this statement. To the extent support is needed, Kenexa points to deposition testimony describing its employees' experience in conduct linkage studies. Def.'s Summ. J. Mem. at Ex. I 128-49.
Summary judgment must be granted for Kenexa as to Statement #4a. Initially, the Court finds that Statement #4a is both a commercial advertisement under Seven-Up and a statement of fact under Presidio. Statement #4a does not, however, unambiguously convey the message that Kenexa has performed any particular kind of linkage studies.
In order to be literally false under the Lanham Act, an alleged misrepresentation must "unavoidably and necessarily" lead consumers to a false message. Novartis, 290 F.3d at 588. Advertising claims that "play upon" consumer perceptions or "suggest" certain messages cannot be literally false under the Act. Id. Here, Gallup argues that Kenexa's broad claim — that linkage research allows clients to "learn more about what drives business results" in their companies — unambiguously conveys the false message that Gallup has tested its engagement model with statistical analyses.
In Novartis, the Third Circuit found that the "Night Time Strength" designation did not unavoidably convey the message that the product was superior for nighttime relief. Novartis, at 588. Such a message would only be reached if consumers made their own assumptions about the MNTS product. Id.
Here, the connection between the arguably false message and the wording of Statement #4a is even more attenuated. Kenexa's customers must independently assume that Kenexa has statistically analyzed its survey model in order to reach the arguably false message. When consumers must make these kinds of assumptions on their own, a statement cannot be proven literally false under the Act. Id. Moreover, Gallup offers no evidence that Statement #4a is misleading under the Act. Accordingly, summary judgment is granted for Kenexa as to Statement #4a.
III. CONCLUSION
Once the movant adequately supports its motion pursuant to Rule 56(c), the burden shifts to the nonmoving party to go beyond the mere pleadings and present evidence through affidavits, depositions, or admissions on file to show that there is a genuine issue for trial. Celotex Corp., 477 U.S. at 324. Regarding the plaintiff's reverse-passing off claims, both parties motions are denied because a triable issue of fact exists as to the Q12's origin. Regarding the plaintiff's false advertising claims, Kenexa's summary judgment motion is granted as to all the challenged statements because Gallup is unable to prove the necessary elements for any of them.
An appropriate order follows.
ORDER
AND NOW, this 30th day of December, 2002, upon consideration of Plaintiff The Gallup Organization's Motion for Partial Summary Judgment (Docket No. 40) and Defendant Kenexa Corporation's Cross-Motion for Partial Summary Judgment (Docket No. 43), IT IS HEREBY ORDERED that the parties' Motions are GRANTED IN PART AND DENIED IN PART, as follows:
(1) Both Parties' Motions are DENIED as to Plaintiff's "Reverse Passing-Off" claim under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125; AND
(2) Defendant's Motion is GRANTED as to Plaintiff's False Advertising claims under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125.
ORDER
AND NOW, this 30th day of December, 2002, IT IS HEREBY ORDERED that the enclosed MEMORANDUM AND ORDER be SEALED AND IMPOUNDED.