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Court Battle Pits Elcometer, TQC-USA

Wednesday, May 22, 2013

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Global coatings instrument maker Elcometer Inc. is locked in federal-court litigation with a former employee and distributor over allegations of unlawful marketing tactics designed to steal Elcometer’s customers.

A federal judge has green-lighted a strongly worded lawsuit filed Oct. 18 by Elcometer that accuses defendants TQC-USA Inc., Panama-based paintmeter.com, and Paintmeter founder Robert Thoren of “trademark infringement, product disparagement, and false and misleading advertising and promotion.”

TQC-USA had sought dismissal of the suit in November, but U.S. District Judge Gershwin A. Drain denied that motion April 9 and allowed the litigation to proceed.

Now, TQC-USA has filed a counterclaim against Elcometer.

Colleagues Turned Competitors

In January 2012, former Elcometer employee Joel Bialek opened TQC-USA.

Paintmeter.com
paintmeter.com

Paintmeter advertises "Elcometer Distribution." Elcometer says it has asked Paintmeter to stop making that claim. Elcometer also alleges that Paintmeter is working with TQC-USA to mislead customers.

Michigan-based TQC-USA is a North American distributor of products made by TQC (Thermimport Quality Control) of Europe and by other manufacturers, including Elcometer competitor DeFelsko, a manufacturer of coating thickness and inspection equipment since 1966.

Neither DeFelsko, based in Ogdensburg, NY, nor TQC of Europe, founded in 1977, is a named party to the litigation, and neither is accused of wrongdoing. Although court documents refer to both “TQC” and “TQC-USA,” both are references to the U.S. operation exclusively.

Paintmeter.com is identified in court documents as a foreign corporation founded by Thoren, a former Elcometer distributor.

In its original complaint, Michigan-based Elcometer identifies itself as the world’s largest manufacturer and distributor of handheld coating thickness gauges and an industry pioneer, “having invented one of the first non-destructive paint gauges in 1947.” The Elcometer trademark dates to 1949.

Elcometer says it does not distribute its products through TQC-USA or through Paintmeter.com.

Google Adwords

Elcometer’s suit accuses the defendants of buying the Elcometer trademark as a Google adword. Thus, users who search Google with the keyword “Elcometer” will see results that prominently feature Paintmeter as an Elcometer distributor.

Alexa.com, a company that provides free website analytics, reports that three of the four top searches that drove users to Paintmeter’s site included the keyword “Elcometer.”

Alexa ranking
alexa.com

Alexa.com, a website analytics tool, shows the top drivers to paintmeter.com in a ranking that appeared Tuesday (May 21).

Paintmeter’s site also advertises “Elcometer® Distribution” and refers extensively to Elcometer products, even showing both the Elcometer and Paintmeter names on the same gauge.

Elcometer’s suit says the Paintmeter website “creates the false impression that Paintmeter is an authorized distributor of and authorized by and connected with Elcometer. Defendants’ actions are plainly calculated to erode Elcometer’s distinctive trademark and trade on the goodwill associated with Elcometer.”

The suit says Elcometer has asked Thoren to stop using its trademark and remove the references, but that he has refused.

Thoren, a resident of Miami, FL, and Panama City, Panama, could not be reached for comment. Paintmeter.com did not respond to a request for comment.

'Bait and Switch'

Elcometer’s action accuses the defendants of “bait-and-switch” tactics.

The suit says that when a customer or potential customer calls the number on the Paintmeter site and asks about Elcometer products, Thoren and other representatives “make false and disparaging statements about Elcometer and the Elcometer products, in an effort to convince the customers and potential customers to purchase DeFelsko products instead.”

Co-branded gauge Elcometer 311
paintmeter.com (left); elcometer.com (right)

At left is a paintmeter.com gauge that also bears Elcometer's name. At right is the Elcometer 311, from Elcometer's site.

“These statements are literally false, give misleading descriptions and misrepresent the facts with respect to Elcometer’s products…,” the suit says.

DeFelsko Responds

DeFelsko issued this statement Tuesday (May 21) regarding the litigation:

  • "DeFelsko is not named as a party in this complaint and there are no allegations of wrong doing against DeFelsko.
  • DeFelsko has no direct knowledge of any of the facts contained in this lawsuit.
  • Joel Bialek is not an employee of DeFelsko nor has he ever been. Rather he and his company, TQC USA, are authorized distributors of DeFelsko products."

8 Counts

The eight-count complaint alleges federal and state trademark infringement, false advertising/unfair competition, product disparagement, violation of the Michigan Consumer Protection Act, and tortious interference with existing and prospective business relations.

The suit seeks a specific accounting “for all profits unlawfully gained” by the defendants, triple compensatory damages, clarifying ads by the defendants, an order directing the defendants to stop using Elcometer’s name, and other remedies.

Failed Motion to Dismiss

Drain allowed the litigation to proceed after a March hearing on TQC-USA’s motion to dismiss Elcometer’s complaint.

“The gist of TQC’s Motion to Dismiss is that Elcometer impermissibly lumps TQC together with Defendants Thoren and Paintmeter, as well as fails to establish an agency relationship between these defendants and Elcometer,” Drain’s ruling says.

“Notably, TQC does not otherwise attack the substance of Plaintiff’s federal and state trademark infringement claims under the Lanham and Michigan Consumer Protection Acts.”

The order notes that a corporation can be held liable for the “authorized acts” of another corporation acting as its agent.

Adwords
Google

Elcometer says the defendants have unlawfully purchased "Elcometer" as a Google adword. TQC-USA says it was not involved in the purchase of adwords or the use of metatags for web searches.

The ruling adds: “In fact, TQC acknowledges in its Response that Paintmeter acts as a dealer for TQC and that TQC warehouses numerous rental units for Paintmeter and Thoren. Further, TQC inexplicably argues that if any agency relationship exists, it is limited to only the distribution of thickness gauges.

“On this argument alone, TQC’s Motion to Dismiss fails since the allegations in the Complaint relate to, among other things, the distribution of thickness gauges.”

Elcometer attorney A. Michael Polizzi said in an email, “We are confident in our position, as stated in the lawsuit, and we are pleased with Court's recent order denying TQC's Motion to Dismiss…”

Counterclaim

In an Answer and Counterclaim filed two weeks after the judge’s ruling, TQC-USA asserts that:

  • It does not own or operate paintmeter.com; and
  • It has “no involvement” in purchasing the Elcometer trademark as a Google adword or in the use of metatags that incorporate Elcometer’s trademark.

As to dozens of other statements and allegations in the Elcometer complaint, TQC-USA repeatedly says that it “lacks knowledge or information sufficient to form a belief about the truth of the allegations of this paragraph. To the extent an answer is required, Defendant TQC denies this allegation.”

In an email, Bialek says TQC-USA’s new claim accuses Elcometer of “Abuse of Power.” The claim alleges “abuse of process” and accuses Elcometer of filing its complaint “for solely anticompetitive reasons.”

Bialek added: “I can only feel like this is a case of a large company trying to push around a smaller competitor.“

In an Answer to TQC-USA's Counterclaim filed Friday (May 17), Elcometer denied the company's allegations.

A jury trial has been set for Feb. 25, 2014.

   

Tagged categories: Business matters; Business operations; Coating Business; DeFelsko; Elcometer; Laws and litigation; Lawsuits; Market share; Marketing; Meters and gauges; Thickness gauge; TQC; TQC-USA

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