Jan 22, 2013 3:26 PM
CINCINNATI (AP) - Appellate judges set out Tuesday to determine if criticizing a competitor's work without using a name is enough to violate a settlement agreement.
An online video made by a Missouri company is at the center of the case before the U.S. 6th Circuit Court of Appeals in Cincinnati. The video never mentions its chief competitor or the company's product by name, but does disparage products similar to its own.
The court dove into contract language and the meaning of phrases in trying to decide if Riverside, Mo.-based Hyalogic broke its settlement agreement with Cogent Solutions Group of Lexington, Ky., over a supplement called Baxyl. The court did not give an indication on when it would rule.
Central to the dispute is a YouTube video promoting a Hyalogic product and referencing products similar to Baxyl, the brand name for a supplement advertised for use in joint function. In the video, Hyalogic scientist Karen Brown discusses the supplement made by her company and says other firms use various preservatives not found in her product. Hyalogic also says it didn't post the video - a foreign company did so on its own.
Cogent Solutions sued Hyalogic in 2011, saying the company used negative advertising to make false and misleading statements about how Baxyl worked and how it performed. The two sides settled the suit in June 2011, with Hyalogic agreeing to take a series of measures to remove a chart comparing the two company's products and to stop negative advertising of Cogent Solutions' product.
The settlement called for Hyalogic to pay Cogent Solutions $5,000 per violation in damages.
Trevor Wells, an attorney for Cogent Solutions, told the judges that, even though Baxyl isn't mentioned by name, the obvious intent of the video is to impugn his client's product. That's in violation of a settlement the two companies reached, Wells said.
Judge John M. Rogers noted that the settlement doesn't ban Hyalogic from talking about all similar supplements, but appears to stop them only from mentioning Baxyl specifically.
"You've got, somehow, to identify the competitor," Rogers said.
"In this context, in this market, these are the two superpowers," Wells said. "It is a comparative inference by nature."
Judge Boyce F. Martin again asked why there's no blanket prohibition on criticizing competitors in the settlement agreement.
"We contend it is what the parties intended," Wells said.
"We could care less what the parties intended," Martin said.
Hyalogic's attorney, Bart Greenwald, latched on to the questions by the judges, again noting that the video mentions "others use some of these preservatives" without citing Baxyl.
"We settled this case. This case should have been over," Greenwald said. "We did what we thought should have gotten rid of this nonsense."
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