Third-party certifications provide credibility to enhance a company’s reputation. But not all certifications are authorized by third-parties. What’s more, instead of using third-party certifications, some companies are creating their own and dubbing their products as leaders in the field without any third-party agency (private or public) providing the proverbial ‘thumbs up’! These certifications are aptly dubbed: selfie certifications. According to the Federal Trade Commission (FTC) their use is rife (and wrong). Indeed, when a spotlight is directed towards the selfie certification, the credibility of a company can only take a downward spiral.
But what constitutes the good, bad and indifferent use of certifications . . . and what can companies do when competitors engage in the deceptive use of certifications standards.
Part I of this post explores the recent Bd.-Tech Elec. Co. v. Eaton Corp., decision. No. 17-3829-cv, 2018 U.S. App. LEXIS 15601, at *1-2 (2d Cir. June 11, 2018). There, the Second Circuit provided guidance on Underwriters Laboratories, Inc.’s (UL) standards (here) and their purported use in false and deceptive advertising.
In terms of background, Bd-Tech and Eaton have competed (and still do) in the business of decorative light switches. To be commercially viable, light switches in the U.S. must undergo certification by UL standards, namely UL 20. Plaintiff Bd.-Tech alleged violations of the Lanham Act against Defendant Eaton for non-compliance with UL 20 safety standards. Id. at *2. More specifically, Bd-Tech alleged that its in-house engineers tested for UL 20 compliance and found that each of the tested 48 light switch units failed—leading to the allegation that Eaton’s use of the UL 20 mark was false and misleading. Id. at *2-3.
Interestingly, the Second Circuit held in favor of Eaton—dismissing the case and finding that Bd.-Tech had failed to plead its case as a matter of law. The rejected theory was predicated on the notion that Eaton’s decorator switches did not comply with the UL 20 safety standards (based on Bd.-Tech’s testing) and that the UL 20 certification was likely to mislead consumers into believing the switches are safe. Critically, however, Bd.-Tech “concede[d] that Eaton ha[d] permission to display the mark” and that UL had not since found that the light switches were non-compliant with UL standards. Id. at *6. The Court concluded that “Bd.-Tech’s testing, absent additional indicia of non-compliance, [did] not render Eaton’s use of the UL 20 mark literally false.” Id.
The Court also found that Bd.-Tech’s reliance on Burndy Corp. v. Teledyne Industries, Inc. was misplaced. 584 F. Supp. 656 (D. Conn. 1984), aff’d by 748 F.2d 767 (2d Cir. 1984). In that case, the competitor’s connectors were altered and were found on retesting by UL to be non-compliant. Id. at 660-61 (emphasis added). By contrast, nothing was pled in Bd.-Tech’s complaint to allege that UL had retested Eaton’s light bulbs, nor that UL had withdrawn certification.
Takeaways: Third-Party Testing and Knowing the Competitive Landscape
First, if challenging a competitor’s products for failing to conform with third-party standards, one must be sure that the third-party has done the testing. It can’t be outsourced to a non-certifying party.
Second, companies should be mindful of their competitive landscape. Parties that certify without undertaking the initial audit can be held to account for their false certifications. Had Eaton not received UL certification—yet placed UL certification on its products—this would have raised Bd.-Tech’s theory beyond the speculative level. In short, Bd.-Tech would have survived the motion to dismiss—and could well have had a decent shot at winning on the merits downstream.
Third, companies should be acutely aware of their competitive landscape, being not only aware of the standards that consumers rely upon; but whether competitors are falsely relying on those standards to garner credibility in the market.
In Part II to follow, the certification discussion continues. Closer analysis will be made of the selfie certifications—i.e., a certification mark or symbol used by a company (deceptively) to enhance credibility. Until then, be sure of your own third-party certifications (and that they’re up to date); and be equally sure of your competitive landscape—ensuring that everyone is on a level playing field.