Tech company can sue competitor over biased white paper.

Byline: Pat Murphy

A Cambridge software company could pursue statutory false advertising claims against a competitor that touted on its website a "white paper" disparaging the plaintiff's products without disclosing that the defendant had commissioned the study, a U.S. District Court judge has found.

The competitor, defendant Appian Corp., argued that its failure to publicly disclose its commissioning of the white paper did not constitute a material omission that was actionable under either the federal Lanham Act or G.L.c. 93A.

But Chief Judge Patti B. Saris concluded that plaintiff Pegasystems' allegations were sufficient to survive a motion to dismiss.

[box type="shadow" align="alignright" width="325px"]Pegasystems, Inc. v. Appian Corp., et al., Lawyers Weekly No. 02-511-19 (20 pages)

THE ISSUE: Could a Cambridge software company pursue statutory false advertising claims against a competitor that, on its website, touted a "white paper" disparaging the plaintiff's products without further disclosing the defendant had commissioned the study?

DECISION: Yes (U.S. District Court)

LAWYERS: Kristopher N. Austin of Foley Hoag, Boston (plaintiff)

Timothy H. Madden of Donnelly, Conroy & Gelhaar, Boston (defendant Appian Corp.)

David M. Magee of Donovan Hatem, Boston (defendant Business Process Management)[/box]

"Nowhere in the Report or Appian's statements promoting it would a reader learn that Appian was involved in the Report's production they would likely be left with the opposite impression," Saris wrote. "The allegation that the Report and website, when viewed in their entirety, are at the very least misleading is plausible because their description conveys neutrality."

Cautionary tale

Boston commercial litigator Tory A. Weigand called Pegasystems a "close case" but said the ruling was understandable given the lenient plausibility standard for surviving a motion to dismiss.

"The difference between surviving a motion to dismiss and ultimately prevailing is obviously significant, particularly in a Lanham Act matter due to the need to show actual deception and injury," Weigand said.

However, he noted that the decision has a concerning aspect in that, by allowing a case to proceed past a motion to dismiss, the court is opening the door to the plaintiff's discovery into a competitor's files.

Weigand said it is not uncommon for businesses to rely on supportive surveys, market studies and reports in the promotion of products and services.

He added...