Testing Systems, Inc. v. Magnaflux Corp

Citation. Testing Sys. v. Magnaflux Corp., 251 F. Supp. 286, 149 U.S.P.Q. (BNA) 129, 10 Fed. R. Serv. 2d (Callaghan) 76 (E.D. Pa. Mar. 2, 1966)

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CitationTesting Sys. v. Magnaflux Corp., 251 F. Supp. 286, 1966 U.S. Dist. LEXIS 10318, 149 U.S.P.Q. (BNA) 129, 10 Fed. R. Serv. 2d (Callaghan) 76 (E.D. Pa. Mar. 2, 1966)

Brief Fact Summary. The Plaintiff, Testing Systems, Inc. (Plaintiff) and the Defendant, Magnaflux Corp. (Defendant), are both engaged in the same trade. The Defendant published statements saying the United States Government had tested the Plaintiff’s product and the Defendant’s product and found the Defendant’s product to be 40% more effective. This statement was untrue.

Synopsis of Rule of Law. For a party to sustain an action for trade libel, they must show that the defendant made statements that are false and that these statements led to a loss of business.

Points of Law - Legal Principles in this Case for Law Students.

If the plaintiff desired to predicate its right to recover damages upon general loss of custom, it should have alleged facts showing an established business, the amount of sales for a substantial period preceding the publication, the amount of sales subsequent to the publication, facts showing that such loss in sales were the natural and probable result of such publication, and facts showing that plaintiff could not allege the names of particular customers who withdrew or withheld their custom.

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Facts. The Plaintiff and the Defendant are both in the business of making products to be used in non-destructive testing.
* The Plaintiff alleges that the Defendant circulated written material among the Plaintiff’s current and potential customers, that the United States Government had tested both the Plaintiff’s and the Defendant’s product and found the Defendant’s product to be 40% more effective. Also, the Defendant’s agent said, in a loud voice at a manufacturer’s convention “[Plaintiff’s] stuff is no good and the government is throwing it out.”
* The Plaintiff sued the Defendant for trade libel. The trial court dismissed the Plaintiff’s case because the Plaintiff failed to show damages.

Issue. Should the Defendant’s motion to dismiss the Plaintiff’s claim for failure to state a case be upheld?

Held. Yes, unless the Plaintiff can amend the claim to include specific clients he lost because of the Defendant’s slander, within thirty days.
* Normally, puffery and comparison between one’s own product and another’s product is not actionable. Saying one’s own product is superior to a competitor is mere opinion. In this case, however, the Defendant made specific claims about the government testing both products, finding the Plaintiff’s to be inferior and deciding to use the Defendant’s product instead. These are specific claims that are untrue and are actionable.
* In a case where the Defendant’s actions are “libelous per se” the Plaintiff need not specify damages.
* This case does not reach the level of “libelous per se”. Therefore, the Plaintiff must specify what damages the Plaintiff has suffered by stating the loss of particular customers name or showing a loss of profits after the statements that can be traced back to the statements.

Discussion. Here, the court makes it clear that absent a showing of libel per se (The court fails to say what, exactly that is.) one of the elements to sustain a case of trade liable is a showing of damages.

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