3M Strikes Against N95 Mask Price Gouging

Sunstein LLP


3M Company is well known for its vigilant program of trademark protection, and that has been underscored during the pandemic. Most recently, 3M obtained a sweeping preliminary injunction in the Sothern District of New York against Performance Supply LLC, an opportunistic company seeking to exploit the demand for critical N95 masks.

3M asserted claims of trademark infringement and dilution, false advertising, unfair competition in violation of the Lanham Act, and numerous violations of New York state law. 3M clearly seeks to shut this company down. It has sought similar relief in at least eight other cases in California, Florida, Indiana, Wisconsin, and Texas.

In Performance Supply, 3M did not face a high hurdle. The defendant appears to be a one-person operation with no experience in supplying medical equipment. The court noted that Performance Supply’s primary line of business is selling vans and other vehicles, and that it did not begin attempting to sell N95 respirators until after the Covid-19 global pandemic began. The defendant did not appear at the hearing or even contest 3M’s preliminary injunction motion. Nevertheless, 3M’s use of trademark law to shut down a price gouger displays the full reach of the Lanham Act to halt both infringement and price gouging.

The facts show an ambitious attempt to capitalize on the Covid-19 crisis. The defendant filed a formal proposal with the City of New York to supply seven million 3M N95 masks at an average markup of 500% from 3M’s posted prices. The proposal used 3M’s character mark and design mark nine times, included a 3M technical specification sheet, used 3M’s slogan (“3M Science Applied to Life”), referenced 3M’s headquarters, and implied a distribution relationship with 3M that does not exist. Initially, a city purchasing agent was misled by the defendant’s implied relationship to 3M.

3M had no relationship whatsoever with the defendant, had never authorized it to act as a distributor, and had never authorized the defendant to refer to its marks or use its technical specifications. 3M had publicly stated that its price for N95 masks would not be raised during the pandemic emergency.

In evaluating 3M’s claims, the trial court acknowledged the company’s famous marks, its active maintenance of trademark registrations, the incontestability of the trademarks, its manufacture of critical health supplies, its concurrent pursuit of price gougers, and its substantial claims against the defendant. Given, however, that the defendant is no threat to 3M and was not likely to pursue its scheme once having drawn 3M’s attention, the court’s decision seems directed less at the defendant and more as fair warning to so many others who have attempted price gouging during the pandemic.

First, the court ruled that the 3M marks are conclusively valid because of their “incontestable” status. The defendant’s scheme was “textbook bad faith,” said the court, and likely to cause confusion as to source and quality, thus infringing and diluting the marks. The scheme was likely false advertising under the Lanham Act because it implied the defendant is an authorized 3M distributor, misrepresented the source of the price markup, and initially misled the city with its formal proposal to sell 3M’s N95 masks. Finally, the court found that the scheme, particularly in the context of a health emergency, was likely to violate New York laws barring deceptive acts and false advertising.

While the preliminary injunction decision in Performance Supply demonstrates timely use of 3M’s program of trademark protection, it also showcases the substantial leverage that can be obtained in employing both the infringement and false advertising provisions of the Lanham Act. It would have been sufficient simply to seek an injunction against infringement. By also pursuing the false advertising claims, 3M successfully challenged the underlying price gouging scheme in the sale of a critical medical supply.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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