Eleventh Circuit Holds That Competitive Injury Must Be Proved, Not Presumed, to Establish Injury-In-Fact for Article III Standing at Summary Judgment Stage

In TocMail Inc. v. Microsoft Corp., No. 22-10223 (11th Cir. Apr. 25, 2023) (per curiam), the Eleventh Circuit dismisses an appeal by a cybersecurity company suing Microsoft for false advertising under the Lanham Act, holding that at the summary judgment stage it failed to establish any grounds for proving lost profits or any other cognizable injury sufficient to support Article III standing.

“Microsoft Corporation offers email security software to shield users from cyberthreats. TocMail, Inc. is a relative newcomer to the cybersecurity scene and offers a product geared towards a specific type of threat called Internet Protocol (IP) evasion. TocMail launched its IP-evasion product, got a patent, and then sued Microsoft for false advertising—all within two months. In its complaint, TocMail alleged that Microsoft misled the public into believing that Microsoft’s product offered protection from IP evasion. And TocMail—who had been selling its product for two months, spent almost nothing on advertising, and had not made a single sale—alleged billions of dollars in lost profits.”

Plaintiff TocMail claimed to have developed a system for warding off malicious links in emails that competed with Microsoft’s own Advanced Threat Protection – specifically, a program called Safe Links – that is bundled with its office suite. It “alleged that Microsoft misled consumers into believing that Safe Links prevented IP evasion. TocMail alleged that it offered the ‘only time-of-click redirection service immune to this attack.’” It alleged that because of Microsoft’s misleading representations to its 100 million subscribers, it prevented TocMail for entering the market and cost it “more than $43 billion in lost profits.”  

At the pleading and summary judgment stage, Microsoft argued that TocMail presented no evidence or factual allegations of lost profits or other injury. TocMail in opposition principally relied on the “presumption of injury that some courts have held arises in a two-player market. According to TocMail, ‘TocMail and Microsoft are the only cybersecurity vendors that promote their cloud-based, time-of-click services as effective protection against IP evasion.’ TocMail argued that, because only two companies (TocMail and Microsoft) purported to offer this protection, the district court could presume that at least some consumers would’ve turned to TocMail if not for Microsoft’s false advertising.”

The district court did not address the argument that there was no injury, instead granting summary judgment to Microsoft on the merits of the Lanham Act claim, i.e., that its advertising was not false or misleading.

On appeal, though, the Eleventh Circuit dismisses the case for lack of standing, holding that TocMail failed to establish injury-in-fact. “TocMail has offered no evidence from which a reasonable jury could find that it suffered any injury. TocMail’s theory is that Microsoft’s ‘false advertising campaign,’ in which Microsoft (allegedly) promised protection from IP evasion, caused consumers to ‘withhold trade from TocMail.’ But TocMail didn’t offer testimony from any witness saying that he or she would have purchased TocMail’s product if not for Microsoft’s advertising. TocMail didn’t offer any expert testimony calculating TocMail’s lost sales from consumers who went with Microsoft. TocMail didn’t produce a survey showing that consumers had any interest in buying TocMail’s product. There’s no evidence, in other words, that TocMail would have ever sold anything to any consumer—even putting Microsoft’s advertising to the side.”

TocMail argued that courts “can ‘presume’ an injury in fact (for purposes of standing) because, in its view, TocMail and Microsoft operated in a two-player market. For this, TocMail (mainly) relied on Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247 (2d Cir. 2014). There, the Second Circuit noted—while addressing the merits of a false advertising claim (not standing)—that, to prove false advertising under the Lanham Act, a plaintiff must prove that it “has been injured as a result of the [defendant’s] misrepresentation.”

But the panel holds that whatever value such a presumption may have to get a case past the pleadings stage, it did not suffice to establish injury-in-fact for standing. “While it may make sense to presume injury in assessing the merits, presuming an injury in fact for purposes of standing would raise serious constitutional questions. That’s because standing is jurisdictional, and our limited jurisdiction hinges on a plaintiff demonstrating, ‘through specific facts,’ an injury that is ‘(a) concrete and particularized; and (b) actual or imminent, not conjectural or hypothetical.’ . . . . . A legal presumption would seem to fall short of showing (through specific facts) a concrete and actual injury.”

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: