Authored and Edited by Margaret A. Esquenet; Kevin Lam†

Can one company use another’s copyrighted images in its advertisements to contrast where the two companies’ products are manufactured? And if this is generally but not always allowed, when is it okay? Also, can a company say that its product is “Made in USA” when certain product parts are made in another country, at least so long as the company discloses what are foreign-made parts? The U.S. District Court for the Northern District of Oklahoma dealt with these issues when Creager Services, LLC sued I Dig Texas, LLC and its owners (“IDT”) for copyright infringement, inducement of copyright infringement, and false advertising under the Lanham Act.

IDT and Creager sell competing products—specifically, post driver attachments—and have long had a contentious history involving mutual interference in each other’s businesses. (Although not expressly described in the opinion, a post driver attachment appears to be a tool that, when affixed to a construction vehicle called a skid steer, is used to install fence posts in the ground.) IDT published an online advertisement that featured two images of Creager’s post driver attachment alongside the phrase “Made in China” inside a red circle and crossed out. At the time, Creager had not yet obtained copyright registrations for its product images, but after IDT’s advertisement appeared, Creager registered the images IDT had used. IDT’s advertisement also claimed that its post driver attachment—in stark contrast to Creager’s—was “Made in USA” with “TRUE U.S. plate steel and red iron I-Beam.” The hostilities between the parties led IDT to file state-law claims against Creager, and in response, Creager asserted copyright and false advertising claims against IDT along with additional state-law claims.

IDT raised a fair use defense to Creager’s copyright claims, saying it is perfectly permissible to use another party’s copyrighted works in comparative advertising, and sought summary judgment. The court evaluated IDT’s fair use defense based on the four recognized statutory factors and held the use fair even though the no part of the products’ appearance was being compared

The court found that the first factor—“the purpose and character of the use”—favored fair use. Although it recognized that using copyrighted works for commercial purposes may weigh against fair use, it observed that there is no presumption that commercial use is unfair. Here, the court found that IDT’s use of the copyrighted images was permissible because the use suggested that consumers should purchase post driver attachments that are made in the United States rather than in China. Next, in evaluating the second factor—“the nature of the copyrighted work”—the court found that Creager’s copyrighted works were merely product images and not likely intended to be creative or artistic. As a result, it found that the second factor was neutral, weighing neither for nor against a fair use finding. The court then found that the third factor—the amount of the copyrighted works used by the alleged infringer—was straightforward since IDT used full reproductions. But this was the only factor that weighed against a fair use finding. Indeed, in addressing the final factor—the copyright work’s value and marketplace, which the court said was the “most important factor”—it found that Creager presented no evidence either that a marketplace for the copyrighted images existed or that the images’ value was potentially impaired due to IDT’s advertisement. Accordingly, after “considering all of the statutory factors,” the court found that IDT engaged in fair use, and it entered summary judgment in IDT’s favor on Creager’s copyright claims.

Moving to Creager’s false advertising claim, the court addressed Creager’s allegations that IDT’s “Made in USA” claim was false advertising both because the economy model of IDT’s post driver attachment was entirely Chinese-made and because its premium model contained a Chinese-made nitrogen fuel cell. Here, the court focused only on the first (and most important) element of a false advertising claim: whether the challenged advertisement contained “material false or misleading representations of fact.” When viewing the entirety of IDT’s advertisement, the court found nothing false or misleading—saying that IDT had specifically disclosed that its economy model was “fully Chinese built” and that its premium was manufactured in the United States except for the “imported nitrogen fuel cell.” Accordingly, it concluded that Creager had failed to show that IDT’s “Made in USA” claim was “false or misleading when viewed in the full context of IDT’s advertisement,” and there was no need for it to discuss the other elements of Creager’s false advertising claim. Thus, it granted summary judgment in IDT’s favor on the claim.

After disposing of these claims—which were the only federal claims in the case—the court declined to exercise supplemental jurisdiction over the remaining state law claims, and it remanded those claims to the state court.

I Dig Texas, LLC v. Creager Services, LLC provides guidance on interesting issues that arise when a competitor uses copyrighted images in comparative advertisements or makes a general “Made In USA” claim about a product despite its having some foreign-made parts. First, at least under the circumstances of the case, a competitor may use a company’s copyrighted product images, even in a negative light, when the use is meant to contrast where products are manufactured and it does not affect the copyrighted images’ value. Second, even when a product is not entirely manufactured in the United States, a “Made In USA” claim does not necessarily constitute false advertising so long as the company identifies the foreign-made parts.

The case is I Dig Texas, LLC v. Creager Servs., LLC, 2023 WL 3066119, No. 22-CV-0097-CVE-JFJ (N.D. Okla. Apr. 24, 2023)