Allegations That Defendants Provided Product For 'Free' State Claims Under California’s UPA And UCL, Notwithstanding That 'Cost' Of Product Was Recouped By Overcharging For Shipping

Bebe Au Lait, LLC v. Mothers Lounge, LLC and Udder Covers, LLC, Case No. 5:13-CV-03035-EJD (N.D. Cal. Sept. 23, 2014)

Plaintiff Bebe Au Lait sells nursing covers. It was the first company to make and sell, pursuant to patent, a flexible, convex stiffener located across the top of a nursing cover ("udder cover") that can be bent to allow a nursing mother to view a nursing infant, and then returned to its original shape.

Bebe alleged that defendants Mothers Lounge, LLC ("Mothers") and Udder Covers, LLC ("Udder") began marketing "Udder Covers" as "knock offs" of Bebe's nursing cover. Bebe alleges that the defendants infringed its patent for its RIGIFLEX stiffener, copied its trade dress, and gave away its udder covers free of charge, when certain promotion codes were entered. It also alleged that the defendants overcharged its customers for shipping. Bebe alleged that the practice caused it lost profits and reduced its market share. It brought an action for patent infringement, trade dress infringement, violation of the California Unfair Practices Act, Business and Professions Code §§ 17043 and 17044, and violation of the California Unfair Competition Law, Business and Professions Code § 17200.

After dismissal of the patent infringement claim, defendants Mothers and Udder moved to dismiss the Unfair Practices Act and Unfair Competition Law claims. Defendants argued that while they were allegedly "giving away" the nursing covers for free, this was more than made up for in its charge to consumers for shipping. Thus, a "zero" charge for the product, plus "$11.90" for product shipping more than covered the total cost of $7.00 to manufacture and ship the product.

Bebe argued in rejoinder that the $11.90 shipping fee was distinct from the "zero" charge for the nursing cover itself. As such, it argued that it stated a claim under §17043 because the nursing cover was given away for "free", and plaintiff had suffered injury as a result of the diversion of sales and its loss of market share.

The court agreed, and dismissed the attack on the § 17043 claim. The court reasoned that the plain meeting of the statute provided for a cause of action if either the defendant sells a product for less than cost, or if the defendant gives away the product for free. The court held that the common understanding of shipping costs is something additional to the cost of the product. Accordingly, it would be error to allow the defendants to aggregate the two. Bebe had...