Falsely Attributing Country of Origin Can Be Defamatory

A false and disparaging statement will not be grounds for a defamation claim unless the words are capable of sustaining a defamatory meaning. Not every insult will be actionable. What is “defamatory meaning”? Well, you should really consult a lawyer on that one as there is no easy answer. Virginia courts have tried to define it as words calculated to render the plaintiff “infamous, odious, or ridiculous.” (See Moss v. Harwood, 46 S.E. 385, 387 (Va. 1904)). Does that help? Not much. In New York, they look to whether the words “tend to expose one to public hatred, shame, obloquy, contumely, odium, contempt, ridicule, aversion, ostracism, degradation, or disgrace, or to induce an evil opinion of one in the minds of right-thinking persons, and to deprive one of their confidence and friendly intercourse in society.” (See Kimmerle v. New York Evening Journal, 186 N.E. 217, 218 (N.Y. 1933)). That seems specific enough, but try applying that test in the real world. How is a court to determine whether one statement tends to expose one to public ridicule but not another?

The Western District of Virginia had a chance to grapple with this question a little bit in AvePoint, Inc. v. Power Tools, Inc. In that case, the court was asked to consider whether a statement falsely describing AvePoint as a Chinese company was defamatory in meaning. Ultimately, the court found that the plaintiff’s allegations were sufficient to survive a motion to dismiss.

AvePoint and its subsidiary are American corporations and providers of infrastructure management and governance software platforms for Microsoft SharePoint products and technologies. AvePoint’s competitor, Axceler, offers similar software for Microsoft SharePoint products. AvePoint sued Axceler and its Regional Vice President of Sales for Western North America, Michael Burns, alleging that they made false and defamatory comments about AvePoint and its products and services on Twitter and in email communications with customers and potential customers. AvePoint alleged that Axceler and Burns made false statements describing AvePoint as a “Chinese company” whose products are “maintained in India,” and claiming falsely that Microsoft recommends Axceler’s software over AvePoint’s, that AvePoint’s customers were abandoning their contracts early in order to buy Axceler’s software, and that Axceler uses maintenance revenue in a way superior to AvePoint.

The court first examined whether statements concerning the origin of AvePoint products could support a defamation claim. Axceler employees allegedly posted messages on Twitter referring to AvePoint as the “Red Dragon,” a term long associated with the People’s Republic of China, and claiming that the SharePoint “Red Dragon” is made in China. An employee also allegedly emphasized in an email that AvePoint software was china_flag.jpgdeveloped in China and maintained in India. Did these statements carry defamatory meaning? AvePoint contended that the origin of its products had an impact on its customers’ willingness and sometimes ability to buy the products. AvePoint pointed to messages that Axceler employees posted on Twitter indicating that customers had switched to Axceler after being led to believe that AvePoint was not developed in the United States. Conversely, Axceler argued that the alleged statements were not defamatory as a matter of law because most Americans no longer believe that Chinese products are inferior or that conducting business with China is unpatriotic. The court allowed the claim to go forward, noting that the federal government has long had a preference for domestically manufactured products.

Next, the court considered whether an Axceler representative’s email to an AvePoint customer stating that Microsoft recommended Axceler’s software over AvePoint’s supported AvePoint’s defamation claim. Axceler argued that this statement was not necessarily harmful since both companies could have high ratings with Microsoft. But the court found that construing the facts in the light most favorable to AvePoint required it to interpret the statements as suggesting that Microsoft had affirmatively recommended that customers buy Axceler’s product over AvePoint’s and that such a statement could prejudice AvePoint in its business. This statement therefore supported a cause of action for defamation per se.

Defendant Burns posted the statement that “U know things are bad when the Evil Avenue’s customers are dumping out of 3 year deals in year 2 to buy Axceler’s [product]” on Twitter. Axceler argued that the statement was not defamatory because it did not mention AvePoint by name. However, it is enough that the publication was of and concerning AvePoint and construing the allegations in the light most favorable to the plaintiffs, it is possible that this statement was intended to refer to AvePoint and that it would be so understood by people reading it who are familiar with AvePoint since it is plausible that “Evil Avenue” referred to AvePoint which produces and sells software called DocAve.

Axceler also argued that this Twitter post offered an opinion, but the court found that the statement did not necessarily depend on Burns’ point of view and contained a factual assertion capable of being proven true or false. Axceler then argued that the statement wasn’t necessarily prejudicial since Axceler could simply be offering deals that are too favorable for AvePoint customers to turn down. Considering the statement in its entirety, the court could not conclude that it lacked the necessary defamatory sting.

The final allegedly defamatory statement was that Axceler uses its maintenance revenue to improve its customers’ existing product whereas AvePoint uses theirs to develop new products to which its customers have no access. AvePoint asserted that this statement was made to a potential customer who relied on it in deciding to buy from Axceler instead of AvePoint. Axceler argued that the statement was not actionable since some customers might prefer the way AvePoint uses maintenance fees. Again, construed in the light most favorable to AvePoint, the statement implies that AvePoint misuses its maintenance revenue and could be defamatory. Therefore, the claim was sufficient on its face.

So, does this mean that the American public views foreigners as “infamous, odious, or ridiculous”? Tweet me if you can answer that.

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