## Facts

- Ely-Norris Safe Co. manufactured safes featuring a patented internal “explosion chamber” intended to protect against burglars.
- Ely-Norris alleged it had the exclusive right to make and sell safes containing that explosion chamber and that such safes were otherwise unavailable in the United States.
- Mosler Safe Co. sold safes with a metal band around the door placed in substantially the same location as the explosion chamber in Ely-Norris’s safes.
- Ely-Norris alleged Mosler represented that the metal band indicated similar explosion-chamber protection, even though Mosler’s safes did not contain an explosion chamber.
- Ely-Norris alleged Mosler’s safes bore Mosler’s own name and address and were not sold as being made by Ely-Norris.
- Ely-Norris claimed Mosler’s misrepresentation diverted customers seeking explosion-chamber protection and caused Ely-Norris lost sales.
- The district court dismissed the bill in equity, relying on authority that such misrepresentations did not create a private cause of action for a competitor.
- Ely-Norris appealed.

## Issues

1. Whether a competitor states a claim for unfair competition when a rival falsely represents its product as having a quality or feature that, as alleged, only the plaintiff’s product can supply.
2. Whether, when the plaintiff plausibly alleges a practical monopoly over the claimed feature, the court may infer at the pleading stage that deceived purchasers were presumptively diverted from the plaintiff.

## Decision

- The Second Circuit reversed the dismissal and held the bill stated a cause of action for unfair competition.
- The court held that if the plaintiff effectively monopolized safes with explosion chambers and the defendant falsely claimed the same feature, purchasers deceived by that claim could be treated as presumptive customers of the plaintiff.
- The court declined to follow the contrary rule applied in earlier decisions that treated such conduct as not constituting a privately actionable wrong between competitors.

## Legal Principles

- Unfair competition may be based on deceitful misrepresentations about a product’s qualities or characteristics, not only misrepresentations about source, when the deception plausibly diverts trade from a competitor.
- A competitor has a cognizable private injury where market conditions alleged in the complaint support a reasonable inference that deception caused loss of sales to the plaintiff.
- When the plaintiff plausibly alleges it is the only practical source for a particular feature, a court may infer that customers deceived into buying a competitor’s falsely described product would otherwise have purchased from the plaintiff, at least for pleading purposes.
- Public-interest enforcement against deceptive practices (such as administrative actions) does not by itself determine whether a competitor has a private remedy; the existence of a private claim depends on common-law unfair-competition principles and proof of competitive injury.

## Conclusion

The Second Circuit held that a complaint adequately pleads unfair competition when it alleges the defendant falsely represented its safes as having a feature the plaintiff uniquely supplied, because such deception supports an inference of diverted customers and competitive injury sufficient to proceed beyond dismissal on the pleadings.


Ely-Norris Safe Co. v. Mosler Safe Co., 7 F.2d 603 (2d Cir. 1925)