## Facts

- Testing Systems, Inc. and Magnaflux Corp. competed in the sale of chemical penetrant products used for nondestructive testing; plaintiff sold “Flaw Finder,” defendant sold “Spotcheck.”
- Plaintiff alleged Magnaflux, through agents, published written and oral statements to plaintiff’s current and prospective customers that disparaged “Flaw Finder” and steered business to “Spotcheck.”
- Plaintiff alleged a written report circulated around May 6, 1965 falsely claimed the U.S. Government had tested plaintiff’s product and found it only about 40% as effective as defendant’s product.
- Plaintiff alleged that at a Philadelphia convention around May 23, 1965, a Magnaflux agent stated in a loud voice that plaintiff’s “stuff is no good” and that “the government is throwing them out.”
- Plaintiff framed the suit as trade libel (disparagement of property) and alleged general harm to business reputation and sales.
- Defendant moved to dismiss under Rule 12(b)(6), accepting the complaint’s factual allegations for purposes of the motion but arguing the statements were nonactionable sales talk and that special damages were not adequately pleaded.

## Issues

1. Whether the alleged “government test” report and convention remarks were actionable disparagement of plaintiff’s product, rather than nonactionable opinion, puffery, or mere unfavorable comparison.
2. Whether the complaint stated a trade libel claim without pleading special damages with particularity.

## Decision

- The court held the alleged statements could be actionable because they asserted specific, verifiable facts (including purported government testing and government rejection) rather than mere product boasting.
- The court held the complaint failed to plead special damages with sufficient specificity for a trade libel claim.
- The court granted the motion to dismiss, with leave to amend within a set period to plead specific pecuniary loss (e.g., identified customers or quantifiable lost business traceable to the statements).

## Legal Principles

- Trade libel (disparagement of property) requires publication of a false statement disparaging the plaintiff’s product and resulting pecuniary loss; special damages are an essential element.
- General allegations of harm to reputation or diminished sales are insufficient; the plaintiff must plead special damages with particularity, such as specific customers lost, canceled orders, or measurable lost profits tied to the disparagement.
- Statements amounting to puffery or subjective comparative opinions are generally not actionable, but false factual assertions—especially those attributed to authoritative third-party sources—may support a trade libel claim.
- When a complaint plausibly alleges actionable disparagement but inadequately alleges special damages, dismissal may be granted with leave to amend to cure the damages pleading defect.

## Conclusion

The court treated the alleged fabricated “government test” and “government rejection” statements as potentially actionable product disparagement, but dismissed the complaint because trade libel requires special damages pleaded with specificity, granting leave to amend to allege concrete, causally connected pecuniary loss.


Testing Sys., Inc. v. Magnaflux Corp., 251 F. Supp. 286 (E.D. Pa. 1966)