The opinion of the court was delivered by: VIRGINIA A. Phillips United States District Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW [Fed. R. Civ. P. 52]
This case was tried to a duly-empaneled jury and simultaneously the Court as to the equitable issues on October 18, 19, 20, 21, 25, 26, 27, 28, and 31, 2011. The jury returned a special verdict on the questions submitted to it on October 31, 2011, finding in favor of Plaintiff K&N Engineering, Inc., on the Complaint and in favor of Counter-Defendant K&N Engineering, Inc., on the Counterclaims. Plaintiff submitted a proposed judgment and Findings of Fact and Conclusions of Law, and the Court heard argument on November 16, 2011, regarding Spectre Performance's objections thereto, and also considered the subsequently filed objections and responses thereto (Doc. Nos. 293-96). Having considered all the evidence presented by the parties, as well as the argument and briefing by counsel, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52 as to the equitable issues and relief sought in the Complaint.
1. K&N and Spectre sell competing automotive air intake products - high performance washable air filters (including those replacing original equipment manufacturer ("OEM") disposable air filters) and high performance air intake systems, which replace the entire factory-installed air path to the engine and include an air filter.
2. K&N is an inventor, manufacturer, distributor, and the leading innovator of cotton gauze reusable air filters for use in automobiles and motorcycles. K&N has sold more than 32 million reusable air filters since 1969; it sells more than 3,000 different cotton gauze air filters.
3. K&N also designs, builds, and tests air intake systems. K&N currently manufactures more than 600 different air intake systems. Since 1992, K&N has sold more than 2.2 million air intake systems in the United States and abroad.
4. Spectre began selling cotton reusable air filters in or about 2004, and it began selling complete air intake systems in or about 2007. Spectre's catalog on its website includes about 142 different air filters and about 31 different air intake systems (exclusive of air intake systems that customers may build using Spectre's modular intake kits).
5. Reusable, high performance air filters and air intake systems are added to vehicles as "upgrade" or "premium" products, replacing disposable OEM filters and stock air intakes.
6. These air filters and air intake systems are designed to reduce the restriction on the amount of air flowing into a vehicle's engine caused by the stock air filter and intake, and thereby potentially increasing the vehicle's engine power.
7. The restrictiveness of air filters is typically measured by the air flow they allow, measured in cubic feet per minute ("CFM") at a particular pressure differential. Engine power is typically measured in horsepower ("HP").
8. Air intake systems are not legal for highway use in California for a particular automotive application (model, make, year, and engine size) unless the California Air Resources Board ("CARB") has issued an Executive Order for that particular application. See Cal. Veh. Code § 27156. Many air intake systems will fit more than one vehicle application.
9. Sellers of air intake systems for applications as to which there is no Executive Order are required to include a disclaimer of limitations on sale or use of the systems with every advertisement in California that makes clear that the systems are not legal for highway use in California. See 13 Cal. Code Reg. § 2222.
10. The restriction of air flow created by an automotive filter or air intake system creates an air pressure differential between two points in an air filter system, usually from a point upstream from the filter to a second point just downstream from it. This pressure differential is commonly referred to as the "pressure drop" and it is commonly measured in inches of water.
11. For any given rate of air flow, a less restrictive filter will create a smaller pressure drop.
Conversely, at a constant pressure drop, a less restrictive filter will allow a higher air flow rate.
12. Therefore, the relative restrictiveness of different air filters can be compared by comparing the air flow through the filters, measured at the same pressure drop and in the same manner. Air flow measurements are meaningless without reference to the pressure drop at which they were taken.
13. K&N, Spectre, and their competitors, use chassis dynomometer ("dyno") tests to evaluate the performance of their own parts and competitors' parts, including air intake systems.
14. One requirement for reliable comparative dyno testing is the control of a number of variables that can affect test results. These variables include air intake and coolant temperature, under-hood temperature, oil temperature, air/fuel ratio, ignition timing or spark advance, tire pressure, condition of the engine, barometric pressure, use of shop fans, and tie down tension.
15. K&N and Spectre have asserted the same four claims for relief against each other: (1) false advertising (15 U.S.C. § 1125(a)); (2) statutory false advertising (Cal. Bus. & Prof. Code §§ 17500 et seq.); (3) statutory unfair competition (Cal. Bus. & Prof. Code §§ 17200 et seq.); and (4) common law unfair competition.
16. The parties' claims for false advertising under 15 U.S.C. § 1125(a) and common law unfair competition are to be decided by the jury. The parties' claims for statutory false advertising under Cal. Bus. & Prof. Code §§ 17500 et seq. and statutory unfair competition under Cal. Bus. & Prof. Code §§ 17200 et seq. are to be decided by the Court.
A. K&N's Claims Against Spectre
17. K&N's claims against Spectre are based upon four different allegedly false and misleading advertising claims made by Spectre: (a) fuel economy claims; (b) filtration claims; (c) performance (horsepower and air flow) claims; and (d) claims relating to the pollution control legality of Spectre intake systems.
18. On product packaging for all of its air filters and its air intake systems, Spectre claims that using a Spectre air filter "Saves Gas." Under the heading "Saves Gas / Ultra Efficient," some of the packaging states that "Government studies show that an efficient air filter can give you up to 10% better fuel economy, which translates to money in your pocket." Spectre has no basis for this claim other than United States government websites. These statements are both false.
19. Since about February 2009, the United States Department of Energy's website has stated:
NEW INFORMATION: Replacing a Clogged Air Filter on Modern Cars Improves Performance but Not MPG A new study shows that replacing a clogged air filter on cars with fuel-injected, computer-controlled gasoline engines does not improve fuel economy but it can improve acceleration time by around 6 to 11 percent. This kind of engine is prevalent on most gasoline cars manufactured from the early 1980s onward.
Tests suggest that replacing a clogged air filter on an older car with a carbureted engine may improve fuel economy 2 to 6 percent under normal replacement conditions or up to 14 percent if the filter is so clogged that it significantly affects drivability.
The effect of a clogged air filter on diesel vehicles will be tested in the near future. http://www.fueleconomy.gov/feg/maintain.shtml.
20. That website posts a February 2009 report, prepared by researchers at the Oak Ridge National Laboratory, entitled "Effect of Intake Air Filter Condition on Vehicle Fuel Economy." Kevin Norman, et al., Effect of Intake Air Filter Condition on Vehicle Fuel Economy, available at http://www.fueleconomy.gov/ feg/pdfs/Air_Filter_Effects_02_26_2009.pdf.
21. The report explains that "clogging the air filter has no significant effect on the fuel economy of the newer vehicles," because "[t]he engine control systems were able to maintain the desired AFR [air to fuel ratio] regardless of intake ...