In the

United States Court of Appeals

For the Seventh Circuit

Nos. 11-2260, 11-2375

NEUROS CO., LTD. and AVIATION AND

POWER GROUP INC.,

Plaintiffs-Appellees/

Cross-Appellants,

v.

KTURBO, INC.,

Defendant-Appellant/

Cross-Appellee.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 08 C 5939—John W. Darrah, Judge.

ARGUED SEPTEMBER 5, 2012—DECIDED OCTOBER 15, 2012

Before POSNER, KANNE, and SYKES, Circuit Judges.

POSNER, Circuit Judge. This litigation, now in its fourth

year, is between competing manufacturers of high-speed

turbo blowers used by waste water treatment plants.

The blowers maintain the oxygen dissolved in the

water at a level needed by the aerobic (that is, oxygen-
2 Nos. 11-2260, 11-2375

dependent) bacteria that play a critical role in the treatment process by breaking down organic waste into

carbon dioxide, nitrogen, and water. The plaintiffs operate in the United States as a joint venture under the

name APG-Neuros, and to simplify exposition we’ll

pretend that APG-Neuros is the plaintiff and (for further

simplification) call it Neuros.

Neuros was the first company to offer such blowers to

waste water treatment facilities in North America. That

was in 2006 and two years later the defendant, KTurbo,

began offering its own blowers to those facilities, though

with little success.

In 2008 Neuros won a bidding contest to supply highspeed turbo blowers to a waste water treatment plant

in Utah. KTurbo came in third in the bidding—last,

because there were only three bidders. Disappointed

with the outcome of the bidding contest, the chief executive officer of KTurbo, HeonSeok Lee, prepared a series

of PowerPoint slides and related tables that accused

Neuros of fraud by representing to the Utah purchaser

that its blowers would achieve a “total efficiency” that

Lee claimed, probably correctly, was unattainable.

Waste water treatment plants hire consulting engineers

to select, test, and install the turbo blowers. Lee’s slides

were aimed at those engineers. Here is a typical slide:
Nos. 11‐2260, 11‐2375                                                                         3
4 Nos. 11-2260, 11-2375

Turbo blowers are fans driven by electricity, and they

use a lot of it—and it’s expensive; the cost of electricity

is the second largest cost (after labor) of operating a

waste water treatment plant, and the blowers account

for a substantial fraction of the electricity cost. M/J Industrial Solutions, “Municipal Wastewater Treatment Plant

Energy Baseline Study,” PG&E New Construction Energy

Management Program, pp. 5-6 (June 2003), www.cee1.org/

ind/mot-sys/ww/pge1.pdf (visited Oct. 9, 2012). “Total

efficiency,” the key term in Lee’s slides, is the ratio of

input power (electrical current) to output power (a specified volume of air blown by the blower at a specified

speed). Were there no power loss, making the ratio 1,

total efficiency would be 100 percent. Even 82.5 percent

of total efficiency, the figure that the slide accused

Neuros of claiming to have attained, appears to be unattainable. But Neuros did not make representations of

total efficiency. It made representations of “wire power,”

which is the ratio of an electrical current to work (such

as turning the blades of a fan); but to estimate total efficiency from wire power requires consideration of other

factors as well, such as temperature and humidity.

KTurbo’s PowerPoint presentation states that some

of Neuros’s claims of wire power imply that its efficiency

claims are exaggerated, but these accusations turned out

to be false too. They were based on computational

errors and incorrect assumptions. KTurbo’s expert

argued that the claimed wire power in one Neuros document implied a 2 to 7 percent overstatement of the efficiency of its blowers, but such overstatements do not,

as KTurbo argues, make its defamatory accusations
Nos. 11-2260, 11-2375 5

“substantially truthful.” For KTurbo claimed that the

overstatement was not 2 to 7 percent but at least 15-20

or even 26 percent. There was no evidence of such overstatement; KTurbo’s expert would not support it.

It was from Neuros’s claims of wire power that KTurbo

deduced that Neuros was implicitly claiming a total

efficiency of 82.5 percent. Lee admits that the wire

power claims imply at most a total efficiency of

76 percent, apparently an attainable percentage. 

Had KTurbo merely accused Neuros of “guaranteeing”

unattainable performance, in the sense of warranting it,

this would not necessarily have been an accusation of

fraud. One can warrant a level of performance that one

may not be confident of attaining, for by accepting a

warranty a customer grants the seller an option to pay

rather than perform. Cf. Zapata Hermanos Sucesores, S.A. v.

Hearthside Baking Co., 313 F.3d 385, 389 (7th Cir. 2002);

Oliver Wendell Holmes, Jr., The Common Law 300-02

(1881). The slide we reproduced earlier did describe the

alleged representation that Neuros’s blowers achieve

82.5 percent of total efficiency as a “guarantee.” But

Neuros had never warranted that performance, and so

if it had represented that its blowers were that efficient,

knowing they were not, the representation would

have been fraudulent; and that is what KTurbo claimed.

Lee made his PowerPoint presentation to a number of

the engineering firms that advise waste water treatment

plants on which turbo blowers to buy. Judging from

the fact that KTurbo failed, so far as appears, to wrest

any business from Neuros, the consulting engineers
6 Nos. 11-2260, 11-2375

were not impressed by the slide show. Lee also published his accusations on one of KTurbo’s websites

and sent them to the sales representatives that the company uses to help market its blowers, doubtless hoping

the representatives would convey the accusations to

the engineers whom they visited on KTurbo’s behalf.

KTurbo vowed in correspondence to “break” and “terminate” Neuros. All to no avail. KTurbo was like a gnat

that buzzes annoyingly around a person’s head but

never manages to land and bite.

The suit charges KTurbo with violations of the

Lanham Act and the Illinois Uniform Deceptive Trade

Practices Act, and with defamation, also under Illinois

law. KTurbo filed parallel counterclaims. A bench trial

resulted in a judgment in favor of Neuros on its claim

of defamation and an award of $10,000 in general

damages and $50,000 in punitive damages. The judge

rejected all other claims, including the counterclaims.

KTurbo’s appeal challenges only the judgment for defamation; Neuros’s cross-appeal challenges the dismissal of

its Lanham Act and Deceptive Trade Practices Act claims.

KTurbo argues that even if it defamed Neuros by

false statements (as clearly it did), it had a “qualified

privilege” to do so. This privilege is available in cases in

which the public had an “interest” in the making of the

statements that turned out to be false. Kuwik v. Starmark

Star Marketing & Administration, Inc., 619 N.E.2d 129, 134-

35 (Ill. 1993); Parker v. House O’Lite Corp., 756 N.E.2d 286,

298 (Ill. App. 2001); Haywood v. Lucent Technologies, Inc., 323

F.3d 524, 533 (7th Cir. 2003) (Illinois law); Restatement
Nos. 11-2260, 11-2375 7

(Second) of Torts §§ 593-98A, 598 comments d-f (1977). This

is pretty vague, but we needn’t worry about that in this

case, since the privilege, whatever its precise boundaries,

is forfeited if the statement is made with knowledge of

its falsity or with reckless disregard for the truth

(which courts in defamation cases like to call “actual

malice”—why we don’t know, since “malice” implies

deliberate rather than merely reckless wrongdoing). Kuwik

v. Starmark Star Marketing & Administration, Inc., supra, 619

N.E.2d at 135-36; Naleway v. Agnich, 897 N.E.2d 902, 913 (Ill.

App. 2008); Giant Screen Sports v. Canadian Imperial Bank of

Commerce, 553 F.3d 527, 536 (7th Cir. 2009) (Illinois law);

Restatement, supra, § 600. KTurbo was warned repeatedly,

not only by Neuros but also by disinterested sources,

that its accusations were false; it ignored the warnings

and refused to investigate the truth of the accusations.

Its conduct was not only disreputable but reprehensible.

KTurbo complains perfunctorily about the award of

punitive damages. The general rule is no injury no tort,

McCann v. Hy-Vee, Inc., 663 F.3d 926, 930-31 (7th Cir. 2011),

and there is no evidence that Neuros was injured by

the false claims that KTurbo made. But there are exceptions (which is why we call it the “general” rule). One is

for trespass, because a continuing trespass may ripen

into a prescriptive right and thus deprive a property

owner of title to his land. Another is for defamation

per se, which means, so far as relates to a business

victim, defamation that impugns the defendant’s competence or honesty. Tuite v. Corbitt, 866 N.E.2d 114,

121 (Ill. 2006). And that was the character of KTurbo’s

defamation of Neuros. KTurbo accused it of committing
8 Nos. 11-2260, 11-2375

criminal fraud against its customers. It’s hard to

imagine a more damaging accusation to make against

a business.

When defamation per se is proved, the plaintiff is

entitled both to general damages—which means “compensatory” damages without proof of injury, id.; Van Horne

v. Muller, 705 N.E.2d 898, 903 (Ill. 1998); Restatement,

supra, § 621 comment a—and, if the defendant in committing the defamation was grossly negligent or worse,

to punitive damages as well. Slovinski v. Elliot, 927

N.E.2d 1221, 1224-25, 1228-29 (Ill. 2010). Compensatory

damages without proof of injury sounds like an

oxymoron, though: for what is there to compensate? But

there can never be assurance that an accusation, however

groundless, is not believed by someone, and doubtless

employees or sales reps of Neuros had to answer

questions put to them by consulting engineers, and perhaps even by shareholders of the parent companies,

concerning Lee’s inflammatory accusations. So a

modest award of damages, though not based on

evidence (what kind of “evidence” would enable an

accurate estimate of the type of cost that we’ve

suggested Neuros incurred from the defamation?), can

reasonably be thought compensatory. The judge may

have pulled the $10,000 figure out of his hat, but the

figure is appropriately modest, considering that a

single high-speed turbo blower costs more than $100,000

and that the APG-Neuros joint venture sold some 500

of them in the first few years of its existence.

The punitive damages award of $50,000 was too

small, and though Neuros is not seeking more, we
Nos. 11-2260, 11-2375 9

cannot forbear to note that the conduct of KTurbo was

outrageous. It is a substantial company and should have

been ordered to pay substantial punitive damages. In

ordering the slap-on-the-wrist award that he did the

district judge may have been concerned that any

multiple of general damages greater than five would

run afoul of the Supreme Court’s decisions placing tight

limitations, in the name of due process, on the ratio of

punitive to compensatory damages. In State Farm Mutual

Automobile Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003),

the Court said that “few awards [of punitive damages]

exceeding a single-digit ratio between punitive and

compensatory damages, to a significant degree, will

satisfy due process . . . . [F]our times the amount of compensatory damages might be close to the line of constitutional impropriety.” But the Court quickly added that

there was merely “a presumption against an award that

has a 145-to-1 ratio,” id. at 426 (emphasis added)—the

award the lower court had upheld—and as we explained

in Mathias v. Accor Economy Lodging, Inc., 347 F.3d 672

(7th Cir. 2003), the presumption can be rebutted in

cases in which the award of compensatory damages

is very small, as indeed the Supreme Court had

indicated in the State Farm case, 538 U.S. at 425; see also

BMW of North America, Inc. v. Gore, 517 U.S. 559, 582-83

(1996); Kunz v. DeFelice, 538 F.3d 667, 679 (7th Cir. 2008);

Alexander v. City of Milwaukee, 474 F.3d 437, 454 (7th Cir.

2007). “The proper focus of analysis of the ratio itself is

the adequacy of the combined award of compensatory

and punitive damages to motivate the prosecution of

a meritorious claim. If compensatory damages are slight,
10 Nos. 11-2260, 11-2375

a single-digit ratio is likely to be insufficient.” Gavin v.

AT&T Corp., 464 F.3d 634, 641 (7th Cir. 2006).

 The gravity of the injury to the victim of a wrongful

act is only one consideration in determining a proper

penalty, as is obvious if one thinks of punishments,

often severe, for criminal attempts that inflict no injury

at all. Or if one considers the factors that enter into the

determination of fines for crimes committed by firms

and other organizations. See, e.g., U.S.S.G. § 8C2.4(a). A

principal goal of punishment is deterrence, and in the

Mathias case an award of punitive damages capped at

$20,000 ($40,000 for the two plaintiffs), as urged by

the defendant because that would be four times the

compensatory award, would have had a negligible deterrent effect. That may be true of the award of $50,000 in

this case, considering the potential gains to KTurbo had

it succeeded in expelling its foremost competitor from

the North American market. It should consider itself

fortunate that Neuros hasn’t challenged the adequacy

of the punitive-damages award.

So much for defamation; let us turn to Neuros’s

challenge to the dismissal of its Lanham Act claim. The

dismissal may seem academic given the absence of provable injury, for there is no contention that general

damages may be awarded for violating the Lanham Act,

and the Act limits punitive damages to threefold the

actual damages, 15 U.S.C. § 1117(a)—an even lower ratio

than the punitive-damages award made by the district

judge to punish KTurbo for defamation. But the Act

permits the award of attorneys’ fees to the prevailing
Nos. 11-2260, 11-2375 11

party in “exceptional cases,” id., a term the meaning of

which we struggled with in Nightingale Home Healthcare,

Inc. v. Anodyne Therapy, LLC, 626 F.3d 958 (7th Cir. 2010),

concluding that an award is appropriate if the opposing

party’s “claim or defense was objectively unreasonable—

was a claim or defense that a rational litigant would

pursue only because it would impose disproportionate

costs on his opponent.” Id. at 965. It is also appropriate

when a party’s violation of the Act is especially egregious. See, e.g., BASF Corp. v. Old World Trading Co., 41

F.3d 1081, 1099 (7th Cir. 1994). The determination of

unreasonableness or egregiousness is to be made in

the first instance by the district court, which wasn’t

done in this case because the judge ruled the Lanham

Act inapplicable. If that ruling was error, which we

have now to consider, the case must be remanded for

consideration of whether to award attorneys’ fees—plus

injunctive relief, authorized in the same section of the

Act and also sought by Neuros and denied by the

district court.

Without meaning to prejudge the determination on

remand, we point out that KTurbo persisted in its

false representations to the engineering community

concerning Neuros’s blowers even after the suit was

filed and compelling evidence was presented that the

representations were false. This weighs in favor of an

award of attorneys’ fees by indicating that this part of

KTurbo’s defense (as opposed to its argument that the

Lanham Act was inapplicable because KTurbo was

not engaged in advertising or promotion, a respectable

argument, as we’re about to see) was objectively unrea-
12 Nos. 11-2260, 11-2375

sonable: KTurbo persisted in denying that the slide

show and related marketing activities were deceptive

long after it was evident that the denial was frivolous.

But is the Lanham Act applicable? It’s limited to misrepresentations “in commercial advertising or promotion,”

15 U.S.C. § 1125(a)(1)(B), and in Sanderson v. Culligan

Int’l Co., 415 F.3d 620, 624 (7th Cir. 2005), we held that

three person-to-person communications at trade shows

did not constitute commercial advertising or promotion,

while in First Health Group Corp. v. BCE Emergis Corp.,

269 F.3d 800, 803-04 (7th Cir. 2001), we said that the

statutory term is limited to “promotional material disseminated to anonymous recipients” and that “an advertisement read by millions (or even thousands in a

trade magazine) is advertising, while a person-toperson pitch by an account executive is not,” before

holding that in any event the defendant’s promotional

materials did not make false or misleading representations. In between those two decisions came ISI Int’l, Inc.

v. Borden Ladner Gervais, LLP, 316 F.3d 731, 733 (7th

Cir. 2003), which held that sending letters to the

plaintiff’s business partners, warning them (falsely) that

if they continued dealing with the plaintiff they would

be liable for patent infringement, was not commercial

advertising or promotion.

These cases do not hold that “advertising or promotion” is always limited to published or broadcast materials—an interpretation that would put us at odds with all

seven other federal courts of appeals to have considered

the issue. LidoChem, Inc. v. Stoller Enterprises, Inc., No. 10-
Nos. 11-2260, 11-2375 13

1686, 2012 WL 4009709, at *6 (6th Cir. Sept. 12, 2012);

Podiatrist Ass’n, Inc. v. La Cruz Azul De Puerto Rico, Inc., 332

F.3d 6, 19-20 (1st Cir. 2003); Fashion Boutique of Short Hills,

Inc. v. Fendi USA, Inc., 314 F.3d 48, 57-58 (2d Cir. 2002);

Proctor & Gamble Co. v. Haugen, 222 F.3d 1262, 1273-74 (10th

Cir. 2000); Porous Media Corp. v. Pall Corp., 173 F.3d 1109,

1121 (8th Cir. 1999); Coastal Abstract Service, Inc. v. First

American Title Ins. Co., 173 F.3d 725, 734-35 (9th Cir. 1999);

Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1384-85 (5th

Cir. 1996). All but one of these cases was decided before

Sanderson, and four were decided before First Health,

and there is no suggestion in either Sanderson or First

Health (or for that matter in ISI Int’l) of an intention

to create an intercircuit conflict. The cases from the

other circuits are not inconsistent with the holding in

Sanderson that three person-to-person communications

at trade shows do not add up to commercial advertising or promotion or the holding in ISI Int’l that

letters threatening suit for patent infringement are not

commercial advertising or promotion; and in First

Health the Lanham Act was held applicable.

A classic advertising campaign is not the only form

of marketing embraced by the statutory term “commercial advertising or promotion.” Podiatrist Ass’n

required merely “some medium or means through

which the defendant disseminated information to a

particular class of consumers.” 332 F.3d at 20. And the

most recent case, LidoChem, explained that “the required

level of dissemination to the relevant purchasing

public ‘will vary according to the specifics of the industry.’ ” 2012 WL 4009709, at *6.
14 Nos. 11-2260, 11-2375

If “advertising or promotion” just meant “advertising,”

then “promotion” would do no work in the statute.

More important (because of the frequency of redundant

language in statutes, see, e.g., Lamie v. United States

Trustee, 540 U.S. 526, 536 (2004); Moskal v. United States,

498 U.S. 103, 119-21 (1990) (Scalia, J., dissenting); United

States v. Costello, 666 F.3d 1040, 1049 (7th Cir. 2012);

Brown v. Griggsville Community Unit School District No. 4,

12 F.3d 681, 683-84 (7th Cir. 1993)), there are industries

in which promotion—a systematic communicative endeavor to persuade possible customers to buy the

seller’s product—takes a form other than publishing or

broadcasting. The de facto customers (de facto rather

than de jure because they are the purchasers’ agents,

rather than the purchasers) for high-speed turbo

blowers used in waste water treatment plants are the

consulting engineers who manage the plants’ bidding

and purchasing. Lee’s road show visited most of the

engineering companies that do this, and each show presented promotional materials that trashed Neuros,

KTurbo’s most prominent competitor.

“Negative” ads—ads that denigrate a competitor—are

a conventional though frequently disparaged form of

commercial advertising. KTurbo’s negative ads reached

fewer customers than a conventional campaign of advertising or promotion would have done, but that was

because there are fewer customers for high-speed

turbo blowers in waste water treatment plants than

there are for dog collars. Road shows are a common

method of promotion; it is, for example, the standard

method of promoting IPOs. And remember that some

of KTurbo’s false statements were posted on one of its
Nos. 11-2260, 11-2375 15

websites—a reminder that methods of advertising

and promotion are changing with innovations in communications media; they are no longer, if they ever were,

confined to newspaper and magazine ads, radio and

television commercials, and billboards.

The district court was troubled by the fact that “there

is no evidence that the statements at issue were

presented to any members of the general public.” Well

of course not; members of the general public do not

buy high-speed turbo blowers or advise waste water

treatment plants on the purchase of such blowers. There

is no basis for limiting the Lanham Act to advertising

or promotion directed to the general public, and the case

law does not do that. See, e.g., LidoChem, Inc. v. Stoller

Enterprises, Inc., supra, 2012 WL 4009709, at *8 (applying

the Act to letters sent and statements made to distributors of farm chemicals); Porous Media Corp. v. Pall

Corp., supra, 173 F.3d at 1114 (applying the Act to an

“alert” sent only to large makers of air filters and to

resellers of the filters); Coastal Abstract Service, Inc. v. First

American Title Ins. Co., supra, 173 F.3d at 735 (to statements made only to one of two or three national refinancing companies); Seven-Up Co. v. Coca-Cola Co., supra,

86 F.3d at 1381 (only to independent soft drink bottlers).

What advertising is not directed to subsets of the public

(dog owners in our previous example) rather than to 314

million individuals and millions of firms? One of the

subsets is engineering firms, and others are subsets of

engineering firms such as the civil engineering firms

that were faxed advertisements in CE Design Ltd. v. King

Architectural Metals, Inc., 637 F.3d 721 (7th Cir. 2011).
16 Nos. 11-2260, 11-2375

No one doubted that those advertisements (challenged

under a different statute) were—advertising.

The Lanham Act claim should not have been

dismissed; nor the parallel claim under the Illinois

Uniform Deceptive Trade Practices Act, 815 ILCS 510/1

et seq., a statute generally thought indistinguishable

from the Lanham Act except of course in its

geographical scope, Muzikowski v. Paramount Pictures

Corp., 477 F.3d 899, 907 (7th Cir. 2007); Israel Travel

Advisory Service, Inc. v. Israel Identity Tours, Inc., 61 F.3d

1250, 1259 (7th Cir. 1995); Thompson v. Spring-Green Lawn

Care Corp., 466 N.E.2d 1004, 1013, 1016 (Ill. App. 1984), and

dismissed by the district court on the same ground

as Neuros’s claim under the Lanham Act was dismissed.

AFFIRMED IN PART, REVERSED AND

REMANDED IN PART.

10-15-12