Federal Lanham Act – What you need to know!

Half Truths can be actionable under the Lanham Act

Under the Lanham Act,  “unfair competition” against a competitor is unlawful, even if it merely deals with so called “½ truths.”  Plaintiff must alleged allege and prove (Carry the Burden of Proof) as to the wrongful conduct, injury and damages sufficient to raise a Lanham Act cause of action.  Here is a look at the law.

Under 15 U.S.C. §1125:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which–

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

In Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) the Court noted that the elements of a Lanham Act § 43(a) false advertising claim are:

(1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product;

(2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience;

(3) the deception is material, in that it is likely to influence the purchasing decision;

(4) the defendant caused its false statement to enter interstate commerce; (arguably newspapers, emails, internet, mail, etc.),

and

(5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products. See Cook, Perkiss and Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 244 (9th Cir.1990); accord ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 964 (D.C.Cir.1990).

To demonstrate falsity within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers. See Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 943, 946 (3d Cir.1993).

Moreover, the United States Supreme Court in POM Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228, 2234, 189 L. Ed. 2d 141 (2014), has also noted the importance of the Lanham Act as a tool to keep the marketplace fair and explained the importance of the private enforcement mechanism available to competitors:

“Competitors who manufacturer or distribute products have detailed knowledge regarding how consumers rely upon certain sales and marketing strategies. Their awareness of unfair competition practices may be far more immediate and accurate than that of agency rulemakers and regulators.” Thus, the “Lanham Act draws upon this market expertise by empowering private parties to sue competitors to protect their interests on a case-by-case basis.” (emphasis added).

In Franklin Mint Co. v. Manatt, Phelps & Phillips, LLP, 184 Cal. App. 4th 313, 348, 109 Cal. Rptr. 3d 143, 173 (2010) the California Court of Appeals held:

“A false advertising claim may be based on a statement that is “literally false, either on its face or by necessary implication,” or a statement that is “literally true but likely to mislead or confuse customers.” (Ibid.) If the statement is literally false, consumer deception is presumed, and there is no need to demonstrate the impact of the advertisement on consumers. (See, e.g., Time Warner Cable, Inc. v. DIRECTV, Inc. (2d Cir.2007) 497 F.3d 144, 153; Johnson & Johnson Vision Care v. 1–800 Contacts (11th Cir.2002) 299 F.3d 1242, 1247; Cashmere & Camel Hair Mfrs. Institute v. Saks Fifth Ave. (1st Cir.2002) 284 F.3d 302, 315.) “Where a statement is not literally false and is only misleading in context, however, proof that the advertising actually conveyed the implied message and thereby deceived a significant portion of the recipients becomes critical.” (William H. Morris Co. v. Group W, Inc. (9th Cir.1995) 66 F.3d 255, 258.)”

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