Federal Law of Unfair Competition

This chapter opens the substantive discussion of business
tort claims. Although business torts are popularly associated
with state law causes of action such as tortious interference
and disparagement, a substantial body of federal statutory law
reaches competitive conduct for which there may or may not
also be private civil liability under the antitrust laws. This
chapter examines federal laws governing unfair competition,
including section 43(a) of the Lanham Act. Common law
disparagement and defamation are addressed in the following
chapter. – Eds.
A. Introduction
The early common law of unfair competition was a limited concept,
involving the palming off of one’s goods as those of another.1 As
commercial ingenuity produced new forms of piracy, “unfair
competition” expanded in the early part of this century to include not
only misrepresentation of the source of goods but also “misappropriation
of what equitably belongs to a competitor.”2
In recent years the field of unfair competition has continued to
evolve, embracing both “statutory and nonstatutory causes of action
arising out of business conduct which is contrary to honest practice in
industrial or commercial matters.”3 This evolution is reflected in the
1. A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 531
(1935); Goodyear’s Rubber Mfg. Co. v. Goodyear Rubber Co., 128 U.S.
598, 604 (1888).
2. Schecter Poultry, 295 U.S. at 532 (citing Int’l News Serv. v. Associated
Press, 248 U.S. 215, 241, 242 (1918)); see Cottman Transmission Sys. v.
Melody, 851 F. Supp. 660, 672 (E.D. Pa. 1994); cf. RESTATEMENT (THIRD)
OF UNFAIR COMPETITION § 38 (1993) [hereinafter RESTATEMENT].
3. Am. Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 14 (5th
48 Business Tort Law
work of the American Law Institute. Chapters 34-36 of the original
Restatement of Torts contained a comprehensive treatment of unfair
competition, and a tentative draft containing an updated treatment was
prepared in connection with the Restatement (Second) of Torts.
Recognizing that the field of unfair competition had become a specialty
in its own right, “governed extensively by legislation and largely
divorced from [its] initial grounding in the principles of torts,”4 the
Council of the Institute decided to reserve the area of unfair competition
for its own restatement. The new Restatement (Third) of Unfair
Competition represents such an “independent restatement of the law
relating to unfair trade practices,”5 including such topics as deceptive
marketing, trademark infringement and misappropriation of trade secrets
and other business intangibles. Noting that “the boundaries of unfair
competition are not fixed,”6 the Restatement (Third) also includes a
residual category of conduct that “substantially interferes with the ability
of others to compete on the merits of their products or otherwise conflicts
with accepted principles of public policy recognized by statute or
common law.”7
§ 4.1 at 120 (3d ed. 1969)); cf. Standard & Poor’s Corp. v. Commodity
Exch., Inc., 683 F.2d 704, 710 (2d Cir. 1982) (unfair competition “has
been broadly described as encompassing ‘any form of commercial
immorality,’ or simply as ‘endeavoring to reap where [one] has not sown;’
it is taking ‘the skill, expenditures and labors of a competitor’ and
‘misappropriati[ng] for the commercial advantage of one person . . . a
benefit or ‘property’ right belonging to another. The tort is adaptable and
capacious.’”) (quoting Roy Export Co. Establishment of Vaduz,
Liechtenstein v. Columbia Broad. Sys., 672 F.2d 1095, 1105 (2d Cir.
1982)); Nw. Airlines v. Am. Airlines, 853 F. Supp. 1110, 1113 n.4 (D.
Minn. 1994) (unfair competition is not a unique tort, but rather a group of
4. RESTATEMENT,supra note 2, reporter’s mem. at xv (Tentative Draft. No.
1, 1988) (quoting RESTATEMENT (SECOND)OF TORTS, Vol. 4 director’s
introduction (1979)).
5. Id.
6. Id. at xvii.
7. RESTATEMENT,supra note 2, § 1 cmt. g.
Federal Law of Unfair Competition 49
In popular usage, “unfair competition” has been even more
expansively described as a “broad class of business torts,”8 including not
only the traditional forms of misrepresentation and misappropriation, but
also commercial disparagement and defamation, fraudulent conduct in
business transactions and tortious interference with commercial
relationships.9 These and other business torts are addressed in the
chapters that follow.10 The discussion below examines the federal law of
unfair competition, including section 43(a) of the federal Lanham Act
and section 5 of the Federal Trade Commission Act.
B. Section 43(a) of the Lanham Act
Occasionally it is written that “[t]here is no federal law of unfair
competition.”11 Such statements are best read advisedly. As the
Supreme Court has observed, the Lanham Act “was intended to make
‘actionable the deceptive and misleading use of marks,’ and ‘to protect
persons engaged in . . . commerce against unfair competition.’”12
Although the Lanham Act is primarily associated with the federal law
pertaining to the infringement of registered trademarks and service
8. Union Nat’l Bank of Tex. v. Union Nat’l Bank of Tex., 909 F.2d 839, 843
n.10 (5th Cir. 1990) (quoting Keebler Co. v. Rovira Biscuit Corp., 624
F.2d 366, 372 (1st Cir. 1980)).
9. Taylor Pub’g Co. v. Jostens, Inc., 216 F.3d 465, 486 (5th Cir. 2000); W.
ed. 1984); RESTATEMENT,supra note 2, § 1.
10. See Chap. 4 (commercial disparagement and defamation), Chap. 5 (tortious
interference), Chap. 6 (fraud and misrepresentation), Chap. 7
(misappropriation of trade secrets).
11. Wich ita Clinic, P.A. v. Columbia/HCA Healthcare Corp., No. 96-1336-
JTM, 1997 WL 225966, at *7 (D. Kan. 1997); Nw. Power Prods., Inc. v.
Omark Indus., 576 F.2d 83, 88 (5th Cir. 1978). It is more accurately said
that the federal courts have “long resisted [the] temptation to create a
federal common law of unfair competition.” George R. Whitten, Jr., Inc.
v. Paddock Pool Builders, Inc., 508 F.2d 547, 560 (1st Cir. 1974) (footnote
omitted); cf. Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 670 (Fed.
Cir. 1988) (“there is no federal common law of unfair competition”) (citing
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-79 (1938) (“There is no
federal general common law.”)).
12. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 123 S. Ct.
2041, 2045 (2003) (quoting 15 U.S.C. § 1127); Two Pesos, Inc. v. Taco
Cabana, Inc., 505 U.S. 763, 768 (1992) (quoting 15 U.S.C. § 1127).

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