L. Unfair Competition

• Library: South Carolina Business Torts (SCBar) (2021 Ed.)

L. UNFAIR COMPETITION

While South Carolina has not expressly abolished the common law claim for unfair competition, use of the claim has become scarce if not completely unused. Under South Carolina law, a claim of common law unfair competition has traditionally been linked to one of common law trademark infringement or intellectual property.⁵⁰¹ In fact, courts often discuss them both as one cause of action.⁵⁰²

It is unclear whether a finding of trademark infringement is necessary — or merely sufficient — for a finding of unfair competition. While some cases indicate that unfair competition can be found, although rarely ruled upon, without an instance of trademark infringement, other courts appear to require the presence of a valid, protectable mark as a pre-condition to a claim for common law unfair competition.⁵⁰³

Commentators have stated that a claim for common law unfair competition can encompass a wide variety of unlawful conduct, including: "use of another company's trademark, logo, slogan, labeling, packaging, advertising, or any other indicia of origin of source of a good or service."⁵⁰⁴ Additionally, common law unfair competition "protects companies from various types of commercial tort, such as trade disparagement and interference with prospective business relations."⁵⁰⁵ The Restatement (Third) of Unfair Competition § 1 (1995) provides that the "unfair competition" encompasses (1) deceptive marketing, (2) infringement of trademarks and other indicia of identification, and (3) appropriation of intangible trade values, including trade secrets and the right of publicity. Again, however, practitioners should be wary of the fact that, in South Carolina, it is unclear whether a finding of trademark infringement is necessary — or merely sufficient — for a finding of unfair competition.

1. Origin and History

"As an initial matter, courts in the Fourth Circuit have effectively found that there is no federal common law for unfair competition or deceptive trade practices."⁵⁰⁶ Thus a cause of action for unfair competition in South Carolina "can arise only under the Lanham Act or the common law of South Carolina."⁵⁰⁷ While use of common law unfair competition is still allowed in South Carolina, the adoption of the South Carolina Unfair Trade Practices Act ("SCUTPA") in 1971 appears to have made a claim for common law unfair competition scarce.

Under the SCUTPA, a person can bring an action for unfair or deceptive practices or unfair methods of competition.⁵⁰⁸ Most claims for unfair competition are typically formatted in the manner of a claim under the SCUTPA or for intentional interference with a contract without expressly indicating so. Thus, it may be the case that a claim for common law unfair competition is obsolete.

2. Trademark Infringement Claim by Another Name?

While the elements of both unfair competition and trademark infringement are decidedly similar, there is a distinction between the two causes of action.⁵⁰⁹ "It is often said that the law of trademark infringement is part of and included in the broader law of unfair competition. However, the law of trademarks is governed by federal statutes, while the related law of unfair competition is of common law origins."⁵¹⁰ South Carolina courts recognize that "[i]t is clear that the action for unfair competition does embrace the law of trademark infringement and extend beyond it."⁵¹¹ Unfair competition, however, "is a somewhat more comprehensive field, developed under the common law," and it allows for "a great deal more flexibility and [courts] may consider a wider number of factors in an unfair competition controversy" as opposed to that of a trademark infringement.⁵¹² "Possible confusion in the minds of the buying public is at the core of the law of trademark infringement. Likewise, the hallmark of that portion of the law of unfair competition which deals with trademarks is possible confusion as to the source of goods."⁵¹³

3. Factors to Consider

The question involved in an unfair competition analysis is: "'Has the plaintiff's legitimate business been damaged through the acts of the defendant which a court of equity would consider unfair?'"⁵¹⁴ Courts have acknowledged that "factors bearing on unjust enrichment are frequently considered by the courts in unfair competition controversies."⁵¹⁵

As most courts treat unfair competition and trademark infringement the same, the factors to be considered in an unfair competition analysis are quite similar to those in a trademark infringement analysis.⁵¹⁶

The test for trademark infringement set forth in 15 U.S.C. § 1114(1), is whether the use of the accused copy or colorable

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