Private Remedies for False or Misleading Advertising: Lanham Act Section 43(a)

• Pages: 1203-1321

1203

CHAPTER VII

PRIVATE REMEDIES FOR FALSE

OR MISLEADING ADVERTISING:

LANHAM ACT SECTION 43(A)

A. Introduction

The federal Lanham Act provides a private right of action to a

business whenever its competitor or another market participant

disseminates a false or misleading description of products or services that

proximately causes a competitive harm. The Lanham Act’s prohibition of

false or misleading statements was enacted “to stop the kind of unfair

competition that consists of lying about goods or services.”1 The statute

provides that any person who uses “in connection with any goods or

services . . . any false description or representation, including words or

other symbols tending falsely to describe or represent the same . . . shall

be liable in a civil action by any person . . . who believes that he is or is

likely to be damaged by the use of such false description or

representation.”2 Section 43(a) of the Lanham Act extends broadly to any

“false or misleading description of fact, or false and misleading

representation of fact” that “misrepresents the nature, characteristics,

qualities, or geographic origin of [the advertiser’s] or another person’s

goods, services, or commercial activities.”

Courts generally have applied a five-factor test to evaluate claims

asserted Courts require that a plaintiff demonstrate that: (1) the defendant

made a false or misleading statement of fact; (2) the statement actually

deceives or is likely to deceive a substantial segment of the advertising

audience; (3) the subject of the statement is material to the decision to

purchase the goods; (4) the statement relates to goods entering interstate

commerce; and (5) the statement caused actual or probable injury to the

plaintiff.

Under this test, Section 43(a) reaches false representations of fact as

long as they are promotional in nature, that is, if they are intended to

induce a sale. The Lanham Act applies broadly to any statement

1. Castrol, Inc. v. Pennzoil Co., 987 F.2d 939, 941 (3d Cir. 1993) (quoting

U-Haul Int’l v. Jartran Inc., 681 F.2d 1159, 1162 (9th Cir. 1982)).

2. 15 U.S.C. § 1125(a).

Position 5271602567 ABA-tx-Consumer Vol2 16-03-28 16:23:53

1204 CONSUMER PROTECTION LAW DEVELOPMENTS

disseminated into interstate commerce, including “traditional”

advertising (print, radio, billboard, broadcast and the like), verbal

statements by sales representatives (provided they are sufficiently

widespread), website and social media statements, point of sale

materials, letters, emails and trade show materials.

An actionable claim can be made expressly or implicitly, with

implied claims usually demonstrated by consumer survey data that shows

what messages consumers “take away” from the advertising. Defenses

include truth (i.e., that the advertising statement is not “false or

misleading”), unclean hands, and puffing or immateriality (i.e., that the

statement is a matter of opinion that cannot be measured as true or false,

obvious parody, or similar types of fluff claims that are not likely to have

a material influence purchasing decisions).

Remedies for Lanham Act violations include preliminary

injunctions, , money damages and or disgorgement of profits for the

competitive harm caused, corrective advertising, and recovery of

attorneys’ fees in exceptional cases.

This Chapter will discuss the foregoing concepts and provide case

illustrations.

B. Background

1.Common Law and Legislative History

Prior to the enactment of the Trademark Act of 1920,3 the

predecessor to the Lanham Act, the only recourse an aggrieved party had

for an alleged false or deceptive advertising or marketing claim was

under state unfair competition law or the common law. Because courts

generally recognized only “palming off’ claims (, i.e., claims that the

defendant was misrepresenting its goods as those of the plaintiff) as

actionable under these state laws, their use was circumscribed

significantly.4 Moreover, even when a plaintiff was able to establish the

falsity of the claim, courts often denied relief on “causation” grounds,

reasoning that unless the plaintiff was the “single source” of the product,5

3. Trademark Act of 1920, 41 Stat. 533 (1920).

4. See Am. Washboard Co. v. Saginaw Mfg. Co., 103 F. 281, 284-85 (6th

Cir. 1900).

5. See, e.g., Ely-Norris Safe Co. v. Mosler Safe Co., 7 F.2d 603 (2d Cir.

1925), rev’d, 273 U.S. 132 (1927). In Ely-Norris, the plaintiff sold a safe

with an explosion chamber. The defendant sold a safe that did not have

such a chamber but represented that it did. The court denied relief

Position 5281602567 ABA-tx-Consumer Vol2 16-03-28 16:23:53

PRIVATE REMEDIES 1205

or had an “exclusive property right” in the product or product name at

issue, 6the plaintiff could not prove that “but for” the defendant’s

deception customers would have bought the plaintiff’s product instead of

that of any of the plaintiff’s competitors.

The first applicable federal statute, the Trademark Act of 1920,

established a private cause of action for false designations of origin.7

However, the statute still had substantial limitations. First, because it was

limited to false designations of origin, the statute did not cover other

false or misleading representations. Second, the statute conferred a right

to sue only upon people, firms, and corporations from the geographic

area falsely indicated as the origin of the product. Finally, in order to

prevail, the plaintiff still had to establish the defendant’s willfulness and

because other competitors in the market also had an explosion chamber,

and thus there was no proof of the plaintiff’s loss of sales, as

distinguished from its competitors. Id. at 604.

6. See also N.Y. & Rosendale Cement Co. v. Coplay Cement Co., 44 F. 277,

279 (E.D. Pa. 1890) (because plaintiff did not have an “exclusive right” in

the name at issue—Rosendale Cement—it could not prevent defendant

from labeling its product “Rosendale Cement,” even though the product

was not from Rosendale). But see Pillsbury-Washburn Flour Mills Co. v.

Eagle, 86 F. 608, 629 (7th Cir. 1898) (although plaintiffs had no

exclusive right to use the geographical names of Minneapolis and

Minnesota, the court upheld an injunction prohibiting defendants from

using “Minneapolis, Minnesota” as part of their brand name).

7. Section 3 of the Act of 1920 read:

That any person who willfully and with intent to deceive,

affix, apply, or annex, or use in connection with any article

or articles of merchandise, or any container or containers of

the same, a false designation of origin, including words or

other symbols, tending to falsely identify the origin of the

merchandise, and shall then cause such merchandise to enter

into interstate or foreign commerce, and any person who

shall knowingly cause or procure the same to be transported

in interstate or foreign commerce or commerce with Indian

tribes, or shall knowingly deliver the same to any carrier to

be so transported, shall be liable to an action at law for

damages and to an action in equity for an injunction, at the

suit of any person, firm, or corporation doing business in the

locality falsely indicated as that of origin, or in the region in

which said locality is situated, or at the suit of any

association of such persons, firms or corporations.

Position 5291602567 ABA-tx-Consumer Vol2 16-03-28 16:23:53