Running the gamut from A to B: federal trademark and false advertising law.

• Author: Tushnet, Rebecca

The Lanham Act bars trademark infringement and false advertising in nearly identical and often overlapping language. In some circumstances, courts have interpreted the two provisions in the same way, but in other areas there has been significant doctrinal divergence, often to the detriment of the law. This Article argues that each branch of the Lanham Act offers important lessons for the other. Courts should rationalize their treatment of implied claims, whether of sponsorship or of other facts; they should impose a materiality requirement, such that the only unlawful trademark and false advertising claims are those that actually matter to consumers; and in false advertising cases, they should recognize that competitors have sufficient interests to confer standing when the advertisers' false statements are doing harm, rather than imposing increasingly elaborate barriers to suit. The present practice of interpreting the same language in substantially different ways lacks justification and has the effect of promoting the interests of the most powerful companies, whether they are asserting claims of trademark infringement against smaller entities or defending themselves against false advertising claims by competitors.

INTRODUCTION I. THE LANHAM ACT II. WHAT DOES THAT MEAN? IMPLICATION AND THE LANHAM ACT A. Trademark's Overexpansiveness B. Implication in False Advertising Cases: Pragmatics and Doctrinal Categories C. A More Persuasive Role for Implications in Trademark 1. Similar Treatment for All Lanham Act Claims 2. The Explicit/Implicit Divide as a Pragmatic Error-Avoidance Rule 3. Other Costs of Protecting Consumers D. A More Persuasive Role for Implications in False Advertising III. WHAT TRADEMARK SHOULD LEARN FROM FALSE ADVERTISING: MATERIALITY A. False Advertising Precedents B. Materiality in Trademark C. Ending the Materiality Divide 1. The Difference Materiality Makes in Practice 2. Restoring Materiality to Rationalize the Law 3. Details of Implementation IV. WHAT FALSE ADVERTISING SHOULD LEARN FROM TRADEMARK: COMPETITION A. In Trademark B. False Advertising's Wrong Turn CONCLUSION INTRODUCTION

McDonald's advertises a Monopoly-themed contest with millions of dollars in high-value prizes, as well as millions more in small prizes. (1) In fact, however, perfidious contractors conspire to allocate the high-value prizes to people they choose, meaning that ordinary consumers have no chance to win. (2) A class of Burger King franchisees, alleging substantial lost business as a result of the contest, sues McDonald's for false advertising but loses a motion to dismiss on the pleadings because the court concludes, without hearing any evidence, that it would be too difficult for the class to show the precise extent to which it had been harmed. (3)

McDonald's sues a dentist's office, McDental, for causing confusion about whether McDonald's approved or endorsed the dental office. (4) McDonald's wins without having to provide evidence that consumers cared about any affiliation or evidence that it had been harmed, even though the office had been in existence for nearly a decade. (5) Now add in one more fact: in both cases, the same federal law was the basis for suit. How can this be?

The Lanham Act, enacted in 1946 and significantly amended several times since, establishes federal trademark law as well as a private cause of action for false advertising more generally. (6) Along with prohibiting infringement of registered trademarks, the Lanham Act protects unregistered trademarks and indications of source against conduct likely to cause confusion as to source or sponsorship, in a provision now known as section 43(a) (1) (A). (7) Congress confirmed by amendment that the Lanham Act's false advertising provision, now known as section 43(a) (1) (B), bars both false statements about an advertiser's own goods or services and false statements about another's goods or services--false boasting and false attacks, respectively. (8)

As their designations indicate, these provisions are next to one another in the U.S. Code. Their wording is nearly identical. Language in both provisions bars "any word, term, name, symbol, or device, ... or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact" that either is likely to cause confusion about the origin or sponsorship of the defendant's goods or services (trademark) or misrepresents the nature, characteristics, qualities, or geographic origin of anyone's goods or services (false advertising). (9) For certain issues--mainly preliminary relief, remedies, and survey evidence--courts have drawn freely on false advertising precedents to decide trademark cases, and vice versa. (10) But in other important areas of the law, doctrine has proceeded as if trademark and false advertising were two entirely separate bodies of law, despite their common heritage. (11)

This Article challenges that separation. It argues in particular that false advertising law, though vastly undertheorized compared to trademark law, has several important lessons for trademark. Right now, trademark doctrine has difficulty defining its proper scope. Instead of reinventing the wheel (and continuing down the wrong track), trademark law should reclaim a few ideas from false advertising law about the importance of implications and materiality. Reciprocally, false advertising doctrines could benefit from trademark law's greater flexibility and clearer ideas about values that might counterbalance a plaintiffs claim to be acting in the interests of deceived consumers. Trying to understand the Lanham Act solely through the lens of trademark law is like trying to write a story with only half the alphabet. False advertising needs to take an equal role. This Article suggests steps toward that goal.

1. THE LANHAM ACT

   A bit of history is essential to understanding the problem. The Lanham Act was conceived as a federal trademark statute, protecting marketplace participants against unfair competition. (12) Consumers are generally presumed to care about the origin or the brand-specific characteristics of a product. A Snickers is not just any chocolate-peanut-nougat confection, and a buyer is entitled to get a genuine Snickers bar if she wants one, not a counterfeit. Thus, trademark infringement is a type of false advertising--a false claim of origin, or perhaps a false claim about a product's characteristics.

   From the beginning, the Lanham Act prohibited false claims in language that extended beyond trademark. Some circuits initially limited the scope of the Act to cases in which an advertiser made false statements about its own products by analogizing to situations in which the advertiser used an infringing mark to identify its own products. (13) In those circuits, false statements about a competitor's product were the province of state trade libel and product defamation law, (14) which were and remain substantially more limited in scope than the Lanham Act because of their scienter requirements. (15) In 1988, Congress amended the Lanham Act to make clear that false statements about anyone's products or services were actionable. (16)

   While courts limited the false advertising provisions of the Lanham Act, they simultaneously interpreted trademark law expansively by treating infringement as a strict liability cause of action, among other things. Courts generally construed the Lanham Act to follow common law concepts of infringement, and so it was with intent. Intent to confuse could justify an inference that consumer confusion was likely, but even innocent intent would not save a defendant whose use was likely to cause confusion. (17) When courts then confronted nontrademark Lanham Act claims, they imposed strict liability for false advertising as well. (18)

   Gilbert Weil, "an early advocate of expansive recovery for false advertising under [section] 43(a)," predicted that the standards for evaluating false advertisers and trademark infringers would converge. (19) Weil wrote that once falsity was established, courts would use the same tools to assess materiality and likely injury that they used to evaluate likely confusion in a trademark case. (20) For example, courts could determine that an advertiser wouldn't spend money making a claim unless it thought the claim would affect sales, thus presuming materiality. (21) Likewise, once a plaintiff showed that an ad was literally false, the plaintiff wouldn't need to provide evidence that consumers were actually deceived, just as a trademark plaintiff wouldn't need to show actual confusion to prevail. (22) As Weil anticipated, unlike the common law, (23) success today under section 43 (a) does not require evidence of specific harm to obtain injunctive relief--a "mere likelihood of deception will suffice." (24)

   Lillian BeVier, writing nearly twenty years ago, criticized these developments as unwarranted expansions of the common law with respect to false advertising. (25) I think BeVier understated the importance of nearly identical statutory language because such language reinforced the relationship between trademark infringement and other types of false advertising under federal law. The Lanham Act targeted consumer deception resulting in harm to competitors, not classical fraud. Once one accepts that the Lanham Act provides a cause of action for more than trademark infringement, we have left the common law--in which competitors, as opposed to consumers, rarely had fraud claims against lying advertisers--behind. This development was also consistent with the modern experience of large-scale consumer advertising, which was in many ways unlike the traditional one-off fraud involving a single seller's deliberate misrepresentation to a single consumer. Mass markets both require and justify a probabilistic examination of the overall effect on consumers (that is, likely confusion) rather than a case-by-case examination of...