The Lanham Act
The Lanham act permits a plaintiff to bring a claim of false advertising in federal court. The Lanham provides that “Any person who…uses in commerce any…false or misleading description of fact, which…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.”[1] That’s quite the mouthful so let’s break down the individual requirements courts will consider.
Falsity
Something can be false or misleading in two ways, it can be 1) literally false, or 2) likely to deceive or confuse consumers. Literally false is pretty straight forward, if you can show that an advertisement’s claim is factually impossible, a court may grant relief without considering whether the buying public was actually misled or not. If, however, the ad’s claim doesn’t rise to the level of being patently false, but only misleading, then the plaintiff has some additional work to do. They would have to show that the public was actually mislead with evidence like consumer surveys, lost sales, ect.
One thing to note with literal falsity is that the literally false claim need not be explicit. It can be “conveyed by necessary implication”[2]. An example of this was a suit against BreathAsure capsules. These were pills designed to be swallowed to fight bad breath “at its source”[3]. The court found that ‘at its source’ was literally false as it implied that the stomach was the source of bad breath. So long as a mere implication is ‘necessary’ (i.e., unambiguous) it can still be considered literally false.
Actual Deception or Tendency to Deceive
If a plaintiff cannot show the slam dunk of literal falsity, then they must show that the misrepresentations actually deceived or at least had a tendency to deceive a substantial portion of the intended audience. Courts don’t seem to make a distinction between ‘actual deception’ and ‘tendency to deceive’. They merely establish with this element that some “meaningful evidence of actual confusion”[4] in the marketplace needs to be presented in court, mostly through the use of consumer surveys. Most courts have held that evidence of 15% of consumers being confused is adequate to establish actual deception.[5]
Commercial Advertising or Promotion
In determining whether a representation constitutes commercial advertising or promotion courts use the 4-part Gordon-Breach test.
“In order for representations to constitute ‘commercial advertising or promotion’ […], they must be: (1) commercial speech; (2) by a defendant who is in commercial competition with plaintiff; (3) for the purpose of influencing consumers to buy defendant’s goods or services. While the representations need not be made in a “classic advertising campaign,” but may consist instead of more informal types of “promotion,” the representations (4) must be disseminated sufficiently to the relevant purchasing public to constitute “advertising” or “promotion” within that industry.”[6]
For commercial speech, this test uses the Supreme Court’s definition as that which does “no more than propose a commercial transaction”[7]
The commercial competition standard in part 2 involves who can bring a claim under the Lanham Act and is discussed below.
Part 3 of the test keeps the door open to nontraditional types of promotion. Some examples that met this test in previous cases include e-mails to customers[8], statements in trade publications[9], or even in anonymous memorandum[10].
This broad standard in part 3 is limited by the commercial speech definition in part 1 (with its accompanying First Amendment implications), by keeping the test from straying into areas of constitutionally protected speech, and by part 4, by limiting these nontraditional promotions to only those which would be considered promotion or advertising in that particular industry.
Material to the Consumer
Materiality is defined as “likely to affect a consumer’s choice of or conduct regarding a product. In other words, it is information that is important to consumers.”[11] Materiality can be presumed by the court where the ad “intended the information […] to have an effect.”[12] This is a pretty easy hurdle to overcome. Why would a soda company waste ink placing ‘Delicious!’ on their can’s if they didn’t intend it to have an effect of the consumer. If materiality cannot be presumed, evidence of such must be presented.
Interstate Commerce and Damages
The mention of interstate commerce is simply a result of this being a federal act; and damages must be shown by an actual diversion of sales and a causal connection to the false advertising.
Puffery and Opinion
Mere ‘puffery’ is not actionable. Puffery is an “exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely.”[13] Red Bull’s claim that it’s product will ‘give you wings’ is a good example. Neither are statements of opinion, such as “You’ll love it!”.
Who can bring a claim?
Consumers themselves cannot bring an action under the Lanham Act. Some states provide a statutory avenue of litigation for consumers, and most of those statutes closely follow Lanham Act elements.
Only competitors can bring claims under the Lanham Act[14], but one need not be a direct competitor. In a Lanham Act context, a competitor can be a party who “(1) suffers an injury to a commercial interest in sales or business reputation that is (2) proximately caused by the defendant’s misrepresentation”[15] This definition can lead to examples like Lexmark Int’l, Inc. v. Static Control Components, Inc.
Lexmark, who makes printer cartridges designed to only fit their printers, was accused of false advertising by SCC, who makes the microchips that go into refurbished printer cartridges designed to compete with Lexmark’s cartridges. The point here being that SCC does not produce printers nor printer cartridges and so does not directly compete against Lexmark. Nonetheless, SCC was allowed to bring a claim as SCC showed that Lexmark’s false advertising proximately caused a decrease in sales of refurbished cartridges, and thus decreased sales of SCC’s chips that go in them.
Along with competitors in federal court and consumers in some state courts, the Federal Trade Commission can bring suits on their own against acts of false advertising.
If you have legal questions about False Advertising Laws and how you or your business should comply with them, contact Revision Legal at 231-714-0100.
[1] 15 U.S.C. § 1125(a)(1)(b)
[2] Novartis Consumer Health v. Johnson Johnson, 290 F.3d 578, 587 (3d Cir. 2002)
[3] Warner-Lambert Co. v. Breathasure, Inc., 204 F.3d 87, 88 (3d Cir. 2000)
[4] Novartis Consumer Health v. Johnson Johnson, 290 F.3d 578, 587 (3d Cir. 2002)
[5] Id.
[6] Proctor Gamble Co. v. Haugen, 222 F.3d 1262, 1273 (10th Cir. 2000)
[7] Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 422 (1993)
[8] National Artists Management v. Weaving, 769 F. Supp. 1224, 1226 (S.D.N.Y. 1991)
[9] Semco, Inc. v. Amcast, Inc., 52 F.3d 108, 110 (6th Cir. 1995)
[10]H R Industries, Inc. v. Kirshner, 899 F. Supp. 995, 999 (E.D.N.Y. 1995)
[11] 103 F.T.C. 100, 174 (1984)
[12] Id.
[13] United Ind. Corp. v. Clorox Co., 140 F.3d 1175, 1178 (8th Cir. 1998)
[14] 15 U.S.C. § 1127
[15] Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 118 (2014)