What Is an Unfair Competition Tort?

In the legal field, the word “tort” is a very broad term that means any cause of action for any sort of injury/damage inflicted by the actions of a person or business. The injury caused can be physical, such as an injury to a person or damage to physical property. The injury caused can also be intangible, such as injury to reputation, and injury/damage to intangible property, such as tarnishment of the trademark. The actions causing injury/damage can be intentional, reckless, or negligent. A typical car accident is a type of tort where a person might be injured in the accident and the vehicle might be damaged.

Unfair competition is another type of tort where a person or business uses unfair business and marketing tactics to injure another business. General examples include:

Use of false and misleading advertising
Use of false and misleading labeling of products
Infringement of trademarks and branding
Business defamation, such as falsely stating that a competitor is under criminal investigation or is filing for bankruptcy
Theft of trade secrets
In some circumstances, tortious interference with a business contract or business opportunity
Cybercriminal activity like hacking, cyber-extortion/blackmail, unauthorized access to computer systems, and other forms of corporate spying and espionage
Cyber-squatting on internet domain names
Bribing public/governmental officials and other forms of unlawful influence
Poaching of a competitor’s employees using unlawful means — “unlawful” might mean violating contractual agreements
Solicitation of a competitor’s clients using unlawful means

As can be seen, there are many types of unfair competition. As can be further seen, many forms of unfair competition are also criminal in nature.

Note that most competition between businesses is NOT unfair and will not result in a legal claim for the tort of unfair competition. For example, if a competitor uses reverse engineering of another company’s new product to create a competing similar product, that is not unfair competition even though the other company might suffer lost sales. If your business has been the victim of unfair competition, you can sue in State or Federal courts and recover monetary compensation for the injuries suffered by your business. You will need the legal services and guidance of experienced commercial litigation attorneys like the ones at Revision Legal. Call for a consultation at 231-714-0100 or 855-473-8474. We are lawyers specializing in punishing unfair competition.

Various forms of unfair competition are actionable as litigation based on judge-made law. But most practices that are deemed unfair competition are also actionable based on statutes and written laws. For example, at the federal level, the Federal Trade Commission Act prohibits various forms of unfair competition, including false and misleading advertising. Recently, the Federal Trade Commission (“FTC”) has taken action against the misleading use of internet influencers. The FTC has stated that if an influencer is being paid or compensated in some manner, such compensation must be prominently disclosed. Otherwise, the business and the influencer are engaged in false and misleading advertising. There are many similar statutes enacted in nearly every State.

Contact the Business Litigation Attorneys at Revision Legal

For more information, contact the experienced Business Litigation Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.

Federal Law: The Lanham Act’s Unfair Competition Provisions

At the federal level, Section 43(a) of the Lanham Act, 15 U.S.C. section 1125(a), is the primary vehicle for unfair competition claims that involve false designations of origin and false advertising. Unlike Section 32 — which applies only to registered marks — Section 43(a) is available even to owners of unregistered marks and trade dress. Courts have interpreted Section 43(a) broadly to cover false or misleading statements of fact about one’s own or another’s goods or services, misrepresentations of geographic origin, reverse passing off, trade dress infringement, and false advertising that is likely to deceive a substantial segment of the audience and has influenced purchasing decisions.

A claim for false advertising under Section 43(a) requires the plaintiff to prove that the challenged statement is either literally false or, while literally true, is misleading. In Pizza Hut, Inc. v. Papa John’s International, Inc., 227 F.3d 489 (5th Cir. 2000), the court held that the slogan ‘Better Ingredients, Better Pizza’ was non-actionable puffery. By contrast, a statement like ‘Our product is clinically proven to reduce cholesterol’ is a specific factual claim subject to Lanham Act scrutiny.

The Federal Trade Commission Act

Section 5 of the Federal Trade Commission Act, 15 U.S.C. section 45, declares unlawful unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce. The FTC has expansive authority to investigate and prosecute unfair competition at the federal level, including deceptive advertising and marketing claims, anticompetitive conduct and market manipulation, misleading influencer endorsements and undisclosed paid promotions, and deceptive subscription and auto-renewal practices. The FTC Act does not provide a private right of action — private parties cannot sue under the FTC Act directly. However, many state consumer protection statutes are modeled on the FTC Act and do provide private rights of action.

Trade Secret Misappropriation as Unfair Competition

Theft of trade secrets is both a form of unfair competition and, since 2016, a federal crime under the Defend Trade Secrets Act (DTSA), 18 U.S.C. section 1836. A trade secret is defined broadly as any information that derives independent economic value from not being generally known and is subject to reasonable efforts to maintain its secrecy. Misappropriation includes both theft of trade secrets and the use or disclosure of trade secrets obtained through improper means or in breach of a duty of confidence.

The DTSA provides significant remedies for trade secret misappropriation, including injunctive relief, damages for actual loss and unjust enrichment, and — in cases of willful and malicious misappropriation — exemplary damages of up to twice the actual damages plus attorneys’ fees. The DTSA also includes an ex parte seizure provision allowing courts to order the seizure of property to prevent propagation or dissemination of the trade secret without advance notice to the defendant.

Remedies for Unfair Competition Claims

The remedies available in an unfair competition case depend heavily on the theory of liability and the jurisdiction. Common remedies include:

Injunctive relief: A court order stopping the unfair competitive practice; this is often the most valuable form of relief because it immediately stops the harm
Actual damages: Compensation for provable economic losses caused by the defendant’s conduct
Disgorgement of profits: Recovery of the defendant’s profits earned through unfair means
Punitive damages: Available in some jurisdictions for willful or malicious unfair competition
Attorneys’ fees: Available under the Lanham Act in exceptional cases and under many state statutes in cases involving willful misconduct

If your business has been harmed by a competitor’s unfair practices — false advertising, trade secret theft, trademark infringement, or other wrongful conduct — the commercial litigation attorneys at Revision Legal are equipped to pursue aggressive enforcement. Call (855) 473-8474 or contact us online to discuss your situation.