False Advertising, Unfair Competition & the Lanham Act

Although this blog focuses principally on non-compete cases, I’d like to take a moment to discuss some other areas of competition law.  Competition law is not limited to non-compete cases or antitrust cases.  It also encompasses a variety of claims under the federal Lanham Act (15 U.S.C. §§ 1051, et seq.).  Some people who are familiar with the Lanham Act believe that it is limited to trademark cases.  This may be because the Lanham Act is also referred to as the Trademark Act.  But that’s only part of the story.  The Lanham Act goes beyond trademark and provides a range of different protections and remedies.

For instance, the Lanham Act broadly prohibits unfair competition and false advertising in a commercial context.   Rather than simply quoting the language of Section 1125, we can summarize the applicable part of the statute as follows:  The Lanham Act prohibits everyone from making false, misleading or confusing statements or advertisements in connection with goods and services.

Let’s look at a few examples of the different types of conduct that can be actionable under this Section:

  • False Advertising:

Remember when Skechers created those shoes called Shape-ups?  The commercials and advertisements for Shape-ups – and even the name of the product – all conveyed one central message:  Wearing these shoes will help you shape up and get toned.   Apparently, according to the Federal Trade Commission, Skechers claims even went beyond that:  Sketchers even made claims about weight loss and cardiovascular health.  Unfortunately for Skechers, the Company could not substantiate those claims.  This type of advertising, if untrue or unverifiable, can give rise to claims under the Lanham Act.

But the Act also prevents companies from making false advertisements or false claims about other companies’ products, goods or services.  When considering these type of claims, parties have to understand that the Act does not limit itself to advertising proper, as in television commercials or print advertisements.  The Lanham Act can reach any type of misrepresentation made publicly in the commercial context.  Here is an example: There are two companies, Extreme Racing and Velocity Sport.  Both of these companies make aftermarket products and accessories for high end and luxury cars.  Let’s say both companies make performance exhaust systems.    Extreme Racing and Velocity Sport are arch enemies.  Velocity Sport begins claiming that consumers cannot buy certain products from Extreme Racing because Velocity owns the rights to those products.  Velocity also tells consumers that whatever products Extreme Racing is selling are unauthorized, are not authentic, and are forgeries made in China.  Velocity posts statements to this effect on industry message boards and also communicates this via an email blast to customers and suppliers in the industry.   Under this type of fact pattern, if Velocity’s statements are demonstrably false, then Velocity could be held liable for violating the Lanham Act.

  • Unfair Competition

Section 1125 of the Lanham Act prohibits not only false advertising, but also advertising (and other conduct) that is likely to cause confusion.  Again, to be clear, a plaintiff does not need to have a formal, registered trademark in order to bring a claim under this section.   An example:  A company called Edriver Inc. registers the website www.dmv.org.  Edriver uses the website to offer a variety of services related to car registration, license renewal, car insurance, fighting traffic tickets, viewing driving records, finding DUI lawyers, etc.  As it turns out, consumers – and even some state employees – are confused:  They think that the website is an official website operated by their state’s Department of Motor Vehicles.  A competing company, TrafficSchool.com, which offers many of the same services, sues Edriver for under Section 1125 of the Lanham Act.  There is no technically false advertising at issue in this case, but, the use of DMV.org could cause – and did cause – consumer confusion.

  •  Cybersquatting

The Anticybersquatting Consumer Protection Act is just another name for a Section 1125(d) of the Lanham Act.  In most instances, cybersquatting cases involve registered trademarks.   Obviously, if a company owns the trademark for Papa Johns and someone else starts using PapaJohnsPizza.com, that triggers liability under a variety of Lanham Act provisions (trademark, cybersquatting, unfair competition).  But let’s stay outside of trademark for now.   Outside of trademarks, cybersquatting cases involves the use of personal names.  Section 1125(d) of the Lanham Act protects not only trademarks, but also personal names.  We’ll often see this in the context of a business dispute.  George Katz owns Company A.  Company A and Company B are rivals and have been in a long-running feud.  Company B decides to register http://www.GeorgeKatz.com  and post a bunch of information trashing Company A, its products and its owner.  In this instance, as in many actual cases, the domain is similar to a protected mark (the person’s name).  Once we have established similarity or a likelihood of confusion, the real test is intent:  Was the domain registered or used in bad faith?  In this hypothetical, Company B had no plausible reason to register www.GeorgeKatz.com and was operating in bad faith. That’s cybersquatting.

The takeaway:  Don’t forget the Lanham Act.  Even if you aren’t dealing with a trademark issue, you still may have a claim under the Lanham Act for false advertising, unfair competition, or cybersquatting.  On the flip side, don’t forget to consider the Lanham Act and its ramifications before you advertise or publicly go after a competitor.

Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida.  He focuses his practice on competition, particularly cases involving non-compete, trade secret and antitrust disputes and represents clients in Florida and throughout the country.  He is licensed in all Florida federal and state courts and routinely represents clients in Fort Lauderdale, Miami, West Palm Beach, Boca Raton, Fort Myers, Tampa, Orlando, Jacksonville, and Sarasota.  His office can be reached at 954-332-2380.

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