False Advertising Under the Lanham Act
COURTLAND L. REICHMAN AND M. MELISSA CANNADY
alse advertising under the
Lanham Act is an increasingly popular cause of action
because of its broad applicability
and ability to remedy competitive
harm. Section 43(a) of the Lanham Act1 proscribes false statements or representations that are
made in commercial advertising
or promotion, are likely to deceive
consumers, and are likely to cause
Courtland L. Reichman
injury to the plaintiff. The remedies available to a plaintiff under
the Lanham Act include injunctive relief, damages, corrective
advertising, and attorneys’ fees,
although the statute affords the
court broad discretion to fashion
an equitable remedy that fairly
compensates the plaintiff.
Section 43(a) of the Lanham
Act prohibits a wide range of false
or misleading statements or representations. Classic false advertisM. Melissa Cannady
ing claims involve a defendant’s
false or misleading statement
either about its own or a competitor’s product. A variety of
claims fall into these categories—statements based on testing,
unsubstantiated assertions, national advertising campaigns,
and verbal sales pitches to a limited number of consumers.
In franchising, false advertising claims are apparently
being brought with increasing frequency. Conventional franchise systems rely heavily on advertising, using it to differentiate themselves in a crowded market. The ability to redress
false advertising claims is an important weapon that, unlike
other intellectual property claims such as trademark infringement, both franchisees and franchisors can use. Recent cases
have involved large franchisors seeking to enjoin competitors’ false comparative advertising, and franchisees seeking
to enjoin competitors from poaching business with false
claims. Further, developing case law supports false advertising claims by franchisees against unscrupulous franchisors.
This article discusses false advertising claims under the
Lanham Act. It examines the elements of a false advertising
claim, including an analysis of what constitutes an actionable
statement, who has standing to sue under the Lanham Act, and
the remedies available to a successful plaintiff. It also highlights the considerable inconsistency in interpretations of false
F
Courtland L. Reichman (creichman@kslaw.com) and M. Melissa Cannady (mcannady@kslaw.com) are attorneys with the firm of King &
Spalding in Atlanta, Georgia.
advertising law among the federal circuit courts. The U.S.
Supreme Court has yet to address false advertising law under
the Lanham Act, and, as a result, the circuits have developed
inconsistent and often contradictory approaches to several
core issues. This article discusses the predominant approaches
and evaluates possible ways to harmonize the case law.
Statutory Bases for Claims
The Lanham Act establishes a federal cause of action for,
among other things, false advertising:2
(a)(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word,
term, name, symbol, or device, or any combination thereof, or any
false designation of origin, false or misleading description of fact,
or false or misleading representation of fact, which—
....
(B) 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.3
The plain language of the statute permits any person likely to be damaged to assert a claim based on a false or misleading statement of fact about a product, service, or
commercial activity. This deceptively simple language has
given rise to a significant body of law that is relatively unsettled and inconsistent in many respects.
Most courts recite the elements of a Lanham Act false
advertising claim as follows:
(1) the defendant made a false or misleading statement of fact in a
commercial advertisement about a product;
(2) the statement either deceived or had the capacity to deceive a
substantial segment of potential consumers;
(3) the deception is material, in that it is likely to influence the consumer’s purchasing decision;
(4) the product is in interstate commerce; and
(5) the plaintiff has been or is likely to be injured as a result of the
statement.4
This list of elements appears to be an historical accident.
It originated in a 1974 district court decision, which did not
analyze the elements and cited as its only authority a 1956
law review article that had formulated the elements based
solely on pre-Lanham Act case law.5 Courts have widely
repeated these elements without analysis, but have rarely (if
ever) applied them as stated.
These five elements do not reflect the actual, substantive
elements required by courts to prove a Lanham Act false
advertising claim. Claimants rarely must show “materiality”
in the sense of proving that the advertisement had a likely
effect on consumers’ purchasing decisions. Instead, in application, the second and third elements merge so that the
Reprinted by permission of the American Bar Association ■ Volume 21, Number 4, Spring 2002 ■ Franchise Law Journal 187
“materiality” element simply requires a showing of deception, or the capacity to deceive.6 Further, although courts
require some showing of “likely effect on consumer decisions,” this is in connection with the fifth element, proving the
fact or the likely threat of actionable injury to the claimant.7
This interpretation hews more closely to the language of
section 43(a), which does not speak of “materiality,” but
requires a false or misleading statement of fact used in commercial advertising or promotion that injures, or creates a
likelihood of injury to, a plaintiff. Thus, this article discusses
the following elements: (1) a false or misleading statement of
fact; (2) that is used in a commercial advertisement or promotion; (3) that is material, in that it deceives or is likely to
deceive; (4) that is used in interstate commerce; and (5) that
causes, or is likely to cause, the claimant competitive or commercial injury.
In Rhone-Poulenc Rorer Pharmaceuticals, Inc. v. Marion
Merrell Dow, Inc.,15 the court held that a drug manufacturer’s
advertisements, which featured images such as two gasoline
pumps and airline tickets with dramatically different prices,
accompanied by the slogan “Which one would you choose?”
was a literally false message, because it conveyed the inaccurate idea that the manufacturer’s drug and its competitor’s
drug could be indiscriminately substituted. In Coca-Cola Co.
v. Tropicana Products, Inc.,16 the court held that the images
of the defendant’s television commercial advertising orange
juice, that depicted an orange being squeezed and poured
directly into the carton made the advertisement literally false,
because it represented that the defendant’s orange juice was
produced by squeezing oranges and pouring the juice directly into the carton, when in fact the juice was heated and
sometimes frozen before packaging.
Similarly, in S.C. Johnson & Son, Inc. v. Clorox Co.,17 the
the Second Circuit considered the falsity of advertising that
False or Misleading Statement of Fact
focused on an image. There, the defendant’s television comTo establish a false advertising claim under the Lanham Act,
mercial and print advertisements depicted two plastic storage
a claimant first must prove a false or misleading statement of
bags filled with water, each containing a goldfish and hangfact. To demonstrate falsity, a claimant generally must show
ing upside down.18 The plaintiff’s plastic bag was shown to
either: (1) that the statement is literally false, or (2) that
be leaking continuously
although literally true, the
and at a fairly rapid rate.
statement is likely to misBased on evidence prelead, confuse, or deceive
sented at trial, the court
consumers.8 If a statement
is literally false, courts
found that the defendant’s
The challenged claim
typically grant injunctive
advertisements were literneed not make a direct
relief without requiring
ally false because they
proof of materiality (i.e.,
falsely depicted both the
comparison to a competitor’s
that the advertisement
risk and the rate of leakage
product or service.
deceived). If, however, a
of the plaintiff’s storage
statement is literally true
bags.19
Claims of superiority
but misleading, courts
can fall on either side of
usually require proof that
the line between actionable falsity and nonactionable
the statement has deceived, or has a tendency to deceive.
“puffery.” To be actionable, the challenged claim need not
make a direct comparison to a competitor’s product or serLiterally False Statements
vice.20 If the advertisement asserts that a product is superior,
Courts typically consider whether an advertisement is liter9
but does not refer to scientific tests as support, the plaintiff
ally false to be an issue of fact. Some courts split the issue
into two inquiries: (1) identification of the claim conveyed
must affirmatively prove that the claim is false, i.e., that the
by the advertisement; and (2) determination of whether the
defendant’s product is equal or inferior.21 Such claims of
10
superiority are distinct from expressions of opinion or exagclaim is false. Courts allow the claimant to prove literal
falsity based on express claims in advertisements and also
geration, often called “puffery” (discussed below), which
on claims that the advertisement conveys by “necessary
typically do not constitute false advertising. Actionable
implication.”11 “A claim is conveyed by necessary implicaclaims of superiority usually refer to specific aspects of a
tion when, considering the advertisement in its entirety, the
product or service (e.g., “our widget lasts longer”), whereas
audience would recognize the claim as readily as if it had
puffery is more general (e.g., “our widget is the best”).22
12
Where the challenged advertisement explicitly or implicitbeen explicitly stated.” If, however, the message is merely
suggestive or requires viewers to make inferential leaps, it is
ly represents that tests or studies prove that its product is
less likely to form an appropriate basis for a literal falsity
superior, the plaintiff can meet its burden in two ways.23
13
First, the plaintiff can prove that the superiority claims are
challenge.
The plaintiff’s burden in proving that a challenged adverliterally false because the tests used are not sufficiently relitisement is literally false depends on the nature of the claim
able to permit a conclusion that the product is superior.24 Sec14
ond, the plaintiff can meet its burden by showing that the
involved and the context in which the claim is made. For
example, a visual image, or a visual image combined with an
tests used, even if reliable, did not establish the proposition
audio component, may make an advertisement literally false.
for which they were cited.25
188 Franchise Law Journal ■ Spring 2002, Volume 21, Number 4 ■ Reprinted by permission of the American Bar Association
For example, in Castrol, Inc. v. Quaker State Corp., the
defendant’s television commercial, which asserted that “tests
prove” that its motor oil provides better protection against
engine wear at start-up, was literally false. The district court
heard five days of expert testimony at trial in determining
whether the tests upon which the defendant relied supported
the superiority claims in the defendant’s commercial. In the
end, the court found that it did not need to consider the tests’
reliability because they did not establish the proposition for
which the defendant cited them.26
lawyers but at a lower price were held to be mere “puffery”
and not actionable as false advertising.36 Similarly, a claim
that “You’re in good hands with” an insurer was held to be
nonactionable puffery because it was general, subjective, and
could not be proven true or false.37
Again, the context of the claim is important when determining whether an advertisement claim is mere puffery. For
example, a clothing manufacturer’s claims that its product
was the “best waterproof golf suit available” or the “best way
to keep dry” were more than puffery when juxtaposed with a
comparison to the competitor’s product, and the manufacturMisleading Statements
er had no evidence of comparison testing.38
The line between actionable statements of fact and mere
A statement may be actionable false advertising even if it is
puffery can be difficult to find. For example, in Pizza Hut,
literally true. “Statements that are literally true or ambiguInc. v. Papa John’s International, Inc.,39 Pizza Hut based its
ous but which nevertheless have a tendency to mislead or
false advertising action on Papa John’s slogan, “Better
deceive the consumer are actionable under the Lanham
Ingredients. Better Pizza.” Pizza Hut challenged the slogan
Act.”27 Such claims may implicitly convey a false impression, may be misleading in context, or may simply be
standing alone and in conjunction with comparative repredeceptive when viewed by consumers.28
sentations regarding the quality of the competitor’s dough
Courts universally hold that if an advertisement is literaland sauce. Papa John’s had asserted that its tomato sauce
ly true but allegedly miswas made with “fresh,
leading, the claimant has
vine-ripened tomatoes”
an additional burden
and its dough with “clear
of proving that the adverfiltered water,” while
The context of the claim
tisement has deceived
Pizza Hut’s sauce came
is important when determining
or has a tendency to
from “remanufactured
deceive.29 As discussed in
tomato paste,” and its
whether an advertisement
greater detail below, a
dough used “whatever
claim is mere puffery.
claimant must prove
comes out of the tap.” 40
The jury found that the
materiality by extrinsic
statements in Papa John’s
evidence, such as a conads were literally true but
sumer survey or market
misleading, and the trial court concluded that the misleading
research, demonstrating how consumers actually reacted to
ads had so “tainted” the slogan that it enjoined further use
the advertising.30
altogether.41
Opinion and Puffery
On appeal, the Fifth Circuit held that the slogan “Better
A third category of statements includes opinion and puffery,
Ingredients. Better Pizzas,” standing alone, was nonactionwhich are not actionable. For a statement to be actionable
able puffery because it was not a quantifiable or verifiable
under section 43(a), it must be a statement of fact, as opposed
fact, and thus not a claim upon which consumers would justo mere opinion or bald assertions of superiority.31 A statetifiably rely.42 But the court upheld the jury’s finding that,
ment of fact is one that “(1) admits of being adjudged true or
when viewed in combination with Papa John’s sauce and
false in a way that (2) admits of empirical verification.”32
dough ads, the slogan was misleading. The court reasoned
“Puffery,” in contrast,
that when used in conjunction with those ads, the slogan
became a verifiable statement regarding the quality of the
comes in at least two possible forms: (1) an exaggerated, blustering,
ingredients, and that there was sufficient evidence in the
and boasting statement upon which no reasonable buyer would be
justified in relying; or (2) a general claim of superiority over comrecord to support the conclusion that the advertisements
parable products that is so vague that it can be understood as nothwere misleading.43 As discussed more fully below, however,
ing more than a mere expression of opinion.33
the Fifth Circuit nonetheless reversed and directed entry of
Thus, a claim that “Less Is More” in advertising for turf
judgment for Papa John’s because Pizza Hut had failed to
grass was held to be nonactionable puffery because it was the
prove materiality.
type of generalized boasting upon which no reasonable buyer
Commercial Advertising or Promotion
would rely.34 But a related claim describing the product with
the phrase “50% Less Mowing” was held to be actionable
The second element of a false advertising claim is that the
false advertising because it was a specific and measurable
false or misleading statement of fact must appear in “comclaim of superiority, apparently based on product testing.35
mercial advertising or promotion.”44 Recent decisions generStatements in a collection agency’s advertisement implying
ally rely on the following definition of “commercial
that the agency offered the same collection services as
advertising or promotion”:
Reprinted by permission of the American Bar Association ■ Volume 21, Number 4, Spring 2002 ■ Franchise Law Journal 189
(1) commercial speech;
Thus, in cases that do not involve conventional, anonymous mass advertising, courts generally examine evidence
on the nature of the industry to determine whether the state(3) for the purpose of influencing consumers to buy the defendant’s
ment was disseminated to enough of the relevant “public”
goods or services; and
to constitute advertising or promotion. “[B]oth the required
(4) that is disseminated sufficiently to the relevant purchasing publevel of circulation and relevant ‘consuming’ or ‘purchaslic to constitute “advertising” or “promotion” within that industry,
ing’ public addressed by the dissemination of false inforeven if not made in a “classical advertising campaign.”45
mation will vary according to the specifics of the
The first three parts of the definition are intended to ensure
industry.”53 Where there are a relatively limited number of
that advertising or promotion excludes noncommercial speech
potential purchasers in a particular market, for example,
that is entitled to a higher degree of protection under the First
even a single promotional presentation to an individual purAmendment.46 In addition to the general commercial speech
chaser may be actionable as “commercial advertising and
element, the definition adds the standing requirement that the
promotion.”54 In Seven-Up Co. v. Coca-Cola Co., the Fifth
Circuit held that a soft drink manufacturer’s sales presentadefendant must be in “commercial competition” with the
tions to representatives of eleven independent bottlers were
plaintiff. This arises out of First Amendment concerns that the
sufficiently disseminated to the relevant purchasing public
Lanham Act not be used to impinge free speech.47 The “commercial speech” element, however, should be read to mean
to be “commercial advertising or promotion” within the
only that advertising and promotions that are fair game under
soft drink industry because the presentation materials were
the First Amendment are actionable. There seems to be little
specifically developed and designed to target independent
justification for adding a “competition” requirement that does
bottlers—the manufacturer’s purchasers—and convince
not appear in the text of the Lanham Act.48
them to change brands.55 Furthermore, oral statements also
This definition also requires the statement to have been
may constitute “advertismade in “advertising or
ing or promotion,” particpromotion.” Courts have
ularly if that is the
struggled to define “advercustomary method of
tising and promotion.” On
advertising in a particular
The definition of
one end of the spectrum,
industry.56
“advertising
or
promotion”
As these decisions
conventional mass advertisillustrate, whether a paring campaigns—such as
should start with the plain
ticular communication
where a company runs
meaning of these words.
constitutes “advertising or
newspaper advertisements,
promotion” is a highly
television commercials, or
fact-specific
inquiry,
other promotions to influwhich often turns on the
ence large numbers of
nature of the industry. Other examples of actionable “adveranonymous consumers to buy its products or services—cleartising or promotion” include:
ly are actionable advertising or promotion. At the other end, a
• In Avon Products, Inc. v. S.C. Johnson & Son, Inc.,57 the
private negotiation between two businesspeople, absent other
49
court held that Avon’s dissemination of lists of alternative
circumstances, would not be actionable. Between these two
poles fall a wide array of statements that may or may not qualuses of its “Skin-So-Soft” bath oil and other materials
ify as “advertising or promotion,” depending on a variety of
touting the bath oil as an insect repellent was advertising
factors, including the context in which the statement was
and promotion under the Lanham Act because Avon’s
made, the relevant audience, the specific industry involved,
business relies exclusively upon promotion by its sales
and the extent of dissemination or publication.
representatives.
The definition of “advertising or promotion” should start
• In Gordon & Breach Science Publishers S.A. v. American
with the plain meaning of these words.50 The U.S. Supreme
Institute of Physics,58 the court held that nonprofit scientifCourt has instructed that when construing a statute, the first
ic societies’ distribution at a librarians’ conference of
step “is to determine whether the language at issue has a
allegedly misleading comparative survey results, which
plain and unambiguous meaning with regard to the particular
favored the societies’ publications, and e-mails to librarians (prospective purchasers of the publications) were
dispute in the case.”51 Webster’s Dictionary defines “advertiscommercial advertising under the Lanham Act because
ing” as, among other things, “the act of calling something to
the survey was explicitly promotional in nature.
the attention of the public especially by paid announce• In National Artists Management Co. v. Weaving,59 the
ments,” and “promotion” as, among other things, “the furcourt concluded that the defendant’s telephone calls to
therance of the acceptance and sale of merchandise through
roughly ten people about reasons for terminating their
advertising, publicity, or discounting.”52 These capacious definitions seem to include more limited communication used to
relationship with plaintiff were “advertising or promopromote or sell products or services, so long as the commution” because, in the theater-booking industry, services are
nication is aimed at the relevant consuming “public.”
promoted by word of mouth and a network of telephone
(2) by a defendant who is in commercial competition with the
plaintiff;
190 Franchise Law Journal ■ Spring 2002, Volume 21, Number 4 ■ Reprinted by permission of the American Bar Association
contacts, and the industry is “indisputably small and
closely interconnected.”
By contrast, the following examples were held not to be
“advertising or promotion”:
• In First Health Group Corp. v. BCE Emergis Corp.,60 the
Seventh Circuit concluded that representations by the
defendant’s executives and lawyers during private contract
negotiations were not advertising within the meaning of
the Lanham Act.
• In Sports Unlimited, Inc. v. Lankford Enterprises, Inc.,61
the Tenth Circuit held that the defendant’s distribution of a
reference sheet describing unfavorable customer comments about the plaintiff’s work did not constitute commercial advertising or promotion because the defendant
distributed the sheet to only two people for whom the
plaintiff was already working.
• In Fashion Boutique of Short Hills, Inc. v. Fendi USA,
Inc.,62 the court held that store employees’ allegedly disparaging comments about another store to twelve customers and nine undercover investigators were not
“advertising or promotion” under the Lanham Act, where
thousands of customers comprised the relevant purchasing
public.
• In Gillette Co. v. Norelco Consumer Products Co.,63 the
court determined that claims in a package insert accompanying an electric razor that the razor provided a “closer,
more comfortable shave” were not commercial advertising or promotion because the statements were inside the
package and therefore did not affect the purchaser’s decision to buy the product.
Materiality
A plaintiff must demonstrate that the false or misleading
advertising or promotion at issue is “material.”64 Materiality
centers on whether the false or misleading advertisement
deceives or is likely to deceive.65 Such materiality generally
is established when the advertisement deceives, or has the
capacity to deceive, a substantial segment of potential consumers about a relevant quality or characteristic of the product or service.
Some older cases discuss materiality in terms of whether
the representation involved an “inherent” quality, characteristic, or nature of the product.66 However, this requirement is
not rooted in the language of the statute, which on its face
includes no materiality or “inherency” requirement, and
courts typically do not impose it.67 Whether the representation is likely to influence consumers’ decisions is more
appropriately addressed as part of the injury requirement.
The plaintiff’s burden of establishing materiality differs
depending on the type of statement involved and the defendant’s intent, as discussed below.
Literally False Statements
Where the statement at issue is literally false, courts presume
that the advertisement was material: “With respect to materiality, when the statements of fact at issue are shown to be literally false, the plaintiff need not introduce evidence on the
issue of the impact the statements had on consumers.”68 This
principle is tied directly to section 43(a), which on its face
does not require an additional showing of deception, and thus
reflects that a literally false statement by its very nature has
the capacity to deceive consumers. Nonetheless, defendants
should be permitted to present evidence rebutting the presumption of materiality by showing that consumers were not,
in fact, deceived by the advertisement.
Misleading Statements
When a claim is literally true but misleading, the claimant
must show the nature of the message actually conveyed to
consumers, which turns on the public’s reaction to the advertisement.69 “The plaintiff may not rely on the judge or the
jury to determine, based solely upon his or her own intuitive
reaction, whether the advertisement is deceptive.”70 Instead,
the evidence must demonstrate that the advertising or promotion deceived a substantial portion of its audience.71 The
requirement of actual deception is grounded in practicality: it
is difficult to determine that a literally true advertisement was
unlawfully “misleading” without reference to whether actual
consumers were misled. “[W]here the advertisement is literally true, [public perception] is often the only measure by
which a court can determine whether a commercial’s net
communicative effect is misleading.”72
The type of evidence necessary to prove materiality varies
depending on the nature of the case and the relief requested.73
In general, surveys are the preferred vehicle.74 However, evidence showing how consumers actually reacted, such as letters, calls, and affidavits, can also show consumer deception.75
Surveys
Surveys are the predominant and most widely accepted
method of proving materiality.76 Even where the claimant
believes that it can rely on a literal falsity claim or seeks only
an injunction (that requires less evidence of materiality),
counsel is wise to develop credible survey evidence. Courts
place great weight on properly conducted surveys, which
often determine appellate results. In JTH Tax, Inc. v. H&R
Block Eastern Tax Services, Inc.,77 for example, the Fourth
Circuit considered whether H&R Block’s false characterization of certain loans as tax “refunds” constituted false advertising under section 43(a). The court relied heavily on a
survey showing that 21.7 percent of consumers regarded the
phrase “refund amount” as more effective than the term
“loan.” In addition, the survey evidence showed that consumers associate loans with numerous unfavorable conditions and obligations, as opposed to a “refund.” Thus,
without addressing whether the challenged statements were
literally false or merely misleading, the Fourth Circuit upheld
the district court’s finding that use of the term “refund” to
advertise a noninterest-bearing loan was likely to deceive a
reasonable consumer.78
In Pizza Hut, Inc. v. Papa John’s International, Inc.,79 the
Fifth Circuit considered materiality based on Pizza Hut’s survey results. As discussed above, Pizza Hut sued Papa John’s
for false advertising based on Papa John’s $300 million
Reprinted by permission of the American Bar Association ■ Volume 21, Number 4, Spring 2002 ■ Franchise Law Journal 191
advertising campaign, which included the slogan, “Better
Standing and Injury
Ingredients. Better Pizzas.” Although the court concluded
The Lanham Act provides that a false advertiser “shall be
that the slogan was misleading when viewed in combination
liable in a civil action by any person who believes that he or
with other misrepresentations, it determined that Pizza Hut
she is or is likely to be damaged by such act.”86 This element
encompasses both a standing and an injury requirement.
had presented insufficient evidence of materiality because
Pizza Hut failed to prove that the Papa John’s ads had the
Standing
tendency to deceive consumers. The court rejected Pizza
The plain meaning of “any person” in section 43(a) encomHut’s attempted use of Papa John’s tracking surveys, which
passes both competitors and consumers that can show harm
showed that 48 percent of respondents believed that Papa
from the false advertising. However, courts have consistently
John’s used better ingredients than other pizza chains, rearejected consumer standing to sue for false advertising under
soning that this was not sufficiently probative of materiality,
the Lanham Act.87 Courts generally root this conclusion in
because the surveys did not indicate whether the participants’
section 45 of the Lanham Act, which provides that the statute
conclusions resulted from the advertisements at issue, from
was enacted “to protect persons engaged in . . . commerce
their own eating experiences, or both.80
The percentage of consumers who must be deceived by an
against unfair competition.”88 Based on section 45, courts
advertisement varies depending on the context and nature of
almost universally hold that the Lanham Act requires some
the survey, but courts generally will find materiality if 20
showing of a potential for commercial or competitive injury.
percent or more of survey respondents were deceived. For
The U.S. Supreme Court has never considered standing under
example, in JTH Tax,81 the court held that a consumer survey
section 43(a)(1)(B), and the federal circuits have been sharply
showing that 20 percent of respondents were deceived by the
criticized for their inconsistent decisions on this issue.89
Although courts have consistently held that there must be
defendant’s advertisement was sufficient to establish materisome commercial injury, approaches differ on whether the
ality. The court in Johnson & Johnson-Merck Consumer
plaintiff must be a competitor of the defendant. For example,
Pharmaceutical Co. v. Rhone-Poulenc Rorer Pharmaceutithe Second Circuit has held that “a section 43 plaintiff need
cals82 held that a survey finding that only 7.5 percent of
respondents were deceived
not be a direct competitor”
by the defendant’s adverof the defendant, but
tisement was not suffiinstead must merely allege
cient, but noted that 20
the potential for commerCourts have consistently
percent would have been
cial or competitive injury.90
rejected
consumer
standing
The Third Circuit has also
sufficient. Also, in Novarrecognized that a noncomtis Consumer Health, Inc.
to sue for false advertising
petitor is not necessarily
v. Johnson & Johnsonunder the Lanham Act.
precluded from bringing a
Merck Consumer Pharmafalse advertising claim
ceutical Co., 83 the court
ruled that survey evidence
under the Lanham Act.91
In the Ninth Circuit, on
showing that only 15.5
the other hand, to have standing to sue for false advertising
percent of the respondents were misled was sufficient to
under the Lanham Act, the plaintiff must “allege commercial
show that, under the Lanham Act, a substantial portion of the
injury based upon a misrepresentation about a product, and
intended audience was deceived.
also that the injury was ‘competitive,’ i.e., harmful to the
Willful or Bad Faith Conduct
plaintiff’s ability to compete with the defendant.”92 The Seventh and Tenth Circuits have followed the Ninth Circuit’s
Although not all circuits have spoken on the issue, several
lead in holding that to have standing for a Lanham Act false
have held that if the defendant violated the Lanham Act willadvertising claim, the plaintiff must be a competitor of the
fully or in bad faith, a plaintiff is not required to provide condefendant and allege a discernible competitive injury.93
sumer survey or other extrinsic evidence in order to prove
Moreover, as discussed above, most circuits include (without
materiality:
analysis) in the definition of “commercial advertising or proIn some circuits, if the defendant “intentionally set out to deceive
motion” a requirement that the defendant is in commercial
the public,” using “deliberate conduct” of an “egregious nature” in
light of the advertising culture of the marketplace in which the
competition with the plaintiff.94
defendant competes, a presumption arises that consumers were, in
In Conte Bros. Auto, Inc. v. Quaker State-Slick 50, Inc.,95
fact, deceived, dispensing with the need for the plaintiff to commisthe Third Circuit articulated a standing test, noting that
sion a consumer survey.84
“there exists no single overarching test for determining the
This presumption is justified by the rationale that actual constanding to sue” under the Lanham Act. Under the Conte
fusion is difficult to prove, and where a defendant intentionally
Bros. standard, a court should consider:
seeks to deceive consumers, it is fair to infer that consumers
(1) The nature of the plaintiff’s alleged injury: Is the injury “of a
were, in fact, deceived.85 Of course, the defendant is free to
type that Congress sought to redress in providing a private remedy
for violations of the [Lanham Act]”?
rebut this by demonstrating an absence of consumer confusion.
192 Franchise Law Journal ■ Spring 2002, Volume 21, Number 4 ■ Reprinted by permission of the American Bar Association
(2) The directness or indirectness of the asserted injury.
(3) The proximity or remoteness of the party to the alleged injurious conduct.
(4) The speculativeness of the damages claim.
(5) The risk of duplicative damages or complexity in apportioning
damages.96
or she is likely to be injured by the false advertising.103 “The
statute demands only proof providing a reasonable basis for
the belief that the plaintiff is likely to be damaged as a result
of the advertising.”104 Thus, a likelihood of injury will not be
presumed.105 “The type and quantity of proof required to
show injury and causation has varied from one case to another depending on the particular circumstances.”106 As discussed above, survey evidence need not be submitted in
every case to prove a likelihood of injury; injury sometimes
will be a fair inference based on the nature of the false statement and of the competition between the parties.
Under the Conte Bros. test and other Lanham Act
jurisprudence, it is highly unlikely that a plaintiff who is
merely a consumer would have standing to bring a claim
for false advertising under the Lanham Act, because a consumer cannot show commercial injury. However, it does not
Remedies
necessarily follow that a plaintiff who is a consumer of the
The Lanham Act provides for broad injunctive and monetary
product or service, but who also has a commercial or comrelief.107 The type of evidence necessary to prove substantive
petitive interest, would not have standing to bring a false
elements of the offense differs depending on the relief
advertising claim.
sought. A plaintiff requesting only injunctive relief need
Of particular relevance to franchising, the Second Circuit
make no greater showing than is necessary to satisfy the
recently held that a trademark licensee is not precluded from
materiality element of the cause of action. Thus, for literally
suing its licensor for false advertising if the licensor makes
false claims, no additional evidence is necessary, and for
false claims to promote a competing product or falsely dismisleading claims, a tendency to deceive consumers must be
parages the licensee’s product.97 The court determined that
“[t]he licensor’s sole enjoyment of the goodwill in the
established.108 By contrast, when the plaintiff seeks damages,
it generally must prove actual confusion or deception arising
licensed mark does not entitle it to make false claims to profrom the violation.109 Finally, other forms of monetary relief
mote its own product, allegedly to the detriment of its
98
can be available in some jurisdictions without demonstrating
licensee.” “Trademark licensees have been able to sue competitors under section 43(a), . . . and we see no reason why a
actual deception.
false advertising claim may not be brought by a licensee just
Injunctive Relief
because the alleged violator is the licensor.”99
This case fits comfortably within precedent requiring
False advertising claims usually include prayers for injuncsome competitive injury, but it also could have far-reaching
tive relief, at least in part because the plaintiff’s burden of
implications. A franchisee,
proof is lower than that
who is a trademark licennecessary to receive damsee of the franchisor,
ages. Injunctive relief
should have standing to
requires a showing only
assert false advertising
that the defendant’s repCourts have broad discretion
claims against the franresentations about its
in fashioning injunctive relief
chisor if the franchisor is
product have a tendency
competing against the franto deceive consumers,
in false advertising cases.
chisee at some level. This
which is presumed where
could occur, for example,
the statement is literally
if the franchisor is using
false.110
Courts have broad disfalse advertising to sell
cretion in fashioning injunctive relief in false advertising
national accounts, or to convince new franchisees to join a
cases.111 The most common form is an injunction prohibiting
separate system operated by the franchisor. If the franchisor
the defendant from further distribution of the false advertisoperates through a dual distribution system, owning some
ing. In some cases, the court may also enter an injunction
stores and franchising others, the franchisor’s risk increases.
ordering the defendant to correct the problems that its false
advertising created. For instance, in Rhone-Poulenc Rorer
Injury
Pharmaceuticals, Inc. v. Marion Merrell Dow, Inc.,112 the
The Lanham Act affords a claim to a plaintiff who “believes”
defendant was required to undertake corrective advertising to
that it is, or is likely to be, damaged by the challenged violaremedy its false advertising, which said that its pharmaceutition.100 However, both case law and common sense dictate
that “despite the use of the word ‘believes,’ something more
cal product could be freely substituted for its competitor’s
than a plaintiff’s mere subjective belief that he is injured or
product. The court ordered the defendant to take steps neceslikely to be damaged is required. . . .”101 On the other hand,
sary to explain to its sales representatives, physicians, pharonly threatened, not actual, injury need be established to
macists, and patients the differences between its product and
obtain injunctive relief.102
its competitor’s product, including that the defendant’s prodGenerally, the case law requires a claimant to show that he
uct was not approved to treat angina.113
Reprinted by permission of the American Bar Association ■ Volume 21, Number 4, Spring 2002 ■ Franchise Law Journal 193
Monetary Damages
Once a violation of section 43(a) has been established, the
plaintiff is entitled
subject to the principles of equity, to recover (1) defendant’s profits,
(2) any damages sustained by the plaintiff, and (3) the costs of the
action. . . . In assessing profits the plaintiff shall be required to
prove defendant’s sales only; defendant must prove all elements of
cost or deduction claimed. In assessing damages the court may
enter judgment, according to the circumstances of the case, for any
sum above the amount found as actual damages, not exceeding
three times such amount. If the court shall find that the amount of
recovery based on profits is either inadequate or excessive the court
may in its discretion enter judgment for such sum as the court shall
find to be just, according to the circumstances of the case. Such sum
in either of the above circumstances shall constitute compensation
and not penalty. The court in exceptional cases may award reasonable attorney fees to the prevailing party.114
This provision confers broad discretion upon the district
court.115
Several forms of monetary relief are possible, including
the amount of profits lost as a result of the defendant’s false
advertising (marketplace damages), the defendant’s profits
gained as a result of its false advertising (unjust enrichment),
amounts necessary for corrective advertising, and attorneys’
fees. Importantly, although the Lanham Act permits courts to
increase damages, punitive damages are not available for violation of section 43(a).116
do not require actual confusion for marketplace damages,
they appear to be mistaken: It is difficult to see how a plaintiff can prove that false advertising directly and proximately
led to a decline in its profits if it cannot show that consumers stopped purchasing the plaintiff’s goods because of
the defendant’s deception. Attributing a decline in profits to
the defendant’s misconduct would appear speculative without such evidence.
Where the challenged advertisement is deliberately false,
some courts have dispensed with the need for actual consumer confusion.121 For example, the Ninth Circuit has held
that the “[p]ublication of deliberately false comparative
claims gives rise to a presumption of actual deception and
reliance,” reasoning that:
The expenditure by a competitor of substantial funds in an effort to
deceive consumers and influence their purchasing decisions justifies the existence of a presumption that consumers are, in fact,
being deceived. He who has attempted to deceive should not complain when required to bear the burden of rebutting a presumption
that he succeeded.122
Defendant’s Profits
Another form of potential monetary relief is recovery of the
defendant’s profits resulting from the false advertising. The
circuits are split on whether such damages are available without proof of deliberate misconduct.
The Second, Third, Sixth, and D.C. Circuits have concludMarketplace Damages
ed that a plaintiff must prove that the defendant acted willfulMost courts require proof of actual consumer deception
ly before it can recover the defendant’s profits.123 The Eighth
and Ninth Circuits have
to award the plaintiff its
suggested that willful con“marketplace damages,”
duct is required. 124 The
which are defined as lost
dominant rationale for
profits and loss of goodMost courts require proof
requiring willful misconwill. Actual deception is
of actual consumer deception
duct is “to limit what may
required because it shows
be an undue windfall to the
that the defendant’s misto award the plaintiff its
plaintiff, and prevent the
conduct caused actual
“marketplace damages.”
potentially inequitable
harm in the markettreatment of an ‘innocent’
place. 117 Conceptually,
actual confusion is part of
or ‘good faith’ infringer.”125
However, the Fifth,
causation, because false
Seventh, Tenth, and Eleventh Circuits do not generally
advertising can only cause monetary damage if consumers
require intentional misconduct.126 For example, the Eleventh
were deceived into buying the defendant’s product in lieu of
Circuit has held that a plaintiff need not demonstrate intenthe plaintiff’s product.
tional misconduct to obtain an award of the defendant’s profThere is, however, disagreement among the circuits on
its.127 Similarly, the Seventh Circuit has held that actual
this issue. The Ninth Circuit has held that actual confusion
confusion is not necessary to recover on an unjust enrichis not necessary and that “the preferred approach allows the
ment theory.128 Instead, these circuits have adopted a flexible
district court in its discretion to fashion relief, including
approach. The Eleventh Circuit has made clear that “all monmonetary relief, based on the totality of the circumetary awards under Section 1117 are ‘subject to the princistances.”118 The Eleventh Circuit has suggested the same
result, stating that “all monetary awards under Section 1117
ples of equity,’ . . . and no hard and fast rules dictate the form
are ‘subject to the principles of equity,’ and contrary to the
or quantum of relief.”129
The flexible approach seems most appropriate. The award
assertions of both parties, no hard and fast rules dictate the
of defendant’s profits should be left to the trial court’s discreform or quantum of relief.”119 Often, however, courts do not
distinguish between “marketplace damages” and other
tion, taking into account the overall equities of the case and
forms of monetary relief, for which proof of actual confuthe parties’ respective conduct. In most instances, an award
sion is less important.120 To the extent that these decisions
of the defendant’s profits will, indeed, be predicated on
194 Franchise Law Journal ■ Spring 2002, Volume 21, Number 4 ■ Reprinted by permission of the American Bar Association
intentional misconduct. However, there are cases where the
defendant’s conduct may not rise to the level of “willfulness,” but nonetheless it would be inequitable for the defendant to keep profits derived from unlawful conduct. The
concern of limiting windfall judgments and preventing
inequitable treatment can be handled on a case-by-case basis
under traditional principles of equity, without the need to
establish an inflexible rule requiring intentional misconduct.
Corrective Advertising and Damage Control
Courts also may award the plaintiff compensation for its own
corrective advertising efforts undertaken before final adjudication of the dispute. 130 In these cases, the court often
requires the plaintiff to prove that its advertising strategy was
actually corrective and undertaken in response to the defendant’s false advertising.131
In addition, courts have awarded damages for prospective
corrective advertising expenditures. To recover these, the
plaintiff often must prove that:
(1) the expenditures are corrective, i.e., responsive to the
defendant’s false advertising;132
(2) the expenditures are a surrogate for measuring the
plaintiff’s actual damages;133 and
(3) the plaintiff is unable to undertake a corrective advertising campaign concurrently with the wrong that it seeks to
redress in court.134
Attorneys’ Fees
The Lanham Act empowers a court to award the prevailing
party reasonable attorneys’ fees in “exceptional cases.”135
The prevailing party has the burden of demonstrating the
exceptional nature of the case by “clear and convincing evidence.”136 While many courts have held that an exceptional
case is one where the defendant’s acts can be characterized
as malicious, fraudulent, deliberate, bad faith, or willful,
some courts have simply characterized the misconduct as
“very egregious.”137 As a practical matter, attorneys’ fees are
difficult to recover unless the defendant intended to deceive
or refused to withdraw the advertising or promotion once it
became aware of the deception.
Conclusion
False advertising under the Lanham Act is an increasingly
popular cause of action because it applies to such a broad
variety of statements in diverse factual settings. False advertising claims may be particularly useful in franchising, given
the importance of advertising in promoting franchise brands
and the ability of franchisees to bring actions, especially
where the competitive paths—and swords—of franchisor
and franchisee cross.
Endnotes
1. 15 U.S.C. § 1125.
2. 15 U.S.C. § 1125(a).
3. Id.
4. See, e.g., Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24, 33 n.6 (1st Cir. 2000); Pizza Hut, Inc. v. Papa
John’s Int’l, Inc., 227 F.3d 489, 495 (5th Cir. 2000); Balance Dynamics
Corp. v. Schmitt Indus., 204 F.3d 683, 689 (6th Cir. 2000); Cook,
Perkiss and Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242,
244 (9th Cir. 2000); United Indus. Corp. v. Clorox Co., 140 F.3d 1175,
1180 (8th Cir. 1998); Johnson & Johnson-Merck Consumer Pharm. Co.
v. Rhone-Poulenc Rorer Pharm., Inc., 19 F.3d 125, 129 (3d Cir. 1994);
Skil Corp. v. Rockwell Int’l Corp., 375 F. Supp. 777 (N.D. Ill. 1974).
5. Skil Corp.., 375 F. Supp. at 783 (citing Weil, Protectability of
Trademark Values Against False Competitive Advertising, 44 CAL. L.
REV. 527, 537 (1956)).
6. See, e.g., Pizza Hut, 227 F.3d at 497; see also discussion of
materiality below.
7. See, e.g., Warner-Lambert Co. v. Breathasure, Inc., 204 F.3d 87
(3d Cir. 2000).
8. S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 238 (2d
Cir. 2001); United Indus. Corp., 140 F.3d at 1179; Southland Sod
Farms v. Stover Seed Co., 108 F.3d 1134, 1139–40 (9th Cir. 1997).
9. See, e.g., Clorox Co. Puerto Rico, 228 F.3d at 34.
10. Id.
11. Id. at 34-35.
12. Id. at 35.
13. See, e.g., id.; United Indus. Corp., 140 F.3d at 1175.
14. See Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 495
(5th Cir. 2000) (“When construing the allegedly false or misleading
statement to determine if it is actionable under section 43(a), the statement must be viewed in the light of the overall context in which it
appears.”); United Indus. Corp., 140 F.3d at 1180.
15. 93 F.3d 511, 516 (8th Cir. 1996).
16. 690 F.2d 312, 318 (2d Cir. 1982).
17. 241 F.3d 232 (2d Cir. 2001).
18. Id. at 235-37.
19. Id. at 239.
20. Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145
(9th Cir. 1997).
21. See Castrol, Inc. v. Quaker State Corp., 977 F.2d 57, 63 (2d Cir.
1992); Avon Prod., Inc. v. S.C. Johnson & Son, Inc., 984 F. Supp. 768,
797 (S.D.N.Y. 1997). In addition, courts have held that a claim that is
unsupported but that is not literally false or deceptive does not violate
the Lanham Act. See Am. Home Prod. Corp. v. Procter & Gamble Co.,
871 F. Supp. 739, 758 (D.N.J. 1994) (“[T]he absence of acceptable
tests or other proof substantiating an advertising claim does not alleviate a Lanham Act plaintiff’s burden of showing that a challenged
advertisement is false or misleading. Thus, a plaintiff must affirmatively prove that the claim in question is false or misleading, not merely
that it is unsubstantiated.”) (quotations and citations omitted); see also
Johnson & Johnson-Merck Consumer Pharm. Co. v. Rhone-Poulenc
Rorer Pharm., Inc., 19 F.3d 125, 129 (3d Cir. 1994); Sandoz Pharm.
Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 228 (3d Cir. 1990).
22. See Cook, Perkiss and Liehe, Inc. v. N. Cal. Collection Serv., Inc.,
911 F.2d 242, 246 (9th Cir. 2000) (“The common theme that seems to
run through cases considering puffery in a variety of contexts is that
consumer reliance will be induced by specific rather than general assertions. Advertising which merely states in general terms that one product
is superior is not actionable.”) (citations and quotations omitted).
23. Castrol, Inc., 977 F.2d at 63.
24. Id.
25. Id. Of course, the plaintiff could also prove that the defendant’s
claim of “tests prove X,” for example, is literally false if in fact the
defendant never conducted any tests.
26. Id. at 63-64.
27. United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1182 (8th Cir.
1998).
28. Id. at 1180.
29. See, e.g., Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24, 33 (1st Cir. 2000).
30. Id.; Gordon & Breach Science Publishers S.A. v. Am. Inst. of
Physics, 859 F. Supp. 1521, 1532 (S.D.N.Y. 1994).
31. See, e.g., Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489,
496 (5th Cir. 2000) (collecting cases); Groden v. Random House, 61
Reprinted by permission of the American Bar Association ■ Volume 21, Number 4, Spring 2002 ■ Franchise Law Journal 195
F.3d 1045, 1051 (2d Cir. 1995) (stating that when a statement is “obviously a statement of opinion,” it cannot “reasonably be seen as stating
or implying provable facts”).
32. Presidio Enter., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d
674, 679 (5th Cir. 1986); see also Southland Sod Farms v. Stover Seed
Co., 108 F.3d 1134, 1145 (9th Cir. 1997).
33. Pizza Hut, 227 F.3d at 496-97.
34. Southland Sod, 108 F.3d at 1134.
35. Id.
36. Cook, Perkiss and Liehe, Inc. v. N. Cal. Collection Serv., Inc.,
911 F.2d 242, 246 (9th Cir. 2000) (finding that reasonable consumers
would not interpret the plaintiff’s claim as a factual claim upon which
they could rely).
37. See Bologna v. Allstate Ins. Co., 138 F. Supp.2d 310, 323
(E.D.N.Y. 2001).
38. W.L. Gore & Associates, Inc. v. Totes, Inc., 788 F. Supp. 800
(D. Del. 1992).
39. 227 F.3d 489, 491 (5th Cir. 2000).
40. Id. at 492.
41. Id. at 493-94.
42. Id. at 498-99.
43. Id. at 501-02.
44. See 17 U.S.C. § 1125(a); Seven-Up Co. v. Coca-Cola Co., 86
F.3d 1379, 1383 (5th Cir. 1996).
45. Gordon & Breach Science Publishers S.A. v. American Inst. of
Physics, 859 F. Supp. 1521, 1532 (S.D.N.Y. 1994); see also Sports
Unlimited, Inc. v. Lankford Enter., Inc., 275 F.3d 996, 1004-05 (10th
Cir. 2002) (using these four factors to determine whether challenged
conduct constitutes “commercial advertising or promotion”); Coastal
Abstract Serv., Inc. v. First Am. Tit. Ins. Co., 173 F.3d 725, 734 (9th
Cir. 1999); Seven-Up Co., 86 F.3d at 1384.
46. Gordon & Breach, 859 F. Supp. at 1536. Although several
courts have adopted the Gordon & Breach four-part test, including
incorporation of the First Amendment “free speech” doctrine, courts
have expressed appropriate skepticism about whether such requirements should be added to the plain language of the statute. See, e.g.,
First Health Group v. BCE Emergis Corp., 269 F.3d 800, 803 (7th Cir.
2001) (“We have serious doubts about the wisdom of displacing the
statutory text in favor of a judicial rewrite with no roots in the language
Congress enacted.”).
47. Gordon & Breach, 859 F. Supp. at 1532.
48. See First Health Group, 269 F.3d at 803.
49. Id. at 804.
50. See, e.g., Barnhart v. Sigmon Coal Co., Inc., 122 S. Ct. 941, 950
(2002) (“As in all statutory construction cases, we begin with the language of the statute.”); First Health Group, 269 F.3d at 803; Seven-Up
Co., 86 F.3d at 1384 (“Courts have noted that we should give the terms
‘advertising’ and ‘promotion’ their plain and ordinary meanings.”).
51. Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997) (citing
United States v. Ron Pair Enter., Inc., 489 U.S. 235, 240 (1989)).
52. WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 59,941 (1984).
53. Seven-Up Co. v Coca Cola, 86 F.3d 1379, 1385 (5th. Cir. 1996).
54. Id. at 1386; Mobius Mgmt. Sys., Inc. v. Fourth Dimension Software, Inc., 880 F. Supp. 1005 (S.D.N.Y. 1994) (holding that a single
letter from a computer software manufacturer to a potential customer
could constitute “advertising or promotion”).
55. Seven-Up Co., 86 F.3d at 1386.
56. See, e.g., Nat’l Artists Mgmt. Co., Inc. v. Weaving, 769 F. Supp.
1224, 1234-35 (S.D.N.Y. 1991).
57. 984 F. Supp. 768, 795 (S.D.N.Y. 1997).
58. 905 F. Supp. 169 (S.D.N.Y. 1995).
59. 769 F. Supp. 1224, 1234-35 (S.D.N.Y. 1991).
60. 269 F.3d 800, 804 (7th Cir. 2001); but see Mobius Mgmt. Sys.,
Inc. v. Fourth Dimension Software, Inc., 880 F. Supp. 1005 (S.D.N.Y.
1994) (holding that a single letter from a computer software manufacturer to a potential customer could constitute “advertising or promotion”).
61. 275 F.3d 996, 1004-05 (10th Cir. 2002).
62. 942 F. Supp. 209 (S.D.N.Y. 1996).
63. 946 F. Supp. 115 (D. Mass. 1996).
64. JTH Tax, Inc. v. H&R Block East Tax Serv., Inc., 28 Fed. App.
207 (4th Cir. 2002).
65. Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 502 (5th
Cir. 2000); Sandoz Pharm. Corp. v. Richardson-Vicks, Inc., 902 F.2d
222, 228-29 (3d Cir. 1990).
66. See, e.g., Coca-Cola Co. v. Tropicana Prod., Inc., 690 F.2d 312
(2d Cir. 1982).
67. See Jean Wegman Burns, Confused Jurisprudence: False Advertising Under the Lanham Act, 79 B.U. L. REV. 807, 871 (Oct. 1999)
(noting that Congress never included a materiality or “inherent”
requirement in § 43(a)). Nonetheless, courts in the Second Circuit continue to recite and apply the “inherent quality or characteristic” language. See, e.g., S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232,
238 (2d Cir. 2001).
68. Pizza Hut, 227 F.3d at 497; see also S.C. Johnson & Son, 241
F.3d at 232; Clorox Co. Puerto Rico v. Procter & Gamble Commercial
Co., 228 F.3d 24 (1st Cir. 2000).
69. See Pizza Hut, 227 F.3d at 497; Southland Sod Farms v. Stover
Seed Co., 108 F.3d 1134, 1140 (9th Cir. 1997); Johnson & JohnsonMerck Consumer Pharm. Inc. Co. v. Rhone-Poulenc Rorer Pharm., 19
F.3d 125 (3d Cir. 1994).
70. Pizza Hut, 227 F.3d at 497 (quotation omitted); see also Clorox
Co. Puerto Rico, 228 F.3d at 37; Johnson & Johnson v. Smithkline
Beecham Corp., 960 F.2d 294, 297 (2d Cir. 1992).
71. See United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1182 (8th
Cir. 1998).
72. Pizza Hut, 227 F.3d at 503 n.13.
73. Id. at 497.
74. See Clorox Co. Puerto Rico, 228 F.3d at 36; Pizza Hut, 227 F.3d
at 497.
75. Pizza Hut, 227 F.3d at 497.
76. See, e.g., id. at 503 n.3 (“[T]he success of a plaintiff’s implied falsity claim usually turns on the persuasiveness of a consumer survey.”).
77. JTH Tax, Inc. v. H&R Block East Tax Serv., Inc., 28 Fed. App.
207 (4th Cir. 2002).
78. Id.
79. 227 F.3d 489 (5th Cir. 2000).
80. Id. at 503.
81. 128 F. Supp. 2d 926 (E.D. Va. 2001), aff’d, 28 Fed. App. 207
(4th Cir. 2002).
82. 19 F.3d 125, 135-36 n.14 (3d Cir. 1994).
83. 129 F. Supp. 2d 351, 367 (D.N.J. 2000) (citing Coca-Cola Co. v.
Tropicana Prod., Inc., 690 F.2d 312, 317 (2d Cir. 1982)).
84. Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co.,
228 F.3d 24 36 n.9 (1st Cir. 1998); see also United Indus. Corp., 140
F.3d at 1183; Johnson & Johnson-Merck Consumer Pharm. Co. v.
Rhone-Poulenc Rorer Pharm., Inc., 19 F.3d 125 (3d Cir. 1994);
Resource Dev., Inc. v. Statue of Liberty-Ellis Island Found., Inc., 926
F.2d 134 (2d Cir. 1991); U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d
1034 (9th Cir. 1986).
85. See Resource Dev., 926 F.2d at 140.
86. 15 U.S.C. § 1125(a) (emphasis added).
87. See, e.g., Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 n.5
(5th Cir. 1996) (“[W]e have found no case which suggests that ‘consumers’ have standing under § 43(a).”); Stanfield v. Osborne Indus.,
Inc., 52 F.3d 867, 873 (10th Cir. 1995) (“[T]hus, to have standing for a
false advertising claim, the plaintiff must be a competitor of the defendant and allege competitive injury.”); Serbin v. Ziebart Int’l Corp., 11
F.3d 1163, 1177 (3d Cir. 1993) (holding that the consumers, as noncommercial plaintiffs, do not have standing under the Lanham Act); Colligan v. Activities Club of New York, Ltd., 442 F.2d 686 (2d Cir. 1971)
(analyzing the legislative history and purpose behind § 43(a) and concluding that consumers lacked standing to bring action under the Lanham Act); Bacon v. Southwest Airlines Co., 997 F. Supp. 775, 780
(N.D. Tex. 1998) (holding that there is no private cause of action for
consumers under the false advertising prong of the Lanham Act); see
also James S. Wrona, False Advertising and Consumer Standing Under
Section 43(a) of the Lanham Act: Broad Consumer Protection Legislation or a Narrow Pro-Competitive Measure?, 47 RUTGERS L. REV. 1085
196 Franchise Law Journal ■ Spring 2002, Volume 21, Number 4 ■ Reprinted by permission of the American Bar Association
(1995) (concluding that most courts agree that consumers do not have
standing to sue, although various rationales are still employed).
88. 15 U.S.C. § 1127.
89. See Burns, supra note 67, at 888 (advocating that federal false
advertising law should develop around the “unifying principle of consumer welfare,” § 43(a)(1)(B)’s “true purpose”). “As a result of Congress’s lack of clarity, the courts remain without guidance on the
central issue in any statutory construction: the purpose behind section
43(a). . . . The federal law of false advertising needs fundamental
change. Currently, the case law under section 43(a)(1)(B) is a collection of inconsistent, ad hoc decisions offering no predictability or unifying philosophy.” Id. at 833-34, 888.
90. Havana Club Holding, S.A. v. Galleon S.A., 203 F.3d 116, 130
(2d Cir. 2000) (quoting Berni v. Int’l Gourmet Restaurants of Am.,
Inc., 838 F.2d 642, 648 (2d Cir. 1988) (citations omitted)).
91. See Joint Stock Soc’y v. UDV N. Am., Inc., 266 F.3d 164 (3d
Cir. 2001) (“Section 43(a) is intended to provide a private remedy to a
commercial plaintiff who meets the burden of proving that its commercial interests have been harmed by a competitor’s false advertising.
This is not to say that a non-competitor never has standing to sue under
this provision; rather the focus is on protecting commercial interests
that have been harmed by a competitor’s false advertising and securing
to the business community the advantages of reputation and good will
by preventing their diversion from those who have created them to
those who have not.”) (citations omitted).
92. Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995) (quoting
Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir. 1992)).
93. See, e.g., Stanfield v. Osborne Indus., Inc., 52 F.3d 867, 873
(10th Cir. 1995); L.S. Heath & Son, Inc. v. AT&T Info. Sys., Inc., 9
F.3d 561 (7th Cir. 1993) (denying standing to a noncompetitor of the
defendant).
94. See, e.g., Sports Unlimited, Inc. v. Lankford Enter., Inc., 275
F.3d 996, 1004-05 (10th Cir. 2002); Gordon & Breach Science Publishers S.A. v. Am. Inst. of Physics, 859 F. Supp. 1521, 1532 (S.D.N.Y.
1994).
95. 168 F.3d 221, 230-31 (3d Cir. 1998).
96. Id. at 233; see also Procter & Gamble Co. v. Amway Corp., 242
F.3d 539, 562-63 (5th Cir. 2001).
97. Twentieth Century Fox Film Corp. v. Marvel Enter., Inc., 277
F.3d 253 (2d Cir. 2002).
98. Id.
99. Id.
100. 15 U.S.C. § 1125(a).
101. Johnson & Johnson v. Carter-Wallace, 631 F.2d 186, 189-90 (2d
Cir. 1980).
102. See, e.g., Warner-Lambert Co. v. Breathasure, Inc., 204 F.3d 87,
93 (3d Cir. 2000).
103. See, e.g., id.
104. Carter-Wallace, 631 F.2d at 190; Warner-Lambert Co., 204 F.3d
at 93.
105. Id.
106. Ortho Pharm. Corp. v. Cosprophar, Inc., 32 F.3d 690 (2d Cir.
1994); Warner-Lambert Co., 204 F.3d at 95.
107. See 15 U.S.C. §§ 1116 (injunctive relief); 1117 (monetary
relief).
108. See, e.g., Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489,
497 (5th Cir. 2000); American Council, 185 F.3d at 618 (“Although
plaintiff need not present consumer surveys or testimony demonstrating actual deception, it must present evidence of some sort demonstrating that consumers were misled.”).
109. See generally George Basch Co., Inc. v. Blue Coral, Inc., 968
F.2d 1532, 1537 (2d Cir. 1992).
110. See, e.g., Pizza Hut, 227 F.3d at 497; American Council, 185
F.3d at 618.
111. See 15 U.S.C. § 1116(a).
112. 93 F.3d 511, 516 (8th Cir. 1996).
113. Id. at 514, 516.
114. 15 U.S.C. § 1117(a).
115. Burger King Corp. v. Mason, 855 F.2d 779 (11th Cir. 1988).
116. See, e.g., Babbit Elec., Inc. v. Dynascan Corp., 38 F.3d 1161
(11th Cir. 1994); Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d
197 (9th Cir. 1989); Getty Petroleum Corp. v. Bartco Petroleum Corp.,
858 F.2d 103 (2d Cir. 1988); Metric & Multistandard Components
Corp. v. Metric’s, Inc., 635 F.2d 710 (8th Cir. 1980).
117. Balance Dynamics Corp. v. Schmitt Indus., 204 F.3d 683, 690
(6th Cir. 2000).
118. Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1146
(9th Cir. 1997).
119. Mason, 855 F.2d at 783.
120. See infra.
121. See, e.g., Southland Sod, 108 F.3d at 1146.
122. U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1040-41 (9th
Cir. 1986); see also Resource Dev., Inc. v. Statue of Liberty-Ellis
Island Found., Inc., 926 F.2d 134 (2d Cir. 1991) (“[U]pon a proper
showing of such deliberate conduct, the burden shifts to the defendant
to demonstrate the absence of consumer confusion.”); Porous Media
Corp. v. Pall Corp., 110 F.3d 1329, 1334-35 (8th Cir. 1992) (applying
rule only in context of comparative advertising where plaintiff’s product was specifically targeted).
123. See George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532,
1540 (2d Cir. 1992); Securacomm Consulting, Inc. v. Securacom Inc.,
166 F.3d 182, 190 (3d Cir. 1999); Frish’s Restaurants, Inc. v. Elby’s
Big Boy, 849 F.2d 1012, 1015 (6th Cir. 1988); ALPO Petfoods, Inc. v.
Ralston Purina Co., 913 F.2d 958, 968 (D.C. Cir. 1990) (Thomas, J.).
124. See Minnesota Breeders, Inc. v. Schell & Kampeter, Inc., 41
F.3d 1242, 1247 (8th Cir. 1994); Gracie v. Gracie, 217 F.3d 1060, 1068
(9th Cir. 2000).
125. George Basch Co., 968 F.2d at 1540.
126. See Rolex Watch USA, Inc. v. Meece, 158 F.3d 816 (5th Cir.
1998); Web Printing Controls Co., Inc. v. Oxy-Dry Corp., 906 F.2d
1202, 1205-06 (7th Cir. 1990); Estate of Bishop v. Equinox Int’l Corp.,
256 F.3d 1050 (10th Cir. 2001); Burger King Corp. v. Mason, 855 F.2d
779, 781 (11th Cir. 1988).
127. Mason, 855 F.2d at 781.
128. Web Printing, 906 F.2d at 1205-06.
129. Mason, 855 F.2d at 783.
130. PBM Prod., Inc. v. Mead Johnson & Co., 174 F. Supp. 2d 417,
420 (E.D. Va. 2001) (citing ALPO Petfoods, Inc. v. Ralston Purina Co,
913 F.2d 958, 969 (D.C. Cir. 1990) (“In a false advertising case . . . actual damages . . . can include . . . the costs of any completed advertising
that actually and reasonably responds to the defendant’s offending
ads.”)).
131. See JTH Tax, Inc. v. H&R Block East Tax Services, Inc., 128 F.
Supp. 2d at 946–47; see also Balance Dynamics Corp. v. Schmitt
Indus., 204 F.3d 683, 691 (6th Cir. 2000). (“[I]t is unreasonable to
expect a business person faced with a Lanham Act violation to sit idly
by until a customer manifests actual confusion. The law should encourage quick responses and the mitigation of damage, and should not
require parties to suffer an injury before trying to prevent it. Moreover,
a rule allowing recovery for damage control costs upon the likelihood
of actual confusion does not risk an ‘undeserved windfall’ to the plaintiff since such an award would not speak to the underlying marketplace
damages.”).
132. Id. (refusing the plaintiff’s claim for advertising expenses
because the plaintiff failed to show that the cost of advertising was a
loss or that the advertising was intended to ameliorate the effects of the
defendant’s advertising, where the plaintiff sought advertising costs for
all of its franchises, not just the affected ones, and where the plaintiff
had committed to its advertising strategy before the defendant began its
false advertising).
133. See U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1037 (9th
Cir. 1986) (awarding plaintiff twice the sum of the cost of defendant’s
false advertising campaign and the cost of plaintiff’s corrective advertising, as a surrogate for plaintiff’s actual damages).
134. PBM Prod., Inc., 174 F. Supp. 2d at 420 (citations omitted).
135. 15 U.S.C. § 1117.
136. Balance Dynamics Corp., 204 F.3d at 686.
137. Id. at 691.
Reprinted by permission of the American Bar Association ■ Volume 21, Number 4, Spring 2002 ■ Franchise Law Journal 197