lanham act – Attorney Evan Brown

June 6, 2023 Unfair Competition

False advertising – how much can a company get away with?

false advertising

A recent federal court decision gives some guidance on what kinds of statements about a competitor rise to the level of false advertising. The case serves as a reminder for companies to be careful when using objective terminology to talk about another company’s products.

Characterizing the competition

In Enigma Software Group USA, LLC v. Malwarebytes, Inc., the Ninth Circuit Court of Appeals held that a company successfully asserted a false advertising claim against its competitor. Both parties are purveyors of computer security software. When Enigma noticed that Malwarebytes was describing Enigma’s software as “malicious” and a “threat” to the security of a computer, Enigma sued. One of the claims it made was that Malwarebytes’ characterization of Enigma’s software was false advertising under the Lanham Act (at 15 U.S.C. 1125(a)).

The lower court dismissed Enigma’s false advertising claim, holding that the statements calling the software malicious or threatening were simply opinion, and not the kind of factual assertions that could be literally false or likely to mislead or confuse consumers (and thereby be false advertising).

Context matters

The Ninth Circuit, however, disagreed with the lower court’s decision. It found that Malwarebytes’ language employed terminology that was substantively meaningful and verifiable in the cybersecurity context. It noted that unlike non-actionable statements of puffery, which are “extremely unlikely to induce consumer reliance,” Malwarebytes’s designations of Enigma’s products made “a claim as to the specific or absolute characteristics of a product” and were accordingly actionable statements of fact under the Lanham Act.

The court emphasized that characterizations of software being a “threat” or “malicious” coming from a cybersecurity company hold a particular kind of value. In the court’s words: “Because whether software qualifies as malware is largely a question of objective fact, at least when that designation is given by a cybersecurity company in the business of identifying malware for its customers, Enigma plausibly alleged that Malwarebytes’s statements are factual assertions” (emphasis added). So, to help avoid a claim for false advertising, a company must remember the industry in which it participates, and anticipate whether hearers or readers of its words will interpret them as objective statements.

Enigma Software Group USA, LLC v. Malwarebytes, Inc., 2023 WL 3769331 (9th Cir., June 2, 2023)

Restraining order entered against website that encouraged contacting children of plaintiff’s employees

Plaintiff sued defendant (who was an unhappy customer of plaintiff) under the Lanham Act (for trademark infringement) and for defamation. Defendant had registered a domain name using plaintiff’s company name and had set up a website that, among other things, he used to impersonate plaintiff’s employees and provide information about employees’ family members, some of whom were minors.

Plaintiff moved for a temporary restraining order and the court granted the motion.

The Website

The website was structured and designed in a way that made it appear as though it was affiliated with plaintiff. For example, it included a copyright notice identifying plaintiff as the owner. It also included allegedly false statements about plaintiff. For example, it included the following quotation, which was attributed to plaintiff’s CEO:

Well of course we engage in bad faith tactics like delaying and denying our policy holders [sic] valid claims. How do you think me [sic], my key executive officers, and my board members stay so damn rich. [sic]

The court found that plaintiff had shown a likelihood of success on the merits of its claims.

Lanham Act Claim

It found that defendant used plaintiff’s marks for the purpose of confusing the public by creating a website that looked as though it was a part of plaintiff’s business operations. This was evidenced by, for example, the inclusion of a copyright notice on the website.

Defamation

On the defamation claim, the court found that the nature of the statements about plaintiff, plaintiff’s assertion that they were false, and the allegation that the statements were posted on the internet sufficed to satisfy the first two elements of a defamation claim, namely, that they were false and defamatory statements pertaining to the plaintiff and were unprivileged publications to a third party. The allegations in the complaint were also sufficient to indicate that defendant “negligently disregarded the falsity of the statements.”

Furthermore, the statements on the website concerned the way that plaintiff processed its insurance claims, which related to the business of the company and the profession of plaintiff’s employees who handled the processing of claims. Therefore, the final element was also satisfied.

First Amendment Limitations

The court’s limitation in the TRO is interesting to note. To the extent that plaintiff sought injunctive relief directed at defendant’s speech encouraging others to contact the company and its employees with complaints about the business, whether at the workplace or at home, or at public “ad hominem” comments, the court would not grant the emergency relief that was sought.

The court also would not prohibit defendant from publishing allegations that plaintiff had engaged in fraudulent or improper business practices, or from publishing the personally identifying information of plaintiff’s employees, officers, agents, and directors. Plaintiff’s submission failed to demonstrate to the court’s satisfaction how such injunctive relief would not unlawfully impair defendant’s First Amendment rights.

The did, however, enjoin defendant from encouraging others to contact the children and other family members of employees about plaintiff’s business practices because contact of that nature had the potential to cause irreparable emotional harm to those family members, who have no employment or professional relationship with defendant.

Symetra Life Ins. Co. v. Emerson, 2018 WL 6338723(D. Maine, Dec. 4, 2018)

July 9, 2015 Trademarks

What is required for a website design to be protectible as trade dress?

Plaintiff sued defendant for, among other things, trade dress misappropriation, asserting that plaintiff’s website had a particular look and feel that would convert leads to sales, and that defendant copied the look and feel of the website’s distinctive elements. Defendant moved to dismiss the trade dress claim for failure to state a claim. The court granted the motion.

It found that plaintiff had failed to meet the requirement of pleading how its website’s design was distinctive. It noted that a mere cataloguing of a website’s features does not give defendants adequate notice of a plaintiff’s trade dress claim, especially, when the list of features comprising the trade dress is not complete. Rather, a complaint must “synthesize” how those features combine to create the website’s protectable look and feel. In the court’s view, a complaint that lists only some, but not all, of the features of the plaintiff’s website that the plaintiff believes constitute its trade dress is insufficient to state a plausible claim for trade dress infringement under the Lanham Act.

FC Online Marketing, Inc. v. Burke’s Martial Arts, LLC, 2015 WL 4162757 (E.D.N.Y., July 8, 2015)

Company facing liability for accessing employee’s Twitter and Facebook accounts

While plaintiff was away from the office for a serious brain injury she suffered in a work-related auto accident, some of her co-workers accessed and posted, allegedly without authorization, from her Twitter and Facebook accounts. (There was some dispute as to whether those accounts were personal to plaintiff or whether they were intended to promote the company.) Plaintiff sued, alleging several theories, including violations of the Lanham Act and the Stored Communications Act. Defendants moved for summary judgment. The court dismissed the Lanham Act claim but did not dismiss the Stored Communications Act claim.

Plaintiff had asserted a Lanham Act “false endorsement” claim, which occurs when a person’s identity is connected with a product or service in such a way that consumers are likely to be misled about that person’s sponsorship or approval of the product or service. The court found that although plaintiff had a protectable interest in her “personal brand,” she had not properly put evidence before the court that she suffered the economic harm necessary for a Lanham Act violation. The record showed that plaintiff’s alleged damages related to her mental suffering, something not recoverable under the Lanham Act.

As for the Stored Communications Act claim, the court found that the question of whether defendants were authorized to access and post using plaintiff’s social media accounts should be left up to the jury (and not determined on summary judgment). Defendants had also argued that plaintiff’s Stored Communications Act claim should be thrown out because she had not shown any actual damages. But the court held plaintiff could be entitled to the $1,000 minimum statutory damages under the act even without a showing of actual harm.

Maremont v. Susan Fredman Design Group, Ltd., 2014 WL 812401 (N.D.Ill. March 3, 2014)

October 7, 2012 Computer Crime, Employment, Trademarks

No Computer Fraud and Abuse Act violation for taking over former employee’s LinkedIn account

Eagle v. Morgan, 2012 WL 4739436 (E.D.Pa. October 4, 2012)

After plaintiff was fired as an executive, her former employer (using the password known by another employee) took over plaintiff’s LinkedIn account. It kept all of plaintiff’s contacts and recommendations but switched out plaintiff’s name and photo with those of the new CEO.

Plaintiff sued in federal court under the Computer Fraud and Abuse Act, the Lanham Act, and a slew of state law claims including identity theft, conversion and tortious interference. The former employer moved for summary judgment on the CFAA and Lanham Act claims. The court granted the motion, but continued to exercise supplemental jurisdiction over the state law claims.

On the CFAA claim, the court found that plaintiff failed to show how the taking over over her account gave rise to a cognizable loss under the CFAA. The kinds of losses she tried to prove, e.g., lost future business opportunities and professional reputation, did not pertain to any impairment or damage to a computer or computer system. Moreover, the court found, plaintiff failed to specify or quantify the damages she alleged.

As for the Lanham Act claim, the court found that there was no likelihood of confusion. It noted that “anyone who navigated to [plaintiff’s] LinkedIn account would be met with [the new CEO’s] name, photograph and new position.” Accordingly, there was no effort to “pass off” the new CEO as plaintiff or to otherwise suggest an endorsement or affiliation.

Though it dismissed all the federal claims, the court kept the pending state law claims. The matter had been before the court for over a year, the judge was familiar with the facts and the parties, and dismissing it so soon before trial would not have been fair.

Other coverage by Venkat.

Photo credit: Flickr user smi23le under this Creative Commons license.

February 6, 2009 Fraud/Misrepresentation, Trademarks

Trademark infringement and false designation claims not subject to heightened pleading standard

Court also foreshadows that if all they’re talking about is metatags, there won’t be much of a case.

Indiaweekly.com, LLC v. Nehaflix.com, Inc., 2009 WL 189867 (D. Conn. January 27, 2009)

In moving to dismiss claims brought against it for trademark infringement and false designation of origin under 15 U.S.C. Secs. 1114(1) and 1125(a), Indiaweekly.com, LLC claimed that the counterplaintiff Nehaflix.com had failed to allege sufficient facts to meet the standard of Fed. R. Civ. P. 9(b). That rule requires that “[i]n alleging fraud . . . a party must state with particularity the circumstances constituting fraud . . . .”

Bollywood mudflap

The U.S. District Court for the District of Connecticut rejected Indiaweekly.com’s assertion that such claims were subject to Rule 9’s heightened pleading standard. Nehaflix.com’s allegations that Indiaweekly.com placed Nehaflix’s trademark on Indiaweekly.com to draw in search traffic survived the motion to dismiss. It was plausible that potential Nehaflix customers, when searching for the term “Nehaflix” would, upon being directed to another site containing the term and selling competing goods, conclude that the two businesses were related when in fact they were not.

It is important to note that the court assumed for the sake of the motion to dismiss that the allegations that the Nehaflix mark “appeared” on Indiaweekly.com meant that the mark was visible when viewing the site and not merely in metatags. The court nodded to S&L Vitamins v. Australian Gold, Inc., 521 F.Supp.2d 188 (E.D.N.Y. 2007), which held that mere metatag use was not “use in commerce” for purposes of the Lanham Act.

Photo courtesy Flickr user Meanest Indian under this Creative Commons license.

October 25, 2008 Trademarks

Court allows U.S. lawsuit over video posted on Mexican website

Rapper 50 Cent’s Lanham Act claim against Cancun night club survives motion to dismiss

Jackson v. Grupo Industrial Hotelero, S.A., No. 07-22046, 2008 WL 4648999 (S.D. Fla. October 20, 2008)

Defendant owns Coco Bongo, a popular Cancun nightclub. Coco Bongo allegedly used rapper 50 Cent‘s likeness as well as one of his registered trademarks in some Spring Break 2007 video advertisements posted to the web. 50 Cent sued under the Lanham Act in federal court here in the United States alleging trademark infringement as false designation of origin.

Coco Bongo moved to dismiss, arguing a lack of subject matter jurisdiction. It contended that the alleged acts occurred outside of the United States, thus an extraterritorial application of the Lanham Act would violate Supreme Court and Eleventh Circuit authority. The court denied the motion.

The fact that the offending advertisements were on the web was key to the court’s finding that the court had subject matter jurisdiction. 50 Cent was seeking enforcement of his United States trademark rights in the United States. Although the Coco Bongo website was located in Mexico, and even though the website and its advertisements might be viewable by numerous other countries, it was the availability of the allegedly infringing advertisement within the United States that gave rise to an alleged violation of the Lanham Act.

See also Rogers v. Wright for analysis of the extraterritorial application of the Lanham Act.

February 20, 2008 Trademarks

Alienware goes after “free” computer offer

Alienware Corporation v. Online Gift Rewards, No. 08-1560, S.D.N.Y. (Filed February 14, 2008).

High-performance computer manufacturer Alienware has filed suit against an online marketer alleging trademark infringement, dilution, and other theories of unfair competition. Alienware claims that the defendant has “disseminated mass unsolicited electronic solicitations” and posted Web pages offering “free” Alienware laptops, when in reality, one has to perform some “onerous” tasks to get them.

According to Alienware, after accepting the offer, users must purchase a specified amount of goods from various other sites. And this obligation is not clearly communicated, but is “presented to the consumer, if at all, only after he or she expends significant time and effort in responding to inquiries and navigating the multiple prompts.”

One may be tempted to speculate that the defendant in this case could raise some kind of defense based on fair use of the trademark. (How could you let people know what you’re offering unless you tell them; and giving away actual Alienware computers also seems like it could be protected under the first sale doctrine.)

And Alienware may have anticipated this defense, by alleging that it’s only “Alienware” serving as the source identifier for the offer, and “[t]here is no other recognizable or identifiable indication of source.” The defendant is an entity called “Online Gift Rewards.” Alienware claims that the designation is “likely to be perceived as a generic description of the offering rather than a source indicator.”

[Download the complaint]

January 30, 2008 Cybersquatting, Trademarks

Finding ATLAS COPCO and ATLAS CASPIAN confusingly similar, court awards in rem ACPA relief to unopposed plaintiff

Atlas Copco AB v. Atlascopcoiran.com, No. 07-1208, 2008 WL 149128 (E.D. Va. January 8, 2008)

Unable to hail the overseas registrants of domain names, including atlascaspian.com and atlascopcoiran.com into a U.S. court, plaintiff Atlas Copco AB sought in rem relief against the domain names under 15 U.S.C. §1125(d)(2)(a). After the defendants failed to answer the complaint, Atlas Copco moved for summary judgment, relying on the allegations of its verified complaint.

The court granted the motion and ordered the domain names transferred.

In finding that the defendants had engaged in cyberpiracy, the court looked at the “dominant or salient portions of the marks” at issue – the plaintiff’s mark and the marks comprising the offending domain names.

For you trademark experts out there, query whether you might characterize the following analysis as a bit of a stretch:

The dominant portion of each of the Defendant Domain Names is “ATLAS COPCO” or “ATLAS.” These “dominant” terms are paired with the generic terms “CASPIAN” and “IRAN,” which are generic geographic terms that do not distinguish the Defendant Domain Names from the ATLAS COPCO trademark. An internet user might reasonably assume that the geographic term “CASPIAN” and “IRAN” were added to the ATLAS COPCO trademark by the Plaintiffs to identify its geographic location.

It looks like another motivation for the court’s finding was some of the subterfuge on the sites at the offending domain names. Turns out some of them pointed to “copycat” websites bearing “Atlas Caspian” logos confusingly similar to the plaintiff’s trademark, and linked to phishing sites bearing the actual Atlas Copco mark.