Also known as: false advertisement · falsely advertise · falsely advertising · falsely advertised · deceptive advertising · misleading advertising
Written by attorneys — see sources below.
A tortious act consisting of distributing an advertisement that is untrue, deceptive, or misleading. The act encompasses false statements of fact about the characteristics, quality, or geographic origin of goods, services, or commercial activities and is actionable by competitors or consumers who reasonably believe they have been or are likely to be damaged.
Faith Fitzgerald films a television spot showing herself arguing before a jury and winning a verdict. In reality she has never tried a case to conclusion before a jury. Viewers who retain her based on the commercial later discover the misrepresentation and complain to the bar.
Foxfire Biotech opens a chain of quick-service eateries using the same color scheme, layout, and signage as an established competitor. Customers enter believing they are patronizing the original chain and the competitor loses sales.
Taco Cabana, Inc., operates a chain of fast-food restaurants serving Mexican food. The first Taco Cabana restaurant opened in San Antonio in September 1978. By 1985 five more had opened in that city. Taco Cabana's Mexican trade dress features a festive eating atmosphere with interior dining and patio areas decorated with artifacts, bright colors, paintings and murals. It also includes a stepped exterior in a vivid color scheme using top border paint and neon stripes, bright awnings and umbrellas. In December 1985, Two Pesos, Inc., opened a restaurant in Houston that adopted a motif very similar to Taco Cabana's trade dress. Two Pesos expanded rapidly in Houston and other markets but did not enter San Antonio. In 1986, Taco Cabana entered the Houston and Austin markets. It expanded into other Texas cities including Dallas and El Paso where Two Pesos was also operating. In 1987, Taco Cabana sued Two Pesos in the United States District Court for the Southern District of Texas. The suit alleged trade dress infringement under § 43(a) of the Lanham Act and theft of trade secrets under Texas common law. The case was tried to a jury. The jury answered five questions. Taco Cabana has a trade dress. Taken as a whole, the trade dress is nonfunctional. The trade dress is inherently distinctive. The trade dress has not acquired a secondary meaning in the Texas market. The alleged infringement creates a likelihood of confusion on the part of ordinary customers as to the source or association of the restaurant's goods or services. The district court entered judgment awarding damages to Taco Cabana. It found that Two Pesos had intentionally and deliberately infringed the trade dress. The Court of Appeals for the Fifth Circuit affirmed the judgment. The Supreme Court granted certiorari to resolve a conflict among the courts of appeals.
View caseFoster Forge advertises replacement toner cartridges as compatible with Lexmark printers when the cartridges actually damage the printers. Static Control Components, a supplier of compatible parts, loses sales and sues under the Lanham Act.
Lexmark International, Inc. manufactures and sells laser printers along with the toner cartridges designed exclusively for those printers. It introduced a Prebate program that offered customers a 20-percent discount on new cartridges if they agreed to return the empty cartridges to Lexmark once used. The program terms were communicated to consumers through notices printed on the toner-cartridge boxes. Static Control Components, Inc. manufactures and sells components necessary for remanufacturers to refurbish used Lexmark toner cartridges. Static Control developed a microchip that could mimic the microchip in Lexmark Prebate cartridges, enabling remanufacturers to refurbish and resell those cartridges after replacing the original chip. In 2002 Lexmark sued Static Control alleging violations of the Copyright Act and the Digital Millennium Copyright Act. Static Control counterclaimed under section 43(a) of the Lanham Act, alleging that Lexmark misled end-users into believing they are legally bound by the Prebate terms. Static Control further alleged that Lexmark sent letters to remanufacturers falsely advising that it was illegal to sell refurbished Prebate cartridges and to use Static Control products. Static Control alleged that these statements caused it lost sales and damage to its business reputation. The district court granted Lexmark’s motion to dismiss the Lanham Act counterclaim on prudential standing grounds. The Sixth Circuit reversed after applying the reasonable-interest test. The Supreme Court granted certiorari to decide the appropriate analytical framework.
View caseBidder’s Edge scrapes eBay listings and advertises its own service as providing real-time auction data identical to eBay’s. eBay loses user traffic and files suit alleging false advertising among other claims.
eBay, Inc. operates an Internet-based person-to-person trading site that allows sellers to list items for auction and buyers to search listings and place bids directly with sellers. The site has over 7 million registered users, adds more than 400,000 new items daily, receives 10 million searches per day, and processes 600 bids per minute across nearly 3 million items. Users register by clicking an “I Accept” button on a seven-page User Agreement that prohibits robots, spiders, or other automated devices from monitoring or copying web pages without prior written permission. Bidder’s Edge, Inc., a 22-employee company founded in 1997, operates an auction aggregation site that compiles data from more than one hundred auction sites into its own database containing over five million items. When a user searches on the BE site, the site queries its database rather than the original host sites. Approximately 69 percent of the items in BE’s database come from eBay auctions, and BE estimates it would lose one-third of its users if it stopped covering eBay. In early 1998 eBay permitted BE to include Beanie Babies and Furbies listings. In April 1999 eBay verbally approved BE crawling the site for a 90-day period while the parties negotiated a licensing agreement, but they failed to reach terms. After BE briefly stopped posting eBay listings in late August or early September 1999 and then resumed in November, eBay sent a November 9 letter demanding that BE cease access, alleging trespass, and offering a license. eBay then blocked 169 IP addresses it believed BE was using; BE evaded the blocks by routing queries through proxy servers. BE sent eBay’s systems between 80,000 and 100,000 requests per day, accounting for 0.70 to 1.53 percent of eBay’s requests and data transfer during October and November 1999. eBay calculated alleged damages of $45,323 to $61,804 over ten months but did not identify specific incremental costs caused by BE. The motion for a preliminary injunction was heard on April 14, 2000.
View caseAT&T Mobility runs national ads promising unlimited data without disclosing throttling after a usage cap. Customers who switch carriers based on the ads later discover the limitation and bring claims.
In February 2002, Vincent and Liza Concepcion entered into an agreement for the sale and servicing of cellular telephones with AT&T Mobility LLC. The contract provided for arbitration of all disputes between the parties but required that claims be brought in the parties' individual capacity and not as a plaintiff or class member in any purported class or representative proceeding. The agreement authorized AT&T to make unilateral amendments, which it did to the arbitration provision on several occasions. The parties agree that the December 2006 revisions control. The revised agreement requires customers to complete a one-page Notice of Dispute form. It allows AT&T to offer settlement. It provides that AT&T must pay all costs for nonfrivolous claims. Arbitration must take place in the county where the customer is billed. For claims of $10,000 or less, the customer may choose in-person, telephone, or submission-based proceedings. The agreement preserves the right to bring claims in small claims court. It requires AT&T to pay a $7,500 minimum recovery plus twice the claimant's attorney's fees if the arbitration award exceeds AT&T's last written settlement offer. The Concepcions purchased AT&T service advertised as including free phones but were charged $30.22 in sales tax based on the phones' retail value. In March 2006, the Concepcions filed a complaint against AT&T in the United States District Court for the Southern District of California. Their suit was consolidated with a putative class action alleging that AT&T had engaged in false advertising and fraud by charging sales tax on phones it advertised as free. In March 2008, AT&T moved to compel arbitration under the terms of its contract with the Concepcions. The Concepcions opposed the motion on the ground that the arbitration agreement was unconscionable under California law because it disallowed classwide procedures. The District Court denied AT&T's motion. It described the arbitration agreement favorably in several respects. Nevertheless, the court found the provision unconscionable under the California Supreme Court's Discover Bank decision because AT&T had not shown that bilateral arbitration adequately substituted for the deterrent effects of class actions. The Ninth Circuit affirmed. It also found the provision unconscionable under California law as announced in Discover Bank. The court held that the Discover Bank rule was not preempted by the Federal Arbitration Act because the rule was simply a refinement of the unconscionability analysis applicable to contracts generally in California. The Supreme Court granted certiorari.
View caseCollege Savings Bank advertises its prepaid tuition plans as fully insured by a state agency when the plans lack that backing. Florida Prepaid loses enrollment and sues for false advertising.
College Savings Bank is a New Jersey chartered bank located in Princeton, New Jersey. Since 1987 it has marketed and sold CollegeSure certificates of deposit designed to finance the costs of college education. College Savings holds a patent upon the methodology of administering its CollegeSure certificates. Respondent Florida Prepaid Postsecondary Education Expense Board is an arm of the State of Florida. Since 1988 it has administered a tuition prepayment program designed to provide individuals with sufficient funds to cover future college expenses. The Trademark Remedy Clarification Act amends the Lanham Act by defining any person to include any State or state instrumentality. It provides that such state entities shall not be immune under the Eleventh Amendment or any other doctrine of sovereign immunity from suit in federal court for violations of the Act. Remedies are available to the same extent as against nonstate entities. College Savings brought a patent infringement action against Florida Prepaid in United States District Court in New Jersey. In the same court College Savings also filed the instant action alleging that Florida Prepaid violated section 43(a) of the Lanham Act by making misstatements about its own tuition savings plans in its brochures and annual reports. Florida Prepaid moved to dismiss on sovereign-immunity grounds. The District Court granted the motion. The Court of Appeals affirmed. The Supreme Court granted certiorari.
View caseA plaintiff must show a false statement of fact in a commercial advertisement that misrepresents the nature, characteristics, qualities, or geographic origin of goods or services, that the statement actually deceives or has the tendency to deceive a substantial segment of consumers, and that the plaintiff has been or is likely to be injured as a result.
No. Exaggerated opinions or vague boasts that no reasonable consumer would rely on as factual statements are considered puffing and are not actionable as false advertising.
Yes. Under the Lanham Act a plaintiff need only show that the false statement is likely to influence purchasing decisions. Proof of actual confusion is not required for injunctive relief though it strengthens a damages claim.
False advertising involves false statements about the defendant’s own goods or services. Trade disparagement involves false statements about a competitor’s goods or services.
…Lexmark’s. Lexmark sued for copyright infringement, but Static Control counterclaimed, alleging that Lexmark engaged in false or misleading advertising in violation of §43(a) of the Lanham Act, 15 U. S. C. §1125(a), and that its misrepresentations had caused Static Control lost sales and damage to its business reputation. The District…