Also known as: unfairly competitive · unfairly competing · unfair trade practices
Written by attorneys — see sources below.
Conduct involving dishonest or fraudulent rivalry in trade and commerce. The doctrine encompasses torts such as passing off goods as those of another, false advertising, misappropriation, and deceptive practices that harm competitors or consumers.
Unity Capital sues Upstream Petroleum after the latter copies its proprietary energy reports and markets them as its own. Unity Capital asserts both a federal copyright claim and a state unfair competition claim arising from the identical copying and sales. The federal court accepts jurisdiction over the unfair competition claim because it shares the same facts as the copyright action.
Uptown Apparel publishes ads claiming its rival Union Steel's garments contain toxic dyes. Union Steel loses customers who believe the false claims. Union Steel sues under the Lanham Act for unfair competition, alleging injury to its commercial reputation and sales.
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 caseUriel Urban develops a secret drilling process at Upstream Petroleum. After leaving, Uriel shares the process with a competitor. Upstream Petroleum sues for unfair competition based on misappropriation even though no patent protects the process.
Harshaw Chemical Co., an unincorporated division of petitioner Kewanee Oil Co., commenced research in 1949 into the growth of synthetic crystals useful in the detection of ionizing radiation and was able to produce one less than two inches in diameter. By 1966, as the result of expenditures in excess of one million dollars, Harshaw was able to grow a seventeen-inch crystal, something no one else had done previously. Harshaw had developed many processes, procedures, and manufacturing techniques in the purification of raw materials and the growth and encapsulation of the crystals which enabled it to accomplish this feat. Some of these processes Harshaw considers to be trade secrets. The individual respondents are former employees of Harshaw who formed or later joined respondent Bicron. While at Harshaw the individual respondents executed, as a condition of employment, at least one agreement each, requiring them not to disclose confidential information or trade secrets obtained as employees of Harshaw. Bicron was formed in August 1969 to compete with Harshaw in the production of the crystals, and by April 1970 had grown a seventeen-inch crystal. Petitioner brought this diversity action in United States District Court for the Northern District of Ohio seeking injunctive relief and damages for the misappropriation of trade secrets. The District Court, applying Ohio trade secret law, granted a permanent injunction against the disclosure or use by respondents of twenty of the forty claimed trade secrets until such time as the trade secrets had been released to the public, had otherwise generally become available to the public, or had been obtained by respondents from sources having the legal right to convey the information. The Court of Appeals for the Sixth Circuit held that the findings of fact by the District Court were not clearly erroneous and that the District Court properly applied Ohio law relating to trade secrets. Nevertheless, the Court of Appeals reversed the District Court, finding Ohio's trade secret law to be in conflict with the patent laws of the United States. The Supreme Court granted certiorari to resolve a question on which there is a conflict in the courts of appeals: whether state trade secret protection is preempted by operation of the federal patent law.
View caseUliana Ustinova, a solo practitioner, runs price advertisements that a state bar deems misleading. The bar disciplines her to prevent unfair competition among attorneys. Uliana challenges the restriction as overbroad.
After admission to the bar in 1972, appellants worked as attorneys with the Maricopa County Legal Aid Society. In March 1974, they left the Society and opened a law office in Phoenix that they called a legal clinic. Their aim was to provide legal services at modest fees to persons of moderate income who did not qualify for governmental legal aid by accepting only routine matters such as uncontested divorces, uncontested adoptions, simple personal bankruptcies, and changes of name. To keep costs down, they relied on extensive use of paralegals, automatic typewriting equipment, and standardized forms and office procedures. After conducting their practice in this manner for two years, they concluded that advertising, and in particular the advertising of fees, was necessary to generate the volume of business required for the clinic to survive. On February 22, 1976, they placed an advertisement in the Arizona Republic, a daily newspaper of general circulation in the Phoenix metropolitan area. The advertisement stated that appellants were offering legal services at very reasonable fees. It listed exact prices for the services, including $175 plus a $20 filing fee for an uncontested divorce or legal separation, $225 plus a $20 filing fee for an uncontested adoption, $250 plus a $55 filing fee for a non-business bankruptcy, and $95 plus a $20 filing fee for a change of name, with personal injury cases handled on a contingent fee basis. Upon the filing of a complaint initiated by the president of the State Bar, a hearing was held before a three-member Special Local Administrative Committee. The committee recommended that each of the appellants be suspended from the practice of law for not less than six months. Upon further review by the Board of Governors of the State Bar, the Board recommended only a one-week suspension for each appellant, the weeks to run consecutively. Appellants sought review in the Supreme Court of Arizona. The court rejected both their Sherman Act and First Amendment claims, concluded that the conduct violated the disciplinary rule, and imposed a sanction of censure. Appellants then appealed to this Court, which noted probable jurisdiction.
View caseUnion Steel manufactures a distinctive lamp base that is not patented. A competitor sells identical bases. Union Steel sues under state unfair competition law to stop the copying, but the claim fails because federal patent law places the design in the public domain.
Stiffel Company secured design and mechanical patents on a pole lamp. The lamp was a vertical tube having lamp fixtures along the outside and constructed to stand upright between floor and ceiling. Pole lamps achieved commercial success after Stiffel brought them to market. Sears, Roebuck & Company subsequently placed on the market a substantially identical lamp that it sold at a lower price. Its retail price matched Stiffel's wholesale price. Stiffel brought an action against Sears in the United States District Court for the Northern District of Illinois. Its first count claimed that Sears had infringed the patents by copying the design. The second count alleged that Sears had engaged in unfair competition under Illinois law by causing confusion in the trade as to the source of the lamps. Evidence introduced included the absence of identifying tags on Sears lamps, although labels appeared on the cartons delivered to customers. Additional evidence showed customer inquiries to Stiffel about differences from Sears lamps and complaints from two customers who had purchased Stiffel lamps upon learning of the cheaper Sears versions. After determining that the patents were invalid for want of invention, the District Court found as a fact that Sears' lamp was a substantially exact copy of Stiffel's. The lamps were so alike in appearance and functional details that confusion between them was likely and had already occurred in some cases. The court then entered judgment against Sears on the unfair competition claim. It enjoined Sears from selling or attempting to sell pole lamps identical to or confusingly similar to Stiffel's lamp. The court also ordered an accounting to determine profits and damages. The Court of Appeals affirmed the District Court's judgment. The Supreme Court granted certiorari to consider the question presented by the case.
View caseUnity Capital operates a subscription database. Uriel Urban deploys bots to scrape listings and republish them on a rival site. Unity Capital sues for unfair competition, alleging the automated access harms its goodwill and user base.
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 caseA federal court may exercise supplemental jurisdiction over a state unfair competition claim when it arises from the same facts as a substantial federal intellectual property claim such as copyright infringement. The claims must form part of the same case or controversy.
No. Liability can rest on conduct that creates a likelihood of confusion even without proof of deceptive intent. The focus is on whether the practices harm competitors or mislead consumers.
No. Federal patent law places unpatented designs in the public domain, and state unfair competition claims that effectively grant patent-like protection are preempted.
Courts may award damages or issue injunctions. An injunction is available without first exhausting damages when ongoing harm is difficult to quantify and the balance of equities favors relief.