The elements of a Lanham Act false advertising claim are 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.
See, e.g., Cook, Perkiss and Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 244 (9th Cir. 2000); 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); 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).
A false advertiser “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.” 15 U.S.C. § 1125(a) (emphasis added). This element states both standing injury requirements. Courts have consistently rejected consumer standing to sue for false advertising under the Lanham Act, however. 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. Sw. 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 (1995) (concluding that most courts agree that consumers do not have standing to sue, although various rationales are still employed).
Section 45 of the Lanham Act protects “persons engaged in … commerce against unfair competition. 15 U.S.C. § 1127. Section 45 requires a commercial or competitive injury. In the Ninth Circuit, a plaintiff must “allege commercial injury based upon a misrepresentation about a product, and also that the injury was ‘competitive,’ i.e., harmful to the plaintiff’s ability to compete with the defendant.” Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995) (quoting Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir. 1992)).
The Plaintiff must first prove the Defendant made a false or misleading statement of fact. Falsity is demonstrated by proving either: (1) the statement is literally false, or (2) although literally true, the statement is likely to mislead, confuse, or deceive consumers. 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). Whether an advertisement is literally false is an issue of fact. See, e.g., Clorox Co. Puerto Rico, 228 F.3d at 34. "A claim is conveyed by necessary implication when, considering the advertisement in its entirety, the audience would recognize the claim as readily as if it had been explicitly stated." Id. at 35. A suggestive representation is less likely to be found as a literally false statement. See, e.g., Id.; United Indus. Corp., 140 F.3d at 1175. Proving that the advertisement is literally false depends on the nature of the claim made in the advertisement, as well as the context in which the claim was made. 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. For example, a visual image may make an advertisement literally false. InRhone-Poulenc Rorer Pharm., Inc. v. Marion Merrell Dow, Inc. (93 F.3d 511, 516 (8th Cir. 1996)), the court found literal falsity when a drug manufacturer's television advertisement showed images of two gasoline pumps side by side, but displaying different prices, together with a question "Which one would you choose?" The court held the advertisement inaccurately portrayed that the manufacturer's and competitor's drugs are substituted for one another.
A statement which is literally true may nevertheless be actionable false advertising. "Statements that are literally true or ambiguous but which nevertheless have a tendency to mislead or deceive the consumer are actionable under the Lanham Act." United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1182 (8th Cir. 1998). This is true where claims convey a false impression, are misleading in context, or may be deceptive when viewed by consumers. Id. at 1180.
If an advertisement is literally true but misleading, the plaintiff must also prove that the advertisement has in fact deceived or has a tendency to deceive. See, e.g., Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24, 33 (1st Cir. 2000). The plaintiff must prove materiality by extrinsic evidence showing what consumers actually believe when viewing the advertising. Id.; Gordon & Breach Science Publishers S.A. v. Am. Inst. Of Physics, 859 F. Supp. 1521, 1532 (S.D.N.Y. 1994).
Opinion and puffery are not actionable. For a statement to be actionable under Section 43(a), it must be a statement of fact, as opposed to mere opinion or bald assertion. See also Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997); Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 496 (5th Cir. 2000) (collecting cases); Groden v. Random House, 61F.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”). A statement of fact is one that "(1) admits of being adjudged true or false in a way that (2) admits of empirical verification." Presidio Enter., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d 674, 679 (5th Cir. 1986); "Puffery," comes in two forms: (1) an exaggerated, blustering, and boasting statement upon which no reasonable buyer would be justified in relying; or (2) a general claim of superiority over comparable products that is so vague that it can be understood as nothing more than a mere expression of opinion. Pizza Hut, 227 F.3d at 496-97.
The false or misleading statement of fact must appear in a "commercial advertising or promotion." See 17 U.S.C. § 1125(a); Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 (5th Cir. 1996). "Commercial advertising or promotion" is defined as:
(1) commercial speech;
(2) by a defendant who is in commercial competition with the plaintiff;
(3) for the purpose of influencing consumers to buy the defendant's goods or services; and
(4) that is disseminated sufficiently to the relevant purchasing public to constitute "advertising" or "promotion" within that industry, even if not made in a "classical advertising campaign." Coastal Abstract Serv., Inc. v. First Am. Tit. Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999); 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”); Seven-Up Co., 86 F.3d at 1384. The definition excludes non-commercial speech; non-commercial speech is entitled to a greater protection under the First Amendment than commercial speech. Gordon& Breach, 859 F. Supp. at 1536.
A plaintiff must demonstrate that the false or misleading advertising or promotion at issue is "material." JTH Tax, Inc. v. H&R Block East Tax Serv., Inc., 28 Fed. App. 207 (4th Cir. 2002). Materiality centers on whether the false or misleading advertisement deceives or is likely to deceive. 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). 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.
Where the statement at issue is literally false, materiality is presumed. "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." Pizza Hut, 227 F.3d at 497; see also S.C. Johnson & Son, 241F.3d at 232; Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24 (1st Cir. 2000). Section 43(a) does not require an additional showing of deception.
With a literally true but misleading statement, materiality is decided based on public's actual reaction to the advertisement. See Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1140 (9th Cir. 1997); Pizza Hut, 227 F.3d at 497; Johnson & Johnson-Merck Consumer Pharm. Inc. Co. v. Rhone-Poulenc Rorer Pharm., 19 F.3d 125 (3d Cir. 1994). "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." 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). Plaintiff must demonstrate that the advertising deceived a substantial portion of the public. See United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1182 (8th Cir. 1998). "[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." Pizza Hut, 227 F.3d at 503 n.13. Generally, surveys are the preferred vehicle; however, evidence of consumers’ letters, calls, and affidavits, can also show consumer deception. See Clorox Co. Puerto Rico, 228 F.3d at 36; Pizza Hut, 227 F.3d at 497; Pizza Hut, 227 F.3d at 497.
The 9th Circuit held that if the defendant violated the Lanham Act willfully or in bad faith, a plaintiff is not required to provide a consumer survey or any other extrinsic evidence in order to prove materiality. U-Haul Intl., Inc. v. Jartan, Inc., 793 F.2d 1034 (9th Cir. 1986).
In some circuits, if the defendant "intentionally set out to deceive the public," using "deliberate conduct" of an "egregious nature" in light of the advertising culture of the marketplace in which the defendant competes, a presumption arises that consumers were, in fact, deceived, dispensing with the need for the plaintiff to commission a consumer survey.
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).
The Lanham Act provides for both injunctive and monetary relief. See 15 U.S.C. §§ 1116 - 1117. For literally false claims where a plaintiff is only seeking injunctive relief, no additional evidence is necessary, and for misleading claims, a tendency to deceive consumers must be established. 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.”). If a plaintiff seeks damages, however, it must prove actual confusion or deception arising from the violation. See generally George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992). Injunctive relief only requires a showing that the defendant's representations have a tendency to deceive consumers (which is presumed where the statement is literally false). See, e.g., Pizza Hut, 227 F.3d at 497; American Council, 185 F.3d at 618.
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.
15 U.S.C. § 1117(a). The courts enjoy broad discretion when determining damages. Burger King Corp. v. Mason, 855 F.2d 779 (11th Cir. 1988).
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 attorney fees. Ninth Circuit law holds that punitive damages are not available for violation of section 43(a). Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197 (9th Cir. 1989). Further, 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.
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).
The Ninth Circuit suggests that willful conduct is required in order to recover defendant’s profits. See Minn. 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).