LIABILITY FOR COMMERCIAL SPEECH Julia Huston,FoleyHoagLLP Disparagement, andRelatedClaims Commercial A GuidetoFalseAdvertising, Commercial Speech: Liability for

MARCH 2015 MARCH This volume summarizes related bodies of law – false advertising, commercial disparagement, and defamation – that govern the conduct of business communications. It sets forth elements, damages, and related defenses for each of these causes of action and suggests ways to reduce the risk of liability in business communications, advertising, and marketing. Related claims, such as trademark infringement, copyright infringement, and interference with contractual relations, are also addressed. Risk management procedures, a checklist for compliance training, and a sample complaint, answer and jury instructions are provided. Table of Contents

I. Introduction to Claims Based on Commercial Speech...... 1 II. False Advertising...... 2 A. Elements of False Advertising...... 3 1. False or misleading statements...... 4 2. Proof of consumer reaction...... 6 3. Commercial advertising or promotion...... 8 4. Establishment claims...... 9 B. Damages and Remedies for False Advertising...... 9 C. Defenses to False Advertising...... 11 1. Opinion...... 11 2. Puffery...... 12 III. Defamation and Commercial Disparagement...... 13 A. Elements of a Defamation Claim...... 13 B. Defamation Defined...... 14 C. Examples of Defamatory Statements...... 15 1. Dishonesty or fraud...... 15 2. Mental disorder...... 15 3. Crime or immorality...... 16 4. Injurious to business reputation...... 16 5. Potential for bad behavior...... 16 6. Careless omission of a significant fact or name in a publication...... 16 D. Proving Fault Within a Free Speech Framework...... 17 E. Elements of a Commercial Disparagement Claim...... 19 1. Privileged statements...... 22 2. Corporations as public figures...... 23 F. Damages and Remedies for Defamation and Commercial Disparagement...... 23 1. Damages...... 23 2. Special damages...... 24 3. Presumed damages...... 25 4. Retraction...... 25 5. Punitive damages...... 26 6. Prior restraint...... 27

Attorney advertising. Prior results do not guarantee a similar outcome. © 2015 Foley Hoag LLP. All rights reserved. G. Defenses to Defamation and Commercial Disparagement...... 28 1. Overview...... 28 2. Truth...... 29 3. Opinion...... 31 4. The libel-proof plaintiff...... 34 5. Absolute Privileges...... 34 a. Litigation privilege...... 35 b. Legislative privilege...... 36 6. Conditional Privileges...... 36 a. Employer privilege...... 38 b. Fair reporting privilege...... 39 c. Common interest privilege...... 40 d. Public interest privilege...... 40 e. Credit report privilege...... 41 f. Law enforcement privilege...... 42 g. Competitive privilege...... 42 IV. Other Claims...... 43 A. Trademark Infringement...... 43 B. Copyright Infringement ...... 45 C. Interference with Contractual Rights...... 46 D. Intentional Infliction of Emotional Distress...... 46 E. Breach of Contract...... 47 F. Unfair or Deceptive Practices in Violation of State Law...... 47 G. Violation of Federal Trade Commission Statutes and Regulations...... 47 H. Violation of Industry Statutes and Regulations...... 48 V. Forums for the Enforcement of False Advertising Claims...... 49 A. Civil Lawsuit in Federal or State Court...... 49 B. Enforcement Action by Federal Trade Commission or State Attorney General...... 49 C. Enforcement Through the National Advertising Division of the Council of Better Business Bureaus...... 49 VI. Minimizing the Risk of Liability...... 50 VII. Treatises and Other Sources of Information...... 51 VIII. Appendices...... 52 Exhibit 1: Checklist for Risk Management Procedures...... 52 Exhibit 2: Checklist for Compliance Training...... 53 Exhibit 3: Checklist for False Advertising...... 54 Exhibit 4: Checklist for Defamation...... 55 Exhibit 5: Checklist for Commercial Disparagement...... 56 Exhibit 6: Sample Complaint...... 57 Exhibit 7: Sample Answer...... 62 Exhibit 8: Sample Jury Instructions...... 66 About the Author...... 71 “The very first law in advertising is to avoid the concrete promise and cultivate the delightfully vague.” - Stuart Chase (1888-1985)

“Never write an advertisement which you wouldn’t want your family to read. You wouldn’t tell lies to your own wife. Don’t tell them to mine.” - David Ogilvy (1911-1999)

“False words are not only evil in themselves, but they infect the soul with evil.” - Socrates LIABILITY FOR COMMERCIAL SPEECH 1 497 F.3d 144, 153 Inc., 497 F.3d DIRECTV, Inc. v. Cable, Time Warner 2007). (2d Cir. 264, 272-73 United Indus. Corp., 315 F.3d Scotts Co. v. 2002). (4th Cir. Saks Fifth Avenue, 284 F.3d Inst. v. & Camel Hair Mfg. Cashmere 2002), cert. denied, 537 U.S. 1001 (2002). 302, 311 (1st Cir. , 882 P.2d 1293, 1297 n.5 (Colo. 1994). Stewart, 882 P.2d Keohane v. 1994). , 626 N.E.2d 862, 866 n.4 (Mass. Chmielewski Draghetti v. , 124 S.W.3d 167, Inc., 124 S.W.3d Granada Biosciences, Forbes Inc. v. (“A business disparagement claim is similar 2003) 170 (Tex. torts to a defamation claim. The two differin many respects in the personal chiefly serve to protect actions defamation that disparagement while a business party, of an injured reputation claim protectsinterests.”). economic Bork, 531 N.E.2d 1033, 1037 (Ill. App. Ct. 1988) Inc. v. Allcare, distinct two disparagement are (“Defamation and commercial integrity causes of action. Defamation lies when a person’s is attacked while commercial in his business or profession disparagement lies when the quality of his goods or services is attacked.”). • • • • • • • I. Introduction to Claims Based on Commercial Speech Commercial Based on to Claims I. Introduction false advertising, of action of causes and commercial defamation, related The loosely communications. impact on business a significant together have disparagement False advertising is advertisinglikely to mislead and that is either literally false or is confuse consumers. Defamation encompasses the torts of libel (written defamation) and slander (spoken defamation). Commercial disparagement, which is closely related to defamation, concerns false disparagement, which is closely related Commercial goods call into question the quality of a competitor’s statements made with the intent to harm. or services and to inflict pecuniary A sample complaint and sample answer for these causes of action are attached as attached A sample complaint and sample answer for these causes of action are attached as Exhibit 8. Other causes Exhibit 6 and Exhibit 7. Sample jury instructions are speech, false or misleading statements in commercial of action that may arise from set forth in Section IV. such as trademark infringement and copyright infringement, are 2 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS defendant kneworshouldhaveknownthatitsstatementwasfalsemisleading. mayalsohavetoprove underLanhamAct§43(a),aplaintiff thatthe advertising state statutesforunfaircompetition,inadditiontoproving theelementsoffalse claimundersome right ofactionfordamages.Inorder afalseadvertising toassert whichareadvertising, enforced bytheAttorneyGeneralanddonotprovide aprivate states havestatutesandregulations prohibiting untrue,deceptiveormisleading a specificstatestatuteoramountstofraudunfaircompetition.Notethatsome mayalsobeactionable understatelawtotheextentthatitviolates False advertising case lawforguidanceregarding theinterpretation ofLanhamAct §43(a). casesare generallylooktofederal advertising brought statecourts infederalcourt, 28U.S.C. § 1338(a).Becausethevastmajorityoffalse federal orstatecourt. under theLanhamAct§43(a)maybebroughtClaims forfalseadvertising ineither 15 U.S.C.§1125(a)(emphasisadded). in 1989,provides: isprohibitedFalse advertising byfederalstatute.TheLanhamAct§43(a),asamended II. FalseAdvertising “ to federal case law for guidance…” brought in federal court, state courts generally look …the vast majority of false advertising cases are she isorlikelytobedamagedbysuchact. activities,… shallbeliableinacivilactionbyanypersonwhobelievesthatheor geographic originofhisorheranotherperson’s goods,services,orcommercial orpromotion,advertising misrepresents thenature, characteristics,qualities,or of fact,orfalsemisleadingrepresentation offact,which.(B)incommercial combination thereof, oranyfalsedesignationoforigin,misleadingdescription for goods,usesincommerce anyword, term,name,symbol,ordevice,any (1) Anypersonwho,onorinconnectionwithanygoodsservices,container • • under Mass.Gen.Lawsc.93A). 120 n.3(D.Mass.1996)(addressing claims forfalseadvertising Gillette Co.v. Norelco ConsumerProds. Co.,946F. Supp.115, Code 17500). deceptive marketingtechniquesunderCaliforniaBus. andProf. Rptr. 2d463,467-68(Cal.Ct.App. 2002)(addressing claimsfor People ex.rel. BillLockyerv. Fremont LifeIns.Co.,128Cal. LIABILITY FOR COMMERCIAL SPEECH 3 , 315 F.3d 264, 272 Corp., 315 F.3d United Indus. Scotts Co. v. 2002). (4th Cir. Avenue, 284 Saks Fifth & Camel Hair Mfg. Inst. v. Cashmere 2002), cert. denied, 537 U.S. 1001 302, 310- 11 (1st Cir. F.3d (2002). 612 F.3d 1298, 1308 Viance, LLC, 612 F.3d Osmose, Inc. v. 2010). (11th Cir. 387, Pasta Co., 371 F.3d World New Am. Italian Pasta Co. v. 2004). 390 (8th Cir. 489, 495 Int’l, Inc., 227 F.3d Papa John’s Pizza Hut, Inc. v. 2000). (5th Cir. 1134, 1139 Stover Seed Co., 108 F.3d Southland Sod Farms v. 1997). (9th Cir. Rhone- Consumer Pharm. Co. v. Johnson & Johnson-Merck 1994). Cir. 125, 129 (3rd Pharm., Inc., 19 F.3d Poulenc Rorer The defendant made a false or misleading statement in a commercial statement in a commercial or misleading made a false The defendant advertisement its own or the plaintiff’s about product; to deceive a substantial deceives or has the tendency The statement actually segment of its audience; of the statement, as a result The plaintiff has been or is likely to be injured of goodwill to the defendant or by a lessening diversion of sales either by direct associated with the plaintiff’s products. • • • • • • • 1.  decision); the purchasing is material (i.e., it is likely to influence 2. The deception 3.  and commerce; placed the statement into interstate 4. The defendant 5.  A. Elements of False AdvertisingA. Elements on a false advertising Act, a plaintiff under the Lanham claim to prevail In order must prove: In some circuits, the order of the second and third elements are reversed, but the reversed, elements are of the second and third the order In some circuits, test is otherwise identical. 4 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS been explicitlystated. it impliesafalsemessagewhichwouldberecognized bytheaudienceasreadily asifithad is falsebynecessaryimplicationif,whenconsidered inthecontextwhich itispresented, A statementcanbeliterallyfalseeitheronitsface or bynecessaryimplication.Astatement or ambiguousbutlikelytomisleadconfuseconsumers. demonstrate thatthedefendant’s statementwaseither literallyfalse,true In order toprevail must onthefirstprong test,aplaintiff ofthefalseadvertising 1. Falseormisleadingstatements • • • • • • • • • • • 158 (2dCir. 2007)). (citing TimeWarner Cable,Inc.v. DIRECTV, Inc.,497F.3d 144,153, (NJ)Inc.v.Tiffany eBay, Inc.,600F.3d 93,112n.19(2dCir. 2010) (6th Cir. 2012). Innovation Ventures, LLCv. N.V.E., Inc.,694F.3d 723,735-36 Rorer Pharm.,Inc.,19F.3d 125,129(3rd Cir. 1994). Johnson &Johnson-Merck ConsumerPharm. Co.v. Rhone-Poulenc (7th Cir. 1994). BASF Corp.v. OldWorld Trading Co.,41F.3d 1081,1088-89 (9th Cir. 1997). Southland SodFarmsv. StoverSeedCo.,108F.3d 1134,1139 (8th Cir. 1998). United Indus.Corp.v. Clorox Co.,140F.3d 1175,1180 (5th Cir. 2000). Pizza Hut,Inc.v. PapaJohn’s Int’l,Inc.,227F.3d 489,495 302, 311(1stCir. denied,537U.S.1001(2002). 2002),cert. Cashmere &CamelHairMfg.Inst.v. SaksFifthAvenue,284F.3d (4th Cir. 2002). Scotts Co.v. UnitedIndus.Corp.,315F.3d 264,272-73 (2d Cir. 2007)). Time Warner Cable,Inc.v. DIRECTV, Inc.,497F.3d 144,153 (NJ)Inc.v.Tiffany eBay, Inc.,600F.3d 93,112(2dCir. 2010)(citing (6th Cir. 2012). Innovation Ventures, LLCv. N.V.E., Inc.,694F.3d 723,735 LIABILITY FOR COMMERCIAL SPEECH 5 , 315 F.3d 264, 274 (4th Cir. 2002). (4th Cir. 264, 274 Corp., 315 F.3d United Indus. v. Scotts Co. Avenue, 284 F.3d Saks Fifth Mfg. Inst. v. & Camel Hair Cashmere 2002), cert. 1001 (2002). , 537 U.S. denied (1st Cir. 302, 315 1134, 1139 Stover Seed Co., 108 F.3d v. Southland Sod Farms 1997). (9th Cir. , 284 F.3d , 284 F.3d Saks Fifth Avenue Inst. v. & Camel Hair Mfg. Cashmere cert. 2002), (2002) denied, 537 U.S. 1001 302, 315 (1st Cir. (explaining distinction). 264, 274 Corp., 315 F.3d United Indus. Scotts Co. v. 2002). (4th Cir. , 497 F.3d 144, 158 Inc., 497 F.3d DIRECTV, Cable, Inc. v. Time Warner 2007). (2d Cir. 264, 275-76 Corp., 315 F.3d United Indus. Scotts Co. v. 2002). (4th Cir. Co., 228 & Gamble Commercial Procter Co. Puerto v. Rico Clorox 2000). 24, 35 (1st Cir. F.3d 694 F.3d 723, 736 Inc., 694 F.3d N.V.E., LLC v. Innovation Ventures, 2012). (6th Cir. 2002). 264, 274 (4th Cir. United Indus. Corp., 315 F.3d Scotts Co. v. Co., 228 & Gamble Commercial Procter Co. Puerto Rico v. Clorox 2000). 24, 35 (1st Cir. F.3d 1998). 1175, 1181 (8th Cir. Co., 140 F.3d Clorox United Indus. Corp. v. • • • • • • • • • • • • Some courts refer to statements that are literally true but likely to mislead and literally true but likely to statements that are Some courts refer false.” Despite the closeness as “impliedly false” or “implicitly confuse consumers statements that are be distinguished from such statements must of the terminology, implication. literally false by necessary If the statement can reasonably be interpreted in more than one way, and one of those than one way, in more be interpreted If the statement can reasonably statement cannot be literally false. ways is not literally false, then the Although a statement may be found false or misleading by implication, the greater false or misleading by implication, the greater Although a statement may be found to integrate the components of the to which the consumer is required the degree to draw the false conclusion, the less likely it is that falsity will advertisement in order be found. 6 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS “ actually misled or confused.” plaintiff must presentevidence that consumers were but likely to mislead and confuse consumers, the If the statement literally is true or ambiguous consumer reaction. willgrantreliefIf thestatementisliterallyfalse,courts withoutrequiring evidenceof 2. Proof ofconsumerreaction Visual imagesaswellwordsVisual canbefalseormisleadingunderLanhamAct§43(a). • • • • • • • • • • United Indus.Corp.v. Clorox Co. , 140F.3d 1175,1180(8thCir. 1998). Board ofPodiatricSurgery, Inc.,185F.3d 606,614(6thCir. 1999). PodiatricPhysiciansandSurgeonsAmerican CouncilofCertified v. American Pizza Hut,Inc.v. PapaJohn’s Int’l,Inc. , 227F.3d 489,497(5thCir. 2000). Scotts Co.v. UnitedIndus.Corp.,315F.3d 264,273(4thCir. 2002). (summarizing casesandapplyingruleindamagescontext). 302, 314-15(1stCir. denied,537U.S.1001(2002) 2002),cert. Cashmere &CamelHairMfg.Inst.v. SaksFifthAvenue,284F.3d F.3d 500,512(7thCir. 2009). Schering-Plough Healthcare Prods. v. Schwarz Pharma, Inc.,586 (NJ)Inc.v.Tiffany eBay, Inc.,600F.3d 93,112(2dCir. 2010). (8th Cir. 1998). United Indus.Corp.v. Clorox Co.,140F.3d 1175,1180-81 (2d Cir. 2007). Time Warner Cable,Inc.v. DIRECTV, Inc.,497F.3d 144,159 (Fed. Cir. 2013). Hall v. Bed,Bath&Beyond,Inc.,705F.3d 1357,1367 LIABILITY FOR COMMERCIAL SPEECH 7 705 F.3d 1357, 1367 1357, 1367 Inc., 705 F.3d Bed, Bath & Beyond, Hall v. 2013). (Fed. Cir. 120 111, Mead Johnson & Co., 639 F.3d LLC v. PBM Prods., 2011). (4th Cir. 2010) 93, 112-13 (2d Cir. Inc., 600 F.3d eBay, Tiffany (NJ) Inc. v. 144, 153 Inc., 497 F.3d DIRECTV, v. Cable, Inc. (citing Time Warner 2007)). (2d Cir. Avenue, 284 F.3d Saks Fifth & Camel Hair Mfg. Inst. v. Cashmere 2002), cert. denied, 537 U.S. 1001 (2002). 302, 311 (1st Cir. 489, 497 Int’l, Inc., 227 F.3d Papa John’s Pizza Hut, Inc. v. 2000). (5th Cir. v. American Council of Certified Podiatric Physicians and Surgeons 606, 614 Inc., 185 F.3d of Podiatric Surgery, American Board 1999). (6th Cir. 694 F.3d 723, 735 Inc., 694 F.3d N.V.E., LLC v. Innovation Ventures, 2012). (6th Cir. 1139, Info. Solutions, Inc., 650 F.3d Experian Fair Isaac Corp. v. 2011). 1151-52 (8th Cir. Co., 228 & Gamble Commercial Procter Co. Puerto Rico v. Clorox 2000). 24, 33, 36 (1st Cir. F.3d Rhone-Poulenc Consumer Pharm. Co. v. Johnson & Johnson-Merck 1994). Cir. 125, 129-30 (3rd Pharm., Inc., 19 F.3d Rorer , 284 F.3d Saks Fifth Avenue, 284 F.3d & Camel Hair Mfg. Inst. v. Cashmere 2002), cert. denied, 537 U.S. 1001 (2002). 302, 316 (1st Cir. • • • • • • • • • • • If the statement is literally true or ambiguous but likely to mislead and confuse and confuse but likely to mislead true or ambiguous is literally If the statement actually misled were that consumers evidence the plaintiffconsumers, must present or confused. As a general rule, the plaintiff must show how consumers actually reacted, as opposed to As a general rule, the plaintiff must show how consumers actually reacted, is most of consumer reaction to the statement. Evidence how they could have reacted, consumer surveys. through often presented If the defendant made the accused statements in bad faith or with intent to harm the If the defendant made the accused statements in bad faith or with intent instead apply and will evidence of consumer reaction plaintiff, many courts will not require that consumers have been misled. a presumption 8 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS statement constitutescommercial orpromotion. advertising Thestatementmustbe: testtodeterminewhethera haveappliedafour-part somecourts advertisements, promotion.” Whenconfronted withstatementsthatappearinformsotherthantraditional By itsexpress terms,LanhamAct§43(a)(1)(B)appliesonlyto“commercial or advertising 3. Commercial orpromotion advertising other evidencethatconsumershavebeenmisled. oftendonotrequireCourts surveyevidenceatthepreliminary injunctionstage,ifthere is 4.  services; and 3. Forthepurposeofinfluencingconsumerstobuydefendant’s goodsor 2. Byadefendantwhoisincommercial competitionwithplaintiff; 1. Commercial speech; • • • • • • • made in a “classic advertising campaign” ormoremade ina“classicadvertising informaltypesof“promotion.” or “promotion” withintheindustry, regardless ofwhethertherepresentations are tothe Disseminated sufficiently relevant purchasing publictoconstitute“advertising” 800, 803(7thCir. 2001)(expressing doubtsastotest). But seeFirstHealthGroup Corp.v. BCEEmergis Corp.,269F.3d promotion). (finding salespresentations toconstitutecommercial or advertising Seven-Up Co.v. Coca-Cola Co.,86F.3d 1379,1384(5thCir. 1996) several respected circuits”). 6, 19(1stCir. 2003)(notingthat“thistestbearstheimprimatur of Podiatrist Assoc.,Inc.v. Rico,Inc.,332F.3d LaCruzAzuldePuerto (8th Cir. 1998). United Indus.Corp.v. Clorox Co.,140F.3d 1175,1183 (4th Cir. 2002). Scotts Co.v. UnitedIndus.Corp.,315F.3d 264,276 (8th Cir. 1998). United Indus.Corp.v. Clorox Co.,140F.3d 1175,1183 (4th Cir. 2002). Scotts Co.v. UnitedIndus.Corp.,315F.3d 264,281 LIABILITY FOR COMMERCIAL SPEECH 9 , 957 F. Supp. 1293, 1302 (D. Mass. 1997), (D. Mass. 1997), 1293, 1302 Supp. , 957 F. Armstrong v. Brown in (statements contained 1997) 1252 (1st Cir. aff’d, 129 F.3d not advertising or promotion). were videotape products 115, Supp. Co., 946 F. Consumer Prods., Norelco Gillette Co. v. package 1996) (statements contained in product 134-35 (D. Mass. not advertisinginserts or promotion). were 485, 506-07 (N.D. Ind. Supp. , 578 F. Nissen Corp. v. Marcyan did not constitute advertising).1982) (user manual , 140 F.3d 1175, 1181-82 Co., 140 F.3d Clorox United Indus. Corp. v. 1998). (8th Cir. 1134, 1139 Stover Seed Co., 108 F.3d Southland Sod Farms v. 1997). (9th Cir. 1081, 1090 , 41 F.3d Co. Trading Old World BASF Corp. v. 1994). (7th Cir. • • • • • • …the plaintiff must demonstrate that he or she she or he that demonstrate must plaintiff …the such by damaged be to is likely she or he that “believes not harm is specific of evidence Thus, [advertising].”… injunction.” an obtain to necessary If the statement is not conveyed to the purchaser prior to the actual purchase, it will not purchase, prior to the actual to the purchaser is not conveyed If the statement of the statute. within the meaning “advertisingconstitute or promotion” 4. Establishment claims a certain claiming that tests or studies prove An “establishment” claim is a statement to mislead, the plaintiff that an establishment claim is false or likely to prove fact. In order reliable to conclude not sufficiently tests were may show that either (1) the defendant’s tests, even if certainty that they supportwith reasonable the claim; or (2) the defendant’s asserted did not support by the defendant. the proposition reliable, B. Damages and Remedies for False AdvertisingB. Damages and Remedies for to obtain an injunction against false advertising § 43(a), in violation of Lanham Act In order the plaintiff must demonstrate that he or she “believes that he or she is likely to be damaged by such [advertising].” 15 U.S.C. § 1125(a)(1). Thus, evidence of specific harm is not necessary to obtain an injunction. “ 10 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS false statementsinthemarketplace. reputation, andcompensationforanycorrective necessarytocounter the advertising disgorgement ofthedefendant’s wrongful profits, compensationforinjurytotheplaintiff’s includerecoveryThe typesofdamagesavailableforfalseadvertising oflostprofits, intent toharmtheplaintiff. orstatementsmade inbadfaithorwithan statements, falsecomparativeadvertising, harmed asaresult. presume Somecourts harmwhere liabilityisbasedonliterallyfalse was customers were andthattheplaintiff actuallydeceivedbythefalseadvertising In order torecover damages,unlessapresumption mustshowthat applies,aplaintiff • • • • • • • • • • profits based onmarketshare analysis). (7th Cir. districtcourt’s 1994) (affirming award of $2.5millioninlost BASF Corp.v. OldWorld Trading Co.Inc.,41F.3d 1081,1092-95 juryaward 2012) (affirming of$1millionforwillfulfalseadvertising). Skydive Ariz.,Inc.v. Quattrocchi, 673F.3d 1105,1116(9thCir. (9th Cir. 1997). Southland SodFarmsv. StoverSeedCo.,108F.3d 1134,1146 Cir. 1999). American Board ofPodiatricSurgery, Inc.,185F.3d 606,618(6th Podiatric PhysiciansandSurgeonsAmerican CouncilofCertified v. (5th Cir. 2000). Pizza Hut,Inc.v. PapaJohn’s Int’l,Inc.,227F.3d 489,497 302, 314-17(1stCir. denied,537U.S.1001(2002). 2002),cert. Cashmere &CamelHairMfg.Inst.v. SaksFifthAvenue,284F.3d (9th Cir. 1997). Southland SodFarmsv. StoverSeedCo.,108F.3d 1134,1145-46 (6th Cir. 1999). American Board ofPodiatricSurgery, Inc.,185F.3d 606,618 PodiatricPhysiciansandSurgeonsAmerican CouncilofCertified v. (5th Cir. 2000). Pizza Hut,Inc.v. PapaJohn’s Int’l,Inc.,227F.3d 489,497 302, 311(1stCir. denied,537U.S.1001(2002). 2002),cert. Cashmere &CamelHairMfg.Inst.v. SaksFifthAvenue,284F.3d LIABILITY FOR COMMERCIAL SPEECH 11

, 793 F.2d 1034, 1041 (9th Cir. 1986) (9th Cir. 1034, 1041 Jartran, Inc., 793 F.2d Inc. v. U-Haul Int’l advertising for plaintiff’s corrective award district court’s (upholding expenses). 332, Supp. 2d State Co., 169 F. Pennzoil Quaker Inc. v. Castrol, a would be of profits (finding that disgorgement 343 (D.N.J. 2001) conduct advertising for false when defendant’s permissible remedy willful). was intentional and

• • , 61 F.3d 1045, 1051-52 (2d Cir. 1995) 1045, 1051-52 (2d Cir. Inc., 61 F.3d Random House, v. Groden the American public” to be non- (finding statement “guilty of misleading as stating interpreted reasonably actionable opinion that could not be facts). provable Generally speaking, a claim that is not is not that a claim speaking, Generally be to likely is verified being of capable protected as a non-actionable opinion.” C. Defenses to False AdvertisingC. Defenses to the following specific general defenses that may be applicable, In addition to any in a false advertising available to a defendant case under Lanham defenses are Act § 43(a). 1. Opinion A statement in an advertisement Act cannot be false or misleading in violation of Lanham In distinguishing between an opinion rather than a fact. § 43(a)(1)(B) if it expresses opinion and fact, courts in false advertising defamation jurisprudence. See cases turn to a claim that is not capable of being verified is Generally speaking, Section III(G)(3), below. event is a future predicting as a non-actionable opinion. A statement likely to be protected but it may be actionable if the speaker has knowledge generally a non-actionable opinion, was made i.e., that it knew at the time the statement of facts not warranting the opinion, good faith belief in the truth of what was said. that it was false or did not have a • “ 12 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS would rely upon theexaggeratedclaims. of acompetitor. isnotactionablewhere Suchnegativepuffery noreasonable consumer hasbeenappliedtonegativecomments madeabouttheproductsThe conceptofpuffery specific andmeasurableisnotpuffery. reasonable buyerwouldrely. Note,however, thataclaimofproduct superioritywhichis an exaggeratedstatement,oftenmadeinablusteringorboastingmanner, uponwhichno superiority thatissovagueastobeperceived asamere expression ofopinion;and(2) haverecognized (1)ageneralstatementaboutproduct’sCourts twokindsofpuffery: findsthatitismere ifacourt “puffery.”A statementwillnotconstitutefalseadvertising 2. Puffery • • • • • • • rather thanstatementoffact). constitutesopinion “anything closercouldbetoocloseforcomfort” 37 (D.Mass.1996)(findingstatementbyrazorblademanufacturer that Gillette Co.v. Norelco ConsumerProds., Co.,946F. Supp.115,136- explaining well-known examples of puffery). explaining well-knownexamples ofpuffery). Inc., 586F.3d 500,512(7thCir. 2009)(collectingcasesand See alsoSchering-PloughHealthcare Prods. v. Schwarz Pharma, specific andmeasurabletoconstitutepuffery). control product tobe puffery, but“50%Less Mowing”tobetoo (9th Cir. 1997)(finding“LessisMore” in relation tocrabgrass Southland SodFarmsv. StoverSeedCo.,108F.3d 1134,1145 explicitorunambiguoustobeactionable). be insufficiently 1998) (findingstatementsaboutoperationof roach killerproduct to United Indus.Corp.v. Clorox Co.,140F.3d 1175,1180(8thCir. standing alone,tobepuffery). Cir. 2000)(findingstatement“BetterIngredients. BetterPizza.”, Pizza Hut,Inc.v. PapaJohn’s Int’l,Inc.,227F.3d 489,498-99(5th and therefore notpuffery). your detergent .Whiter isnotpossible”capableofmeasurement, F.3d 24,38-39(1stCir. 2000)(findingstatement“Compare with Clorox Ricov. Co.Puerto Procter &GambleCommercial Co.,228 lifetime ofthetowel”notmere puffery). Cir. that laststheuseful 2013)(findingstatement“performance Hall v. Bed,Bath&Beyond,Inc.,705F.3d 1357,1367,1368(Fed. LIABILITY FOR COMMERCIAL SPEECH 13 , 85 Cal. Rptr. 2d 397, 402 (Cal. Ct. App. 1999) 2d 397, 402 , 85 Cal. Rptr. Maldonado Smith v. The tort in reputation. interest (“Defamation is an invasion of the of a statement of fact that is involves the intentional publication or which tendency to injure false, unprivileged, and has a natural causes special damage.”). 1999) App. Div. 2d 1, 5 (N.Y. , 704 N.Y.S. New York City of Dillon v. a false statement, published (“The elements [of defamation] are constituting fault party, a third without privilege or authorization to and, it must at a minimum, a negligence standard, as judged by, defamation per se.”). either cause special harm or constitute Dugan v. Mittal Steel USA Inc., 929 N.E.2d 184, 187 (Ind. 2010) Dugan v. supervisor that employee (statement made by plaintiff employee’s was “stealing time” and working on a “scheme with her boss… allegedly an attempt to defraud the Company” constituted defamation per se). Inc., 917 N.E.2d 650, 657-58 (Ind. 2009) Tremco Baker v. (statement that former employee had engaged in “inappropriate sales practices” did not constitute defamation per se because it • • , 497 F.3d 144, 160 (2d Cir. (2d Cir. 144, 160 Inc., 497 F.3d DIRECTV, v. Cable, Inc. Time Warner television competitor’s images of exaggerated grossly 2007) (finding distorted, be puffery). pixelated” to and “unwatchably blurry, service as 131 D. Supp. 115, Co., 946 F. Prods., Consumer Norelco v. Gillette Co. pain and danger of visual images exaggerating the Mass. 1996) (finding including a swarm of bees stinging razor blade, shaving with a regular turn into sharp- razors that spit out flames and a face and animated to be puffery).toothed animals, • • III. Defamation and Commercial Disparagement and Commercial III. Defamation a Defamation Claim A. Elements of A party that the may have a claim for defamation if he or she can demonstrate statement of fact, of or concerning defendant has made a defamatory prospective is false and causes economic harm. that the complaining party, • • In most states, certain statements are considered defamatory on their face. Such considered In most states, certain statements are (2) a per se if they impute: (1) criminal conduct; statements constitute defamation office, or occupation; profession, trade, in a person’s loathsome disease; (3) misconduct or (4) sexual misconduct. If a statement is defamatory per se, harm will be presumed. 14 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS reputation inthecommunityandexposesthatpersontohatred, ridicule,orcontempt. It iswellestablishedthatastatement“defamatory”ifittendstoinjure aperson’s B. DefamationDefined decisionsand statutes. well asstatecourt decisionsas mayincludefederal court law foradefamationclaimfiledinstatecourt The FirstAmendmentdefinestheboundariesofdefamationlaw. Therefore, theapplicable the plaintiff ifitcouldreasonablythe plaintiff beunderstoodtorefer tohimorher. Even where isnotmentionedbyname,astatementdeemedtobeabout theplaintiff mustalsoproveNote thattheplaintiff “fault,”asdescribedinSectionIII(D),below. Showing a defamatory statement to just one person is sufficient toproveShowing adefamatorystatementtojustonepersonissufficient publication. • • • • • 151 N.E.209 (N.Y. 1926)). society.’”) (quoting Sydneyv. MacFaddenNewspaperPubl.Corp., thinking persons,andtodeprive himoftheirfriendlyintercourse in disgrace, orinduceanevil opinionofhiminthemindsright- topubliccontempt,ridicule,aversion or to exposetheplaintiff 2007) (“Defamationisthe makingofafalsestatementthat‘tends Manfredonia v. Weiss, 829N.Y.S.2d 508,509(N.Y. App.Div. dealingwith him.”). of thecommunityortodeterthird persons from associatingor to harmthereputation ofanotherastolowerhimintheestimation defamatory statementisdefinedasacommunication thattends Mercer v. Cosley,955A.2d550,561(Conn.App.Ct.2008)(“A operation couldreasonably beunderstoodtorefer tohim). that aBrookline deliownerwasinvolvedinan“Israelimafia”cocaine expressly newsreports, becausethestatement namedintheoffending statedaclaimfordefamation,eventhoughhewas not (plaintiff Eyal v. HelenBroad. Corp.,583N.E.2d228,230-31(Mass.1991) even thoughthatpersonisenjoinedtosecrecy.”). that thedefamatorymatteriscommunicatedtoonepersononly, Hecht v. Levin,613N.E.2d585,587(Ohio1993)(“Itissufficient student’s advisorwere “published”fordefamationpurposes). letters sentinternallyfrom universitypresident onlytopost-graduate Dube v. Likins,167P.3d 93,104-105(Ariz.Ct.App.2007)(two harmful thatproof ofitsinjuriouscharacterwasunnecessary). was toovaguetoconcludethatitsoobviouslyandnaturally LIABILITY FOR COMMERCIAL SPEECH 15 , 997 So.2d 1098, 1114 (Fla. 2008) 1098, 1114 Rapp, 997 So.2d Jesus, Inc. v. Jews for the plaintiff in the if it prejudices is defamatory (“[A] communication minority of the community.’”). and respectable eyes of a ‘substantial App. 959, 963 (Colo. Denver Publishing Co., 5 P.3d v. Tonnessen the a statement need only prejudice be defamatory, 2000) (“To minority of the plaintiff eyes of a substantial and respectable in the community.”). be 621 (N.H. 1998) (“To Bank, 712 A.2d 619, St. Mary’s v. Touma the plaintiff language must tend to lower in the esteem defamatory, even though it may be group, of any substantial and respectable quite a small minority.”). , 993 F.2d 1063, , 993 F.2d Div. Prod. ITT Corp. Electro-Optical Swengler v. law) (statements by 1993) (applying Virginia 1070- 71 (4th Cir. contractor was defrauding terminated employee that government government funds constituted the government and mismanaging defamation). (letters sent Latif, 323 N.E.2d 913, 914 (Mass. 1975) v. Ricciardi by defendants to plaintiff’s falsely stating that plaintiff customers found defamatory). were product to pay for defendant’s had refused , 626 A.2d 595, 601 (Pa. Super. Inc., 626 A.2d 595, 601 (Pa. Super. Schott Glass Tech., Kryeski v. Ct. 1993) (statements that employee was “crazy” did not rise to the such words level of defamation, consistent with other cases where “nuts” did not rise to and “crazy,” as “paranoid,” “schizophrenic,” the level of defamation). Int’l Bus. Mach. Corp., 467 N.E.2d 126, 133 Mass. (1984) Bratt v. (statements made by employer that plaintiff has a specified mental may be defamatory). disorder • • • • • • • Some courts note that the statement must discredit the plaintiffSome courts of in the minds must discredit the statement note that class of the community. respectable any considerable, C. Examples of Defamatory Statements them: alleged defamed have that plaintiffs examples of statements are The following 1. Dishonesty or fraud 2. Mental disorder 16 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS 6. Careless omissionofasignificantfactornameinpublication 5. Potentialforbadbehavior 4. Injurioustobusinessreputation 3. Crimeorimmorality • • • • • • • earlier lawsuits againstsurgeon hadbeen voluntarilydismissed). regarding medicalmalpracticeclaimsandomitted thefactthat judgment ondefamationclaim whennewspaperpublishedstories 837 (Ct.App.Tex. 2003)(denyingdefendant’s motionforsummary Scripps Texas Newspapers,L.P. v. Belalcazar , 99S.W.3d 829,835- customer tobearrested). report thatshopkeeperhadcausedamentallyhandicapped would nothavechangedtheoverallimpression from television but refusing tofinddefamationwhere inclusionofmaterialfacts that omissionofmaterialfactscanrisetothelevel ofdefamation, Mohr v. Grant,108P.3d 768,773-77(Wash. 2005)(recognizing behavior on the part of plaintiff couldbeinferred ofplaintiff frombehavior onthepart theletter). defendant’s restaurant wasdefamatorybecausethepotentialforbad thatshewasnolongerpermitted toenter police –advisingplaintiff (letter sentbydefendant’s – andalsotothe lawyertoplaintiff Smith v. SuburbanRests.,Inc.,373N.E.2d215,217(Mass.1978) patents were defamatory). competitor’s customersthatcompetitor’s products infringedits 270 (Cal.App.Ct.2002)(findingthatcompany’s statementsto Atlantic MutualIns.Co.v. J.Lamb.Inc.,123Cal.Rptr. 2d256, malpractice). defamation claimagainstclient’s motherforaccusinghimoflegal Costello v. Hardy, 864So.2d129,142(La.2004)(attorneyfiled beaten duetounpaiddebtsorganized crimeboss). radio stationforfalselyreporting thathehadbeenabductedand 36-37 (N.Y. 1993)(prominent businessmanbrought suitagainst Prozeralik v. CapitalCitiesCommunications,Inc.,626N.E.2d34, alleginglinkstoorganizedarticle crime). businessmansuednewspaperfordefamationpublishing (plaintiff Philadelphia Newspapers,Inc.v. Hepps,475U.S.767,769(1986) LIABILITY FOR COMMERCIAL SPEECH 17 New York Times Co. v. Sullivan, 376 U.S. 254, 267 (1964). The Times Co. v. New York in a Court “actual malice” to prevail held that a plaintiff must prove officialdefamation action against a public or public figure. Court Butts, 388 U.S. 130, 133-34 (1967). The Curtis Publ’g Co. v. for defamation actions brought affirmed the actual malice standard against news organizations. by public figures • • A statement is published with ‘actual malice’ if it it if malice’ ‘actual with is published A statement with or is false it that knowledge with is published is false.” it whether as to disregard’ ‘reckless D. Proving Fault Within a Free Speech Framework Speech Within Fault Free a D. Proving Court the protectionsdefamation law within the contours of defines jurisprudence U.S. Supreme damages right to recover speech with the right of free balance the Amendment. To of the First Court part “fault” on the that a plaintiff has held the Supreme for defamation, of the must prove of proof The burden each of the elements described above. to proving defendant in addition the status of the plaintiff.varies depending on If the plaintiff is a public official figure, or public he acted with “actual malice.” that the defendant or she must prove responsibility A “public official” employee who has substantial is generally a government Baer, 383 U.S. 75, 85 government affairs. over the conduct of Rosenblatt v. or control in the role of prominence who has assumed a is an individual figure” (1966). A “public (1974). Inc., 418 U.S. 323, 345 Robert Gertz Welch, v. affairs of society. E.I. Flotech, Inc. v. under certain circumstances. also be a public figure A corporation can 775 Supp. 358, 365 (D. Mass. 1985), aff’d, 814 F.2d Du Pont de Nemours Co., 627 F. 1987) (collecting cases). (1st Cir. malice” if it is published with knowledge that it is A statement is published with “actual Sullivan, Times Co. v. as to whether it is false. New York disregard” false or with “reckless if it is disregard” is made with “reckless 376 U.S. 254, 280 (1964). A statement Thompson, 390 U.S. 727, its truth. St. Amant v. published with serious doubts as to 731 (1968). Journal Co. Lorain, Milkovich v. by clear and convincing evidence. Malice must be proved Inc., 418 U.S. 323, 342 (1974)). Robert497 U.S. 1, 15 (1990) (citing Gertz Welch, v. be acquainted with the clients in a defamation action should Practitioners representing Court cases: following Supreme “ 18 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS Builders, Inc.,472U.S.749,761(1985). need toprove malicetoobtainpresumed damages. Dun&Bradstreet, Inc.v. Greenmoss Similarly, ifthestatementrelates may toamatterofpublic concern,aprivateplaintiff N.E.2d 161,164(Mass.1974). 437 N.E.2d205,208(Mass.1982);Stonev. EssexCountyNewspapers,Inc.330 Unfair Competition§27:108at27-249(4thed.2010);see,e.g.,Schrottman v. Barnicle , defendant actedwithnegligence.J.ThomasMcCarthy, onTrademarks McCarthy and a privatefigure Inamajorityofstates,privatefigure plaintiff. need prove onlythatthe public figures undertheFirstAmendment.Statelawestablishesburden ofproof for The Supreme hasheldthatprivatefigures Court are afforded greater protection than • • • • (1st Cir. 1992). Phantom Touring, Inc.v. Publ’n,953F.2d Affiliated 724,727-28 offact.AnexcellentdiscussionMilkovichappearsin assertion heldthatan“opinion”maybeactionableifitimpliesafalse Court Milkovich v. LorainJournalCo.,497U.S.1,19-20(1990).The defamation law, atleastwhere amediadefendantisinvolved. must beprovable asfalsebefore there canbeliabilityunderstate heldthatastatementonmatterofpublicconcern The Court Philadelphia Newspapers,Inc.v. Hepps,475U.S.767,774(1986). such statementstoobtainpresumed andpunitivedamages. doesnothavetoprovethus, aprivateplaintiff malicewithrespect to doesnotapply; heldthatGertz matter ofpublicconcern.TheCourt withrespect applied toaprivateplaintiff toastatementthatisnot (1985). Theissuebefore waswhethertheholdingofGertz theCourt Dun &Bradstreet, Inc.v. Greenmoss Builders,Inc.,472U.S.749,761 mustproveplaintiff malicetoobtainpresumed orpunitivedamages. impose liabilitywithoutrequiring someshowingoffault;andaprivate showing inactionsinvolvingmediadefendants;statesmaynot neednotmaketheNewYorkheld thatprivateplaintiffs malice Times v. Welch,Gertz Robert Inc.,418U.S.323,345(1974).TheCourt LIABILITY FOR COMMERCIAL SPEECH 19 Negligence evidence of actual malice Clear and convincing concerning the plaintiff,for almost all statements or her personal to his relating including statements etc.) life (sex life, drug use, as when the such In very limited circumstances, the plaintiff’sdefendant falsely fictionalizes life and it as the truth, negligence may apply presents for Clear and convincing evidence of actual malice statements concerning the plaintiff’s public activities For other defamatory statements, negligence for Clear and convincing evidence of actual malice to plaintiff’s status as a public statements relating official, including plaintiff’sfor public fitness office For other defamatory statements, negligence BURDEN OF PROOF 464 Mass. 517, 523 (2013) (“[I]n order to Kiel, 464 Mass. 517, 523 (2013) (“[I]n order v. Inc. Hipsaver, disparagement, a plaintiff must on a claim alleging commercial prevail that a defendant: (1) published a false statement to a person prove other than the plaintiff; (2) ‘of and concerning’ the plaintiff’s products falsity or with or services; (3) with knowledge of the statement’s pecuniary harm of its truth or falsity; (4) where disregard reckless and (5) such was intended or foreseeable; to the plaintiff’s interests in special damages in the form of pecuniary loss.”). publication resulted • Pervasive public figure (such as a nationally known (such as a Pervasive public figure celebrity) (one who has thrust Limited purpose public figure of a public himself or herself into the forefront to influence the outcome of the issues controversy involved) Public official (but note that not all government “public officials” for the considered employees are purpose of defamation law) Private figure STATUS OF PLAINTIFF STATUS E. Elements of a Commercial Disparagement Claim E. Elements of a Commercial to defamation. It disparagement is a common law tort closely related Commercial intended to call into question the quality of a has been defined as a false statement The states have to inflict pecuniary harm. goods or services in order competitor’s several designations for what is essentially the same tort: disparagement” “Commercial In jurisdictions where private figures or matters of private concern are subject to a concern are of private or matters private figures where In jurisdictions the table shows how the following a majority of states, which is standard, negligence applies: of proof burden 20 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS “Trade libel” “Product disparagement” “Business disparagement” • • • • • proximately causedas a result of thepublishedfalsehood.”). and(5)specialdamages are in inducingothersnottodeal withtheplaintiff; (4)infact,thefalsehood doesplayamaterialandsubstantialpart plaintiff; should knowthatitwilllikely result ininducingothersnottodeal withthe to athird person; (3)whenthedefendant-publisherknowsorreasonably must allege:(1)afalsehood;(2)hasbeenpublished,or communicated 2006) (applyingFloridalaw)(“To stateavalidclaimoftradelibel,plaintiffs Border CollieRescue,Inc.v., 418F. Ryan Supp.2d1330,1348 (M.D. Fla. causing specialdamages.”). recognized thatitwaslikelytodoso;(5)withmalice;(6)thus, pecuniaryinterest,plaintiff’s oreitherrecognized orshouldhave (4) through whichthedefendantintendedtocauseharm to athird (3)derogatory businessingeneral; party; totheplaintiff’s proof ofthefollowingelements:(1)afalsestatement;(2)published ofproduct(Colo. App.1989)(“Thetort disparagementrequires Teilhaber Manu.Co.v. Unarco MaterialsStorage,791P.2d 1164 privilege, (4)thatresulted inspecialdamagestotheplaintiff.”). and disparaginginformationaboutit,(2)withmalice,(3)without mustestablishthat(1)thedefendantpublished false plaintiff (Tex. 2003)(“To prevail onabusiness disparagementclaim,a Forbes Inc.v. GranadaBiosciences,Inc.,124S.W.2d 167,170 property,’ ‘slanderofgoods,’and‘tradelibel.’”). by variousnames,including‘injuriousfalsehood,’‘disparagementof of‘commercialn.1 (D.Mass.2006)(“Thetort disparagement’goes First ActInc.v. Brook MaysMusicCo.,429F. Supp.2d429,432 Restatement (Second)ofTorts §623(A)(1977)). is falseoractsinreckless disregard ofitstruthorfalsity”)(quoting in factresult; and(4)thepublishereitherknowsthatstatement that publicationwillresult inpecuniaryloss;(3)lossdoes publication tocausepecuniarylossorreasonably shouldrecognize “(1) thestatementisfalse;(2)publishereitherintends 243,246 (Pa.2002)(commercial disparagementisshownwhere Pro GolfMfg.Inc.v. Tribune ReviewNewspaperCo.,809A.2d LIABILITY FOR COMMERCIAL SPEECH 21 , 684 N.E.2d 1378, 1388 (Ill. App. Ct. 1997) (Ill. App. Ct. 1997) 1378, 1388 Zellner, 684 N.E.2d Becker v. viable cause of disparagement is not a (finding that commercial District of Illinois). action in the Second 702-703 (Ill. App. Ct. CBS, Inc., 776 N.E.2d 693, v. Schivarelli of action “it is disputed as to whether a cause 2002) (noting that viable in Illinois,” and disparagement remains for commercial a viable cause of disparagement is if commercial holding that even action, plaintiff show that defendant’s hot dog stand owner failed to and demeaning statements regarding made false television program the quality of plaintiff’s hot dogs). , 69 F. Supp. Inc., 69 F. Bahr Consultants, Co. v. Kansas Bankers Surety date, disparagement of 1999) (“To 2d 1004, 1014-15 (E.D. Tenn. as a in Tennessee recognized quality or trade libel has not been separate cause of action.”). 464 Mass. 517, 522 (2013) (“A defamation Kiel, 464 Mass. 517, 522 (2013) (“A defamation Inc. v. Hipsaver, of for damages to the reputation a remedy action … affords action for commercial By comparison, an party. the injured for harm to the economic a remedy disparagement affords loss. A in pecuniary party that results of the injured interests plaintiff for false damages asserting such a claim seeks to recover or often a product disparaging statements about plaintiff’s property, service being sold.” (internal citations omitted)). 167, 170 Granada Biosciences, Inc., 124 S.W.2d Forbes Inc. v. 2003) (“A business disparagement claim is similar in many (Tex. to a defamation action. The two torts differrespects in that reputation the personal defamation actions chiefly serve to protect while a business disparagement claim protects party, of an injured economic interests.”). • • • • • Not every jurisdiction recognizes this tort, courts it may take. The whatever name jurisdiction recognizes Not every in a viable disparagement is raise uncertainty commercial whether particular, Illinois, in action. cause of Tennessee is another state that casts doubt on the availability of this count. is Tennessee It is useful to distinguish corporate defamation from commercial (or product) (or product) commercial defamation from It is useful to distinguish corporate of the corporation the reputation injures disparagement. Defamation of a corporation of the corporation’s the reputation disparagement injures itself, while commercial or services. products 22 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS protected as conditionallyprivileged. Statements thatwouldotherwise constitutecommercial disparagementare often 1. Privilegedstatements loss, andthelosswasnotattributabletoothercauses. disparaging statementswere suffered madetomultiplecustomers,theplaintiff pecuniary caninsteadshowthat aplaintiff exception thathasbeenadoptedbymanycourts, sales toidentifiablecustomers.However, underthe“widespread dissemination” special damagesforcommercial mustshowaspecificlossof disparagementtheplaintiff special damages(economicloss).SeeSectionIII(F)(2),below. Normally, toestablish in thecasesdescribedabove,commercial must alsoprove disparagementplaintiff sharesThis tort theelementsofdefamation,withnotableexceptionthat,asreflected • • • • • to acommercially disparagingstatement whenthestatement 1997) (applyingPennsylvania law)(“Aconditionalprivilegeattaches KBT Corp.,Inc.v. CeridianCorp.,966F. Supp.369,374(E.D.Pa. whom itisimpossibletoidentify.”). that thelosshasresulted from theconductofanumber ofpersons established byproof oftheconductspecificpersonsorproof Restatement (Second)ofTorts §633(2)(“[P]ecuniary lossmaybe disparaging article). to identifythosecustomersthatdidnotorder becauseofthe sells onlythrough mailorders” impossible” anditwouldbe“virtually required toidentifyspecificlostcustomersbecausethe“plaintiff 155-56 (S.D.N.Y. 1983)(applyingNewYork not law)(plaintiff Charles Atlas,Ltd.v. Time-LifeBooks,Inc.,570F. Supp.150, recover forpecuniaryloss”). loss ofsalestoidentifiablecustomersbefore can theplaintiff inacommercialplaintiff disparagementactionmustprove aspecific ‘widespread dissemination’exceptiontothegeneralrulethata Hipsaver, Inc.v. Kiel,464Mass.517,539(2013)(recognizing “the the company’s goodsandserviceswasnotattacked). did notconstitutecommercial disparagementbecausethequalityof investigation forfraudmightconstitutecorporatedefamationbut was payingbribesandthatmedicalsupplycompanyunder (defendant’s statementsthatmedicalsupplycompany’s president Allcare, Inc.v. Bork,531N.E.2d1033,1037-38(Ill.App.Ct.1988) LIABILITY FOR COMMERCIAL SPEECH 23

involves some interest of the person who publishes it, some interest it, some interest who publishes of the person some interest involves or person, other third is published or some to whom it of the person public.”). of the interest a recognized 1994) 964 (D. Mass. Supp. 951, Leavitt, 865 F. Inc. v. Picker Int’l, courts “[m]any buyers acknowledge that matter, (as a public policy [of a rival] as non-objective and highly disparagement … recognize Antitrust Law § Turner, & Donald F. Philip Areeda biased”) (quoting 3 Restatement (Second) 1978)); see also Brown 738c, at 281 (Little, §§ 623A, 626 (1979)). of Torts , 124 S.W.2d 167 (Tex. 167 (Tex. Inc., 124 S.W.2d Granada Biosciences, Forbes Inc. v. a actual malice arising from 2003) (Granada failed to establish at several Forbes magazine article discussing financial problems multiple misstatements and corporate subsidiaries that contained failed to distinguish among the corporations). , 283 Cal. Rptr. 644, 658- Cos., Inc., 283 Cal. Rptr. American Broadcasting v. Weller jury damages for actual injury to659 (Cal. Ct. App. 1991) (upholding when television broadcast reputation business and to antique dealer’s suggested that antiques dealer had knowingly sold stolen property).

• • • 2. Corporations as public figures 2. Corporations as event, In that certain under circumstances. be deemed a public figure A corporation may in a malice on the partthe corporation must establish actual of the defendant to prevail disparagement case. commercial F. Damages and Remedies for Defamation and Commercial Disparagement for Defamation and Commercial Damages and Remedies F. 1. Damages entitled disparagement case is or commercial at trial in a defamation A plaintiff prevailing to actual or compensatory damages. … in cases of slander (spoken defamation) or commercial commercial or defamation) (spoken slander of cases … in damages special prove must plaintiff the disparagement, award.” a monetary recover to loss) (economic “ 24 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS recover amonetaryaward. commercial mustprove disparagement, theplaintiff specialdamages (economicloss)to because damagesare presumed. However, incasesofslander(spokendefamation)or In casesinvolvinglibel(writtendefamation),proof ofgeneraldamagesissufficient 2. Specialdamages injuries suchasmentalanguish,embarrassment,andhumiliation. and(3)medicalexpensesothercostsrelatedopportunities; toremedying emotional reputation;Actual damagesmayinclude(1)thevalueofplaintiff’s (2)lostbusiness privacy, andrelated claimswas$3.2million.Id. 2011, theaveragedamagesaward againstmediadefendantsinvolvingdefamation, Publishing Law§5.13,at5-75–76(4thed.2013)(discussingdamages).In2010and E. GabrielPerle,JohnTaylor &MarkA.Fischer, Williams &Fischeron Perle,Williams reduced to$22.7millionandwasneverpaidduesubsequentcasedevelopments). against DowJonesin1997basedonaWall Street (theverdict Journalarticle waslater towards highjuryverdicts indefamationcases,”includingarecord $222.7millionverdict According toonelegalresource, overthepastdecadethere hasbeen“analarmingtrend • • • • who chosenottopurchase goodsor services.”). aplaintiff’s customers disseminated,’ anditwould be impossibletoidentifyparticular recognized incircumstances where afalsestatementhasbeen ‘widely … Anexceptiontotherequirement ofspecificlostsaleshasbeen show, where feasible,aspecificlossofsalestoidentifiablecustomers. special damagesinacommercial must disparagementaction,aplaintiff Hipsaver, Inc.v. Kiel,464Mass.517,537(2013)(“[T]oestablish loss insales,reputation, opportunity, andbusiness). App. 1991)(upholdingcompensatorydamagesof$517,752for GN Danavox,Inc.v. StarkeyLabs.,Inc.,476N.W.2d 172(Minn.Ct. dealer hadknowinglysoldstolenproperty). when televisionstationbroadcast report suggestingthatantiques injury toreputation, lostpotentialbusiness,andemotionaldistress $2.3millionindamagesfor 658-659 (Cal.Ct.App.1991)(affirming Weller v. AmericanBroadcasting Cos.,Inc.,283Cal.Rptr. 644, stating that plaintiff wasgoingoutofbusiness). stating thatplaintiff defamation whencompetitorcirculated falsely advertisements compensatorydamagesforbusiness Ct. App.1991)(affirming GN Danavox,Inc.v. StarkeyLabs.,Inc.,476N.W.2d 172(Minn. LIABILITY FOR COMMERCIAL SPEECH 25 , 223 S.W.3d 616, 628 (Tex. 628 (Tex. 616, , 223 S.W.3d Inc. SNF, v. of Iowa, Inc. Astoria Indus. plaintiff damages, the special must prove prove (“To App. 2007) a substantial part played communications that the disparaging in parties in a with the plaintiff, not to deal third inducing resulting such as or liquidated, been realized pecuniary loss that has direct dealings.”). loss of trade, or loss of other specific lost sales, 2d Inc., 123 Cal. Rptr. J. Lamb, Co. v. Atlantic Mutual Insurance in all App. 2002) (“The plaintiff256, 270 (Cal. Ct. must prove substantial has played a material and cases that the publication he part a result not to deal with him, and that as inducing others damages claimed the special damages ... Usually, has suffered with the plaintiff’s contracts loss of prospective have consisted of customers.”). Baker v. Tremco Inc., 917 N.E.2d 650, 657 (Ind. 2009). Tremco Baker v. Ariz. Rev. Stat. Ann. § 12-653.02 (“The plaintiff Stat. Ann. § 12-653.02 shall serve upon the Ariz. Rev. of at the place or broadcaster publisher at the place of publication, claimed to be a written notice specifying the statements broadcast, be corrected.”). libelous and demanding that the same at § 48a(1) (“Plaintiff Code shall serve upon the publisher, Cal. Civ. a written notice specifying the the place of publication or broadcast, statements claimed to be libelous and demanding that the same be corrected.”). the defendant in an action Mass. Gen. Laws c. 231, § 93 (“Where for libel, at any time after the publication of the libel hereinafter but before is brought, or after such action to, either before referred gives written notice to to be filed therein is required answer the the plaintiff a retraction or to his attorney of his intention to publish which he of the libel, accompanied by a copy of the retraction • • • • • • 3. Presumed damages 3. Presumed damages as , the plaintiffIn cases involving defamation per se is entitled to presumed defamation. The plaintiff consequence of the per se prove must a natural and probable the amount of those damages, however. 4. Retraction that the defendant be given an opportunity statutes require retraction Generally, but do not specify timing. to retract, 26 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS Plaintiffs mustcrossPlaintiffs ahighthreshold torecover punitivedamages. 5. Punitivedamages “ statements that are allegedly false.” injunctive relief against commercial it more difficult to obtain preliminary The prior restraint doctrine can make • • • have beensooutrageousastoimplymalice.”). knowledge musthavemotivateditsstatement,or actionsmust requires more where punitivedamagesare concerned: [Defendant’s] defamatory statementswouldinjure terminatedemployee,“Maine (applying Mainelaw)(evenifdefendantemployerknewthat Galarneau v. MerrillLynch , 504F.3d 189,205(1stCir. 2007) rights orsafetyofothers”). that theactsofdefendantshowdeliberatedisregard forthe punitive damagesinMinnesotaas“clearandconvincingevidence disregard probable for[plaintiff’s] injury,” andnotingthe standard for business,andyet[defendant]actedwith of injuryto[plaintiff’s] wasgoingoutofbusiness“createdthat plaintiff ahighprobability when defendantknewthatfalsestatementsinflyerssuggesting 177 (Minn.Ct.App.1991)(upholdingaward ofpunitivedamages GN Danavox,Inc.v. StarkeyLabs.,Inc.,476N.W.2d 172,176- recovered.”). statements with‘actualmalice’before punitivedamagescanbe mustestablishthatthedefendantmade se, butthataplaintiff law presumes actualdamagesunderaclaimfordefamationper 1072 (4thCir. 1993)(applyingVirginia law)(“We notethatVirginia Swengler v. ITTCorp.Electro-Optical Prod. Div., 993F.2d 1063, mitigation ofdamage.”). of retraction, thedefendantmayprove suchnon-acceptancein doesnotaccepttheoffer such publication,and,iftheplaintiff and theretraction ispublished,hemayprove publish, to intends LIABILITY FOR COMMERCIAL SPEECH 27 , 593 P.2d 777, 788-89 (Or. 1979) (holding that 1979) (Or. 777, 788-89 , 593 P.2d Green Wheeler v. constitution). the Oregon cases violate in defamation punitive damages 1074 (Wash. 1072, Hoefer, 25 P. & Dray Co. v. Spokane Truck civil cases). State Washington damages in (abolishing punitive 1891) or libel c. 231, § 93 (“In no action of slander Mass. Gen. Laws be allowed.”). shall… punitive damages Central Hudson Gas & Elec. Corp. v. Public Service Commission v. Central Hudson Gas & Elec. Corp. can be no constitutional , 447 U.S. 557 (1980) (“there of New York messages that do not of commercial objection to the suppression The government lawful activity. accurately inform the public about likely to deceive the public more may ban forms of communication , 131 S. Ct. IMS Health Inc. v. than to inform it”). But see Sorrell heightened requires 2653, 2664 (2011) (“The First Amendment of speech a regulation creates scrutiny whenever the government . . . with the message it conveys. because of disagreement marks and speech is no exception.” (internal quotation Commercial citations omitted)). , 356 F. Supp. 2d 1071, 1084 (C.D. Cal. Supp. 2d 1071, 1084 (C.D. Lavasoft, 356 F. Inc. v. New.Net, 2003) (“the question of the actual truth or falsity is not appropriate because “making injunctive relief,” on this motion for preliminary on speech will ultimately ex ante as to what restrictions predictions speech”) and may chill protected be found permissible is hazardous York, 196 v. City of New York, Inc. (citing Latino Officers Ass’n, New 1999)). 458, 465 (2d Cir. F.3d • • • • • Several states do not allow punitive damages. do not allow Several states 6. Prior restraint disparagement cases, the and commercial available in defamation are While injunctions willingness of courts of speech at issue. It is injunctions depends on the type to enter and statements than against political commercial easier to obtain an injunction against other types of speech. and is protection, speech garners a lower level of constitutional As a rule, commercial speech. than non-commercial restriction, subject to greater accordingly Bans on commercial statements usually take the form of permanent injunctive relief injunctive relief statements usually take the form of permanent Bans on commercial can make doctrine issued against statements found libelous after trial. The prior restraint statements that relief against commercial injunctive difficult to obtain preliminary it more allegedly false. are 28 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS commercial disparagement action.Othercommondefensesincludethefollowing: statutorylimitations,truth isanabsolutedefensetoadefamationor certain With 1. Overview G. DefensestoDefamationandCommercial Disparagement preventing thepublicationofpotentiallydefamatorystatements. In thenon-commercial sphere, bycontrast,itismore toobtainan injunction difficult • • • • • • • • • The defendanthasaconditional orabsoluteprivilege. is“libelproof,”The plaintiff or The statementisanopinionandtherefore notactionable, security ortherighttoafairtrial.). circumstances, such aswhere publicationwillimplicatenational willgrantprior restraint(Mass. 1974)(acourt onlyinextraordinary Stone v. EssexCountyNewspapers,Inc.,311N.E.2d52,63 security isatstake). (recognizingthat injunctionmaybeappropriate where national Near v. StateofMinnesota,283U.S.697,716(1931) fair trial,eveninahighlysensationalizedandpublicizedcase). prior restraint wasnotjustifiedtoguaranteeacriminaldefendant Nebraska Press Ass’nv., 427U.S.539(1976)(holdingthat Stuart (quoting BantamBooks,Inc.v. Sullivan,372U.S.58,70(1963)). bearing aheavypresumption againstitsconstitutionalvalidity.”) (“Any systemofpriorrestraints ofexpression comestothisCourt New York TimesCo.v. UnitedStates,403U.S.713,714(1971) concerns underthefree speechclauseoftheFirstAmendment”). prohibition doesnotarouse offalseandmisleadingadvertising at evidentiaryhearingtobefalse,because“theLanhamAct’s (preliminary injunctionisavailableagainststatementsshown Cornwell v. Sachs,99F. Supp.2d695,708-709(E.D.Va. 2000) therefore unprotected bytheFirstAmendment). publishingonly statementsthatwere found“literallyfalse”attrial and in contextofpermanentinjunction,defendantisbarred from Castrol v. PennzoilCo.,987F.2d 939,949(3dCir. 1993)(even LIABILITY FOR COMMERCIAL SPEECH 29 , 5 So.3d 862, 867 of La. Sys., 5 So.3d 862, 867 Univ. Bd. of Sup’rs for the Cyprien v. (La. 2009) (plaintiff defamation where employee failed to establish his that employee misrepresented statement defendant employer’s resume was true). his qualifications in 1999) App. Div. (N.Y. 1, 6 , 704 N.Y.S.2d City of New York Dillon v. (plaintiffs employer stated that to establish defamation when failed was true). because the statement they had been “terminated,” 562-563 (Conn. App. Ct. 2008) Cosley, 955 A.2d 550, v. Mercer statements defendant’s defamation when (plaintiff failed to prove true, based on plaintiff’s own admissions). were , 997 So.2d 1098, 1106 (Fla. 2008) , 997 So.2d 1098, 1106 (Fla. 2008) Rapp Jews for Jesus, Inc. v. by implication). a cause of action for defamation (recognizing , 475 U.S. 767, 777 (1986) Hepps Philadelphia Newspapers, Inc. v. speech at issue falsity if defamatory of proving (plaintiff has burden is a matter of public concern). Communications, Inc., 626 N.E.2d 34, Capital Cities v. Prozeralik that of proving 1993) (well-known businessman had burden 38 (N.Y. been kidnapped was false). that he had reporting radio broadcast Commonwealth Motor Parts Ltd. v. Bank of Nova Scotia, 355 Commonwealth Motor Parts Ltd. v. is an absolute, 1974) (“Truth App. Div. 138, 141 (N.Y. N.Y.S.2d unqualified defense to a civil defamation action.”). 252, 255 (Minn. Parke, Davis, & Co., 297 N.W.2d Stuempges v. is a complete defense [to defamation], and however, 1980) (“Truth, not actionable.”). true statements, however disparaging, are • • • • • • • • 2. Truth the that If the plaintiff will likely argue the defendant a claim for defamation, states at issue is true. statement Even if a statement is true, it may be defamatory by implication if it gives a false Even if a statement is true, it may impression. The plaintiff has the burden of proving falsity if he or she is a public official falsity if he or or public of proving The plaintiff has the burden a matter of public concern. or the defamatory statement involves figure, In most states, truth is an absolute bar to recovery. 30 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS “ reputation asthe statement, ‘Jones aliar.’” is my opinion Jones aliar,’ is can cause asmuch damage to does not dispel these implications”. .“the statement, ‘In Simply couching such statements in terms of opinion published with“goodmotives”and“withoutmalice.” In otherstates,truthisabartorecovery fordefamationonlyifthe communicationis • • • • • presumed from publication.”). was madewithactualmalice.Actualmaliceshallnotbeinferred or [to libel]unlessitshallbeproved thatthepublication bytheplaintiff 1994) (“Thetruthinitselfandaloneshallbeacompletedefense Young v. FirstUnitedBankofBellevue,516N.W.2d 256(Neb. Ct. App.2000)). motive.’”) (quotingLipsigv. Ramlawi,760So.2d170,183(Fla.Dist. defense todefamationwhenthetruthhasbeencoupledwithagood 87 (Fla.Dist.Ct.App.2003)(“UnderFloridalaw, truth‘isonlya LRX, Inc.v. HorizonAssoc.JointVenture , 842So.2d881,886- mayfindforthedefendant.”). mischievous motives,thecourt published properly forpublicinformation,andwithnomaliciousor given inevidence,ifitisfoundthatthesamewaswrittenor writing orpublishingofalibel,where thetruthispleadedand Del. CodeAnn.Tit.10,§3919(“Inactionsfordamagesthe citing Mass.Gen.Lawsc.231,§92). toshowdefamation)(applyingMassachusettslawand sufficient employee wasfired couldhavebeenmadewithactualmalice executive’s emailsentto1500employeestruthfullystatingplaintiff Noonan v. Staples,Inc.,556F.3d 20(1stCir. 2009)(holdingthat to anylibelaction.”). 897 (Cal.App.Ct.1996)(“Truth, ofcourse,isanabsolutedefense Campanelli v. RegentsoftheUniv. ofCal.,51Rptr. 2d891, LIABILITY FOR COMMERCIAL SPEECH 31 , 420 U.S. 469, 489-490 (1974) 469, 489-490 , 420 U.S. Cohn v. Corp. Cox Broadcasting the subject where required of truth is constitutionally (“The defense is a public officialof the publication or public figure.”). (1986) Hepps, 475 U.S. 767, 776 Inc. v. Philadelphia Newspapers, when plaintiff falsity is a private of proving (plaintiff burden bears concern). but publication is of public figure , 791 P.2d 1164, Materials Storage, 791 P.2d Unarco Co. v. Mfg. Teilhaber a afforded protections 1167 (Colo. 1989) (“The constitutional a applicable to a defendant in defendant in a defamation action are statement of opinion, disparagement action ... In general, a product expression will be protected as opposed to a statement of fact, under the First Amendment.”). 2d 891, of Cal., 51 Cal. Rptr. the Univ. Regents of Campanelli v. objectively unjustified they are 894 (Cal. App. Ct. 1996) (“Even if statements of opinion which are or made in bad faith, publications for a libel action.”). rather than fact cannot form the basis Milkovich v. Lorain Journal Co., 497 U.S. 1, 18-19 (1990) (“If a Lorain Journal Milkovich v. he implies a Jones is a liar,’ speaker says, ‘In my opinion John conclusion that Jones told an knowledge of facts which lead to the untruth. Even if the speaker states the facts upon which he bases or incomplete, or if either incorrect his opinion, if those facts are the statement may still imply his assessment of them is erroneous, a false assertion of fact. Simply couching such statements in terms of opinion does not dispel these implications; and the statement, ‘In can cause as much damage to reputation my opinion Jones is a liar,’ as the statement, ‘Jones is a liar.’”). • • • • • Truth is always an absolute defense to defamation if the plaintiff is a public figure or the or plaintiff defamation if the defense to is always an absolute figure is a public Truth concern. an issue of public matter is 3. Opinion not actionable as defamation. speech and therefore protected An opinion is constitutionally The form of the language used is not controlling, however, because writers and speakers because writers and however, not controlling, The form of the language used is when asserting a factual untruth. Thus, a “opinion” as a preface often use the word untrue. may be defamatory if it conveys facts that are statement couched as an opinion The relevant question is not whether the statement is an opinion, but rather whether question is not whether the statement is an opinion, but rather whether The relevant assertions of fact. or imply provable be understood to declare it would reasonably 32 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS an individual. Statements thatcannotbe reasonably interpreted as statingactualfactsabout Statements thatcannotbeproven false. The Constitutionprotects thefollowingtypesofstatementsasopinion: any accompanyingopinionandotherstatedfacts. evaluated fortheirtruthorfalsityinisolation;theymustbeconsidered inthecontextof considered ofanallegedlydefamatorystatementmaynotbe asawhole.Factualportions In determiningwhetherastatementisoneoffactoropinion,themustbe • • • • • Amendment.”). stating factsare protected from defamationactionsbytheFirst or falseandstatementsthatcannotbereasonably interpreted as matters ofpublicconcernthatare notcapableofbeingproven true 868 (8thCir. 2005)(applyingMinnesotalaw)(“Statementsabout Aviation Charter, Inc.v. AviationResearch Group, 416F.3d 864, communicates onlyideasoropinions.”). not express orimplyprovable facts;necessarily, suchastatement opinion. Astatementdoesnotmeetthistesttothe extentitdoes the statementis,inform,aoffactor of falsely expresses orimpliesprovable facts,regardless ofwhether that isprovably false.Astatementmeetsthistesttotheextentit Ct. App.1997)(“Adefamationclaimmustbebasedonastatement Schmalenberg v. Tacoma News,Inc.,943P.2d 350,357(Wash. that onecouldreasonably drawfrom thestatement). considering thestatementasawhole,includinganyimplications ofdefendant’sportions allegedly defamatorystatement,butalso (2009) (defamationanalysisrequires notjustanalyzingfactual Hyland v. RaytheonTech. Servs.Co.,670S.E.2d746,751-52 implying theexistenceoffactsare actionableasdefamation.”). 1071 (4thCir. 1993)(applyingVirginia law)(“Statementsclearly Swengler v. ITTCorp.Electro-Optical Prod. Div., 993F.2d 1063, declares orimpliesaprovably offact.”). falseassertion a reasonable factfindercouldconcludethepublishedstatement statement isfactoropinion.Rather, thedispositive questioniswhether are actionable...Thequestionisnotstrictlywhetherthepublished offact App. 2004)(“Statementsofopinionthatimplyafalseassertion Franklin v. DynamicDetails,Inc.,10Cal.Rptr. 3d429,441(Cal.Ct. LIABILITY FOR COMMERCIAL SPEECH 33 , 497 U.S. 1, 21 (1990) (“loose, 1, 21 (1990) (“loose, Co., 497 U.S. Lorain Journal v. Milkovich that a against concluding weighs or hyperbolic language” figurative assertiondefamatory of fact was made). 350, 357 (Wash. , 943 P.2d News, Inc. Tacoma v. Schmalenberg on a statement defamation claim must be based Ct. App. 1997) (“A it meets this test to the extent false. A statement that is provably of whether facts, regardless or implies provable falsely expresses of in form, a statement of fact or a statement the statement is, extent it does does not meet this test to the opinion. A statement such a statement facts; necessarily, or imply provable not express ideas or opinions.”). communicates only 864, , 416 F.3d Group Aviation Research Inc. v. Aviation Charter, law) (“Statements about 2005) (applying Minnesota 868 (8th Cir. proven not capable of being matters of public concern that are interpreted be reasonably trueor false and statements that cannot defamation actions by the First from protected as stating facts are Amendment.”). 724, 727 (1st Affiliated Publ’n, 953 F.2d Inc. v. Phantom Touring, who decided “the producer that wrote 1992) (theater critic who Cir. admission for that show is committing highway robbery” to charge would reader liability because no reasonable would be immune from of an actual crime). the producer understand the critic to be accusing , 23 F. Supp. 2d 348, 385 (S.D.N.Y. 1998) Supp. 2d 348, 385 (S.D.N.Y. , 23 F. NYP Holdings Jewell v. reader (cartoon not actionable as defamation because “a reasonable given would not view such a cartoon as a statement of fact; rather, view it as would reader of a cartoon,reasonable a nature the inherent opinion not based on undisclosed facts”). a statement of pure 883, 886-87 (Mich. App. News, 522 N.W.2d Detroit Garvelink v. 1994) (context of satirical editorial column about local school be superintendent means that editorial “cannot reasonably as stating actual facts about plaintiff”). interpreted , 51 Cal. Rptr. 2d 891, 895 of Cal., 51 Cal. Rptr. Regents of the Univ. Campanelli v. (Cal. Ct. App. 1996) (“California courts have developed a totality of • • • • • • • Statements that, from their context, negate the impression that they are factual. that they are their context, negate the impression Statements that, from Courts may state pragmatically that all circumstances are considered in determining considered are Courts all circumstances may state pragmatically that whether a statement is an opinion. 34 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS certain statements madeinconnectionwith litigationorthelegislative process.certain maker ofanotherwisedefamatory statementfrom liability. Absoluteprivilegesapplyto circumstances,In certain anabsoluteprivilegemayoperateasadefense and protect the 5. Absoluteprivileges caused bydisclosure ofthetruth. reputationthe defamatorystatementcannotharmplaintiff’s beyondtheharmalready as ataxevader. this defenseinnoncriminalcontextswhere Defendantscanalsoassert defamed. Forexample,amassmurderer cannotbedefamedbybeingfalselydescribed whosereputationsagainst plaintiffs are already sotarnishedthattheycannotbe “libel-proof” andtherefore unableto prevail. Defendantsfrequently thisdefense assert Even where maybedeemed thechallengedstatementisfoundtobefalse,aplaintiff 4. Thelibel-proof plaintiff • • • • libel-proof withrespect toimplicationsofbeinga murderer). App. 1999)(well-knownproponent ofphysician-assisted suicidewas Kevorkian v. AmericanMedicalAss’n,602N.W.2d 233,239(Mich. activity haddestroyed hisreputation). for kidnappingandmurder waslibel-proof becausehiscriminal (applying Kansaslaw)(prisonerservingthree consecutivelifeterms Lamb v. Rizzo,242F. Supp.2d1032,1037-38 (D.Kan.2003) reputation). car’s and safetyrecord poorperformance hadalready dentedits federal safetyregulations; waslibel-proof theplaintiff becausethe safety record butmistakenlyclaimedthatthecarfailedtomeet truthfully reported thecar’s ratingsandpoor abysmalperformance that foranarticle has nolibelclaimagainstConsumerReports 516 F. Supp.742,750-51(S.D.N.Y. 1981)(electric-carmaker Simmons Ford, Inc.v. ConsumersUnionoftheUnitedStates,Inc., intrusion onthefieldoffree expression”). constitutionally required factorstoguard against“aforbidden Cir. anindependentexaminationofall undertakes 1992)(court Phantom Touring, Inc.v. Publ’n,953F.2d Affiliated 724,727(1st audience towhomthepublicationwasdirected.”). the communicationandtoknowledgeunderstandingof mustlookatthenature statement .Thecourt andfullcontentof an averagereader anddecidethenaturalprobable ofthe effect the circumstances mustputitselfintheplaceof test.Thecourt LIABILITY FOR COMMERCIAL SPEECH 35 , 884 A.2d 63, 79 (D.C. 2005) (“This jurisdiction, , 884 A.2d 63, 79 Watts Oparaugo v. an other jurisdictions, has long recognized like the majority of to, or in for statements made preliminary absolute privilege long as the statements so proceeding, the course of, a judicial Finkelstein, (quoting proceeding.”) to the bear some relationship Hemispherx, 774 A.2d Biopharma, Inc. v. Thompson & Loughran 332, 338 (D.C. 2001)). 2002) Inns, Inc., 566 S.E.2d 595, 603 (W.Va. Red Roof Collins v. a party to judicial proceeding, (“Prior to the filing of a prospective to publish defamatory matter a dispute is absolutely privileged person who is not a party to the dispute only when about a third in good faith judicial action is contemplated (1) the prospective (2) the defamatory statement and is under serious consideration; and (3) the judicial proceeding; to the prospective is related in to persons with an interest defamatory matter is published only judicial proceeding.”). the prospective 966, 971 (Wyo. 2009) (statements , 213 P.3d Wood v. Abromats for service provider made by crime victim to crime victim absolutely privileged because they were submission to court were made in the course of a judicial proceeding). , 778 N.W.2d 410, 424 (Neb. 2010) McQuaid, 778 N.W.2d Kocontes v. absolutely privileged). of Pardons (statement made in letter to Board Nos. 2006-SC- ----, Lottery Corp., --- S.W.3d Ky. But see Hill v. *10- 000748-DG, 2008-SC-000380-DG, 2010 WL 1636870, at • • • • • …the defendant is generally found not liable for for liable not found is generally defendant …the so otherwise defamatory, be would that statements the that believed reasonably defendant as the long faith.” good in acted and true were statements a. Litigation privilege a. Litigation parties,Attorneys, an absolute have witnesses participating and in a judicial proceeding that – to publish statements privilege to as the litigation – sometimes referred privilege good faith. contemplated in is as the proceeding so long proceeding, to the related are Statements made in a quasi-judicial proceeding are also privileged. are proceeding Statements made in a quasi-judicial “ 36 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS these privileges applies,thedefendant isgenerallyfoundnotliable forstatementsthat haverecognizedCourts anumberofconditionalprivileges,asdescribed below. Ifoneof 6. Conditionalprivileges otherwise bedefamatorymadeduringalegislative proceeding. Most stateshaveprovisions thatgrantabsoluteimmunitytostatementswould b. Legislativeprivilege particularly withregardparticularly toactivitiespreceding litigationoroutsidethescopeoflitigation. The litigationprivilege–although“absolute”andbroad inscope–isnotwithoutlimits, • • • • • • it wasmadeduringalegislative proceeding). compensation review committeewasabsolutelyprivilegedbecause by specialassistantattorneygeneralbefore alegislativeworker’s Voigt v. State,759N.W.2d 530,533(N.D.2008)(statementmade Representatives absolutelyprivileged). made bystatelegislatorduringsessionofHouse of Cooper v. Glaser,228P.3d 443,444-45(Mont. 2010)(statement to threatened litigation). inresponseallegedly defamatorystatementmadebypotentialparty P.3d 496,503(Nev. 2009)(extendingabsoluteprivilegeto But seeClarkCo.Sch.Dist.v. Educ.Software, Inc.,213 Virtual but wasnotpending). privilege doesnotapplywhenlitigationwasmerely contemplated Lindeman v. Lesnick,604S.E.2d55,58-59(Va. 2004)(absolute outsidethelitigation). parties privilege doesnotapplytostatementsmadebyattorneythird Thompson v. Frank,730N.E.2d143,146(Ill.App.2000)(absolute proceeding.”). to communicationsmadepreliminary toaproposed judicial of judicialproceedings, theyhavenotextendedtheprivilege communications madeinthecourse to regards in privilege law) (“Although recognize Indiana Courts thelitigation 458 F. Supp.2d716,728(N.D.Ind.2006)(applyingIndiana Medical InformaticsEng’g,Inc.v. Ne,P.C. Orthopaedics , regulatory authorityandwasmademaliciously). not madebytheheadofanagencyexercising quasi-judicialand 11 (Ky. 2010)(statementnotabsolutely privileged where itwas LIABILITY FOR COMMERCIAL SPEECH 37 , 17 F.3d 980, 985 Service Soc. of Wisc., 17 F.3d Children’s Kennedy v. (applying Wisconsin 1994) privilege law) (“A conditional (7th Cir. the disregards defendant knows or recklessly is abused if: (1) the other matter is published for a purpose truth; (2) the defamatory is the privilege is given; (3) the publication than that for which to be necessary believed not reasonably made to some person (4) the of the purpose of the privilege; for the accomplishment to be necessary believed not reasonably are defamatory statements the publication is privileged; or to accomplish the purpose for which matter.”). (5) the publication includes unprivileged 1993) 57, 62 (2nd Cir. Piedmont Airlines, Inc., 985 F.2d v. Weldy law) (“A plaintiffabuse of the may demonstrate (applying New York malice,law common with (1) acted defendant that proving by privilege or (3) with knowledge thator (2) outside the scope of the privilege, truth.”). as to its disregard the statement was false or with a reckless Jacron Sales Co., Inc. v. Sindorf, 350 A.3d 688, 699-700 (Md. Sales Co., Inc. v. Jacron of the disregard or reckless 1976) (holding that actual malice privilege, but not mere truth is enough to defeat a conditional negligence). , 3 F.3d 868, 872 (5th Cir. 1993) (applying 868, 872 (5th Cir. Shell Oil Co., 3 F.3d Stockstill v. good faith and lack of requires Louisiana law) (qualified privilege malice, meaning that “the person making the statement must have for believing that it is true and he must honestly grounds reasonable statement.”). believe that it is a correct 205 (Utah Williams & Hunt, Inc., 221 P.3d v. But see Ferguson and threshold grounds 2009) (abandoning lack-of-reasonable stating that plaintiff can only show abuse of conditional privilege statement made knowing it to be false, or acting in reckless where as to its falsity). disregard • • • • • would otherwise be defamatory, so long as the defendant reasonably believed that the believed reasonably so long as the defendant be defamatory, would otherwise such a a defense involving overcome in good faith. To true and acted were statements the plaintiffprivilege, statements were or that the abuse of the privilege must show an malice. made with Simple negligence, lack of sound judgment, or hasty action will not cause the loss of the Simple negligence, lack of sound privilege in these circumstances. However, some states require that the speaker have at least a reasonable basis for that the speaker have at least a reasonable some states require However, the privilege. to maintain statement in order believing the truth of the defamatory 38 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS reference. made byformeremployerstoprospective employers, forexample,inanemployment A conditionalprivilegemayalsoapplytostatements aboutanemployee’s performance employer’s legitimateinterest hisorherjob. inthefitnessofanemployeetoperform are conditionallyprivilegedifthestatementswere reasonably necessary toservethe Similarly, statementsmadebyanemployertoemployee’s supervisororcoworkers perform theirduties. perform recognize thelegitimateneedofemployerstodeterminetheiremployees’capacity Conditional privilegeoftenarisesintheemploymentcontext,becausecourts a. Employerprivilege • • • • • privilege torespond todirect inquires byprospective employers.”). against defamationsuits... An employermayinvokeaconditional reference toaprospective employer holdssomequalifiedprivilege (applying Illinoislaw)(“Generally, aformeremployerwhogivesnegative Delloma v. Consol.Coal Co.,996F.2d 168,171-72(7thCir. 1993) employee’s isconditionallyprivileged”). performance law ofFlorida,acommunicationtoanemployerregarding his teacher’s were performance privileged,as“[u]nderthecommon (statements bystudent’s fatheratschoolboard meetingregarding Nodar v. Galbreath, 462So.2d803,809-810(Fla.1984) employee’s misconduct). conditionally privilegedbecauseitconcernedinvestigationofan (statement madeincourseofinvestigatingharassmentcomplaint Bahr v. BoiseCascadeCorp.,766N.W.2d 910(Minn.2009) explaining whysixemployeeswere terminatedwere privileged). (finding thatstatementsbymanagementto1500employees Schrader v. EliLillyandCo.,639N.E.2d258,262-63(Ind.1994) interest.”). person toanotheruponasubjectinwhichtheyhavecommon context, theyare qualifiedlyprivilegedashavingbeenmadeby one file, orstatementsare madeaboutanemployeeinemployment connection withanemployeereview, orare placedinapersonnel (“To theextentthatmemorandaare prepared forinternalusein Dillon v. CityofNewYork, 704N.Y.S.2d 1,6-7(N.Y. App.Div. 1999) LIABILITY FOR COMMERCIAL SPEECH 39

Trail v. Boys and Girls Clubs of Northwest Boys and Girls Indiana, 845 N.E. v. Trail a qualified (“Indiana recognizes 136-37 (Ind. 2006) 2d 130, and prospective between former for communications privilege employers. Like communications, intracompany privilege afforded needs by permitting former human resource that privilegeprotects for an to requests yet critical responses sincere employers ‘to give qualifications without fear of a employee’s appraisal of a prospective defamation action.”). , 36 P.3d 456, 460 (Okla. Civ. 456, 460 (Okla. Civ. Gen. Hosp., 36 P.3d Holdenville Thornton v. a corporation, between its App. 2001) (“Communication inside officers, and agents, is never a publication for the employees, purposes of actions for defamation.”). Cas. Co., 823 N.E.2d 184, 189 (Ill. App. Ct. Cont’l Popko v. employees of a that a communication between 2005) (recognizing corporation can constitute publication). Howell v. Enterprise Publ’g Co., LLC, 920 N.E.2d 1, 13 (Mass. 2010) Enterprise Howell v. and accurate to enjoy the fair must be full, fair, (newspaper reports by misconduct privilege, but the privilege may be vitiated report part). than negligence on the newspaper’s amounting to more (applying 2007) 396, 399 (6th Cir. , 477 F.3d Moore Nichols v. Michigan law) (“If the gist, the sting, of the article is substantially true, the defendant is not liable...”). Republican Nat. Committee, 557 S.E.2d 853, 861-62 (W.Va. Pritt v. 2001), cert. denied, 537 U.S. 812 (2002) (“The law of libel… overlooks minor inaccuracies and concentrates upon substantial • • • • • • As a practical matter, however, employers often provide only basic factual information to only basic factual employers often provide however, As a practical matter, risk of litigation. the to reduce and termination dates) as hire employers (such prospective split on whether intra-corporate element, courts to the publication are With regard states, it is a defense to can constitute publication. In some communications between employees of a corporation, since it is publication if the statement is made number of states hold “talking to itself.” A growing a corporation merely considered otherwise, however. b. Fair reporting privilege b. Fair reporting subject and accurate, and made without malice to be or articleA report must be full, fair, Statements that contain minor inaccuracies but are privilege. to a fair reporting privileged. substantially true are 40 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS necessary to the performance ofthelegalduty.necessary totheperformance an absoluteorconditionalprivilegetomakestatements ofakindthatare reasonably A legaldutyimposedfortheprotection classofpersonscarrieswithit ofa particular d. Publicinterest privilege the communicationisreasonably intendedtopromote it. privilege mayapplywhere thepublisherandrecipient haveacommoninterest, and Overlapping someoftheotherprivilegesdescribedhere, theso-calledcommoninterest c. Commoninterest privilege as thereport isafull,fair, andaccurateaccountofthecontentscomplaint. isthatsuchreports areamong courts absolutelyprivileged,regardless ofmalice,solong regardWith themoderntrend toreporting onthecontentsofcomplaintsfiledincourt, • • • • privileged under Utahlawconcerningthe makingofreports required Utah law)(statementsby members ofstateinvestigatorybodywere Becker v. Kroll , 494F.3d 904,927-28(10thCir. 2007)(applying privilege basedonmutualityofinterest ofspeaker andlistener”). son’s withthe classclearlycamewithinthescopeof difficulties class atapublichighschoolinwhichhissonwasenrolled andhis meeting concerningthecurriculumandinstruction in anEnglish defendant, addressed inpersontoaschoolboard ataschoolboard teacher’s were performance privileged,as“[t]heremarks ofthe (statements bystudent’s fatheratschoolboard meetingregarding Nodar v. Galbreath, 462So.2d803,809-810(Fla.1984) subject onwhichtheyshared acommoninterest andduty). without abuse,asitconcernedthetheftofcompanyproperty, a security chiefwasprivilegedbecauseitmadeingoodfaithand (statement from employee’s plaintiff supervisortocompany’s Dugan v. MittalSteelUSAInc.,929N.E.2d184,189(Ind.2010) and discussingtrend amongcourts). full, fair, andaccurateaccountofafiledcomplaint)(collectingcases containing (newspaper publishernotliablefordefamationarticle Salzano v. N.JerseyMediaGroup Inc.,993A.2d778(N.J.2010) would haveproduced.”). onthemindofreadereffect from thatwhichthepleadedtruth statement isnotconsidered falseunlessitwouldhaveadifferent substance, thegist,sting,oflibelouscharge bejustified.A truth. Minorinaccuraciesdonotamounttofalsitysolongasthe LIABILITY FOR COMMERCIAL SPEECH 41

by state or federal law, and therefore would have provided immunity immunity provided would have and therefore or federal law, by state except that plaintiffs provided slander, suits for libel or from privilege). sufficient to overcome evidence of malice 2003) (statements 1, 23-24 (Ala. , 871 So.2d of Argo Town Butler v. were member during city council meeting made by city council Alabama the public welfare, to promote “In order privileged, stating, of legislative bodies an absolute upon members law has conferred performance certain from causes of action stemming privilege from functions.”). of their legislative Whitehall Co., 508 N.E.2d 113, Hearthside Inc. v. Rest., Dexter’s was under a legal the defendant Ct. 1987) (where 117 (Mass. App. Alcoholic Beverages delinquent accounts to the duty to report one of its regarding report Commission, its erroneous Control privileged). customers was found to be conditionally , 457 F.3d 460, 471 (5th Info. Services, LLC, 457 F.3d Equivax Morris v. or other law) (“Reports of mercantile 2006) (applying Texas Cir. in good faith to one having a agencies, furnished credit-reporting privileged.”). in the information, are legitimate interest Experian Info. Solutions, Inc., 317 F. Inc. v. County Vanlines, law) (“Credit 2004) (applying New York Supp. 2d 383 (S.D.N.Y. agencies enjoy this qualified privilege investigation and reporting matter was ‘not liable for defamation unless the defamatory and are of the disregard with malice or such a wanton and reckless uttered equivalent.’”). rights of another as is ill will’s

• • • •

e. Credit report privilege report e. Credit Trademark Office in order to be infringed or diluted.” or infringed be to order in Office Trademark trademark to be registered by the Patent and and Patent the by registered be to trademark federal and state laws. It is not necessary for a for necessary is not It laws. state and federal “Trademark claims may be asserted under both both under asserted be may claims “Trademark 42 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS g. Competitiveprivilege f. Lawenforcement privilege • • • • • • characteristic”). integrity orincompetencenor evenimplyanyreprehensible personal statements didnotaccuse theproducer of“dishonesty, lackof goods were ofpoorqualitywere notdefamatory becausethe Ct. 1985)(comedian’s statementsindicating thatwineproducers Polygram Records, Inc.v. Sup. Ct.,216Cal.Rptr. 252(Cal.App. Torts §§623A,626(1979)). 738c, at281(Little,Brown 1978));seealsoRestatement(Second)of biased.”) (quoting3PhilipAreeda &DonaldF. Turner, AntitrustLaw§ . recognize disparagement[ofarival]asnon-objectiveandhighly fraud, deceit,dishonesty, orreprehensible conduct.’.many buyers it isnotconsidered libelousunlessit‘imputestothecorporation (“Generally, where thediscussion involvesarival’s servicesorproduct, Picker Int’l,Inc.v. Leavit,865F. Supp.951,964(D.Mass.1994) conduct initsbusinessrelation tosaidgoodsorproduct.”) imputes tothecorporationfraud,deceit,dishonesty, orreprehensible unless byfairconstructionandwithouttheaidofextrinsicevidenceit or manufacturer, itwillnotbeheldlibelousperseastothecorporation, its faceisdirected againstthegoodsorproduct ofacorporatevendor (3rd Cir. 1990)(applyingPennsylvanialaw)(“Where thepublicationon U.S. Healthcare, Inc.v. BlueCross ofGreater Phila.,898F.2d 914,924 charges are presumptively qualifiedlyprivileged”). the policeorstate’s attorneypriortotheinstitutionofcriminal defamatory statementsvoluntarilymadebyprivateindividualsto “as amajorityoftheotherstateshaveheldinthiscontext,that Fridovich v. Fridovich,598So.2d65,69(Fla.1992)(holding of communicationbetweencitizensandpublicofficials.”). therefor aninvestigationtobeeffective, mustbeanopenchannel for communicationsbetweencitizensandlawenforcement. Inorder recognizing publicpolicysupports aqualifiedprivilege (“Important Richmond v. Nodland,552N.W.2d 586,589(N.D.1996) store wasprotected byqualifiedprivilege). law enforcement thatacustomerhad“pulledgun”inside officer v.Williams Tharp,914N.E.2d756(Ind.2009)(statementmadeto LIABILITY FOR COMMERCIAL SPEECH 43 15 U.S.C. § 1125(a). 2006) (automobile 534 (6th Cir. D’Amato, 469 F.3d Audi AG v. infringement and sued website operator for trademark manufacturer to trademark and logo on website dilution for use of manufacturer’s sell goods). 477 (5th Cir. Inc., 381 F.3d of Vacuums House Scott Fetzer Co. v. sued independent vacuum 2004) (vacuum cleaner manufacturer dilution, shop for trademark infringement, cleaner sales and repair in advertisement).and unfair competition for use of trademark , 588 F.3d 97, 115 Coffee, Inc., 588 F.3d Borough Wolfe’s Starbucks Corp. v. 2009) (applying eight-factor test). (2d Cir. 1, 10 LLC, 531 F.3d Super Duck Tours, LP v. Boston Duck Tours, 2008) (applying eight-factor test). n.6 (1st Cir. Netscape Commc’ns Corp., 354 F.3d Playboy Enters., Inc. v. 2004) (applying eight-factor test). 1020,1026 (9th Cir. • • • • • • IV. Other Claims Other IV. Infringement A. Trademark advertisement or logo) in an as a brand name a trademark (such The use of or other dilution by the for trademark infringement or speech may give rise to a claim commercial claims may be asserted both federal and state laws. It under Trademark trademark owner. Office in Trademark by the Patent and a trademark to be registered is not necessary for to be infringed or diluted. order is that there a trademark owner must prove trademark infringement, to prove In order the parties mistake or deception as between likely to be confusion, or their respective to believe that the accused goods That is, consumers must be likely goods and services. or affiliatedwith, endorsed by, or are the trademark owner, coming from and services are by the trademark owner. sponsored In evaluating whether there is a trademark infringement, most courts is a trademark infringement, employ a multi- In evaluating whether there the similarity of the marks, similarity of the goods factor balancing test which considers overlap in channels of trade, the existence of any and services, overlap in consumers, of the plaintiff’sthe intent of the defendant in trademark, actual confusion, the strength adopting the mark, and other factors. The use of another party’s trademark constitutes fair use if the challenged use is not trademark constitutes The use of another party’s or phrase, word actually a trademark use as such, but is instead use of a descriptive 44 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS a designation fortheparty’s owngoods orservices. toqualifyforthestatutory defense,theaccuseduseofmarkmustnot beusedas the goodsorservicesof the famousmarkowner.” 15U.S.C. §1125(c)(3)(A).Inorder or identifying,parodying, criticizing,orcommentinguponthe famousmarkowneror orpromotionwith advertising thatpermitsconsumerstocompare goods orservices; of trademarkdilutioniftheaccuseduseis“fair .,includinguseinconnection statute, asamendedin2006,expressly provides thatitshallbeadefensetoclaim eyes ofconsumersevenintheabsenceanylikely confusion.Thefederaldilution use ofafamousmarkinmannerthatislikelytoblur ortarnishthefamousmarkin Trademark dilution,incontrasttotrademarkinfringement,requires theunauthorized endorsement bythetrademarkowner. the defendanthasengagedinanyotheractsthatwouldfalselysuggestsponsorshipor necessary toidentifythetrademarkownerofitsproducts (suchasalogo),andwhether descriptive word usedmore orphrase),whethertheparty ofthetrademarkthanwas whether there isalegitimateneedtousethetrademark(asopposedsomemore consider and services.Indeterminingwhethernominativefairuseapplies,manycourts owner’s marktoidentifythetrademarkowneritselforowner’s owngoods In addition,thedoctrineofnominativefairuseprovides mayuseatrademark thataparty also fairuse,provided thatthenameisnotbeingusedasatrademark. of thegoodsandservices.Useaparty’s individualnameinhisorherownbusinessis provided thatthedesignationisbeingusedtofairlyandaccuratelydescribesomeaspect • • • • • suggested affiliation, sponsorship, orendorsement). suggested affiliation, using universities’colorschemesandlogosinaway thatimproperly nominative fairusewhere manufacturer sportswear soldt-shirts Smack Apparel Co.,550F.3d 465,489(5thCir. 2008)(findingno Bd. ofSupervisorsforLa.StateUniv. Agric.&Mech.Coll.v. infringement). defensetotrademark fair useinthecontextofanaffirmative (3rd Cir. 2005)(employingvariationofNewKidstestfornominative Century 21RealEstateCorp.v. Lendingtree, Inc.,425F.3d 211 oft-citedthree-part testfornominativefairuse). 1992) (articulating New KidsontheBlockv. NewsAm.Publ’g,Inc ., 971F.2d 302(9thCir. designer ofproducts beingsold). of trailerhitchdesigner, forpurposesofidentifying inadvertising 2009) (applyingfairusedefensetoofHENSLEY, lastname Hensley Mfg.,Inc.v. ProPride, Inc.,579F.3d 603,612(6thCir. 15 U.S.C.§1115(b)(4).

LIABILITY FOR COMMERCIAL SPEECH 45 15 U.S.C. § 1125(c)(3)(A). 15 U.S.C. 97 Coffee, Inc., 588 F.3d Borough Wolfe’s Corp. v. Starbucks as name not protected CHARBUCKS 2009) (finding (2d Cir. parody for the was used as a brand it where federal statute under coffee). own defendant’s , 507 F.3d 252 (4th Cir. 252 (4th Cir. Dog, LLC, 507 F.3d Haute Diggity S.A. v. Louis Vuitton Malletier 2009) (affirming as a brand for dog toys did not finding that CHEWY VUITON of statutory for designer goods despite inapplicability dilute LOUIS VUITTON defense). parody 17 U.S.C. §§ 101, et seq. , 499 U.S. 340, 361-64 Co., Inc. Serv. Rural Tel. Feist Publ’ns, Inc. v. book did not phone from (1991) (publication of information copied compilation of factual data inconstitute copyright infringement because for obtaining copyright protection). phone book did not meet standard Nimmer on Copyright § 2.12 Melville B. Nimmer & David Nimmer, to characters). (2007) (discussing extension of copyright protection • • • • • • The use of another’s trademark for purposes of parody may be protected, even if the may be protected, for purposes of parody trademark The use of another’s the not met (because, for example, are parody for the statutory defense of requirements and own goods or services party’s being used as a designation for the accused mark is the famous trademark owner). not just to identify B. Copyright Infringement own advertisement or commercial in one’s copyrighted material The use of another’s claim for copyright infringement. Copyright communication may give rise to a and characters as works, and may extend to corporate logos original, creative protects does not extend to any idea or method of operation, well as text and images. Copyright of such ideas or methods. Copyright expressions but only to the original and creative based work is copied (which may be inferred infringement occurs when a copyrighted the two works are similarity) and plus probative on access to the copyrighted work elements protectable observer once the an ordinary substantially similar in the eyes of out. filtered are Fair use is a defense to copyright infringement. Generally speaking, the use of aFair use is a defense to copyright infringement. Generally speaking, the work itself the copyrighted work for purposes of criticizing, commenting upon, or parodying taking facts, however, is likely to constitute fair use. Each case must be decided on its own or for commercial into account (1) the purpose and character of the use, including whether of the copyrighted work; (3) the amount and educational purposes; (2) the nature nonprofit to the copyrighted work as a whole; and (4) thesubstantiality of the portion used in relation 46 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS may bringaclaimforintentionalinflictionofemotional distress understatelaw. In somecircumstances, believedtobeharmed byfalseormisleadingstatements aparty D. IntentionalInflictionofEmotionalDistress interference withexistingorprospective contractualrelations pursuanttostatelaw. False ormisleadingstatementsincommercial speechmaygiverisetoclaimsfor C. Interference withContractualRights copyright owner is likely to experience any diverted salesorothermonetarylosses. copyright ownerislikelytoexperienceanydiverted oftheuseonmarketvaluecopyrightedwork,includingwhether effect • • • • • • • when hewasfired forbeinghomosexual). and intentionalinfliction of emotionaldistress suitagainstchurch 2008) (formerchurch memberandworship director fileddefamation Gunn v. MarinersChurch, Inc.,84Cal.Rptr. 3d1(Cal.Ct.App. surrounding histermination). intentional inflictionofemotionaldistress for schooldistrict’s actions (terminated workersuedschooldistrictfordefamation and Oman v. DavisSchoolDistrict,194P.3d 956(Utah2008) series of emails that plaintiff hadstolencopyrightedmaterials). series ofemailsthatplaintiff and prospective economicrelationships whendefendantsuggestedina allegedtradelibelandinterference withcontractual App. 2004)(plaintiff Franklin v. DynamicDetails,Inc.,10Cal.Rptr. 3d429,441(Cal.Ct. information totheINS). business expectancyclaimsagainstadvisorforreporting incorrect interference with (graduate studentfileddefamationandtortious Dube v. Likins,167P.3d 93,97-103(Ariz.Ct.App.2007) comparative advertising constituted fairuse). comparative advertising 1030 (9thCir. 2000)(useofscreen shotsfrom avideogamein Sony ComputerEntm’tAm.,Inc.v. Bleem,LLC,214F.3d 1022, as afairuse). campaign constitutedcopyrightinfringementthatwasnotprotected photo showingindividualwearingcopyrightedeyewearinadvertising Davis v. Gap,Inc.,246F.3d 152,173-76(2dCir. 2001)(useof 17 U.S.C.§107. LIABILITY FOR COMMERCIAL SPEECH 47

, 863 N.Y.S.2d , 863 N.Y.S.2d Health and Hospitals Corp. New York Pandian v. medical sued resident 2008) (anesthesiology App. Div. 668 (N.Y. when medical school of contract and defamation school for breach of to American Board evaluation of resident submitted negative Anesthesiologists). 91 (Haw. & Stifel, 176 P.3d Goodsill Anderson Quinn Kamaka v. of breach attorney sued former law firm for 2008) (terminated being on a leave after when she was fired contract and defamation and childbirth). of absence due to pregnancy , 418 F. Supp. 2d 1330, 1338-39 Ryan , 418 F. Collie Rescue, Inc. v. Border and military contractor brought (M.D. Fla. 2006) (defendant dog trainer inter alia, defamation, trade against former employee for, counterclaim law). in violation of Florida of trade secrets libel, and misappropriation (“Dot Com Disclosures”). The Dot Com Disclosures are intended to provide guidance intended to provide are The Dot Com Disclosures (“Dot Com Disclosures”). clear andfor mobile and other online advertisers and explain how to make disclosures emphasize that consumer conspicuous to avoid deception. The Dot Com Disclosures on all mediums, whether delivered laws apply equally to marketers across protection .com Disclosures: How to Make Effective in Digital Advertising.com Disclosures: Disclosures • • • • E. Breach of Contract E. Breach between the parties, may or misleading statements false upon the relationship Depending of contract. to claims for breach give rise F. Unfair or Deceptive Practices in Violation Unfair or Deceptive Practices of State Law F. trade unfair and deceptive under state statutes prohibiting Claims may often be brought for unfair competition, common law claims practices. Many states also recognize and similar torts. misappropriation, G. Violation of Federal Trade Commission Statutes and Regulations G. Violation Trade of Federal “unfair or deceptive acts or practices in Commission (FTC) prohibits The Federal Trade “any false advertisement… for the and specifically prohibits or affecting commerce” of the purchase or indirectly to induce, directly purpose of inducing, or which is likely cosmetics.” 15 U.S.C. §§ 45(a)(1) & 52(a); 16 C.F.R. foods, drugs, devices, services, or by the FTC, either at its own actions may be brought §§ 1.1, et seq. While enforcement private is no there of a competitor or another aggrieved party, initiative or at the request right of action under the statute. guidelines as to specific advertising issues, including time to time, the FTC releases From the following: 48 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS 2241 (2014). labels satisfyFDCAregulations. POMWonderful LLCv. Coca-ColaCo.,134S.Ct.2228, claimsundertheLanhamActforfalseormisleadinglabelsevenif the false advertising FDCA. 21U.S.C.§337(a).However, canbring theSupreme hasheldthatparties Court other products. 21U.S.C.§§301,etseq.There isnoprivaterightofactionunderthe medicaldevicesand false ormisleadingstatementsonlabelsforfood, drugs, andcertain industry regulations. Forexample,theFood,Drug,andCosmeticAct(FDCA)prohibits mayalsobesubjecttoliabilityforfalseormisleadingstatementsthatviolate Parties ofIndustryStatutesandRegulations H. Violation • • their claimstoavoiddeceivingconsumers. claims, howmarketerscansubstantiatetheseandqualify environmental marketingclaims,howconsumersare likelytointerpret particular substantiated. Theguidancetheyprovide includesgeneralprinciplesthatapplytoall marketers ensure thattheenvironmental claimstheyare makingare trueand or “Green 260.TheGreen Guides”),16CFRPart Guideswere issuedtohelp Guides fortheUseofEnvironmental Marketing Claims(“Environmental Guides” endorsement, itshouldbedisclosed. endorser andthemarketerofaproduct howpeopleevaluatethe thatwouldaffect statethatifthere have. TheEndorsementGuidesfurther isaconnectionbetweenthe haven’t triedit,ormakeclaimsaboutaproduct thatwouldrequire proof theydon’t endorsers knowthattheyshouldn’ttalkabouttheirexperiencewithaproduct ifthey expect from useoftheproduct orservice.Inaddition,theEndorsementGuideslet they are notaccompaniedbyinformationdescribingwhatconsumerscangenerally areadvertisers advisedthatusingunrepresentative testimonialsmaybemisleadingif together withexamplesillustratingtheapplicationofthoseprinciples.Forexample, general principlesthattheFTCusesinevaluatingendorsementsandtestimonials, the 255.TheEndorsementGuidessetforth (“Endorsement Guides”),16CFRPart Guides ConcerningtheUseofEndorsementsandTestimonials inAdvertising withsmallscreens smartphones andtheriseofsocialmediamarketing. radio, orprint,andprovide examplesthattakeintoaccounttheexpandinguseof a desktopcomputer, amobiledevice,or more traditionalmediasuchastelevision,

LIABILITY FOR COMMERCIAL SPEECH 49 . Better Business Bureaus V. Forums for the Enforcement of False Advertising of False Claims for the Enforcement Forums V. advertisement false or misleading by the allegedly that is aggrieved A company of a widely known. not which are to it, some of of options available has a number competitor in Federal or State CourtA. Civil Lawsuit federal or in either advertisingA lawsuit for false under the Lanham Act may be brought jury trial, and an injunction is a right to a state court. 1338. There 28 U.S.C. §§ 1331, available. are and monetary damages Attorney General Commission or State by Federal Trade Action B. Enforcement Commission (FTC) the Federal Trade a civil lawsuit, a company may inform As an alternative to General (AG) of an allegedly false advertisement.or a state Attorney The FTC or AG may take The FTC or will be commenced. case a formal proceeding in which advertiser, action against the such as all one advertiser, than against more to commence proceedings AG has the discretion similar advertising engaged in practices. companies within an industry that are the FTC determines whether the advertisement proceeding, In an FTC enforcement or is “any acts or practices in or affectingconstitutes an “unfair or deceptive commerce” false advertisement directly . . . for the purpose of inducing, or which is likely to induce, U.S.C. of foods, drugs, devices, services, or cosmetics.” 15 the purchase or indirectly §§ 1.1, et seq. §§ 45(a)(1) & 52(a); 16 C.F.R. if it appears that consumers, as opposed to competitors,The FTC or AG is likely to take action being harmed by the advertisement in question. The FTC is principally concerned withare A competitor who brings a or otherwise widespread. national in nature advertisements that are AG is not normally entitled to participatematter to the attention of the FTC or in any resulting damages. any monetary party or receive against a third proceeding by the FTC is set forth in the proceedings Detailed information about enforcement §§ 1.1, et seq.) and at www.ftc.gov (16 C.F.R. applicable regulations the National Advertising Division of the Council of Through C. Enforcement relating programs operates several self-regulating The Council of Better Business Bureaus the National Advertisingto nationwide advertisements, Division (NAD). principally through established by the National Advertising Review are for NAD The policies and procedures Advertising (CARU), which Review Unit Council (NARC). NARC also governs the Children’s Retailing Self- and the Electronic children, towards advertisements directed addresses marketing. response direct (ERSP), which addresses Regulation Program 50 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS Detailed informationaboutNADisavailableatwww.nadreview.org. reported totheappropriate federalorstateauthorities. failstocomplywithadecisionofNADorNARB,thisfactwillordinarilyadvertiser be public member, agencymember, oneadvertising andthree members. Ifan advertiser ReviewBoardthe NationalAdvertising (NARB).Thereviewing NARBpanelconsistsofone areand astatementbytheadvertiser madepublic.NADdecisionsmaybeappealedto At theconclusionofcase,challenger’s andadvertiser’s positions,NAD’s decision, often allowsforacasetoberesolved whiletheaccusedadcampaignisstillrunning. decision within60businessdaysofthefilingdatecomplaint.Thisacceleratedprocedure NAD adheres todetailedprocedures withstrictdeadlines,andordinarily deliversawritten Commission), andpublicizethefactthatithasdoneso. refer themattertoappropriate federalorstateauthorities(suchastheFederalTrade intheNADprocess, declinestoparticipate NADwill confidential material.Iftheadvertiser tomakeuptwosubmissions,whichmayinclude challenger eachhaveanopportunity basiccriteria,commenceacaseagainsttheadvertiser.certain and Theadvertiser truthful oraccurate.NADwillinvestigatetheclaimand,provided thatthecomplaintmeets isnot mayfileacomplaintwithNAD,allegingthatnationaladvertisement Any party Exhibit 1,andchecklistsforcompliancetrainingare provided inExhibits2through 5. groups thatengageinsuchactivities.Riskmanagementprocedures are suggestedin provide basicprocedures andcompliancetrainingforrepresentatives from thebusiness and hostingawebsite.Therefore, youmaywantto advisetheseclientsthattheyshould pressmarketing, publiccommunications(suchasadvertising, releases ornewsletters), expose theircompanytoliability. Suchactivitiesincludehumanresources, salesand However, even“lowrisk”clientshavebusinessgroups thatengageinactivities could activities. extensive advertising orpublicrelationsclients, advertising firms,orInternetserviceproviders), orengagesin susceptible toliabilityfordefamation(e.g.,publishers,newsorganizations orothermedia risk managementprocess ifyourclientisofatypethat maybeespeciallyimportant action andimplementingprocedures tominimizetheriskofunanticipatedclaims.This andpublicrelationsadvertising, involvesunderstandingtheelements ofeachcause Advising clientsonhowtominimizerisksassociatedwithbusinesscommunications, VI. MinimizingtheRiskofLiability LIABILITY FOR COMMERCIAL SPEECH 51

(4th ed. 2013) (concerning false advertisement).§ 27:24 et seq. (4th ed. 2013) (concerning Perle, Williams WilliamsMark A. Fischer, & Taylor Gabriel Perle, John Law § 5.01 et seq. (4th ed. 2013). & Fischer on Publishing and Related Robert Libel, Slander, D. Sack, Sack on Defamation: (4th ed. 2013). Problems and Bruce E.H. Johnson, Advertising and Steven G. Brody Speech: A First Amendment Guide (2nd ed. 2013). Commercial §§ 558 et seq. (concerning Restatement (Second) of Torts, commercial defamation), and §§ 623A, 626 (concerning disparagement). McCarthy on Trademarks and Unfair Competition and Unfair McCarthy on Trademarks J. Thomas McCarthy, • • • • • VII. Treatises and Other Sources of Information of Other Sources and VII. Treatises to the law relating summary of the only a brief to provide is intended This publication following The disparagement. false advertising,claims of and commercial defamation, and of law, these areas analysis in in-depth a more for providing may be useful treatises may be useful in a particular that case. further information and resources for providing 52 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS procedures thattakeintoaccountitsbusinessphilosophy, budgetandtoleranceforrisk. minimizing riskare suggestedbelow. Obviously, eachclientshoulddevelopitsown describedinthischapter. torts communications andadvertising Otherprocedures for Basic trainingshouldincludeteachingyourclientstheelementsofbusiness Training procedure high-riskclientsisthesinglemostimportant forminimizingrisk. Exhibit 1:ChecklistforRiskManagementProcedures VIII. Appendices 9. 8. 7. 6. 5. 4. 3. 2. 1. advertising liability.advertising Promptly report anyclaimstothe insurer. Obtain appropriate insurancecoverageforbusinesscommunicationsand sensitive informationcouldreduce theriskofadefamationsuit. that expressly prohibits employeesfrom improperly disclosingpersonnelandother client’s proprietary informationgenerally. Inaddition,anondisclosure agreement disclosure ofconfidentialinformation.Anondisclosure agreement safeguards a Require allemployeestosignanondisclosure agreement prohibiting theimproper threatened orfiled,considerpublishinga retraction ofthestatementatissue. defamation,orcommercialIf anactionforfalseadvertising, disparagementis competitors thatmaybeactionable(orresult inlegalaction). Maintain corroborating informationforstatementsmadeaboutthird or parties policy shouldalsodisclaimallliabilityforposting. reserves therighttoremove anycontentforreason atitssole discretion. The that thecompanydoesnotreview contentpostedonthesitebythird and parties Such policyshouldincluderequirements forpostingcontent,andprovide notice if employees,customers,orthepublicare abletopostmessagesonthewebsite. Develop apolicyregarding communicationsonthecompany’s website,particularly Include acorporatecommunicationspolicyintheemployeehandbook. Send questionablematerialtooutsidecounselforreview before release. spokespersons fortheclient.Makesure thattheyare allwell-trained. about competitors.Limitthenumberofpeoplewhoare authorizedas Assign onepersontoreview allpubliccommunicationsthatcontainstatements prevent thedisclosure ofpotentiallydefamatorystatements. 1 through toidentifyand 5,totrainmanagementandhigh-riskdepartments Develop andimplementatrainingprogram foryourclient,asdescribedinExhibits

LIABILITY FOR COMMERCIAL SPEECH 53 Clients should be informed that false or misleading communications may result in communications may result informed that false or misleading Clients should be posted on the Internet, or printed in correspondence, liability whether spoken, published in advertising content. or editorial even truthful informed that, under certainClients should be circumstances, with the malicious intent of injuring in liability if made statements can result another party. to identify suspect statements administrator should be trained website client’s Your an audit if you may want to suggest You published on the Internet. they are before advertising website contains false or potentially defamatory suspect that a client’s or disparaging content. departments internal that even their human resources Clients should remind information about an employee may result dissemination of potentially defamatory risk. Confidentiality is crucial to minimizing in liability. they plan to make about competitors that Clients should scrutinize statements or with existing customers, their competitors’ contractual relations could injure in particular should be trained to loss. Sales and marketing groups financial cause identify such is any question a legal evaluation if there and to request statements, constitute defamation, commercial about whether the statement could disparagement or false advertising. parties about made by third actionable statements to recognizing With respect “free Constitution protects your clients that the U.S. your clients, you should remind opinions, hyperbole, and name-calling (e.g., your client is a Therefore, expression.” generally not such statements are stupid, senile bum”) may be upsetting, but “silly, or services products statements about your client’s unflattering actionable. Further, likely to literally false, are will likely not be actionable unless the statements are or mislead or confuse consumers, or allege “fraud, deceit, dishonesty, likely to cause direct conduct” on the part of your client, and are reprehensible economic loss. 1. 2. 3. 4. 5. 6. Exhibit 2: Checklist for Compliance Training Compliance 2: Checklist for Exhibit of the the elements your clients should include teaching training Basic compliance also concepts should The following torts communications business herein. described be part a training program: of 54 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS Exhibit 3:ChecklistforFalseAdvertising 9. 8. 7. 6. 5. 4. 3. 2. 1. knowledge offactsnotwarrantingtheopinion? Is thestatementoneofopinionratherthanfact?Ifopinion,didspeakerhave reasonable consumerwouldtakeitseriously)? products oftheclient’s competitor, whichissounrealistic or playfulthatno Is thestatement“reverse (i.e.,anexaggerationofthequalities puffery” product superiority)? upon whichnoreasonable consumerwouldrely, ratherthanameasurableclaimof (i.e.,anexaggerationorboastabouttheclient’sIs thestatement“puffery” products incommercialCould aparty competitionwiththeclientbeinjured bythestatement? complete)? statement inaproduct thatwouldonlybediscovered insert afterthepurchase was purpose ofinfluencingpurchasing decisions(asopposedto,forexample,a disseminatedtothepurchasing thestatementbesufficiently Will publicforthe thestatementbeplacedininterstatecommerce?Will Is thestatementmaterial,inthatitislikelytoinfluencepurchasing decisions? actually misledorconfused?Whatwouldaconsumersurveybelikelytoshow? substantial numberofconsumers?Ifso,isthere evidencethatconsumerswere If thestatementisliterallytrue,itnonethelesslikelytomisleadandconfusea Is thestatementliterallyfalse? LIABILITY FOR COMMERCIAL SPEECH 55

Does the statement imply or contain any fact concerning a living individual or an or an living individual fact concerning a or contain any statement imply Does the Willsubstantially false? company that is existing to be “published” the statement writing? either orally or in people, one or more opinion of the of the community form a lower member a reasonable Would of the statement? Will the statement result as a direct individual or company If an individual, will the to avoid the individual or company? cause the public status? his or her professional statement injure of dishonesty or fraud, accuse an individual or company Does the statement Or does a or potential for bad behavior? crime or immorality, mental disease, importantstatement delete or company in such a way as facts about an individual them? to injure for reason damaging, what is the client’s If the statement is true but potentially publishing the statement? of Is it about a matter officialDoes the statement concern a public or figure? public concern? between an opinion and way to tell the difference Is the statement an opinion? One false. proven a fact is that an opinion cannot be fairly portrayDoes the statement accurately and Are the facts of the matter? available? sources corroborating proceeding? the statement made in connection with a judicial or legislative Was with an employment matter or a matter If the statement was made in connection believed good faith and reasonably was the statement made in of public interest, to be true? 1. 2. 3. 4. 5. 6. 7. 8. 9. Exhibit 4: Checklist for Defamation 4: Checklist for Exhibit 56 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS Exhibit 5:ChecklistforCommercial Disparagement 3. 2. 1. dishonesty, orreprehensible conduct? Does thestatementimputeanyoffollowingtoarivalcompany:fraud,deceit, Could thestatementdirectly causefinancialdamagestoacompetitor? interfere withacontractualrelationship withanexistingcustomer? could thepublicationofastatementregarding acompetitor’s product orservice onthechecklistfordefamation,Exhibit4, In additiontothequestionssetforth LIABILITY FOR COMMERCIAL SPEECH 57

SUPERIOR COURT SUPERIOR OF THE DEPARTMENT COURT TRIAL Action No. 10-0000 Civil PARTIES ) ) ) ) ) ) ) ) ) JURISDICTION AND VENUE COMPLAINT AND JURY DEMAND COMPLAINT AND JURY Plaintiffs, Defendants. COMMONWEALTH OF MASSACHUSETTS COMMONWEALTH

The Massachusetts Superior Court has jurisdiction over this action pursuant to M.G.L. c. The Massachusetts Superior Court has jurisdiction over this action pursuant to The United States District Court for the District of Massachusetts [If filed in federal court: Plaintiff Zephyr Security Software, Inc. (“Zephyr”) is a Delaware corporation with a principal is a Delaware corporation Zephyr Security Software, Inc. (“Zephyr”) Plaintiff Way, residing at 17 Reindeer Anderson is the founder and president of Zephyr, John Plaintiff residing at 89 Hedgehog Lane, Providence, Defendant Douglas Balmy is an individual is a Delaware corporation owned by Balmy Inc. (“Secur-Space”), Defendant Secur-Space, 5. 6. 1. 2. 3. 4. The amount in controversy exceeds twenty-five thousand dollars 223A, § 3 and G.L. c. 214, § 1. in this forum is proper pursuant to G.L. c. 223, § 1. Venue ($25,000), exclusive of interest and costs. and has jurisdiction has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331, 1332 and 1338, over state law and common law claims pursuant to the doctrine of pendant jurisdiction. [If diversity: over state law and common law claims pursuant to the doctrine of pendant jurisdiction. exclusive of interest The amount in controversy exceeds seventy-five thousand dollars ($75,000), of Massachusetts is proper under in the United States District Court for the District Venue and costs. 28 U.S.C. § 1391.]] Massachusetts. place of business at 123 Dove Street, Boston, Brookline, Massachusetts. Balmy has also uses the alias “Code __Kid” when publishing Road Island. On information and belief, Anderson. information concerning Zephyr and Birds Nest Street, Boston, Massachusetts. with a principal place of business at 2000 ZEPHYR SECURITY SOFTWARE, INC., SOFTWARE, ZEPHYR SECURITY and JOHN ANDERSON, Exhibit 6: Sample Complaint Exhibit ss. SUFFOLK, v. INC., SECUR-SPACE, and DOUGLAS BALMY 58 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS your company.” advisor that,“ZephyrSofthas secretfilesembeddedinitthatmakepossibleforZephyr tospyon Zephyr’s long-term clients,Gizmo,Inc.(“Gizmo”),andinformedMeganCharles, Gizmo’s security Zephyr’s software in preventingsecuritybreachesisalsowhollyuntrue. products orservicesiswhollyuntrue. provides?” security breaches.Doesn’t yourbusinessdeservethesecurityandpeaceofmindthatonlySecur-Space tests showthatSecur-Space’s softwareisthreetimesmoreeffective thanZephyrSoftinpreventing advertisement wentontocomparetheSecur-Space softwareproductwithZephyr’s: “Independent “Zephyr’s presidenthasacriminalpast.Nowonderheconsidershimself anexpertonsecurity.” The that read:“Can You Entrust Your Building’s Securityto This Man?” The textbelowtheheadlineread: in theBostonBusinessBee. The advertisementfeaturedaphotographof Anderson andaheadline message onthe Yippee! messageboard. Security Software,hasacriminalpast.” message onthe Technology messageboard:“IknowthatJohn Anderson, thepresidentofZephyr topics. UserscanpostmessagesforthepublictoviewonInternet. clients. Accordingly, Secur-Space competesforthesameclients as Zephyr. visibly angry. employment onJuly31,2007. Boston. and otherpublicproperties.Zephyrhasestablisheditselfasawell-respectedcorporatecitizenof sector. Zephyrhasalsoadvised thecityofBostononmattersrelatingtosecuritygovernmentoffices blue chipclienteleovertheyears,andhaswonindustryawardsforinnovationinsecurityservices applications forover15years.ItspremiersoftwareapplicationisZephyrSoft.Zephyrhasdevelopeda 20. 19. 18. 17. 16. 15. 14. 13. 12. 11. 10. 9. 8. 7. On oraboutNovember20,2008, Balmy, asarepresentative ofSecur-Space, calledoneof The statementthatSecur-Space’s securitysoftwareisthreetimesmoreeffective than The statementthat Anderson, andbyaffiliationZephyr, cannotbetrustedtoprovidesecurity On oraboutOctober20,2008,BalmyandSecur-Space publishedafull-pageadvertisement The statementthat Anderson hasacriminalpastiswhollyuntrue. On informationandbelief,BalmyisthepersonwhousedaliasCode_Kidtopublishsaid On oraboutSeptember20,2008,apersonusingthealiasCode_Kidpublishedfollowing One Yippee! messageboardconcerns Technology. An Internetsitecalled Yippee! operatesandmaintains“messageboards”concerningvarious On informationandbelief,Secur-Space developscustomsecuritysoftwareforcorporate Balmy foundedhisowncompany, Secur-Space, onorabout August 1,2001. When Anderson advisedBalmy thathisemploymentwasbeingterminated,Balmy Balmy washiredbyZephyrasacomputerengineerinJune2006.terminatedBalmy’s Zephyr isalocalcompanythathasbeendevelopingsoftwareforcorporatesecurity FACTS LIABILITY FOR COMMERCIAL SPEECH 59 . COUNT I COUNT II (Defamation of Zephyr by Balmy and Secur-Space) (Defamation of Zephyr by Balmy and (Defamation of John Anderson by Balmy and Secur-Space) (Defamation of John By telling the statement to the security advisor at Gizmo, Megan Charles, Defendants By telling the statement to the security advisor at Gizmo, Megan Charles, Defendants causing Defendants negligently published the false and defamatory statements about Zephyr, Defendants’ statements that the president of Zephyr, John Anderson, has a criminal past and John statements that the president of Zephyr, Defendants’ and in the Boston Business Yippee! board of By publishing the statements on the message software has secret files embedded in it, and that statements that Zephyr’s Defendants’ Zephyr incorporates by reference the allegations set forth in paragraphs 1 through 29, above. Zephyr incorporates by reference the allegations The statement that Zephyr spies on Gizmo, or on any company, is also wholly untrue. is also any company, on Gizmo, or on that Zephyr spies The statement its it was terminating Zephyr that registered letter informing Gizmo sent a later, Three days paragraphs 1 through 23, above. by reference the allegations set forth in Zephyr incorporates and Anderson, has a criminal past John the president of Zephyr, statements that Defendants’ and in the Yippee! of message board Technology on the By publishing the statements Anderson, and defamatory statements about Defendants negligently published the false statements with the knowledge that the Defendants published the false and defamatory Anderson. reputation of defamatory statements injured the Defendants’ The statement that ZephyrSoft has secret files embedded in it is wholly untrue. in it is wholly has secret files embedded that ZephyrSoft The statement 34. 35. 31. 32 33. 30. 22. 23. 24. 25. 26. 27. 28. 29. 21. published the defamatory statement to at least one other person. the monetary loss of an important and valuable client, Gizmo, and damages, including Zephyr to suffer reputation. injury to Zephyr’s and defamed Zephyr. cannot be trusted, are false and untrue, statements to a wide range of persons in the public via the Bee, Defendants published defamatory Internet. Zephyr uses the files to spy on its clients, are false and untrue and defamed Zephyr

of Zephyr’s was for the use The contract software. destroying Zephyr’s contract and security services in excess of $100,000 annually. services, for which Gizmo paid Zephyr software and support Anderson. false and untrue, and defamed cannot be trusted, are Bee, Defendants published defamatory statements to a advertisement placed in the Boston Business wide range of persons in the public. and injury to his reputation. damages, including emotional distress causing him to suffer disregard as to the falsity of the statements. statements were false, or with reckless

60 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS statements werefalse,orwithrecklessdisregardastothefalsityofstatements. commerce. newspaper distributedinMassachusetts andotherstates,wastherebyplacedintointerstate to purchasesecurityproducts andservices. influence, thepurchasingdecisions ofpotentialcustomersZephyr continue todeceive,asubstantialsegmentofitsintendedaudience. Secur¬Space’s andZephyr’s products. security breaches,”isfalseandmisleading,misrepresented thecharacteristicsandqualitiesofboth Space’s softwareisthreetimesmoreeffective thanZephyr’s software,ZephyrSoft,inpreventing statement wasfalse,orwithrecklessdisregardastothefalsityofstatements. Gizmo, andinjurytothereputationofZephyrSoftZephyr. to suffer specialandgeneraldamages,including themonetarylossofanimportantandvaluableclient, published thedisparagingstatementstoawiderangeofpersonsinpublic. disparaged Zephyr’s softwareproduct,ZephyrSoft. reprehensible conducttoZephyr. causing acustomertoregardZephyrSoftasdangerous,andimputingdeceit,dishonesty published thedisparagingstatementtooneormorepeople. untrue, anddisparagedZephyr’s softwareproduct,ZephyrSoft. 37. 36. 50. 49. 48. 47. 46. 45. 44. 43. 42. 41. 40. 39. 38. Defendants’ defamatorystatementsinjuredthereputationofZephyr. Defendantspublishedthefalseanddefamatorystatementswithknowledgethat The deceptiveadvertisement was publishedintheBostonBusinessBee,abusiness The deceptionoftheadvertisement ismaterial,andhasinfluenced,willcontinueto The falseandmisleadingstatementintheadvertisementdeceived, andhasatendencyto The statementsinDefendants’ advertisementthat,“IndependenttestsshowthatSecur- Zephyr incorporatesbyreferencetheallegationssetforthin paragraphs1through45,above. Defendants publishedthefalseanddisparagingstatementwithknowledgethat Defendants publishedthefalseanddisparagingstatementsaboutZephyrSoft,causingZephyr By publishingthefalseanddisparagingstatementinBostonBusinessBee,Defendants Defendants’ statementthatZephyr’s presidenthas acriminalpastisfalseanduntrue, Defendants negligentlypublishedthefalseanddisparagingstatementconcerningZephyrSoft, By tellingthestatementtosecurityadvisoratGizmo,MeganCharles,Defendants Defendants’ statementthatZephyr’s softwarehassecretfilesimbeddedinitisfalseand Zephyr incorporatesbyreferencetheallegationssetforthinparagraphs1through37,above. (False Advertising —Section43(a)oftheLanhamAct) (False Advertising (Commercial Disparagement) COUNT IV COUNT III , specificallycompaniesthat plan LIABILITY FOR COMMERCIAL SPEECH 61

ZEPHYR SECURITY SOFTWARE, INC. SOFTWARE, ZEPHYR SECURITY ANDERSON JOHN attorney, their By #000001 BBO Kermit, LLP Josephina KIBBLESTONE & KERMIT 1 Winter Street Winter 1 02110 MA 111-2222 Boston, (617) Tel. COUNT V JURY DEMAND JURY

Preliminarily and permanently enjoin Defendants from publishing further defamatory enjoin Defendants from publishing Preliminarily and permanently and ZephyrSoft; Anderson, statements about Zephyr, all counts of the Complaint; Enter judgment against Defendants on at trial; damages in an amount to be determined Plaintiffs Award fees attorneys’ plus its reasonable law, enhanced damages as permitted by Plaintiffs Award and the costs of this action; and just and proper. Grant such other relief as the Court deems The deceptive advertisement violates Section 43(a) of the Lanham Act, codified at 15 U.S.C. Act, codified 43(a) of the Lanham violates Section advertisement The deceptive remedy at law. Zephyr has no adequate statutes, intentional interference unfair competition, violation of [Other counts may include The deceptive advertisement injured, and is likely to continue to injure, Zephyr. to continue to injure, injured, and is likely advertisement The deceptive A. B. C. D. E. 52. 53. 51. Zephyr demands a jury trial on all triable issues. Zephyr demands a jury trial on all triable 54. this Court: respectfully request that THEREFORE, Plaintiffs Dated: ______

representations of or disparaging using false, misleading, Defendants from which prohibits § 1125(a), products. or Zephyr’s or qualities of its own characteristics, the nature, fact that misrepresent etc.] breach of non-compete agreement, with contractual relations,

62 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS and DOUGLASBALMY SECUR-SPACE, INC., v. Plaintiffs, JOHN ANDERSON, and ZEPHYR SECURITY SOFTWARE, INC., SUFFOLK, ss. Exhibit 7:SampleAnswer engineer inJune1989.Otherwise denied. allegations containedinparagraph7oftheComplaintand thereforedeniesthesame. Complaint.] uses an“alias.”Otherwise,admitted. allegations containedinparagraph2oftheComplaint. allegations containedinparagraph1oftheComplaint. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. Defendant DouglasBalmy(“Balmy”)intheabove-captionedactionanswersComplaintasfollows: Balmy admits the allegationscontainedinparagraph 10oftheComplaint. Balmy deniestheallegations contained inparagraph9oftheComplaint. Balmy admitsthathewashired byZephyrSecuritySoftware,Inc.(“Zephyr”)asacomputer Balmy iswithoutknowledgeorinformationsufficienttoform abeliefastothetruthof [If filedinfederalcourt:Balmyadmitstheallegationscontained inparagraph6ofthe Balmy admitstheallegationscontainedinparagraph5of Complaint. Balmy admitstheallegationscontainedinparagraph4ofComplaint. Denied totheextentthatallegationinparagraph3ofComplaintallegesBalmy Balmy iswithoutknowledgeorinformationsufficienttoformabeliefasthetruthof Balmy iswithoutknowledgeorinformationsufficienttoformabeliefasthetruthof Defendants.

COMMONWEALTH OFMASSACHUSETTS ANSWER OFDOUGLASBALMY JURISDICTION ANDVENUE

) ) ) ) ) ) ) ) ) PARTIES FACTS Civil Action No.10-0000 TRIAL COURT DEPARTMENTOF THE SUPERIOR COURT

LIABILITY FOR COMMERCIAL SPEECH 63 COUNT I COUNT II Balmy denies the allegations contained in paragraph 31 of the Complaint. Balmy denies the allegations contained in paragraph 32 of the Complaint. Balmy denies the allegations contained in paragraph 33 of the Complaint. Balmy denies the allegations contained in paragraph 34 of the Complaint. Balmy incorporates by reference the answers set forth in paragraphs 1 through 29 of this Answer. this Balmy incorporates by reference the answers set forth in paragraphs 1 through 29 of Balmy denies the allegations contained in paragraph 25 of the Complaint. Balmy denies the allegations contained in paragraph 26 of the Complaint. Balmy denies the allegations contained in paragraph 27 of the Complaint. Balmy denies the allegations contained Balmy denies the allegations contained in paragraph 28 of the Complaint. Balmy denies the allegations contained in paragraph 29 of the Complaint. Balmy incorporates by reference the answers set forth in paragraphs 1 through 23 of this Answer. set forth in paragraphs 1 through 23 of this Balmy incorporates by reference the answers Balmy admits the allegations contained in paragraph 13 of the Complaint. contained in paragraph the allegations Balmy admits admit or deny the allegations or knowledge sufficient to Balmy is without information the Complaint. contained in paragraph 15 of Balmy denies the allegations admit or deny the allegations or knowledge sufficient to Balmy is without information the Complaint. contained in paragraph 17 of Balmy admits the allegations the Complaint. contained in paragraph 18 of Balmy denies the allegations in paragraph 19 of the Complaint. Balmy denies the allegations contained in paragraph 20 of the Complaint. Balmy denies the allegations contained sufficient to admit or deny the allegations Balmy is without information or knowledge sufficient to admit or deny the allegations Balmy is without information or knowledge sufficient to admit or deny the allegations Balmy is without information or knowledge Balmy admits that he develops custom security software for clients. Balmy denies that he Balmy denies that for clients. custom security software that he develops Balmy admits 12 of the Complaint. contained in paragraph the allegations Balmy admits

31. 32. 33. 34. 30. 25. 26. 27. 28. 29. 24. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 11. 12.

denies the same. 14 of the Complaint and therefore contained in paragraph denies the same. 16 of the Complaint and therefore contained in paragraph and therefore denies the same. contained in paragraph 21 of the Complaint and therefore denies the same. contained in paragraph 22 of the Complaint and therefore denies the same. contained in paragraph 23 of the Complaint as Zephyr. for the same clients competes 64 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS

response isdeemedrequired,Balmydeniestheallegations containedinparagraph53oftheComplaint. response isdeemedrequired,Balmydeniestheallegations containedinparagraph52oftheComplaint. statements setforthintheComplaint arestatementsofopinion. 37. 36. 35. 53. 52. 51. 50. 49. 48. 47. 46. 45. 44. 43. 42. 41. 40. 39. 38. Plaintiff’s claimsare barredbecausetheallegedlydefamatoryordisparagingstatement or The Complaintfailstostatea claimuponwhichreliefcanbegranted. 54.

Balmy deniestheallegationscontainedinparagraph37ofComplaint. Balmy deniestheallegationscontainedinparagraph36ofComplaint. Balmydeniestheallegationscontainedinparagraph35ofComplaint. Paragraph 53containsalegalconclusiontowhichnoresponse isrequired. To theextenta Paragraph52containsalegalconclusiontowhichnoresponse isrequired. To theextenta Balmy deniestheallegationscontainedinparagraph51ofComplaint. Balmydeniestheallegationscontainedinparagraph50ofComplaint. Balmy deniestheallegationscontainedinparagraph49ofComplaint. Balmy deniestheallegationscontainedinparagraph48ofComplaint. Balmy deniestheallegationscontainedinparagraph47ofComplaint. Balmy incorporatesbyreferencetheanswerssetforthinparagraphs1through45ofthis Answer. Balmy deniestheallegationscontainedinparagraph45ofComplaint. Balmy deniestheallegationscontainedinparagraph44ofComplaint. Balmy deniestheallegationscontainedinparagraph43ofComplaint. Balmydeniestheallegationscontainedinparagraph42ofComplaint. Balmy deniestheallegationscontainedinparagraph41ofComplaint. Balmy deniestheallegationscontainedinparagraph40ofComplaint. Balmy deniestheallegationscontainedinparagraph39ofComplaint. Balmy incorporatesbyreferencetheanswerssetforthinparagraphs1through37ofthis Answer. [Responses toothercounts,aslistedinComplaint.] SECOND AFFIRMATIVE DEFENSE FIRST AFFIRMATIVE DEFENSE COUNT IV COUNT III COUNT V LIABILITY FOR COMMERCIAL SPEECH 65

Francis X. Wigglesworth, BB0#000002 Wigglesworth, X. WIGGLESWORTH Francis & Street WIGGLESWORTH Winter 02110 2 MA Boston, 555-5555 (617) DOUGLAS BALMY attorney, his By

DEMAND FOR JURY TRIAL DEMAND FOR JURY FIFTH AFFIRMATIVE DEFENSE FIFTH AFFIRMATIVE SIXTH AFFIRMATIVE DEFENSE SIXTH AFFIRMATIVE THIRD AFFIRMATIVE DEFENSE THIRD AFFIRMATIVE EIGHTH AFFIRMATIVE DEFENSE EIGHTH AFFIRMATIVE FOURTH AFFIRMATIVE DEFENSE FOURTH AFFIRMATIVE SEVENTH AFFIRMATIVE DEFENSE SEVENTH AFFIRMATIVE Enter an Order dismissing the Complaint; each count of the Complaint; Enter judgment on behalf of Balmy on fees and costs; and Grant Balmy his reasonable attorneys’ just and proper. Grant such other relief as the Court deems A. B. C. D. Balmy demands a jury trial on all triable issues. [Other defenses may be based on laches, estoppel, acquiescence, statute of limitations, [Other defenses may be based on laches, Plaintiff’s claims are barred because Plaintiff has suffered no harm, to its reputation, its business or no harm, to its reputation, its business has suffered claims are barred because Plaintiff Plaintiff’s Balmy respectfully requests that this Court: WHEREFORE, with respect to the Complaint, Some or all of Plaintiff’s claims are barred by the First Amendment and the state and federal Amendment and the state by the First claims are barred Some or all of Plaintiff’s Plaintiff’s claims are barred because the allegedly defamatory or disparaging statement or the allegedly defamatory or disparaging claims are barred because Plaintiff’s statement or the allegedly defamatory or disparaging claims are barred because Plaintiff’s Plaintiff’s claims are barred because the allegedly defamatory or disparaging statement or disparaging statement defamatory or because the allegedly claims are barred Plaintiff’s

Dated: ______

or disparaging statement or statements set forth in the otherwise, as a result of the alleged defamatory set forth in the Complaint. Complaint or as a result of any other conduct jurisdiction, etc.] free speech. constitutional protections afforded opinion, to be true. as a matter of Balmy’s of opinion, which Balmy believed, statements are statements or puffery. in the Complaint are rhetorical hyperbole statements set forth are true. statements

66 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS in the affairs ofsociety.in theaffairs 2. The status of “public figure” applies to individuals who have assumed roles of prominence discredit inthemindsofanyconsiderable,respectable theplaintiff classofthecommunity. the statementsallegedinthiscase,andcircumstances underwhichtheywere made, substantial responsibility orcontrol overtheconductofgovernmentaffairs; generallyappliestogovernmentemployeeswhohave 1. Thestatusof“publicofficial” [Choose theapplicableinstruction]: circumstances. prove publication. false orwith“reckless disregard” astowhetheritwasfalse. statement waspublishedwith“actualmalice”ifitknowledgethat public figure, mustprove theplaintiff A thatthedefendantactedwith“actualmalice.” a or isapublicofficial Ifyoufindthat theplaintiff depending onthestatusofplaintiff. or publicfigure: isapublicofficial [If theplaintiff Theburden of proof for proving faultvaries damaged theplaintiff. statement mustbeonethatwasfalseandmadepublicly. Itmustalsobeastatementthat The the defendanthasmadeadefamatorystatementoforconcerningplaintiff. mustproveIn aclaimfordefamation,theplaintiff byapreponderance oftheevidencethat A. ElementsofClaim I. Defamation Exhibit 8:SampleJuryInstructions 9 8 7 6 5 4 3 2 1 statement. figure needonlyprove thatthedefendantactedwithnegligenceinmakingdefamatory than publicfigures whoisaprivate undertheFirstAmendment.InMassachusetts,aplaintiff are Privateindividuals,suchastheplaintiff, [If aprivateplaintiff: afforded greater protection the defendantbyapreponderance oftheevidence. damages fordefamation.Forthatreason, mustalsoprove of theplaintiff “fault”onthepart Our judicialsystemworkstobalancetherightoffree speechwiththerighttorecover community andexposeshimorhertohatred, ridicule,orcontempt. A statementisconsidered defamatoryifittendstoinjure reputation theplaintiff’s inthe Flotech, Inc.,627F. Supp.at365. v. Welch,Gertz Robert Inc.,418 U.S.323,345(1974). Rosenblatt v. Baer, 383U.S.75,85(1996). New York TimesCo.v. Sullivan,375U.S.254,280(1964).7Rosenblattv. Baer, 383U.S.75,85(1996). 849, 851,330N.E.2d161,164(1974). Schrottman v. Barnicle,386Mass.627,630,437N.E.2d205,208(1982);Stonev. EssexCountyNewspapers,Inc.,367Mass. Flotech, Inc.,627F. Supp. at367. Flotech, Inc.v. E.I.DuPontdeNemoursCo.,627F. 814 F.2d Supp.358,367(D.Mass.1985),aff’d, 775(1st Cir. 1987). Shafir v. Steele,431Mass.365,372,727N.E.2d1140,1145(2000). Cignetti v. Healy, 89F. Supp.2d106(D.Mass.2000). 5 ] 9 ] 2 1 Making a defamatory statement to even one person is sufficient to to Makingadefamatorystatementtoevenonepersonissufficient 8 A corporation may be a public figure under certain Acorporationmaybeapublicfigure undercertain 6 ] 3 You must determineif 7 or 4 LIABILITY FOR COMMERCIAL SPEECH 67 13 14 12 The relevant question for you to determine is not whether the statement question for you to determine The relevant 11 A defendant, however, cannot escape potential liability just by using the word the word escape potential liability just by using cannot A defendant, however, 10 Flotech, Inc., 627 F. Supp at 368 (D. Mass. 1985); Cole v. Westinghouse Broad. Co., 386 Mass. 303, 306-09, 435 N.E.2d 1021, Broad. Westinghouse Supp at 368 (D. Mass. 1985); Cole v. Flotech, Inc., 627 F. 1023- 25 (1982). Lorain Journal Co., 497 U.S. 1, 18-19 (1990). Milkovich v. if the statement could Note that whether a statement is a fact or an opinion is a question of law to be decided by the court. However, Myers v. the issue of whether it is a fact or an opinion must be decided by the jury. to be either, be understood by the average reader Boston Magazine Co., 380 Mass. 336, 339-40 (1980). F.2d 724, Affiliated Publ’n., 953 Inc. v. Touring, 1997); Phantom 122, 127 (1st Cir. Inc., 127 F.3d Wal-Mart Stores, Inc. v. Levinsky’s, Co., 398 Mass. 731, 733-34 (1986). Globe Newspaper 1992); Aldoupolis v. 727 (1st Cir. 2000). 243, 248 (1st Cir. Inc., 221 F.3d Press, St. Martin’s Gray v. the statement is an opinion, the statement is an or the plaintiff is “libel-proof,” a privilege. the defendant has 10 11 12 13 14 Even where the challenged statement is found to be false and not an opinion, a plaintiff the challenged statement is found may Even where is already If the plaintiff’s reputation unable to prevail. and therefore be deemed “libel-proof” or disparaged.so tarnished by prior acts, it is possible that he or she cannot be defamed cannot be defamed by being falsely For example, in a criminal context, a mass murderer described as a tax evader. If the statement presents or implies actual facts, the defense of opinion does not apply. On the defense of opinion does not apply. or implies actual facts, If the statement presents the statement that the defendant is merely the context of the other hand, if it is plain from or surmise, rather than conjecture, a theory, an interpretation, a subjective view, expressing verifiable facts, or that the statement is merely claiming to be in possession of objectively find the statement to be a non-actionable opinion. hyperbole or fiery rhetoric, you must In making this determination, you must consider whether the context in which the statement isIn making this determination, you must used, not should consider all the words You that it is factual. published negates the impression any cautionary terms used by the should also consider a particular phrase. You merely statement was published, and the intended readers. defendant, the publication in which the B. Defenses of defamation [or to the claim defenses more has one or that the defendant may find You commercial a defamation [or defense to is an absolute Truth disparagement]. commercial that the statement of the evidence, find, by a preponderance action. If you disparagement] find for the defendant. is true, you must including: other defenses that may apply, I will now explain some 1. 2. 3. not actionable as speech, and therefore protected An opinion is constitutionally defamation. “opinion” while asserting as an opinion a factual untruth. For example, a statement couched – may be defamatory if it implies false and– ”in my opinion, John Jones is a liar” defamatory facts. is couched as an opinion, but rather whether the statement presents or implies the whether the statement presents is couched as an opinion, but rather false. true or capable of being proven existence of facts that are 68 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS based onanintenttopunishdefendant’s conduct orattempttodeterfuture conduct. mental anguish,embarrassmentandhumiliation. you, andcosts,suchasmedicalexpenses,related toremedying emotionalinjuriessuchas reputationdamages mayincludethedamagetovalueofplaintiff’s asdeterminedby isentitledtodamagesifheorsheprevailsA plaintiff attrial in adefamationcase.Actual C. Damages mustinturnprove,plaintiff byapreponderance oftheevidence,thatprivilegewasabused. claimed defensesandprivileges.Ifaqualifiedprivilegeisestablishedbythedefendant, The defendanthastheburden ofproof ofestablishing,byapreponderance oftheevidence,any abuse thisprivilege,youmustfindforthedefendant. If youfindthatthedefendanthadaprivilegeinmaking[hisorher]statementanddidnot that thedefendantabusedprivilegeormadestatementwithmaliciousintent. However, proves thedefendantisnotentitledto thebenefitofprivilegeifplaintiff or competitiveprivilege.] privilege, publicinterest privilege,credit report privilege,lawenforcement privilege, the litigationprivilege,employerfairreporting privilege,commoninterest [Describe anyprivilegesthatare applicabletothespecificfactsofcase,suchas as thedefendantreasonably believedthestatementwastrueandactedingoodfaith. generally permittedtomakestatementsthatwouldotherwisebedefamatorysolong circumstances,Under certain aprivilegemayapply. Insuchcases,thedefendantis 17 16 15 However, punitivedamagesare prohibited. mayalsorecover Theplaintiff suffering. specificeconomicharmcausedbythedefamation. reputation andstandinginthecommunity, personalhumiliation,andmentalanguish proving theactualharminflictedbydefamatorystatement,whichincludesimpairment of actual injuryresulting from thewrong hastheburden donebythedefendant.Theplaintiff of recoveryIn acaseofdefamation,theplaintiff’s islimitedtocompensatory damagesfor damages require economicloss. damages,” ratherthanmere damagetoreputation, torecover amonetaryaward. Special In casesinvolvingslander, mustprove whichisspokendefamation,theplaintiff “special Mass. Gen.Lawsc.231,§93. Alba v. Sampson,44Mass.App.Ct.311,312,690N.E.2d1240,1242(1998). Dexter’s Rest.,Inc.v. Hearthside WhitehallCo.,24Mass.App.Ct.217,220,508N.E.2d113,116(1987) 16 17 Thatmeansyoumustnotaward damages 15

LIABILITY FOR COMMERCIAL SPEECH 69 22

Actual damages may include 20

19

21

18 Picker Int’I., Inc. v. Leavitt, 865 F. Supp. 951 (D. Mass. 1994). Leavitt, 865 F. Picker Int’I., Inc. v. Supp. at 365 (D. Mass. 1985). Flotech, Inc., 627 F. 1987). 775 (1st Cir. Supp. 358, 365 (D. Mass. 1985), aff’d, 814 F.2d E.I. Du Pont de Nemours Co., 627 F. Flotech, Inc. v. Hearthside Rest., Inc., 24 Mass. App. Ct. at 220. Dexter’s 2002). 302, 310-311 (1st Cir. Saks Fifth Ave., 284 F.3d & Camel Hair Mfg., Inst. v. Cashmere the defendant made a false or misleading statement in a commercial advertisement statement in a commercial the defendant made a false or misleading decision); the deception is material (i.e., it is likely to influence the purchasing segmentthe statement actually deceives or has the tendency to deceive a substantial and the defendant placed the statement into interstate commerce; of the statement, either by direct as a result the plaintiff has been or is likely to be injured 18 19 20 21 22 III. False Advertising A. Elements of Claim the defendant with false advertising under Lanham Act § 43(a). In The plaintiff has charged on a false advertising claim under the Lanham Act, the plaintiff to prevail must prove, order of the evidence: by a preponderance 1. about its own or the plaintiff’s product; 2. 3. of its audience; 4. 5. the plaintiff’sdiversion of sales to defendant or by a lessening of goodwill associated with products. C. Damages The plaintiff to actual or compensatory damages if you find that the defendant is entitled caused economic loss. made a disparaging statement that B. Defenses [Same defenses as for defamation.] [The elements the plaintiff must prove in a commercial disparagement action are the same action are disparagement in a commercial plaintiff[The elements the must prove of the by a preponderance defamation.] The plaintiffas the elements of must also prove, the plaintiff economic loss. Thus, damages.” Special damages require evidence, “special to recover economic loss in order the disparaging statement caused must establish that disparagement. damages for commercial II. Commercial Disparagement II. Commercial of Claim A. Elements Commercial disparagement. with commercial the defendant The plaintiff has charged to call into question made with the intent a false statement consists of disparagement the quality of a competitor’s goods or services in order to inflict economic harm on order goods or services in the quality of a competitor’s that competitor. the value of lost business opportunities. 70 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS actually deceived. has occurred, isnotrequired andtheplaintiff toprove thatcustomerswere If youfindthestatementwasliterallyfalse,maypresume thatdeception isentitledtocompensationfortheharmthat it suffered.plaintiff determine tobespecificandmeasurableisnotpuffery. is toovaguetobemeasured canalsobepuffery, aclaimofproduct superioritythatyou on whichnoreasonable buyerwouldrely. Whileageneralclaimofproduct superioritywhich oftenmadeinablusteringorboastingmanner,statement containedinanadvertisement, ifyoufindthatitismerenot constitutefalseadvertising “puffery.” isanexaggerated Puffery Act ifyoufindthatitexpresses anopinionratherthanafact. cannotbefalseormisleadinginviolationoftheLanham A statementinanadvertisement B. Defenses to prove thatconsumerswere notactuallydeceived. willpresumeconsumers, thecourt actualdeceptionandtheburden shiftstothedefendant If thestatementisliterallyfalseordefendantactedinbadfaithtointentionallymislead 30 29 28 27 26 25 24 23 defendant toprove thatconsumerswere notactuallydeceived. If youpresume deceptionforoneofthereasons describedabove,theburden shiftstothe actually deceived. may presume isnotrequired deceptionandtheplaintiff toprove thatcustomerswere the defendantactedwillfullyorinbadfaithintentionallydeceivedpublic,you If youfindthatthestatementwasliterallytruebutmisleading,andalso washarmedasaresult. andthattheplaintiff by thefalseadvertising In order torecover mustshowthatcustomerswere damages,theplaintiff actuallydeceived C. Damages exaggerated claims. considered puffery, butonlyifyoufindthatno reasonable consumerwould rely onthe Exaggerated negativecommentsmadeabouttheproducts ofacompetitormayalsobe Cashmere, 284 F.3d 318. Cashmere, 284F.3d 316-18. Cashmere &CamelHairMfg.,Inst.v. SaksFifthAve.,284F.3d 302,310-311(1stCir. 2002). Intl., Inc.,999F.2d 1,5(1st Cir. 1993)). Brown v. Armstrong, 957F. 129F.3d Supp.1293,1302n.8(D.Mass.1997), aff’d, 1252(citingAktiebolagetElectrolux v. Armatron Gillette Co.,946F. Supp.at 131. Clorox Co.P. R.v. Procter &GambleCommercial Co.,228F.3d 24,38-39(1st Cir. 2000). Gillette Co.v. Norelco ConsumerProds. Co.,946F. Supp.115,136-37(D. Mass.1996). Cashmere, 284F.3d at 311-318. 29 28 26

23

25 24 Additionally, astatementwill 30

27 In that event, the Inthatevent,the

LIABILITY FOR COMMERCIAL SPEECH 71

Julia Huston 617 832 1166 [email protected] @JuliaHuston Twitter: The author gratefully acknowledges the assistance of Steve T. Bychowski, who provided Bychowski, who provided The author gratefully acknowledges the assistance of Steve T. support, Kelly A. Hoffman, and Joel R. Leeman, Sarah C. Peck, and invaluable research work. Eric J. Huang, who contributed substantially to earlier versions of this Julia Huston, Partner in Foley Hoag LLP’s Intellectual Property Department and Chair of the firm’s Department Intellectual Property and Chair of the firm’s Julia Huston, Partnerin Foley Hoag LLP’s is well known for her high-profile and Unfair Competition practice group, Copyright Trademark, false advertisingvictories in trademark, copyright and cases. copyrights, of trademarks, includes litigation, counseling and strategy in the areas practice Julia’s false advertising,competition, and unfair domain name piracy, Internet commerce, trade secrets, matters for the owners of famous trademarks in a patents. Julia has handled major trademark several multimillion-dollar IP judgments and settlements, variety of industries. Julia has obtained advocates on behalf of in a false advertising case. She regularly including a $20.7 million verdict and of the U.S. Patent and Appeal Board Trial clients in federal and state courts, the Trademark resolution proceedings. Office, international domain name dispute and in national and Trademark their counsels clients on developing long-term strategies for In addition to litigation, Julia regularly enables her to build extensive experience in litigation and dispute resolution IP portfolios. Julia’s for maximum and defense enforcement her clients’ IP portfolios strategically with an eye toward advantage in the marketplace. Julia leads due diligence teams that thoroughly In the context of corporate transactions, Julia being acquired. the value of, intellectual property investigate, and assist clients in assessing rights in of intellectual property advice concerning protection comprehensive also provides licensing and assignment transactions. laude; B.A., magna cum laude Boston University (J.D., magna cum from Ms. Huston holds degrees University (Ed.M.). with distinction, Phi Beta Kappa; B.S., magna cum laude) and Harvard About the Author About 72 A GUIDE TO FALSE ADVERTISING, COMMERCIAL DISPARAGEMENT, AND RELATED CLAIMS www.trademarkandcopyrightlawblog.com Trademark &CopyrightLaw Blog Other titlesavailableinoureBookseriesincludethefollowing: visit usatwww.foleyhoag.com. andupdatesfromindustry-specific alerts FoleyHoag,orbrowse ourwebsite To sampleotherfree titlesfrom theFoleyHoageBooklibrary, sign-upfor Foley HoageBookLibrary Driving Business Advantage Business Driving

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