False Advertising Law in the Second Circuit

A NEW YORK LAW JOURNAL SPECIAL SECTION Intellectual Property Web address: http://www.nylj.com MONDAY, OCTOBER 29, 2007 FalseFalse AAdvertisingdvertising ART BY NEWSCOM Law in the Second Circuit Court adopts ‘false by necessary implication’ doctrine in ruling over Lanham Act claims. an advertisement making no explicitly false which…in commercial advertising or promo- claims may nevertheless be found literally “false tion, misrepresents the nature, characteristics by necessary implication,” (ii) whether grossly [or] qualities…of his or her or another person’s exaggerated visual depictions may qualify as goods.” This language covers false claims about non-actionable “puffery,” and (iii) whether a the advertiser’s product, as well as false claims false advertising plaintiff’s required showing of about the competitor’s product, whether those irreparable harm on a preliminary injunction claims are comparative or non-comparative. motion may be presumed when a challenged Lanham Act suits are brought in federal court, BY HAROLD P. WEINBERGER, comparative advertisement does not reference and are typically accompanied by a request for JONATHAN M. WAGNER the plaintiff’s product by name. a preliminary injunction seeking an immediate AND SETH F. SCHINFELD The court answered all three questions in halt to the offending ads. the affirmative. This decision will likely have a If a Lanham Act plaintiff persuades the ARLIER this year, the U.S. Court substantial impact on Lanham Act false adver- court that the challenged advertisement is of Appeals for the Second Circuit tising law in the Second Circuit. literally false, or “false on its face,” the court Eissued a significant decision concern- may grant relief without considering extrinsic ing the scope of liability under the Lanham Lanham Act False Advertising Law evidence of consumer reaction to the adver- Act’s prohibition against false advertising. In Before a discussion of the impact of the tisement. However, when a plaintiff claims Time Warner Cable, Inc. v. DIRECTV, Inc.,1 decision, a review of basic principles under- that a competitor’s advertisement is literally the court considered three issues: (i) whether lying Lanham Act false advertising law is true but nonetheless has a tendency to mislead, in order. Section 43(a) of the Lanham Act confuse, or deceive, or that the advertising authorizes a party to sue a competitor who, in makes or conveys what is called an “implied” Harold P. Weinberger and Jonathan M. connection with the sale of goods or services, claim, the plaintiff must come forward with Wagner are partners and Seth F. Schinfeld is uses a “false or misleading description of fact, extrinsic evidence demonstrating that a mate- an associate at Kramer Levin Naftalis & Frankel. or false or misleading representation of fact, rial number of consumers took away a mis- NEW YorK Law JOURNAL MONDAY, OCTOBER 29, 2007 paign first launched by DIRECTV in 2006. sion commercials at issue. This commercial The goal of DIRECTV’s campaign, which con- simulated a scene from the recent motion sisted of commercial spots on television and picture version of the 1980s’ hit television banner advertisements on the Internet, was show “The Dukes of Hazzard,” with singer- to persuade consumers seeking high-definition turned-actress Jessica Simpson playing the part (HD) programming that HD television sets of local waitress Daisy Duke. At one point in do not display HD-quality images unless and the commercial, Ms. Simpson turns to the until a consumer purchases HD programming camera and addresses the viewer: from service providers like DIRECTV. Y’all ready to order? ART BY NEWSCOM In response to the campaign, Time Warner Hey, 253 straight days at the gym to get sued DIRECTV for false advertising under this body and you’re not gonna watch me on DIRECTV HD? §43(a) of the Lanham Act, and sought a You’re just not gonna get the best picture preliminary injunction seeking to enjoin out of some fancy big screen TV without DIRECTV from airing the commercials in any DIRECTV. market in which Time Warner provides cable It’s broadcast in 1080i. I totally don’t know service. The case centered on DIRECTV’s what that means, but I want it. claims concerning Time Warner’s provision The Second Circuit found these claims lit- of HD-quality programming. Though Time erally false by examining the explicit words Warner and DIRECTV supply customers used in the advertisement: “These state- with access to multi-channel video service ments make the explicit assertion that it is via different means—Time Warner provides impossible to obtain ‘the best picture’—i.e., cable service and DIRECTV provides satel- a ‘1080i’-resolution picture—from any other lite service—both companies offer equivalent source than DIRECTV. This claim is untrue; HD service on select channels, and compete the uncontroverted factual record establishes for customers in markets where the two that viewers can in fact get the same ‘best companies’ service territories overlap. Time picture’ by ordering HD programming from Warner claimed that certain advertisements their cable service provider.” Thus, the court leading message from the advertisement. This used in DIRECTV’s campaign—known as the enjoined DIRECTV’s claims featured in the proof is typically supplied through a consumer “SOURCE MATTERS” campaign—made lit- Simpson commercial by applying the well- survey designed to gauge the impact of the erally false claims that DIRECTV’s HD pro- established rule that explicit advertising claims advertisement on the relevant public. gramming was superior in quality to service that are false on their face will be deemed Many Lanham Act preliminary injunction provided by Time Warner. The U.S. District “literally false” for purposes of a Lanham applications founder at the consumer survey Court for the Southern District of New York Act challenge.3 stage. As courts have noted, there is no such agreed, and granted Time Warner’s motion In analyzing whether claims made by thing as a perfect consumer survey, and the for a preliminary injunction.2 DIRECTV in the second disputed televi- plaintiff’s consumer survey often makes an DIRECTV appealed and sought relief from sion commercial were literally false, the Sec- inviting target for the defendant advertiser. the district court’s opinion and order on three ond Circuit adopted the “false by necessary A defendant typically offers a survey expert separate grounds. to critique plaintiff’s survey or, on occasion, to conduct a survey to discredit plaintiff’s. Literal Falsity This added layer of proof can significantly First, DIRECTV argued that its television complicate a Lanham Act plaintiff’s case. commercials could not be construed as liter- Thus, if a Lanham Act plaintiff can properly ally false because none of the commercials characterize a defendant’s advertisement as explicitly stated that DIRECTV’s HD pro- false on its face instead of impliedly false, it gramming was superior to that of other cable will materially advance its case. providers, including Time Warner. The Sec- ond Circuit disagreed and affirmed the district Time Warner and DIRECTV court’s findings. The DIRECTV suit concerned a dispute The Second Circuit had no difficulty between Time Warner Cable and DIRECTV affirming the literal falsity of claims made with respect to a multimedia advertising cam- by DIRECTV in the first of the two televi- NEW YorK Law JOURNAL MONDAY, OCTOBER 29, 2007 Captain Kirk: At ease, Mr. Chekov. implication” doctrine. While this doctrine Again with the shields, I wish he’d just has been applied for some time in other relax and enjoy the amazing picture circuits and even relied upon by district clarity of the DIRECTV HD we just courts within the Second Circuit, the Court hooked up. of Appeals had never formally embraced the With what Starfleet just ponied up for this doctrine. The Second Circuit described the big screen TV, settling for cable would be illogical. “false by necessary implication” doctrine this way: On its face, this commercial makes no Under this doctrine, a district court evalu- explicitly false assertions. However, the dis- ating whether an advertisement is literally trict court found that Mr. Shatner’s declaration false must analyze the message conveyed that “‘settling for cable would be illogical,’ in full context[.] …If the words or images, considered in context, necessarily imply considered in light of the advertisement as a a false message, the advertisement is lit- whole, unambiguously made the false claim erally false and no extrinsic evidence of that cable’s HD picture quality is inferior to consumer confusion is required.4 that of DIRECTV’s.” Applying the “false by If the criteria for application of this doc- necessary implication” doctrine, the Second trine are met, then the plaintiff can show Circuit agreed, noting the close proximity that an advertisement is literally false and of Mr. Shatner’s “illogical” line to his claims thus will not have to offer a survey, even attesting to the “amazing picture clarity of though the claim alleged to be false is not DIRECTV HD.”5 specifically stated in the commercial. In adopting the false by necessary impli- Examining the facts of this case, the Sec- cation doctrine, the court harmonized its ond Circuit upheld the district court’s finding holdings in two prior decisions, American that statements made in DIRECTV’s televi- Home Products Corp. v. Johnson & Johnson,6 sion commercials, in context, unambiguously and Avis Rent A Car System, Inc. v. Hertz conveyed a literally false claim of superiority Corp.7 The court in DIRECTV explained that concerning HD picture quality. Specifically, “American Home Products counsels that when the second disputed commercial simulated a an advertisement is not false on its face, but tion doctrine, DIRECTV materially expands scene from the science-fiction television and instead relies on indirect intimations, district the scope of literal falsity under Second Circuit film series “Star Trek,” with actor William courts should look to consumer reaction to Lanham Act false advertising law.

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