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False Advertising Requires Evidence of Injury

Posted by James Juo | Dec 22, 2023 | 0 Comments

False advertising claim under Section 43(a) of the Lanham Act requires:

  1. a false statement of fact by the defendant in a commercial advertisement about its own or another's product;
  2. the statement actually deceived or has the tendency to deceive a substantial segment of its audience;
  3. the deception is material, in that it is likely to influence the purchasing decision;
  4. the defendant caused its false statement to enter interstate commerce; and
  5. the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products.

See Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) (citing Cook, Perkiss and Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 244 (9th Cir. 1990)).

To demonstrate falsity under the Lanham Act, “a plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers.” Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). When evaluating whether a claim is literally false, the claim must always be analyzed in its full context. Id. “Literal falsity is a question of fact, and summary judgment should not be granted where a reasonable jury could conclude a statement is not false.” K&N Eng'g, Inc. v. Spectre Performance, No. EDCV 09-01900- VAP, 2011 WL 4387094, at *9 (C.D. Cal. Sept. 20, 2011) (citing Southland Sod Farms, 108 F.3d at 1144–45).

Where a challenged statement is literally false, consumer confusion or deception is presumed. U-Haul Int'l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1041 (9th Cir. 1986).

Under the Lanham Act, false or deceptive advertising is material where “it is likely to influence the purchasing decision.” Rice v. Fox Broad. Co., 330 F.3d 1170, 1181 (9th Cir. 2003) (quoting Cook, Perkiss, and Liehe, 911 F.2d at 244). Skydive Ariz., Inc. v. Quattrocchi, 673 F.3d 1105, 1111–12 (9th Cir. 2012); Obesity Research Inst., LLC v. Fiber Research Int'l, LLC, 310 F. Supp. 3d 1089, 1125 (S.D. Cal. 2018) (discussing Ninth Circuit precedent).

Interstate commerce often is presumed for statements on websites that constitute “commercial advertising or promotion.” 15 U.S.C. § 1125(a)(1)(B).

Lastly, the required showing for injury under the Lanham Act depends on the remedy sought. See Obesity Research, 310 F. Supp. 3d at 1126–28.

To obtain monetary damages and unjustly obtained profits, a plaintiff must have been “or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products.” Southland Sod Farms, 108 F.3d at 1139. When suing for damages, “actual evidence of some injury resulting from the deception is an essential element of the plaintiff's case.” Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197, 210 (9th Cir. 1989).

Typically, some proof of past injury or risk of future injury caused by Defendants' false statements to establish that such injury is not speculative. See, e.g., Quidel Corp. v. Siemens Med. Solutions USA, Inc., No. 16-CV-3059-BAS-AGS, 2020 WL 4747724, at *10 (S.D. Cal. Aug. 17, 2020), aff'd, No. 20-55933, 2021 WL 4622504 (9th Cir. Oct. 7, 2021); Cascade Yarns, Inc. v. Knitting Fever, Inc., No. C10-861 RSM, 2015 WL 1735517, at *6 (W.D. Wash. Apr. 15, 2015);, 653 F.3d at 831 (noting without proof of past injury “the district court had no way to determine with any degree of certainty what award would be compensatory” and therefore not speculative) (citing ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 969 (D.C. Cir. 1990)).

One exception is in false comparative advertising in a two-player market, because “it's reasonable to presume that every dollar defendant makes has come directly out of plaintiff's pocket.”, 653 F.3d at 831; see also Nat'l Prod., Inc. v. Gamber-Johnson LLC, 699 F. Supp. 2d 1232, 1241 (W.D. Wash. 2010).

Another exception is in false advertising cases involving improper use of a competitor's mark, where injury can be presumed because the use of the mark violated the rights of the mark registrant. See Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1403 (9th Cir. 1993); see also Certified Nutraceuticals Inc. v. Clorox Co., No. 18-CV-0744 W (KSC), 2021 WL 4460806, at *7 (S.D. Cal. Sept. 29, 2021).

But merely being direct competitors is not enough to trigger the presumption. Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1334 (8th Cir. 1997) (“[W]here a defendant is guilty of misrepresenting its own product without targeting any other specific product, it is erroneous to apply a rebuttable presumption of harm in favor of a competitor. Otherwise, a plaintiff might enjoy a windfall from a speculative award of damages by simply being a competitor in the same market.”).

No Injury Between Compounding Pharmacies

In ImprimisRx, LLC v. OSRX, Inc., 2023 WL 8604148, No. 21-cv-01305-BAS-DDL (S.D. Cal. Dec. 12, 2023), the court granted a motion for partial summary judgment of no false advertising between competing are compounding pharmacies. The allegedly false statements were presented in a small font on a website, but possible purchasers could still see them on the website and order forms. Even so, injury still must be shown for a claim of false advertising.

Here, email correspondence where defendants attempted to poach plaintiff's customers was not sufficient to presume injury.

Because prescribers have many options in selecting post-operation ophthalmological drugs, the Court cannot assume Plaintiff's sales were necessarily reduced by any increases to Defendants' sales due to the false statements.

The result may have been different if this was a two-player market, or if the allegedly false statements harmed the entire market's reputation. See, e.g., Sandoz Inc. v. Amgen Inc., No. 2:22-CV-05326-RGK-MARX, 2023 WL 4681569, at *4 (C.D. Cal. June 29, 2023).

Professor Tushnet noted that “false advertising is harder to prove than TM infringement because of the injury requirement.”

Thomas P. Howard, LLC litigates nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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