Friday, March 03, 2006

BadBusinessBureau accused of monkey business

Hy Cite Corporation v., L.L.C., 2005 WL 3811420 (D.Ariz.)

According to plaintiff (which sells cookware), defendant is in the business of soliciting complaints about businesses – even offering compensation to good complainers – posting them on its website, and then offering to fix the problems thus generated by mediating between the targeted businesses and their disgruntled customers, for only $50,000 and a $1500 monthly fee. Rather than pay up, plaintiff sued.

Eric Goldman has written about the CDA section 230 immunity issues raised by the case, since it's one of the few in which a court rejected a section 230 defense by a service provider and refused to dismiss the defamation claims.

Plaintiff's RICO claims also survived defendant's motion to dismiss. Not so plaintiff's false advertising claim. Although plaintiff alleged that defendant solicited trumped-up complaints on its site, which it would then use to extort money from targeted businesses, the Lanham Act doesn't cover false claims made by noncompetitors. Another way to frame the conclusion, in this case, was that the complaints on the site weren't advertising, and thus didn't fall under the Lanham Act even if they were false and even if they were designed to generate business for defendant.

The court engages in what seems to me a superfluous discussion of Bosley Medical, a trademark case that held that allegations that the defendant's gripe site constituted extortion and prevented users from reaching the plaintiff's site wasn't enough to trigger Lanham Act liability. It is surely true that "no one will mistakenly purchase cookware or dinnerware from Defendants in the mistaken belief that it is Plaintiff's cookware or dinnerware," but that's not why the false advertising claim should fail. The court may have mushed the two causes of action together because (a) the Lanham Act does, which is actually a pretty good reason -- the standing requirements for false advertising are a judicial creation -- or (b) because lack of competition is relevant to trademark cases too; it's just not dispositive in a classic trademark infringement case the way it is in a classic false advertising case. Also, plaintiff brought common-law trade libel claims under the heading "trademark infringement and unfair competition," which likely muddied the waters further. Given its conclusion on the defamation issue, the court easily found that plaintiff had adequately alleged that strand of common law unfair competition, once again demonstrating the utility of the rump trade libel cause of action even with the Lanham Act's far lower standards for false advertising liability.

Speaking of trademark, anyone think that the Better Business Bureau has a claim against BadBusinessBureau?

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