ABA Antitrust section: Lanham Act roundup

Changing Rules in Competitor False Advertising Litigation

Session Chair and Moderator:

Bruce A. Colbath, Weil Gotshal & Manges LLP, New York, NY

Linda A. Goldstein, Manatt Phelps & Phillips LLP, New York, NY

Rebecca Tushnet, Georgetown University Law Center, Washington, DC

John E. Villafranco, Kelley Drye Collier Shannon, Washington, DC

We had a nice discussion about several trends in Lanham Act litigation, most notably the contraction of the availability of relief through doctrines like prudential standing, materiality, and the application of Dastar to preclude false advertising claims where a court thinks it unlikely that consumers care about origin. Colbath is more appreciative of courts’ use of a multifactor test to assess standing than I am; I think courts often make factual assessments at the pleading stage in order to conclude that there’s no standing (though this is a broader trend, of course).

Colbath also pointed to developments in the law of irreparable harm. When there is a presumption of irreparable harm sufficient to entitle a plaintiff to a preliminary injunction is pretty murky (though direct negative comparative advertising will probably get there). Money damages alone are insufficient, even when there’s explicit falsity about the defendant’s own product. I think this might have been a problem of testimony: if an expert in the field could truthfully state that people tend to stick with their brands, such that a lost sale will be sticky and thus harm the plaintiff’s goodwill in the long run, that should get around the “money damages alone” problem.

Villafranco and Colbath discussed Allied Domecq, calling it a terrific development for the NAD. The NAD’s own rules shut down its process if litigation begins. This allows companies to game the system by filing for a declaratory judgment after a competitor has already invested substantial time and resources in a NAD proceeding, which can be hard to explain to clients. The district court’s decision might change that strategic behavior. Villafranco suggested, however, that the result could easily have been different if there had been counterclaims. (I checked, and there were in fact counterclaims in Allied Domecq, which is even better news for the NAD.) Goldstein pointed out that greater deference to NAD could have an important effect on both sides’ strategic calculations, but cautioned that the district court’s deference might not be repeated outside of New York.