Friday, June 27, 2008

230 protects another review site; Lanham Act claims also fail

Eric Goldman points to Nemet Chevrolet Ltd. v., Inc., 1:08CV254 (E.D. Va. June 18, 2008) and the related CMLP page with links to source documents. ConsumerAffairs is a website that hosts third-party consumer reviews of various products and services, including Nemet’s. Nemet sued ConsumerAffairs for defamation, tortious interference, and Lanham Act false advertising claims based on bad reviews posted by consumers. Section 230 got rid of the first two claims quite easily.

Nemet also brought claims under §43(a)(1)(A) and (B). The court held that Nemet lacked standing as a matter of law no matter how the Lanham Act claim was framed. Among other things, this follows the unfortunate trend of using “standing” as a catchall for failed claims, which is problematic because sometimes (though not here) it substitutes for actual factfinding. Here, the “standing” problem was that the parties weren’t in competition—what courts would formerly have called a failure to properly allege that the allegedly false claims appeared in “commercial advertising or promotion.”

Of course, you might be wondering, “Since when is competition a requirement for trademark infringement? That went out of style a century ago!” Or you might be wondering, “Doesn’t §230 also knock out the false advertising claim, which is not an intellectual property claim?” Good questions; sadly, the second isn’t answered by the opinion at all.

To answer the first question, it might help to know that the §43(a)(1)(A) claim was that the name “Consumer Affairs” diverts consumers by making them think that defendant is some sort of official or governmental body, which is also the basic gist of the §43(a)(1)(B) claim. So Nemet wasn’t making the standard false endorsement/affiliation trademark claim that disgruntled plaintiffs make against internet critics. It was just making a §43(a)(1)(B) claim that for some reason (§230?) it packaged as (a)(1)(A) as well. The court therefore held that the alleged harm is not the type of harm the Lanham Act seeks to prevent, given that the parties don’t compete. It applied the Conte Bros. standing test, and for once I don’t mind so much. The (a)(1)(A) problem is that Nemet doesn’t own any relevant marks or otherwise have any connection to any false association/affiliation with a consumer affairs agency. This is more of a real standing problem than most “standing” challenges these days.

Even if Nemet had standing, the court continued, its unfair competition claim would fail as a matter of law. Here the court proceeded as if Nemet had brought a false endorsement claim and relied on the unrelatedness of the parties’ goods and services, which is a bold move on a motion to dismiss. Unrelatedness can’t really justify dismissal as a matter of law without some other policy concern in play—here, protecting critics. At the very least, it’s not “unrelatedness” in general that justifies dismissal, but the unrelatedness of the specific service—providing consumer reviews—to any product or service reviewed.

Likewise, and getting to the better reason for dismissing the false advertising claim, the court found that even if Nemet had standing it couldn’t show the necessary competition to make defendants’ statements count as “commercial advertising or promotion.”

As for inquiry into whether §230 bars false advertising claims, that will have to await another day.

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