how can one show false advertising injury to get a presumption of irreparable harm?

Santos Elecs. Inc. v. Outlaw Audio, LLC, No. 8:22-cv-827-JVS-KESx, 2022 WL 18396275 (C.D. Cal. Dec. 12, 2022)

Reconsidering its previous decision as to the Lanham Act claim, the court granted a preliminary injunction against counterclaim defendant Santos dba OSD. The parties compete in the market for audio products and sell competing models of multichannel amplifiers on different platforms, including Amazon.

The false statement at issue is OSD’s claim that one of its products, an amplifier, has a signal-to-noise ratio of 115 decibels. “The signal-to-noise ratio measures the difference between the amplified signal coming out of a power amplifier and the inherent noise that already exists. The lower the total harmonic distortion and the higher the signal-to-noise ratio, the better audio experience is for a user.” This ratio is “extremely important” to consumers.

OSD’s signal-to-noise statement was literally false because it advertised its amplifier as having 115 decibels on numerous websites even though OSD said in other statements under penalty of perjury that the signal-to-noise ratio was 104 decibels, and it didn’t submit test results or objective evidence that it was 115.

Likely injury: Unlike a trademark claim, false advertising has injury as an element of the claim, and thus the statutory presumption of irreparable injury is less helpful to false advertising plaintiffs. Injury requires evidence of causality and consumer deception. But the Ninth Circuit says that commercial injury can be “generally presumed” when the parties “are direct competitors and defendant’s misrepresentation has a tendency to mislead consumers.” Still, the court here thought that, while causation of injury may be presumed when there’s a literally false statement and direct competitors, evidence of injury is still needed. Even without a presumption of injury, a plaintiff may “establish an injury by creating a chain of inferences showing how defendant’s false advertising could harm plaintiff’s business,” even “without direct evidence of lost sales or concrete proof of injury.”

The parties here sell the same products on the same platforms using substantially similar graphics, photos, and descriptions of the products. Outlaw submitted proof that its sales have declined as a result of OSD’s false signal-to-noise ratio statements on third-party websites and advertisements. OSD argued that Outlaw couldn’t establish causation because the sales were declining even before the alleged misrepresentation. Still, a portion of the decline could still be attributable to the false statement. This was enough to create a presumption of commercial injury.

Once this was done, there was a rebuttable presumption of irreparable harm, which was not rebutted. Injunction against the statement granted.