SW Legal studies in Business

False Ads That Inflict Harm on a Competitor May Be Blocked
Description Appeals court held that a cable television service provider could get a court injunction against the airing of commercials that contained false comparisons of its picture quality compared to a satellite provider. Because the claims made were false and named the competitor, injury was inflicted.
Topic Intellectual Property
Key Words False Advertising; Lanham Act; Injunction
C A S E   S U M M A R Y
Facts Time Warner Cable (TWC) and DIRECTV both provide HD TV broadcasts; TWC by cable and DIRECTV by satellite. Both transmit the same programs in the same format, so the picture quality is identical. In one DIRECTV ad, the endorser said “You’re just not gonna get the best picture out of some fancy big screen TV without DIRECTV” and “For picture quality that beats cable, you’ve got to get DIRECTV.” In response to complaints by TWC, DIRECTV changed the text to say “For an HD picture that can’t be beat, get DIRECTV.” In another ad, the characters said that it would be illogical to have a nice big screen TV and settle for cable rather than DIRECTV HD. The ads also featured two televisions side by side, one labeled DIRECTV, which had a good picture, and the other with a bad quality picture labeled “OTHER TV.” Text stated “Find out why DIRECTV’S picture beats cable.” TWC sued for false advertising in violation of the Lanham Act. The trial court held that, taken in context, the ads were taken to say to consumers that DIRECTV HD picture quality was superior to TWC HD picture quality, when the technology was identical, although delivery different. The court issued an injunction against the false advertisements. DIRECTV appealed.

Affirmed in part. When an advertisement is shown to be literally or facially false, consumer deception is presumed and the court may grant relief. A plaintiff can show that an advertisement, while not literally false, is nevertheless likely to mislead consumers. Here, viewers were left with an impression that conflicts with reality. The statement that a consumer could not get the “best picture” without satellite service is literally untrue and is false advertising. The statement that “settling for cable would be illogical,” considered in context of the whole ad, makes a false claim of superior picture quality. The side-by-side televisions, where one had a very bad quality picture, is puffery. Consumers would know it was not intended to be an actual comparison; that is not actionable because the representation is so grossly exaggerated that no reasonable buyer would take it at face value. A general but vague claim of superiority is also just puffery and is not actionable. Because some of the statements were false advertising, the trial court was correct to order an injunction against the ads, since they were misleading and harmful to a competitor since the competitor was mentioned by name.

Citation Time Warner Cable v. DIRECTV, 497 F.3d 144 (2nd Cir., 2007)

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