The following article appears in the journal JOM,
50 (9) (1998), p. 68.

JOM is a publication of The Minerals, Metals & Materials Society

Federal Statutory Unfair Competition Law

Arnold B. Silverman

Earlier articles in this series focused on the subjects of trademark infringement and trademark dilution, which are two areas of the law falling within the broader scope of unfair competition law. This article focuses on business conduct, which involves false designations of origin and false descriptions as covered by Section 43(a) of the Lanham Act. While the Lanham Act, in general, focuses primarily on obtaining, maintaining, and enforcing trademark and service mark rights, Section 43(a) has frequently been referred to as a federal unfair competition provision.

Section 43(a), in part, states

"Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities or geographic origin of his or her or another person's goods, services or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act."

It is not necessary to have a trademark registration in order to enforce rights under Section 43(a). One must, however, have "standing to sue" in order to seek relief under the law. Among the factors considered in evaluating this issue are the nature of the conduct alleged to be in violation of Section 43(a), the manner in which the person seeking relief has been or is likely to be damaged by such conduct, and whether the damage is of the type sought to be protected by the act. For example, if a competitor of a claimant inaccurately states that their goods were manufactured in the United States in order to sell to a customer that has a "buy-American" pol-icy, a claimant offering competitive goods that were manufactured in the United States could have a basis for asserting that he or she has been harmed by such conduct. Such conduct would be a false designation of origin. Another example is if a competitor showed a potential customer the claimant's product, representing that it was actually the competitor's; this could be an actionable misleading description of fact. If a competitor were to state untruthfully that their goods would last twice as long as that of the claimant without having any substantiating data, such conduct could be actionable as a misleading representation. In order for there to be a cause of action for conduct recited in the preamble of Section 43(a), the conduct must also fall within either paragraph A or paragraph B.

With respect to paragraph A, the conduct must be likely to cause confusion or mistake or deceive regarding affiliation with another person or origin, sponsorship, or approval of the goods, services, or commercial activities by another person. For example, conduct must give the impression that there was such an affiliation or that the origin, sponsorship, or approval emanated from another person when, in fact, it did not. While one may lawfully name a competitor in making a truthful comparison with the competitor's product, one cannot improperly expressly or implicitly give the impression that there has been approval or endorsement or some sort of relationship that does not exist. All of these activities would involve specific instances of competing unfairly with another.

Paragraph B focuses specifically on commercial advertising or promotion and has two prohibitions. The nature, characteristics, qualities, or geographic origin of goods, services, or commercial activities cannot be misrepresented. Such misrepresentations also cannot be made with respect to another's goods, services, or commercial activities. It is important to bear in mind that the term misrepresentation under paragraph B sweeps broadly as to the type of misrepresentation and relates to the goods, services, and commercial activities of both competitors. An example of false advertising would be to state falsely that wine that was made in the United States was made in France or Germany. This conduct would be actionable under this provision.

Paragraph B does not, however, prohibit statements regarding one's own goods, services, and commercial activities or another's goods, services, and activities provided the statements are not misrepresentations. If, for example, a comparison was made of company A's aluminum wire with company B's aluminum wire in a print advertisement, and company A stated that its wire of a given size had a tensile strength at least 20 percent greater than comparably sized wire made by company B, this would not be improper conduct if company A had reliable test data that confirmed this conclusion.

One troublesome aspect of paragraph B is that ambiguous statements frequently make it difficult to determine whether there has been a misrepresentation. For example, if a company advertises that its new dry cereal offers enhanced health benefits because it has less calories, it is not clear whether the standard to be employed in measuring the reduced calorie content is the same manufacturer's prior cereal or some other standard. One could envision a situation wherein the advertiser's prior cereal had an outrageously high calorie content that was reduced by five percent, but still was at a very high level. Would such a statement be a misrepresentation? Difficulty in applying the standard in certain situations should not, however, detract meaningfully from the benefits of having Section 43(a) available to challenge certain unfair competition practices under this portion of the Lanham Act.

A further area of protection under Section 43(a) involves the trade dress of a product. For example, the unique shape of the Coca-Cola bottle is readily recognizable by a high percentage of people as identifying the Coca-Cola product. The trade dress, in order to be protectable under Section 43(a), must either be inherently distinctive or have acquired secondary meaning through usage. Assuming that the trade dress is not functional and serves a legitimate purpose of identifying the source of the product, it can be protected under Section 43(a).

Arnold B. Silverman is chair of the Intellectual Property Department and a member of Eckert, Seamans Cherin & Mellott, LLC, in Pittsburgh, Pennsylvania.

For more information, contact A.B. Silverman, Eckert Seamans Cherin & Mellott, LLC, 600 Grant Street, 42nd Floor, Pittsburgh, Pennsylvania 15219; (412) 566-2077; fax (412) 566-6099; e-mail ARNIE@TELERAMA.LM.COM.

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