Trade Libel: An Introductory Guide

Trade Libel

Trade libel is lying about a business or product in order to harm them. Trade libel has become more and more common due to the ubiquity of online reviews in the modern marketplace.

The Basics of Libel Law

To win a trade libel lawsuit, the plaintiffs must prove that the statements in question:

  1. Are provably false,
  2. Caused them financial or reputational harm,
  3. Were published intentionally,
  4. Were not properly fact-checked before they were published, and
  5. Were not made under any sort of privilege.

Plaintiffs must be able to demonstrate that the statements caused them actual monetary damages.
Plaintiffs have the option to seek compensatory or punitive damages, or even injunctive relief.

Defenses Against Trade Libel

Defendants can defeat a claim of trade libel by proving that:

  1. They didn’t publish or broadcast the statement,
  2. The statement is true, or
  3. The plaintiff was not harmed by the statement.

The Lanham Act

The Lanham Act is large piece of federal legislation that deals with false advertising and unfair competition in the US. The elements of a Lanham Act § 43(a) false advertising claim are: (1) a false statement of fact by the defendant in a commercial advertisement about its own or another’s product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products. Cook, Perkiss and Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 244 (9th Cir.1990). To demonstrate falsity within the meaning of the Lanham Act, a plaintiff may show that the statement was literally false, either on its face or by necessary implication, or that the statement was literally true but likely to mislead or confuse consumers. Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 943, 946 (3d Cir.1993).

“[A] competitor need not prove injury when suing to enjoin conduct that violates section 43(a).” Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197, 210 (9th Cir.1989). “When an advertisement is shown to be literally or facially false, consumer deception is presumed, and the court may grant relief without reference to the advertisement’s actual impact on the buying public.” Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 157 (2d Cir.2007) (citation and internal quotation marks omitted; alterations deleted).

15 U.S.C. § 1117(a) permits disgorgement of any unjust enrichment resulting from a violation of section 1125. Damages recoverable under § 1117 are compensatory in nature. See Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1146 (9th Cir.1997) (stating “[section] 1117 allows the district court to award the plaintiffs any just monetary award so long as it constitutes ‘compensation’ for the plaintiff’s losses or the defendant’s unjust enrichment and is not simply a ‘penalty’ for the defendant’s conduct”). The Lanham Act provides that a successful plaintiff is entitled, “subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” 15 U.S.C. § 1117. This recovery is cumulative, that is, the Court may award Plaintiff both its damages and Defendants’ profits. Babbit Electronics, Inc. v. Dynascan Corp. . 38 F.3d 1161, 1182 (11th Cir.1994). The Lanham Act “vests considerable discretion in the district court. Guided by the principles of equity, the court may award the defendant’s profits. Additional extraordinary relief such as treble damages and attorney’s fees are available under the statute if the district court believes that such an assessment would be just.

Competition in the marketplace is healthy, but unfair competition is not.

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