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Monday, July 19, 2010
Lanham Act False Advertising: the Expert Is Key
By Harold P. Weinberger,
Jonathan M. Wagner
and Matthew C. Temkin
The Lanham Act Framework
Section 43(a) of the Lanham Act provides a civil
remedy for a party damaged by a competitor’s
false advertising. The act creates a claim for relief
against a competitor who, in connection with
the sale of goods or services, uses a “false or
misleading description of fact, or false or misleading
representation of fact, which…in commercial
advertising or promotion, misrepresents the
nature, characteristics [or] qualities [of]…his
or her or another person’s goods.”1
A Lanham Act plaintiff must prove the following
elements:
Harold P. Weinberger and Jonathan M. Wagner are
partners at Kramer Levin Naftalis & Frankel. Matthew C.
Temkin is an associate at the firm.
© Digital Vision
H
ERE IS SOMETHING you already know:
expert testimony is often the linchpin that
determines the outcome of sophisticated
commercial litigation. But here is something you
may not know: expert testimony is probably more
critical in Lanham Act false advertising litigation
than most other litigations.
Unless you retain qualified experts in the right
fields, you are doomed even before you start, no
matter how strong your case may be on the merits.
Beyond that, you need to retain experts who make
good witnesses. They must be able to explain
complex concepts in a clear and simple way. They
must be persuasive. And above all, they must
be credible and honest. Below, we highlight the
key types of experts required in false advertising
suits.
(i) a false or misleading description or
representation of fact by the defendant in a
commercial advertisement about its own or a
competitor’s product,
(ii) deception or a tendency to deceive a
substantial segment of the audience,
(iii) materiality, or that the false or misleading
statement is likely to influence consumers’
purchasing decisions, and
(iv) injury or a likelihood of injury resulting
from the false or misleading statements, either by
a diversion of sales or a lessening of the goodwill
associated with plaintiff’s products.
Most Lanham Act false advertising cases are
litigated in the context of a preliminary injunction
motion; a plaintiff will try to persuade a court to
enjoin the offending ads right away before the
false claims inflict any long-lasting or irreparable
harm.
In some cases, the court may consolidate a
preliminary injunction hearing with a final trial on
the merits as to plaintiff’s request for a permanent
injunction. In a few cases, a Lanham Act plaintiff
may proceed to a jury trial after losing at the
preliminary injunction stage. Lanham Act jury
trials are rare, however, since the cases usually
settle after a court’s preliminary injunction
decision; a plaintiff who prevails at that stage
typically has difficulty proving damages, since
the false ads would likely have aired for just a
short time prior to the injunction.
At the same time, a defendant who loses at the
preliminary injunction stage may lose interest in
the advertising claim over time, and a plaintiff
who loses a preliminary injunction motion may
not be willing to bear the expense of taking the
case to a final trial on the merits, especially if the
court expresses a negative view of the merits in
any preliminary injunction decision.
Because of the nature of false advertising
litigation, expert testimony is almost always more
important than fact testimony at trial. It is not
uncommon for a trial to feature just one or two
fact witnesses but as many as three or four or
more experts for each side.
Product Testing
The type of evidence required to prove an
advertising claim false depends on the nature of
the challenged advertising. If the defendant’s ad
states that “tests prove” or “tests establish” that
Product X is twice as strong as Product Y, a claim
known as an “establishment claim,” a plaintiff can
prove the claim false either by exposing the faults
in the testing offered to support the claim, or by
showing that the testing, even if reliable, does not
establish the claim made by the advertiser.
When an advertisement does not cite tests,
however, a Lanham Act plaintiff must affirmatively
prove the challenged claim false or misleading, not
merely that the claim is unsubstantiated by scientific
or other testing.
For example, if an ad states that “Product
X is more effective than Product Y,” a general
superiority claim, a plaintiff can prevail only
Monday, July 19, 2010
with clinical testing or other proof showing that
in fact Product X is not more effective than Product
Y. On rare occasions, a plaintiff may sustain its
burden of proof through its own interpretation of
the defendant’s test data. Generally, though, to
prove a claim false a plaintiff must actually test
the products at issue.
Product testing breaks loosely into two
categories: (i) in-vitro testing, and (ii) in-vivo
testing.
In vitro testing is laboratory testing: for example,
measuring the tensile strength of a paper product
advertised to be “strong,” or measuring the
absorption speed of a sponge advertised to absorb
“twice as fast” as a competitor’s sponge.
Proving a claim false solely by in-vitro testing
is difficult. At a minimum, plaintiff must establish
a correlation between the in-vitro testing and the
real life performance of the products.
In-vivo studies, a test of the product with
actual users or in a clinical setting, are generally
considered the preferred measure of product
performance. However, in-vivo testing is much
harder to control and more expensive than in-vitro
testing. Neither form of testing is immune from
design flaws or challenges.
Whatever their nature, Lanham Act product
tests are supported and challenged at trial by
experts, either generalists with respect to product
testing or specialists in the particular product
field at issue.
In designing a product test to withstand
challenge by an opposing expert, several factors
should be considered.
First, a study is given little weight if it does
not mirror how the product is intended to be
used. For example, in S.C. Johnson & Son Inc. v.
Clorox Co., the court rejected testing offered by a
Lanham Act defendant in support of performance
claims about its roach traps. The testing had (i)
employed pest control experts to identify the most
effective product placement, (ii) used more traps
than an ordinary consumer would, and (iii) “extrabaited” the traps, a practice inconsistent with the
product’s own directions. The court held that the
testing had “interject[ed] an entirely unrealistic
element as compared to how these products
[were] applied in the real world.”2
Second, studies should minimize the impact of
variables that the test is not designed to measure.
When comparing two products in a test, conditions
in both segments of the study should be as identical
as possible to ensure that any differences detected
are attributable to the products themselves and
not to any other factor.
Third, a test should eliminate or at least
minimize bias. In Gillette Co. v. Norelco Consumer
Products Co., plaintiff had used its own employees
in a study comparing its product to a competitor’s.
The court found that plaintiff could not have
expected its own employees to be unbiased in
their evaluations of plaintiff’s own products.3
To protect against the effects of bias in product
testing, a litigant should take steps to blind the
testing whenever possible and/or employ an
outside service to design and conduct it. Care
should be taken to ensure that the service retained
is qualified in its field and has been used in prior
Lanham Act litigation.
Surveys
In addition to the element of falsity, a Lanham
Act plaintiff must demonstrate that the false or
misleading statement actually deceived or has
the capacity to deceive a substantial portion of
the intended audience. A plaintiff can satisfy this
element in three ways.
First, plaintiff can assert that the challenged
claim is false on its face or “literally false.” Second,
while the ad may not be explicitly false, plaintiff
may plead that the claim is “false by necessary
implication”—that is, no matter how the claim is
read, the advertising necessarily implies a false
message. If a court agrees with plaintiff under
either of these two theories, the court may grant
plaintiff relief, at least at the preliminary injunction
stage, without evaluating whether consumers were
actually misled.
Unless you retain qualified experts
in the right fields in Lanham Act
false advertising litigation, you are
doomed even before you start, no
matter how strong your case may
be on the merits. Beyond that, you
need to retain experts who make
good witnesses.
Often, however, a Lanham Act plaintiff cannot
show that the challenged claim is literally false
or false by necessary implication. Imagine, for
instance, an advertisement declaring, “Nothing is
more effective than Product X.” While this claim
does not explicitly state that Product X is more
effective than Product Y, and in fact, the statement
makes only a claim of parity, or that nothing is
better, it is easy to see why, depending on other
language or images in the ad, a substantial number
of viewers might interpret the ad as claiming that
Product X is more effective than Product Y.
In that circumstance, a false advertising
plaintiff will have to prove that the claim, while
literally true (assuming, of course, that Product X
is as effective as any other competitive product),
actually misled a “substantial portion” of the
relevant public. This claim of “implied falsity”
requires a showing that at least 15 to 20 percent
of the audience perceives the false message
in the ad.
The ultimate success of an implied falsity claim
almost always turns on the persuasiveness of a
consumer survey. A Lanham Act consumer survey
is not standard market research but rather a survey
specially designed for litigation, conducted and
executed according to rigorous and idiosyncratic
rules. To create and administer such a survey, a
plaintiff will employ an expert, who will then have
to testify at trial concerning the survey.
At the most basic level, a Lanham Act consumer
survey will expose a group of potential consumers
to the challenged ad and then ask them questions
to determine how many received the allegedly
implied false message. Of course, if 15 percent or
more of the survey respondents report receiving
the message, that is meaningful only if the results
can be generalized to the population at large. Thus,
the evidentiary value of survey results rests upon
the underlying objectivity of the survey itself.4
Survey design is a critical element of any implied
falsity claim, and this responsibility falls squarely
on the shoulders of the survey expert.
A truism often repeated by courts in Lanham
Act cases is that there is no such thing as a
perfect consumer survey. Nor is there any
Lanham Act consumer survey expert who is
unscathed by judicial criticism. Survey experts
therefore provide fertile ground for crossexamination in any Lanham Act trial.
The most typical challenges to surveys and
survey experts include:
(i) the survey questions unduly influenced the
survey’s results, for example because the questions
were “leading” or suggested the favorable answer
that the survey expert was looking for,
(ii) the sample selected for participation in
the survey was not representative of the relevant
consumer audience, and
(iii) the survey did not employ a proper
“control.”
The “control” critique requires further
explanation. Because an advertiser is responsible
only for those misperceptions that the ad
creates and not for consumers’ pre-existing
misperceptions, a survey should identify and
subtract the positive results of pre-existing beliefs
or “noise.” To do so, a survey expert may include
in the survey a control group of respondents who
view a control advertisement and answer the same
questions posed to those respondents who view
the challenged ad.
Any positive responses to the control ad by
definition result from pre-conceptions or other
“noise” and not from the challenged claim. The
percentage of positive responses to the control ad
Monday, July 19, 2010
are subtracted from the deception figure obtained
for the challenged ad to arrive at a net percentage
of the audience misled by the false claims.
A survey expert should use particular care in
developing a control ad. Except for the allegedly
false elements, the control should be as similar
as possible to the challenged ad. The greater the
difference between the ads with respect to the
non-challenged elements, the less effective the
control.
For example, in P h a r m a c i a C o r p . v.
GlaxoSmithKline Consumer Healthcare, L.P.,
plaintiff’s survey expert employed a control
ad which, unlike the challenged ad, was not
comparative in nature. Defendant’s survey expert
contended that because plaintiff’s control ad was
not comparative, the survey did not effectively
isolate impressions of superiority resulting
from viewing any comparative ad regardless of
content. The court rejected plaintiff’s survey
on that very ground, for failing to “adequately
control for consumers’ pre-existing beliefs that
comparative commercials imply some sort of
superior efficacy.”5
Statistics
Statistical considerations affect the design,
analysis and type of product testing.
A test design must provide reasonable assurance
that results are not due to chance but rather reflect
the impact of the measured attribute of the tested
products. This requirement mandates an analysis
of “statistical significance.”
The term “p-value” or confidence level is used to
measure statistical significance, and represents the
likelihood that the results of the study are not due
to the variable being measured but instead are due
to chance. A p-value of .05 or less means that there
is a less than 5 percent chance that the results of
the test are due to chance and that it can be said
with 95 percent “confidence” that the results reflect
the impact of the variable being measured. The 95
percent confidence level is generally accepted as
the yardstick to determine whether the results of
a study are not due to chance.
In designing a product test, statistics are used
to determine the necessary “power” of the study:
that is, the number of times the test must be run
to establish results at the 95 percent confidence
level. The “powering” of a test depends on its
purpose.
For example, a test intended to prove that
products perform at parity will require many
more replicates than a test intended to prove
superiority. In other words, a difference between
two products can be demonstrated with fewer
repetitions than the number of replicates needed
to show the absence of a difference.
Without statistical support that the testing was
properly powered, the advertiser cannot be certain
that a result showing no performance difference
between the two products tested was attributable
to an insensitive study or just pure chance, rather
than to the existence of actual parity between
the products.
These principles highlight the reason statistics
experts are often required in Lanham Act false
advertising suits. Statistics experts frequently
testify concerning whether a test was properly
powered, whether the correct statistical analysis
was employed, or whether a p-value lower than
.05 should have been required on account of the
number of comparisons measured in the test.
Lanham Act cases often turn on statistical issues,
and therefore finding a qualified statistics expert
is critical.
Damages
As noted above, only rarely does a Lanham Act
false advertising plaintiff proceed to a final trial on
liability and damages. In those isolated instances,
plaintiff may theoretically recover as damages
(i) plaintiff’s own lost profits, (ii) defendant’s
profits attributable to the false advertising, or
(iii) corrective advertising expenses.
Proving damages in Lanham Act cases is
exceedingly complicated and almost always
requires testimony of an expert, usually an
economist. Because a false advertising plaintiff
is entitled to damages only to the extent caused by
the challenged false claim, the preferred framework
for measuring damages is a regression analysis,
which attempts to control for all variables in the
market except for the false claim.
But product markets are rarely static; they
change rapidly on account of myriad factors,
including changing consumer attitudes and habits,
the actions of non-litigant competitors, the entry
of new products in the market, advertising claims
other than those at issue in the case, and changes
in the economy at large. The task of defendant’s
expert is to show that any supposed lost sales
resulted from these other factors—or merely that
plaintiff’s expert in attributing plaintiff’s lost sales
to defendant’s false advertising did not properly
account for the impact of other relevant factors
in the market.
must have “specialized knowledge through
‘experience, training or education’ to render
his or her opinion,” and must “explain how and
why he or she has reached the conclusion being
proffered and must have as a basis more than
a subjective belief or speculation.”7
A court addressing a Daubert challenge has
wide discretion whether to exclude all or part of
an expert’s proposed testimony. Since most false
advertising cases are judge trials—preliminary
and permanent injunction hearings—courts
usually will not exclude expert testimony in that
circumstance. Typically, the court will hear the
testimony and determine what weight if any to
accord to the expert.
Daubert challenges in those rare Lanham Act
jury trials are more frequent, but even in that
context the court in performing its gate-keeping
function typically errs on the side of admitting
the expert’s opinion.
Conclusion
Beyond identifying qualified experts in the right
fields, a Lanham Act litigant must also find experts
who make appealing witnesses. An expert at the
top of his or her field may be a lousy witness; an
expert from the middle of the pack may make a
great impression.
Your experts must be effective and persuasive
communicators, particularly since the concepts
about which they testify are normally complex.
And, above all, your experts must be honest and
believable witnesses.
In choosing an expert, exercise judgment
wisely.
••••••••••••••••
•••••••••••••
1. 15 U.S.C. §1125(a)(1)(B).
2. 930 F. Supp. 753, 766 (E.D.N.Y. 1996).
3. 946 F. Supp. 115 (D. Mass. 1996).
4. LG Electronics U.S.A. Inc. v. Whirlpool Corp., 661 F. Supp.
2d 940, 951 (N.D. Ill. 2009).
5. 292 F. Supp. 2d 594, 603 (D.N.J. 2003).
6. 509 U.S. 579 (1993).
7. Playtex Prods. Inc. v. Procter & Gamble Co., No. 02 Civ.
8046 (WHP), 2003 WL 21242769 (S.D.N.Y. May 28, 2003).
Challenging the Experts
Since Lanham Act false advertising cases
generally feature a great deal of expert
testimony, challenges under Daubert v. Merell
Dow Pharmaceuticals are not uncommon.6 To
survive a Daubert challenge, the proffered expert
Reprinted with permission from the July 19, 2010 edition of the NEW YORK
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