Second Circuit: Advertisement can be literally false even if no explicitly false assertion made

August 10, 2007
Post by Blog Staff

Yesterday the Second Circuit handed down a decision concerning a preliminary injunction that clarifies false advertising under the Lanham Act, especially regarding the use of images in advertisements. In an opinion containing the unlikely combination of pop icons William Shatner and Jessica Simpson, the court adopted the "false by necessary implication" doctrine and concluded that images can be "literally false" for the purposes of the Lanham Act. The court also held that images that are sufficiently exaggerated such that "no reasonable consumer would rely on them in navigating the marketplace" are non-actionable puffery.

The court also considered the presumption of irreparable harm in favor of parties whose names are explicitly mentioned in false advertising. The court extended this presumption to parties whose names are not explicitly mentioned when "given the nature of the market, it would be obvious to the viewing audience that the advertisement is targeted at the [party]."

More detail of Time Warner Cable, Inc. v. DIRECTV, Inc. after the jump.

This appeal addressed a preliminary injunction entered against DIRECTV that prohibited it from posting any internet advertisements disparaging the quality of Time Warner Cable (TWC) or displaying either of the two TV commercials at issue (the Simpson and Shatner commercials) or any other advertisement disparaging the video or audio quality of TWC in any market that TWC serves. The commercials are below:

The court first considered the likelihood of success on the merits regarding each of the commercials in question. For the case at bar, the deciding factor was whether or not the commercials were "literally false," as TWC did not present any extrinsic evidence of consumer confusion which would have been necessary if pursing an implied falsehood theory. Regarding the Simpson commercial, the court determined that the line, "You're just not gonna get the best picture out of some fancy big screen TV without DIRECTV," was "flatly untrue" as both services provided the same quality picture.

In addressing the Shatner commercial, the court formally adopted the "false by necessary implication" doctrine. Under this doctrine, the court considers the advertisement in full context, including images and words. If the advertisement necessarily implies a false message, it is considered literally false, and no extrinsic evidence is required. If there is ambiguity "such that the language or graphic is susceptible to more than one reasonable interpretation," then the court "must look to consumer data to determine what the person to who the advertisement is addressed finds to be the message." The false statement in the Shatner commercial was the statement: "With what Starfleet just ponied up for this big screen TV, settling for cable would be illogical." The court determined that the ad taken as a whole, especially the preceding line praising the "amazing picture clarity of DIRECTV HD," "unambiguously made the false claim that cable's HD picture quality is inferior to that of DIRECTV's."

The court then addressed the issue of puffery in the context of internet banner ads. The court defined two different types of puffery, the first class of puffery is "an exaggeration or overstatement expressed in broad, vague, and commendatory language" which essentially "amounts to a seller's privilege to lie his head off, so long as he says nothing specific." The second class, which was more applicable to the case at bar, was "exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely". The internet advertisements in question featured a "split screen" comparison of "other TV" and "DIRECTV HD." The "other tv" is distorted beyond recognition while the DIRECTV picture is extremely clear. The court found the ads to be puffery, and reversed the district court, because the extreme level of distortion was "not even remotely realistic" to the extent that it was "difficult to imagine that any consumer, whatever the level of sophistication, would actually be fooled by the Internet Advertisements."

Finally, the court turned to the issue of irreparable harm. The court noted that a presumption of irreparable harm arises when false advertising mentions the plaintiff's product by name. Despite the fact that the advertisements in question did not mention TWC by name, the court nevertheless found irreparable harm in both TV commercials. The Shatner commercial was included because the term "cable" was used. The court found that TWC is "cable" in its respective distribution areas and this amounted to a direct mention of TWC in the ad. The court found that the presumption extended to the Simpson ad because the "binary" nature of the industry made it such that DIRECTV's claims of superiority were aimed at disparaging "cable," which was found to be synonymous with TWC. As summarized by the court:

[L]ikelihood of irreparable harm may be presumed where the plaintiff demonstrates a likelihood of success in showing that the defendant's comparative advertisement is literally false and that given the nature of the market, it would be obvious to the viewing audience that the advertisement is targeted at the plaintiff, even though the plaintiff is not identified by name.
In summary, this decision marks the Second Circuit's adoption of the "false by necessary implication" doctrine. It also expands and clarifies the definition of puffery and expands the scope of the presumption of irreparable harm in false advertising cases.

To read the full decision of Time Warner Cable, Inc. v. DIRECTV, Inc. click here.

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