Loyola University Chicago Law Journal

Volume 15
Article 2
Issue 1 Fall 1983

1983

False Advertising: A Discussion of a Competitor's

Rights and Remedies
Gary Schuman

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Gary Schuman, False Advertising: A Discussion of a Competitor's Rights and Remedies, 15 Loy. U. Chi. L. J. 1 (1983).
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 False Advertising: A Discussion of a
Competitor's Rights and Remedies
Gary Schuman *

INTRODUCTION

Advertising theoretically provides the public with information

about products and services in a convenient and understandable
manner so that consumers can differentiate between available
brands.' Advertising is influential because people make pur-
chasing decisions on the basis of information they receive
2
through advertisements.
Advertisers seek to present their goods and services to consum-
ers in a favorable light 3 because the primary purpose of most
commercial advertising is to induce the consuming public to buy
a particular product or service. 4 To the extent that advertising
provides reliable information about products or services, it is a

*B.A. 1971, Alfred University; J.D. 1974, University of Notre Dame Law School; member
of the New York and Illinois bars.
1. Bates v. State Bar of Ariz., 433 U.S. 350, 376 (1977).
2. See Triangle Publications, Inc. v. Knight-Ridder Newspapers, Inc., 445 F. Supp.
875, 883 (S.D. Fla. 1978); 1A R. CALLMANN, THE LAW OF UNFAIR COMPETITION, TRADE-
MARKS AND MONOPOLIES § 5.07 (4th ed. 1981); Note, Developments in the Law-Deceptive
Advertising, 80 HARV. L. REv. 1005, 1008 (1967); Comment, The Law of Commercial Dis-
paragement:Business Defamation's Impotent Ally, 63 YALE L.J. 65, 65 (1953).
The United States Supreme Court stated in Virginia State Bd. of Pharmacy v. Virginia
Citizens Consumer Council, 425 U.S. 748 (1976):
Advertising ... is nonetheless dissemination of information as to who is pro-
ducing and selling what product, for what reason, and at what price. So long as
we preserve a predominately free enterprise economy, the allocation of our
resources in large measure will be made through numerous private economic
decisions. It is a matter of public interest that those decisions, in the aggregate,
be intelligent and well informed. To this end, the free flow of commercial infor-
mation is indispensable.
Id. at 765.
3. See Coca-Cola Co. v. Tropicana Prods., Inc., 690 F.2d 312, 314 (2d Cir. 1982).
4. "In selling, getting the prospect's attention is often the most crucial step.
Sterk, The Law of ComparativeAdvertising: How Much Worse is "Better" than "Great",
67 TRADE-MARK REP. 368, 368 (1977).
 Loyola University Law Journal [Vol. 15

valuable and necessary component of the competitive market. 5

Although advertisers generally attempt to influence the buying
public by emphasizing the merits of their own goods, 6 recently,
advertisers have begun to compare their products with those of
7
the competition.
Comparative advertising when presented in a straightforward
and unbiased manner can be a useful tool for consumers. Compara-
tive advertising can provide a meaningful frame of reference for
evaluating sellers' claims by contrasting the attributes of com-
peting products or services.8 In addition, comparative adver-
tising can provide information concerning relative product pri-
ces, and it also allows a company to rebut the false or inaccurate
claims of competitors. 9 Finally, comparative advertising per-
mits new market entrants to gain a foothold among established
brands by inviting the consumer to try something new. 10
Many product brands, however, are virtually indistinguishable
from one another." Consequently, advertisers must find ways
to differentiate their products so that the public will perceive
them as being "better" than other similar products. To create a

5. "[W]here consumers have the benefit of price advertising, retail prices often are
dramatically lower than they would be without advertising." Bates v. State Bar of Ariz.,
433 U.S. 350, 377 (1977) (footnote omitted).
6. See generally Sterk, supra note 4.
7. The Second Circuit Court of Appeals noted this trend: "Comparative advertising in
which the competing product is explicitly named is a relatively new weapon in the Madi-
son Avenue arsenal." American Home Prods. Corp. v. Johnson & Johnson, 577 F.2d 160,
162 (2d Cir. 1978) (footnote omitted). See also Ragold, Inc. v. Ferrero, U.S.A., Inc., 506 F.
Supp. 117 (N.D. Ill. 1980) (two brands of candy being compared on a television ad). For a
general commentary on comparative advertising, see Conlon, Comparative Advertising:
Whatever Happened to "BrandX"?, 67 TRADE-MARK REP. 407, 408-09 (1977).
8. See Nye, In Defense of Truthful ComparativeAdvertising, 67 TRADE-MARK REP. 353
(1977). Some commentators believe that comparative advertising will create more confu-
sion in the market and be of little if any benefit to the consumer. For example, compara-
tive advertising may cause consumers to confuse the established brand with the newer
and less known product. If the new product is not satisfactory, the public may also stop
buying the established product, believing the two are related. See Robin & Barnaby,
Comparative Advertising: A Skeptical View, 67 TRADE-MARK REP. 358, 366 (1977).
9. "Apart from the tradesman's right of free speech, which must be vigorously safe-
guarded, the public has a genuine interest in learning the relative merits of particular
products, however that may come about." Testing Sys., Inc. v. Magnaflux Corp., 251 F.
Supp. 286, 288-89 (E.D. Pa. 1966).
10. Smith v. Chanel, Inc., 402 F.2d 562, 568-69 (9th Cir. 1968). See also Pridgen &
Preston, Enhancingthe Flow of Informationin the Marketplace:From Caveat Emptor to
Virginia Pharmacy and Beyond at the Federal Trade Commission, 14 GEO. L. REv. 635,
676-77 (1980).
11. Pridgen & Preston, supra note 10, at 647.
19831 False Advertising

distinctive brand image, advertisers often present nonfactual

information to the public rather than information about the use
or merits of a particular product. 12 Differences which cannot be
objectively demonstrated, may nonetheless be real to the consum-3
er who is often willing to pay more for the "premium" product.'
Consequently, puffs, social-psychological claims, and nonver-
bal images distinguish one brand from its competitors' brands
when facts about tangible product qualities cannot distinguish
them from one another.' 4 Problems occur because these influen-
tial advertising techniques often convey deceptive messages
which injure the consumer. 15 However, consumer lawsuits
against advertisers are rare because injuries are often to small
and too difficult to prove to justify individual resort to the
16
courts.
False advertising also harms competitors. When a purchaser's
attention is directed to a product that is falsely advertised, it
lures potential customers away from honest competitors.1 7 To
protect against future unfair competition and to obtain redress
for the damage resulting from a competitor's false advertise-
ments, an injured business seeks compensation for damage sus-
tained and an assurance that no further damage will occur. To
obtain adequate protection and compensation, an injured com-
petitor must turn to the courts for relief.
Until recently, competitors rarely sought relief from the courts
for injuries suffered because of another competitor's false adver-

12. For a general discussion detailing how competitors selling virtually identical prod-
ucts attempt to distinguish their name brand through subjective images which, in reality,
are meaningless, see Note, supra note 2, at 1008, 1047.
13. "A court should ... recognize the economic fact that many buyers are motivated
by personal prejudice or other preferences which have no rational basis in fact." IA R.
CALLMANN, supra note 2, § 5.14, at 88 (footnote omitted).
14. See Note, supra note 2, at 1008.
15. IA R. CALLMANN, supra note 2, § 5.12, at 80.
16. One Note described the situation as follows:
Legal pitfalls and requirements of proof. . . were sufficient to dissuade all but
the most persistent or most seriously injured consumer. The purchaser willing
to seek recovery of the nominal sum usually involved was likely to be told by
the court that scienter had not been proved, that his reliance on the misrepre-
sentation was unreasonable... that the representations concerned matters of
opinion and thus-as "puffing"-should have been treated with skepticism, or
that in any case he had not sufficiently demonstrated that his purchase was
induced by the advertisement.
Note, supranote 2, at 1017 (footnotes omitted) (emphasis in original).
17. Id.
 Loyola University Law Journal [Vol. 15

tising. 18 In part, this was due to the courts' restrictive interpre-

tation of a competitor's common law rights to prevent such false
claims through equitable relief or monetary redress. Now, with
the assistance of recent federal and state statutes which ease the
required burden of proof necessary to prevail on a claim of false
advertising, competitors are increasingly seeking redress in the
courts.
First, this article will discuss the common law claim of false
advertising and the obstacles in proving injury which have
deterred many competitors from bringing false advertising
claims. This article will then analyze the Lanham Act which
provides a statutory remedy for false advertising and obviates
the necessity of proving injury. This article will also discuss the
common law claim of disparagement and a plaintiffs difficulty
in proving special damages which has prevented many competi-
tors from recovering under a disparagement claim. Next, this
article will analyze the Uniform Deceptive Trade Practices Act
which allows statutory relief for disparagement without a show-
ing of special damages. This article concludes that the federal
and state statutes which ease the burden in proving a claim for
either false advertising or disparagement properly allow compet-
itors to recover for injuries suffered as a result of misrepresenta-
tions made by another.

COMMON LAW CLAIM FOR FALSE ADVERTISING

Traditionally, courts were reluctant to grant relief to advertis-
ers for the false advertising of a competitor. The primary obsta-
cle a plaintiff faced under the common law in attempting to
establish a case for false representations was proving that he
had suffered an actual injury because of a competitor's false
advertising.
In American Washboard Co. v. Saginaw ManufacturingCo.,1 9
the plaintiff was the sole manufacturer of aluminum wash-
boards. The plaintiff sued to enjoin the defendant from falsely

18. Because competitors would not sue each other for false claims, the Federal Trade
Commission took a more active role to protect consumers. See generally Pitofsky, Beyond
Nader: Consumer Protection and the Regulation of Advertising, 90 HARV. L. REV. 661,
664-65 (1977).
19. 103 F.2d 281 (6th Cir. 1900).
19831 False Advertising

advertising that its zinc washboards were made of aluminum.20

The plaintiff alleged that it was injured because the defendant
had diverted business from the plaintiff by misbranding its prod-
uct.2 1 The Court of Appeals for the Sixth Circuit denied injunc-
tive relief.22 The court noted that a manufacturer could recover
for trademark infringement 23 and passing-off 24 by a competitor
because those activities violated a manufacturer's property rights.
In contrast, the court stated that the defendant's misrepresenta-
tion concerning the quality of its own goods was not actionable
25
because no property rights of the plaintiff had been invaded.
In Ely-Norris Safe Co. v. Mosler Safe Co., 26 the Court of
Appeals for the Second Circuit disagreed with the decision in
American Washboard that an action for unfair competition was
limited to the infringement of another's trademark or the passing-
off of goods as those of a competing producer. 27 The court stated
that trademark infringement and passing-off were actionable
because of the deceit of a competitor. 28 For the same reason, the
court concluded that the plaintiff had a cause of action for the
wrongful diversion of his trade achieved through a competitor's
29
false advertising.
In Ely-Norris, the plaintiff manufactured safes which con-

20. Id. at 281-82.

21. Id. at 283. The plaintiff sought relief, not because the defendant was selling its
goods as the goods of the plaintiff, but because the plaintiff was the only manufacturer of
a genuine aluminum board and the defendant was deceiving the public by selling a
board made of zinc material, although falsely branded as aluminum.
22. Id. at 287.
23. Protection against trademark infringement stems from the general principle that
when one has established a trade or business in which he has used a particular device,
symbol, or name so that it has become known in trade as a designation of such person's
goods, equity will protect him in the use thereof. Such person has a right to complain
when another adopts his symbol or manner of marking his goods. The plaintiff comes
into a court of equity in such cases for the protection of his property rights. The private
action is given, not for the benefit of the public, although that may be its incidental
effect, but because of the invasion by the defendant of that which is the exclusive prop-
erty of the plaintiff.
24. "Palming-off" or "passing-off" is an attempt by one person to induce customers to
believe that his products are actually those of another. PIC Design Corp. v. Bearings
Specialty Co., 436 F.2d 804, 806-07 (1st Cir. 1971); Mutation Mink Breeders Ass'n v. Lou
Nierenberg Corp., 23 F.R.D. 155, 159 (S.D.N.Y. 1959).
25. 103 F.2d at 285.
26. 7 F.2d 603 (2d Cir. 1925), rev'd, 273 U.S. 132 (1927).
27. Id. at 604.
28. Id.
29. Id.
 Loyola University Law Journal [Vol. 15

tained a patented explosion chamber which made the safes

burglar-proof. 30 The plaintiff sought an injunction to prevent the
defendant from continuing to falsely represent that its safes also
contained an explosion chamber. 31 The court construed the plain-
tiffs complaint as alleging that the plaintiff was the sole manu-
facturer of explosion chamber safes. 32 The court ruled that the
traditional restriction on a competitor's legal action, which
required him to show injury through direct evidence of a loss of
sales, should not apply when a plaintiff was in a monopoly posi-
tion because injury in such a case may be inferred. 33 In contrast
to the monopolist's burden of proving injury, the court noted:
In an open market it is generally impossible to prove that
a customer, whom the defendant has secured by falsely
describing his goods, would have bought of the plaintiff,
if the defendant had been truthful. Without that, the
plaintiff, though aggrieved in company with other honest
traders, cannot show any ascertainable loss. He may not
recover at law, and the equitable remedy is concurrent.
The law does not allow him to sue as a vicarious avenger
34
of the defendant's customers.
The court stated that because the plaintiff in this case was the
sole manufacturer of explosion chamber safes, it could be inferred
that the plaintiff was injured through diversion of customers,
and consequently sales, to the defendant because of the defend-
ant's false advertising. 35 The court concluded that but for the
false advertising the defendant's customers would have bought
explosion-proof safes from the single available source, which
was the plaintiff.36 The Supreme Court reversed because the
plaintiff had not adequately alleged that it was the single source
of explosion-proof safes. 37
The exception to the common law rule that diversion of trade
through false advertising must be proven through direct evi-
dence, enunciated by the court in Ely-Norris, is often referred to

30. Id. at 603.

31. Id. The court acknowledged that the defendant's name and address appeared
prominently upon its safes and that no customer had ever been given reason to believe
that the defendant's safes were manufactured by the plaintiff. Id.
32. Id. at 604.
33. Id.
34. Id.
35. Id.
36. Id.
37. 273 U.S. 132 (1927).
19831 False Advertising

as the "single source" rule. The single source exception was

further defined in Electronics Corp. of America v. Honeywell,
Inc. 38 In this case, the plaintiff manufactured safety control sys-
tems. 39 The defendant constructed its own programmer so that it
could be installed in the plaintiffs systems, 40 thus permitting
the defendant to compete with the plaintiff in the business of
selling replacement parts for the plaintiffs control systems. 41 The
owners of the plaintiffs systems could choose between purchas-
ing replacement parts manufactured by either the plaintiff or the
42
defendant.
The defendant advertised the quality of its product 43 and the
ease of its product's installation in contrast to the plaintiffs prod-
uct, despite evidence that the defendant's replacement pro-
grammer was more difficult to install in the plaintiffs machines
than the plaintiffs product. 44 The defendant made other quasi-
comparative claims to promote the quality of its product. 45 The
plaintiff contended that the misrepresentations made by the de-
fendant were actionable because customers who had previously
purchased its product were now buying from the defendant
46
because of the defendant's false and misleading statements.
The trial court held that despite the presence of some mislead-
ing statements the plaintiff had no cause of action without a
showing of trademark infringement, passing-off, or express dis-
paragement of the plaintiffs product. 4 7 The Court of Appeals for
the First Circuit, however, reversed and remanded the
case48 holding that material misrepresentations made by a com-
petitor in a two-firm market may be enjoined when injury to the
49
plaintiff is ascertainable.

38. 428 F.2d 191 (1st Cir. 1970).

39. Id. at 192.
40. Id. at 193.
41. Id.
42. Id. at 194.
43. Id. at 194-95.
44. Id.
45. Id. at 193.
46. Id. at 194. Because these misrepresentations related directly to the qualities of a
product which was sold only by the plaintiff and the defendant, buyers who bought from
the defendant on the basis of the false advertising were buyers who probably would have
purchased the product from the plaintiff.
47. Id. at 195.
48. Id. at 196.
49. Id. at 194-96.
 Loyola University Law Journal [Vol. 15

The court noted that the instant computer market was essen-
tially a two-firm market comprised of the plaintiff and the
defendant,50 and therefore buyers in the market could only buy
the plaintiffs or the defendant's product. 51 Consequently, there
was an ascertainable loss of revenue to the plaintiff as a result of
the defendant's false advertising. 52 Recognizing the difficulty an
aggrieved competitor has of showing injury through direct evi-
dence of a loss of sales,5 3 the court concluded that this proof was
54
not mandatory and that injunctive relief was appropriate.
By granting relief to a plaintiff who competes in a two-firm
market, the court slightly expanded the single source exception.
However, few plaintiffs will be able to avoid the general rule that
injury by diversion of trade must be established through direct
evidence of a loss of sales by relying on the Honeywell case
because there are few markets in which there are only two
55
competitors.

STATUTORY CLAIM FOR FALSE ADVERTISING

The Lanham Act

Section 43(a)56 of the Lanham Act 57 makes various types of
unfair competition occurring in interstate commerce a federal

50. Id. at 194.

51. Id.
52. Id. at 196.
53. Id. at 194.
54. Id. at 194, 196.
55. In Smith-Victor Corp. v. Sylvania Elec. Prods., Inc., 242 F. Supp. 302 (N.D. Ill.
1965), the court denied relief for a common law claim of false advertising based on the
reasoning in Ely-Norris. The court concluded that unless a plaintiff has a monopoly posi-
tion in the market, it is impossible to establish the diversion of sales by a defendant's
false advertising. Id. at 309. The court stated: "The tenuous connection between what one
says about his own product and the injury to a competitor probably accounts for the
reluctance of some courts to recognize a cause of action for false advertising which does
not include palming off." Id. at 312. See also Hall v. Duart Sales Co., 28 F. Supp. 838,
840-41 (N.D. Ill. 1939) (The defendant falsely advertised that its facial cream was the only
cream containing milk when the plaintiffs and other competitors' products also con-
tained milk. The court denied relief stating that the defendant's sales may have been
obtained from the plaintiffs competitors and thus the plaintiff could not prove damage.).
56. Section 43(a) of the Lanham Act provides:
Any person who shall affix, apply, or annex, or use in connection with any
goods or services, or any container or containers for goods, a false designation
1983] False Advertising

tort. Anyone who uses a false designation of origin 58 or any

other false description or representation of goods or services in
commerce will be found to have violated section 43(a).5 9 Reme-
dies include civil damages and/or injunctive relief. Section 43(a)
is "an affirmative code of business ethics" designed to protect an
60
honest competitor in his fair business dealing.
The common law rule requiring an invasion of the plaintiff's
property rights either through trademark infringement or passing-
off to allow recovery, is not a prerequisite for section 43(a)
recovery. 6 1 Rather, recent decisions have noted that Congress

of origin, or any false description or representation, including words or other

symbols tending falsely to describe or represent the same, and shall cause such
goods or services to enter into commerce, and any person who shall with
knowledge of the falsity of such designation of origin or description or represen-
tation cause or procure the same to be transported or used in commerce or
deliver the same to any carrier to be transported or used, shall be liable to a
civil action by any person doing business in the locality falsely indicated as
that of origin or in the region in which said locality is situated, or by any per-
son who believes that he is or is likely to be damaged by the use of any such
false description or representation.
15 U.S.C. § 1125(a) (1982). For a discussion of § 43(a) and the scope of protection it
affords, see Germain, Unfair Trade Practices Under Section 43(a) of the Lanham Act:
You've Come a Long Way, Baby-Too Far, Maybe?, 64 TRADE-MARK REP. 193 (1974);
Note, Section 43(a) of the Lanham Act-A Federal Unfair Competition Remedy, 25
DRAKE L. REV. 228 (1975); Note, Trademark Infringement-Lanham Act § 43(a)-Source
Confusion, 48 TENN. L. REV. 182 (1980); Note, The Lanham Trademark Act, Section
43(a)-A Hidden National Law of Unfair Competition, 14 WASHBURN L.J. 330 (1975);
Comment, Analysis of a Statutory Violation of the Lanham Act § 43(a), 29 MERCER L.
REV. 1083 (1978); Comment, The Present Scope of Recovery for Unfair Competition Viola-
tions Under Section 43(a) of the Lanham Act, 58 NEB. L. REV. 159 (1979).
57. 15 U.S.C. §§ 1051-1127 (1982).
58. The word "origin" in § 43(a) does not merely refer to geographical origin, but also
to origin of source or manufacture. Federal-Mogul-Bower Bearings, Inc. v. Azoff, 313 F.2d
405, 408 (6th Cir. 1963).
59. See, e.g., Chevron Chem. Co. v. Voluntary Purchasing Groups, 659 F.2d 695, 700
(5th Cir. 1981); Johnson & Johnson v. Carter-Wallace, Inc., 631 F.2d 186, 187-88 (2d Cir.
1980); Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 648 (3d Cir. 1958);
Springs Mills, Inc. v. Ultracashmere House, Ltd., 532 F. Supp. 1203, 1220 (S.D.N.Y. 1982);
Ames Publishing Co. v. Walker-Davis Publications, Inc., 372 F. Supp. 1, 10 (E.D. Pa.
1974); Iding v. Anaston, 266 F. Supp. 1015, 1018 (N.D. Ill. 1967).
60. Gold Seal Co. v. Weeks, 129 F. Supp. 928 (D.D.C. 1955), aff'd sub nom., S.C. John-
son & Son, Inc. v. Gold Seal Co., 230 F.2d 832 (D.C. Cir. 1956).
61. However, the Lanham Act does provide a statutory remedy for trademark infringe-
ment and passing-off. "Palming-off' or "passing-off' is the selling of a good or service
under the name or mark of another. Historically, the terms were used to describe a
wrongful intent on the part of the defendant to pass or palm-off his goods as being those
of the plaintiff, but most courts have come to use the terms to describe cases where likeli-
hood of confusion between goods is present. Thus, the courts have shifted the emphasis
from the wrongful action of the defendant to the effect on the customer. The shift has
 Loyola University Law Journal [Vol. 15

created this section of the Lanham Act to, in part, provide new
remedies for false advertising. 62 Thus, courts have recognized
63
that section 43(a) did not simply codify the common law.

come about in large part as the result of an effort by the courts to conform the test for
common law trademark infringement with the test for statutory trademark infringement.
A false designation of origin in the form of reverse passing or palming-off is also illegal
under the Lanham Act. Williams v. Curtiss-Wright Corp., 691 F.2d 168, 170 (3d Cir. 1982).
Reverse passing-off occurs when a person removes or obliterates the original trademark
without authorization before reselling goods produced by someone else. U-Haul Int'l, Inc.
v. Jartran, Inc., 681 F.2d 1159, 1161 (9th Cir. 1982); John Wright, Inc. v. Casper Corp., 419
F. Supp. 292, 325 (E.D. Pa. 1976), aff'd in part and rev'd and remanded in part sub nom.,
Donsco, Inc. v. Casper Corp., 587 F.2d 602 (3d Cir. 1978). Reverse passing-off is accom-
plished expressly when the wrongdoer removes the name or trademark on another's prod-
uct and sells that product under the wrongdoer's name. 3 R. CALLMANN, THiE LAW OF
UNFAIR COMPETITION, TRADEMARKS AND MONOPOLIES § 18.2(b)(1) (4th ed. 1981). Implied
reverse passing-off occurs when the wrongdoer simply removes or otherwise obliterates
the name of the manufacturer or source and sells the product without any brand identifi-
cation. Id. In reverse passing-off, the originator of the misidentified product is deprived of
the advertising value of its name and of the goodwill that would otherwise stem from
public knowledge of the true source of the product.
62. The Second Circuit Court of Appeals in Johnson & Johnson v. Carter-Wallace,
Inc., 631 F.2d 186 (2d Cir. 1980), stated the reason for the enactment of§ 43(a) as follows:
Prior to the enactment of § 43(a), false advertising claims were governed by
the common law of trade disparagement. Under the common law, liability was
generally confined to "palming-off' cases where the deceit related to the origin
of the product. In these cases the offending product was foisted on an unwary
consumer by deceiving him into believing he was buying the plaintiffs product.
Other instances of false advertising were safe from actions by competitors due
to the difficulty of satisfying the requirement of proof of actual damage caused
by the false claims. In an open market, it is normally impossibile to prove that
a customer, who was induced by the defendant through the use of false claims
to purchase the product, would have bought from the plaintiff if the defendant
had been truthful.
Id. at 189. See also Pennwalt Corp. v. Plough, Inc., 85 F.R.D. 257, 260 (D. Del. 1975); Skil
Corp. v. Rockwell Int'l Corp., 375 F. Supp. 777 (N.D. Ill. 1974) (In passing § 43(a) "Con-
gress undoubtedly recognized and intended to remedy the destructive effect that Erie v.
Tompkins, had upon the development of a uniform federal common law of unfair compe-
tition." Id. at 782 (citation omitted).).
63. The Third Circuit Court of Appeals noted the significance of § 43(a) in L'Aiglon
Apparel v. Lana Lobell, Inc., 214 F.2d 649 (3d Cir. 1954). There it was emphasized that
§ 43(a) was not a mere codification of pre-Lanham Act common law, but rather a federal
provision "which, with clarity and precision adequate for judicial administration, creates
and defines rights and duties and provides for their vindication in the federal courts." Id.
at 651. Subsequently, other courts stated that § 43(a) created a new federal statutory tort
and did not merely codify the common law principles of unfair competition. See, e.g.,
McDonald's Corp. v. Gunvill, 441 F. Supp. 71, 74 (N.D. Ill. 1977), aff'd, 622 F.2d 592 (7th
Cir. 1980); American Consumers, Inc. v. Kroger Co., 416 F. Supp. 1210, 1212 (E.D. Tenn.
1976); Universal Athletic Sales Co. v. American Gym, Recreational & Athletic Equip.
Corp., 397 F. Supp. 1063, 1071-72 (W.D. Pa. 1975), vacated on other grounds, 546 F.2d 530
(3d Cir. 1976), aff'd, 566 F.2d 1171 (3d Cir. 1977).
 19831 False Advertising

Courts have broadly interpreted section 43(a)6 4 to mean that one

competitor cannot conduct business in a manner that interferes
unfairly with the business of another competitor, or which injures
another competitor, by either destroying a basis of genuine com-
petition between their products or preventing the consumer from
65
judging fairly between them.
Liability under this section may arise when no federally regis-
tered trademark is involved, 66 even though section 43(a) is con-
tained in the Lanham Act, which primarily relates to federally
registered trademarks. Section 43(a), however, does not have
boundless application as a remedy for unfair trade practices. 67
This section only provides a remedy for unfair competitive activ-
ities which are analogous to, or associated with, the misuse of
trademarks or trade names and which produce similar kinds of
injuries. In other words, section 43(a) is only concerned with the
defendant's false representations regarding his own goods or
services. For example, courts have interpreted section 43(a) to
encompass a claim of false advertising when the misrepresenta-
tion relates to the defendant's own product or service, 68 while
disparagement of a competitor's product will not provide the

64. The Second Circuit Court of Appeals noted: "One of the principal purposes of the
1946 revisions to the Lanham Act was '[t]o modernize the trade-mark statutes so that
they will conform to legitimate present-day business practices.' " Vidal Sassoon, Inc. v.
Bristol-Myers Co., 661 F.2d 272, 277 (2d Cir. 1981) (quoting S. REP. No. 1333, 79th Cong.,
2d Sess. (1946), reprinted in 1946 U.S. Code Cong. Serv., at 1276). For this reason, the
court stated that § 43(a) must be broadly interpreted "lest rapid advances in advertising
and market methods outpace technical revisions in statutory language and finally defeat
the clear purpose of Congress in protecting the consumer." Id.
65. Gold Seal Co. v. Weeks, 129 F. Supp. 928, 940 (D.D.C. 1955), aff'd sub nom., S.C.
Johnson & Son, Inc. v. Gold Seal Co., 230 F.2d 832 (D.C. Cir. 1956) (Congressional intent
was to allow a competitor's private cause of action to prevent or terminate the type of
unfair competition that consists of lying about goods or services in interstate commerce.).
See also Skil Corp. v. Rockwell Int'l Corp., 375 F. Supp. 777, 784-85 (N.D. Ill. 1974).
66. While the intent of Congress in enacting the Lanham Act was to make deceptive
and misleading use of trademarks actionable, the Lanham Act was also intended "to
protect persons engaged in [interstate] commerce against unfair competition." 15 U.S.C.
§ 1127 (1982).
67. See Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 160-62 (1st Cir. 1977).
See also Alfred Dunhill Ltd. v. Interstate Cigar Co., 499 F.2d 232, 237-38 (2d Cir. 1974)
("Not every possible evil has yet been proscribed by federal law. The fact that there are
some acts which may arguably be wrongful and which are not prohibited by existing
statutes does not license courts to disregard the boundaries which Congress has written
into its legislation.").
68. Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272, 278 (2d Cir. 1981); Toro Co.
v. Textron, Inc., 499 F. Supp. 241, 251 (D. Del. 1980). Universal Athletic Sales Co. v.
 Loyola University Law Journal [Vol. 15

basis for a cause of action under section 43(a). 69 Similarly, the

use of another's trademark to identify the trademark owner's
product in comparative advertising is not prohibited absent
misrepresentation regarding the products or confusion as to their
70
source or sponsorship.
Unlike the common law claim of false advertising which effec-
tively limited relief to a competitor who fell within the single
source exception because of the burden of proving injury through
direct evidence, section 43(a) states that an unfair competitor is
liable to "any person who believes that he or she is likely to be
damaged.1 71 Although section 43(a) obviates the necessity of

American Gym, Recreational & Athletic Equip. Corp., 397 F. Supp. 1063, 1071-74 (W.D.
Pa. 1975), vacated on other grounds, 546 F.2d 530 (3d Cir. 1976), aff'd, 566 F.2d 1171 (3d
Cir. 1977); Alberto-Culver Co. v. Gillette Co., 408 F. Supp. 1160, 1163 (N.D. Ill. 1976). The
basis of recovery for false advertising claims arising under § 43(a) is the statute's prohi-
bition against "any false description or representation, including words or other symbols
tending falsely to describe or represent the same." 15 U.S.C. § 1125(a) (1982).
69. Bernard Food Indus., Inc. v. Dietene Co., 415 F.2d 1279, 1282-83 (7th Cir. 1969);
Toro Co. v. Textron, Inc., 499 F. Supp. 241, 251 n.20 (D. Del. 1980); Universal Athletic
Sales Co. v. American Gym, Recreational & Athletic Equip. Corp., 397 F. Supp. 1063,
1073 (W.D. Pa. 1975), vacated on other grounds, 546 F.2d 530 (3d Cir. 1976), aff'd, 566 F.2d
1171 (3d Cir. 1977). This distinction was criticized by the court in Skil Corp. v. Rockwell
Int'l Corp., 375 F. Supp. 777 (N.D. Ill. 1974):
With due respect to the court [referring to Bernard Food Indus., Inc. v. Die-
tene Co., 415 F.2d 1279 (7th Cir. 1969)], it does not seem logical to distinguish
between a false statement about the plaintiffs product and a false statement
about the defendant's product in a case where the particular statement is con-
tained in comparison advertising by the defendant, such that in the first
instance the plaintiff does not have a cause of action whereas in the latter he
does .... Rather, it would seem that in comparison advertising, a false statement
by the defendant about plaintiff's product would have the same detrimental
effect as a false statement about defendant's product. I.e., it would tend to mis-
lead the buying public concerning the relative merits and qualities of the prod-
ucts, thereby inducing the purchase of a possibly inferior product.
Id. at 782 n.10.
70. One may always truthfully compare the quality of his product with that of a com-
petitor, utilizing the competitor's product and name therein Triangle Publications, Inc. v.
Knight-Ridder Newspapers, Inc., 445 F. Supp. 875, 883 (S.D. Fla. 1978); McDonald's Corp.
v. Gunvill, 441 F. Supp. 71, 74 (N.D. Ill. 1977), aff'd, 622 F.2d 592 (7th Cir. 1980). As
stated in Societe Comptoir de L'Industrie Cotonniere Establissements Boussac v. Alex-
ander's Dep't Stores, Inc., 299 F.2d 33 (2d Cir. 1962):
The Lanham Act does not prohibit a commercial rival's truthfully denominat-
ing his goods a copy of a design in the public domain, though he uses the name
of the designer to do so. Indeed it is difficult to see any other means that might
be employed to inform the consuming public of the true origin of the design.
Id. at 36 (citations omitted). However, such comparison must be accurate or the plaintiff
will be entitled to relief. Chanel, Inc. v. Smith, 528 F.2d 284, 285 (9th Cir. 1976) (per
curiam).
71. The language of the section states that "[any person ... shall be liable to a civil
19831 False Advertising

proving diversion of trade 72 and thus eliminates the requirement

that the competitor seeking relief is the single source of a prod-
uct, the competitor still must have some protectable interest that
is likely to be damaged. Section 43(a) is also distinguishable
from the common law because the statutory section was designed
to protect consumers as well as commercial interests from the
effects of false advertising. 73 Nonetheless, the majority of courts
have been unwilling to hold that the Lanham Act confers a right
74
of action on consumers.
75
The court in Skil Corp. v. Rockwell International Corp.,
established a five-part test to determine whether relief for false
advertising should be granted under the Lanham Act. The test
requires proof that: (1) the defendant made false statements of
fact in advertising his products; (2) those advertisements ac-
tually deceived or have the tendency to deceive a substantial

action by any person... who believes that he is or is likely to be damaged by the use of
any such false description or representation." 15 U.S.C. § 1125(a) (1982) (emphasis
added). See also New West Corp. v. NYM Co., 595 F.2d 1194, 1198 (9th Cir. 1979) ("The
dispositive question is whether the party has a reasonable interest to be protected against
false advertising."). One court has stated that to have standing to sue under § 43(a), the
plaintiffs product must be in competition with the defendant's product. Springs Mills,
Inc. v. Ultracashmere House, Ltd., 532 F. Supp. 1203, 1220-21 (SD.N.Y. 1982).
72. Mutation Mink Breeders Ass'n v. Lou Nierenberg Corp., 23 F.R.D. 155, 166
(S.D.N.Y. 1959).
73. Ames Publishing Co. v. Walker-Davis Publications, Inc., 372 F. Supp. 1, 14 (E.D.
Pa. 1974). But see American Home Prods. Corp. v. Johnson & Johnson, 436 F. Supp. 785,
797 (S.D.N.Y. 1977) ("[An action under the Lanham Act and state unfair competition
laws is not the proper legal vehicle in which to vindicate the public's interest in health
and safety."), aff'd, 577 F.2d 160 (2d Cir. 1978).
74. See, e.g., Alfred Dunhill Ltd. v. Interstate Cigar Co., 499 F.2d 232, 236 (2d Cir.
1974); Rare Earth, Inc. v. Hoorelbeke, 401 F. Supp. 26, 39 (S.D.N.Y. 1979); Pennwalt Corp.
v. Plough, Inc., 85 F.R.D. 257, 260 (D. Del. 1975); Florida ex rel. Broward County v. Eli
Lilly & Co., 329 F. Supp. 364, 366-67 (S.D. Fla. 1971). In regard to a consumer bringing a
cause of action pursuant to § 43(a), the court in Colligan v. Activities Club Ltd., 442 F.2d
686 (2d Cir. 1971), stated as follows:
The [Lanham] Act's purpose .... is exclusively to protect the interests of a purely
commercial class against unscrupulous commercial conduct.

...[Tihe procedural advantages of bringing suit in federal court, would lead

to a veritable flood of claims brought in already overtaxed federal district
courts, while adequate private remedies for consumer protection, which to date
have been left almost exclusively to the States, are readily at hand.
Id. at 692-93 (footnote omitted). But see Arnesen v. Raymond Lee Org., 333 F. Supp. 116,
120 (C.D. Cal. 1971) ("[Tjhere is, absent legislative intent to the contrary, no reason why
[a consumer] should not be able to sue for his own protection.").
75. 375 F. Supp. 777 (N.D. Ill. 1974). In this case, the defendant's advertising cam-
paign centered upon product testing done on a variety of electric drills and jigsaws
 Loyola University Law Journal [Vol. 15

segment of their audience; (3) the deception is material because it

is likely to influence purchasing decisions; (4) the defendant
caused its falsely advertised goods to enter interstate commerce;
and (5) the plaintiff has been injured or is likely to be injured as
the result of the defendant's conduct either by direct diversion of
sales from the plaintiff to the defendant, or by lessening the
goodwill which the plaintiffs products enjoy with the buying
76
public.
To prevail on a charge of unfair advertising under section
43(a), a plaintiff must first prove by a preponderance of the evi-
dence that the challenged advertisements are false or deceptive.77
Because wilfulness is not a factor in the determination of section
43(a) liability, proof by the defendant that the use of a false
designation, description or representation was undertaken inno-
cently will not constitute an affirmative defense to the charge. 78
Liability under the statute is not restricted to descriptions
which are literally false, 79 but includes situations where the
defendant creates a false impression. 0 A statement which is
actionable under the Lanham Act may be an affirmatively mis-
leading statement, a partially incorrect statement, or a statement

manufactured by the plaintiff, the defendant, and several other competitors. The plaintiff
alleged that some of the factual statements made by the defendant "concerning the quali-
ties and relative performance of its own products and those of [the plaintiff]" were "false,
misleading, deceptive and incomplete." Id. at 780. The trial court found these allegations
adequate to state a claim under § 43(a) because "the Congressional intention [in enacting
§ 43(a)] was to allow a private suit by a competitor to stop the kind of unfair competition.
that consists of lying about goods or services, when it occurs in interstate commerce." Id.
at 784-85.
76. Id. at 783.
77. Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 648 (3d Cir. 1958);
Toro Co. v. Textron, Inc., 499 F. Supp. 241, 251 (D. Del. 1980).
78. Johnson & Johnson v. Carter-Wallace, Inc., 631 F.2d 186, 189 (2d Cir. 1980); Better
Business Bureau, Inc. v. Medical Directors, Inc., 509 F. Supp. 811, 814 (S.D. Tex. 1981),
aff'd, 681 F.2d 397 (5th Cir. 1982); U-Haul Int'l, Inc. v. Jartran, Inc., 522 F. Supp. 1238,
1254 (D. Ariz. 1981), aff'd, 681 F.2d 1159 (9th Cir. 1982); Ames Publishing Co. v. Walker-
Davis Publications, Inc., 372 F. Supp. 1, 11 (E.D. Pa. 1974); Gold Seal Co. v. Weeks, 129 F.
Supp. 928, 940 (D.D.C. 1955), aff'd sub nom., S.C. Johnson & Son, Inc. v. Gold Seal Co.,
230 F.2d 832 (D.C. Cir. 1956).
79. Better Business Bureau, Inc. v. Medical Directors, Inc., 681 F.2d 397, 400 (5th Cir.
1982); McNeilab, Inc. v. American Home Prods. Corp., 501 F. Supp. 517, 525 (S.D.N.Y.
1980).
80. American Home Prods. Corp. v. Johnson & Johnson, 577 F.2d 160 (2d Cir. 1978).
In this case, the plaintiff advertised its product, Anacin, as superior to the defendant's
products, Tylenol and Datril. Proof of consumer perception of Anacin's general superior-
ity over its competitor's products without evidence of discernment of Anacin's superiority
19831 False Advertising

which is untrue as the result of the defendant's failure to disclose

a material fact.8 ' The courts have also recognized that a state-
ment which is literally true can be misleading because of the
82
manner in which it is presented.
In situations involving literally false claims, it is immaterial
how consumers perceive the message of the advertisements 83 be-
cause courts presume that false claims "tend to mislead" consum-
ers.84 This presumption relieves the plaintiff of his burden to
adduce evidence to prove part (2) of the Skil Corp. test. If a
statement is actually false, relief can be granted without refer-
5
ence to the reaction of the buyer or consumer of the product.8
However, when the issue is whether a statement acknowledged
by the plaintiff to be literally true and grammatically correct,
nevertheless, has a tendency to mislead, confuse or deceive
because of the way it is presented, the plaintiff has a greater
burden of proof. He must show that the persons to whom the
advertisement is addressed would find that the message received
left a false impression about the product.8 6 To prove this ele-
ment, courts have stated that the relevant interpretation of the
statement is one that would be made by the "average individual"
or by the "buying public" generally.87 Courts have also stated
that the law protects the "ignorant, the unthinking and the cre-

over Tylenol specifically, was sufficient to establish that the plaintiff had misrepresented
Anacin in its comparison with Tylenol. The court stated: "[Cjlever use of innuendo, indi-
rect intimations, and ambiguous suggestions could shield the advertisement from scrut-
iny precisely when protection against such sophisticated deception is most needed." Id. at
165.
81. See U-Haul Int'l, Inc. v. Jartran, Inc., 522 F. Supp. 1238, 1247 (D. Ariz. 1981), aff'd,
681 F.2d 1159 (9th Cir. 1982).
82. The way the public perceives the product is the only true measure of deceptive-
ness. Hesmer Foods, Inc. v. Campbell Soup Co., 346 F.2d 356, 359 (7th Cir. 1965); Park-
way Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 648 (3d Cir. 1958).
83. Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272, 277 (2d Cir. 1981); Ameri-
can Brands, Inc. v. R.J. Reynolds Tobacco Co., 413 F. Supp. 1352, 1356-57 (S.D.N.Y. 1976).
84. American Brands, Inc. v. R.J. Reynolds Tobacco Co., 413 F. Supp. 1352, 1356-57
(S.D.N.Y. 1976).
85. Id.
86. Id The court in American Brands stated:
We are dealing not with statements which are literally or grammatically
untrue .... Rather, we are asked to determine whether a statement acknowl-
edged to be literally true and grammatically correct nevertheless has a ten-
dency to mislead, confuse, or deceive. As to such a proposition "the public's
reaction to [the] advertisement will be the starting point in any discussion of
the likelihood of deception ....If an advertisement is designed to impress...
customers, . the reaction of [that] group[s] will be determinative."
 Loyola University Law Journal [Vol. 15

dulous," 88 and that an advertisement should be interpreted from

the point of view of the "least sophisticated reader."8 9 The literal
truth of the assertions is no defense in this situation if the
representations are misleading. 90
A court in making the determination of whether a statement is
deceptive should consider actual consumer perceptions to evaluate
whether the advertisement contains false representations.9 1 Thus,
in determining whether statements are misleading or deceptive
despite their truthfulness, the plaintiff must adduce evidence,
usually in the form of market research or consumer surveys to
show the manner in which the statements are perceived by those
who are exposed to them. 92 An advertisement's tendency to mis-
lead need not be established by any minimum percentage of con-
fused consumers. Rather, a plaintiff need only show that a sub-
stantial number of consumers received a false or misleading

Id. at 1357 (quoting 1 R. CALLMANN, THE LAW OF UNFAIR COMPETITION, TRADEMARKS AND
MONOPOLIES § 19.2(a)(1) (3rd ed. 1967)).
87. Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272, 278 (2d Cir. 1981) (reasona-
bly intelligent consumer); Charles of the Ritz Distrib. Corp. v. FTC, 143 F.2d 676, 679 (2d
Cir. 1944) (general populace). See also 1A R. CALLMANN, supra note 2, § 5.14, at 88
("Words must be interpreted in the same manner as they would be understood by those to
whom they are directed.").
88. E.g., Aronberg v. FTC, 132 F.2d 165, 167 (7th Cir. 1942).
89. Id. However, because advertisers aim their advertisements at different consuming
groups, advertisements must be judged in the context of the marketplace where they
appear. American Brands, Inc. v. R.J. Reynolds Tobacco Co., 413 F. Supp. 1352, 1360
(S.D.N.Y. 1976). If the advertisement is directed exclusively at the expert, then his exper-
tise will be the proper frame of reference in assessing its deceptive nature. See Glenn v.
Advertising Publications, Inc., 251 F. Supp. 889, 904-05 (S.D.N.Y. 1966).
90. McNeilab, Inc. v. American Home Prods., Corp., 501 F. Supp. 517, 525 (S.D.N.Y.
1980).
91. Normally, the representation which is relevant in determining the legality of an
advertisement is the general impression given by the advertisement as a whole, not the
literal truth of the statements. Coca-Cola Co. v. Tropicana Prods., Inc., 538 F. Supp. 1091,
1095 (S.D.N.Y.) rev'd on other grounds, 690 F.2d 312 (2d Cir. 1982). An advertisement's
contents should not be dissected but must be viewed in light of the reactions of the
audience to which it was directed. As stated in FrC v. Sterling Drug, Inc., 317 F.2d 669
(2d Cir. 1963):
It is therefore necessary... to consider the advertisement in its entirety and not
to engage in disputatious dissection. The entire mosaic should be viewed rather
than each tile seperately .... [T]he buying public does not ordinarily carefully
study or weigh each word in an advertisement. The ultimate impression upon
the mind of the reader arises from the sum total of not only what is said but
also of all that is reasonably implied."
Id. at 674 (quoting Aronberg v. FrC, 132 F.2d 165,167 (7th Cir. 1942)).
92. Schutt Mfg. Co., v. Riddell, Inc., 673 F.2d 202, 206, 208 (7th Cir. 1982); R.J. Rey-
nolds Tobacco Co. v. Loew's Theatres, Inc., 511 F. Supp. 867 (S.D.N.Y. 1980). In American
19831 False Advertising

impression from the defendant's statements in order to substan-

9 3
tiate his charge that the advertisement is deceptive.
Another factor considered by courts in determining liability
under the Lanham Act is consumer reliance on the truth of the
statement. This factor also indicates the competitive impact of
the advertisement.9 4 Additionally, reliance is also related to the
question of materiality. 95 A purchaser is likely to rely upon
material claims which would then affect his purchasing deci-
sions.9 6 According to part (3) of the Skil Corp. test, for a plaintiff
to recover under the Lanham Act he must prove that the defend-
ant's deception is material because it is likely to influence con-
sumers' purchasing decisions. If the advertisement is misleading
with respect to facts to which the public does not attach any
97
significance, it may be allowed.
Finally, to have jurisdiction under the Lanham Act, a plaintiff
must allege that the false statements concern goods or services
involved in interstate commerce.98 Because of the broad inter-

Brands, Inc. v. R.J. Reynolds Tobacco Co., 413 F. Supp. 1352 (S.D.N.Y. 1976), the defend-
ant's advertising boasted the low tar quantity in its cigarettes. No mention was made of
the plaintiff's trademark. The court held that without a survey of consumer reaction, the
plaintiff could not establish any confusion resulting from the advertising. Id. at 1358.
93. Coca-Cola Co. v. Tropicana Prods., Inc., 690 F.2d 312 (2d. Cir. 1982). In this case,
the parties were competitors in the sale of orange juice. The defendant, Tropicana, adver-
tised its product on TV showing Bruce Jenner squeezing a fresh orange and pouring the
juice in a Tropicana carton. This visual demonstration and its commentary, according to
the plaintiff, falsely represented that Tropicana orange juice was freshly squeezed unpro-
cessed juice, when it was not. A consumer survey indicated that 15% of the public may
have been confused by the commercial's message. The Second Circuit Court of Appeals
ordered that Tropicana be enjoined from showing this commercial. The court stated: "The
District Court found that at least a small number of those interviewed in the survey were
deceived. This is not an insubstantial number of consumers and thus plaintiff has met its
burden of proving irreparable harm." Id. at 317.
94. Toro Co. v. Textron, Inc., 499 F. Supp. 241, 254 (D. Del. 1980).
95. See Id. Materiality concerns the fact that "the maker of the representation knows
that its recipient is likely to regard the fact as important although a reasonable man
would not so regard it." RESTATEMENT (SECOND) OF TORTS § 538(2)(b), at 80 (1976).
96. Toro Co. v. Textron, Inc., 499 F. Supp. 241, 251 (D. Del. 1980).
97. For example, consumers are not expected to rely on an advertiser's puffing that
his products are the "best," "greatest," and the like. See also Toro Co. v. Textron, Inc.,
499 F. Supp. 241, 251 (D. Del. 1980) (the deceptive statement must be material so that the
public will rely on it in their purchasing decisions). But see McNeilab, Inc. v. American
Home Prods. Corp., 501 F. Supp. 517, 530 (S.D.N.Y. 1980) "([Ijt must be assumed that
more often than not advertisements successfully project the messages they are intended
to project, especially when they are professionally designed .... ).
98. Article I, § 8 of the Constitution provides in part that Congress shall have the
power "[t]o regulate Commerce with foreign Nations, and among the several States."
 Loyola University Law Journal [Vol. 15

pretation given to the definition of interstate commerce, 99 this

element of the cause of action is not difficult to prove.100
A Defense to a FalseAdvertising Claim
A frequent defense to a false advertising claim under the
common law and the Lanham Act is that challenged adver-
tisements merely puff or boast about the product's quality.
The concept of puffery as a permissible form of advertising or
sales technique has existed for many years. Puffing involves
situations in which superlatives are used to describe products or
services. 10' 1 Under the puffing doctrine, a businessman can adver-
tise that his goods are the best in the market as long as 10 he
2
makes no specific assertions of fact unfavorable to his rivals.
This rule is based on practicality because in competitive adver-

99. As early as 1824 in Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 194 (1824), the Court
recognized that interstate commerce involves "commerce which concerns more States
than one." Since that time the clause has been given an increasingly liberal interpreta-
tion. For one example of the modern scope of interstate commerce, see Heart of Atlanta
Motel, Inc. v. United States, 379 U.S. 241 (1964), where the Court found that commerce
power legislation would be upheld if there were any arguable connection between the
regulation and commerce which touched more states than one. Thus, the jurisdictional
requirement under the Lanham Act is satisfied if the defendant's alleged unfair activi-
ties, even if occurring exclusively within one state, affect the plaintiffs interstate busi-
ness. Crossbow, Inc. v. Glovemakers, Inc., 265 F. Supp. 202, 205 (N.D. Ill. 1967); Burger
King, Inc. v. Brewer, 244 F. Supp. 293, 298 (W.D. Tenn. 1965).
100. For a discussion of facts which courts have considered to be sufficient to show
interstate commerce, see Note, Section 43(a) of the Lanham Act-A Federal Unfair Com-
petition Remedy, 25 DRAKE L. REv. 228, 230-31 (1975).
101. See, e.g., Kidder Oil Co. v. FTC, 117 F.2d 892, 901 (7th Cir. 1941) ("amazing" and
"perfect"); Wolf v. Louis Marx & Co., 203 U.S.P.Q. 856, 859 (S.D.N.Y. 1978) ("new and
novel"); Smith-Victor Corp. v. Sylvania Elec. Prods., Inc., 242 F. Supp. 302, 308 (N.D. Ill.
1965) ("far brighter than any other lamp ever before offered"); Lewyt Corp. v. Health-
Mor, Inc., 84 F. Supp. 189, 194 (N.D. Ill. 1949) ("new and revolutionary"). As the court
stated in Carlay Co. v. FTC, 153 F.2d 493 (7th Cir. 1946):
Whether one [diet] plan is easy and another hard, whether one is easier than
another, whether one simple and another intricate, are all questions of comparative
character and quality .... [S]uch words as "easy," "perfect," "amazing," "prime,"
"wonderful," "excellent," are regarded in law as mere puffing or dealer's talk upon
which no charge of misrepresentation can be based.
Id. at 496 (footnotes omitted). One commentator has stated that puffing has become a
"privilege to lie." W. PROSSER, THE LAW OF TORTS 949 (3d ed. 1964). The term puffing
which grew up in an era of caveat emptor reflects the view that the buyer should expect a
considerable amount of actual lying by sellers eager to dispose of their goods. Sims v.
Mack Truck Corp., 488 F. Supp..592, 605 (E.D. Pa. 1980); Universal Athletic Sales Co. v.
American Gym, Recreational & Athletic Equip. Corp., 397 F. Supp. 1063, 1073 (W.D. Pa.
1975), vacated on other grounds, 546 F.2d 530 (3d Cir. 1976), aff'd, 566 F.2d 1171 (3d Cir.
1977).
102. See Fur Information & Fashion Council, Inc. v. E.F. Timme & Son, Inc., 501 F.2d
19831 False Advertising

tising, puffing is, for the most part, either discounted or ig-
nored.10 3 The public has become insensitive to a seller's claim
that his product is "the best." The average buyer is skeptical and
therefore attaches little importance to a seller's boasting.
However, the line between puffing and false advertising is
often indistinguishable.1 0 4 To make this determination, it is neces-
sary to consider the advertisement's effect on the average pur-
chaser. 10 5 If the evidence indicates that an advertisement has
the tendency to deceive and that the material representations
were relied upon by purchasers, then the advertisement is false
and should not be considered to be mere puffing. 10 6 There is an
obvious difference, for example, between stating that one's prod-
uct is the best and asserting that a competitor's product is only a
certain percentage as effective as one's own product.10 7 The
former instance merely expresses an opinion, the truth or falsity
of which is difficult or impossible to ascertain. The latter instance,
however, is an assertion of fact which implies that the party

1048, 1051 (2d Cir. 1974); Smith-Victor Corp. v. Sylvania Elec. Prods., Inc., 242 F. Supp.
302, 308 (N.D. 111.1965).
103. As stated in Julie Research Laboratories, Inc. v. General Resistance, Inc., 25 A.D.
2d 634, 268 N.Y.S.2d 187 (1966), aff'd, 19 N.Y.2d 906, 227 N.E.2d 892, 281 N.Y.S.2d 96
(1967):
The defendant's advertisements, amounting to no more than a claim in general
terms of superiority of its product over the products of competitors, constitute
mere "puffing" and are not actionable. "Mere general statements of compari-
son, declaring that the defendant's goods are the best on the market, or are
better than the plaintiffs, are privileged so long as they contain no specific
assertions of unfavorable facts reflecting upon the rival product. The feeling
has been that the practice of sellers to make consciously exaggerated claims for
their own goods is so well known that purchasers attach little or no importance
to such assertions, and they usually can do no serious harm. They are some-
times said to be mere statements of opinion."
Id. at 636, 268 N.Y.S. 2d. at 189 (quoting W. PROSSER, THE LAW OF TORTS 949 (3d ed. 1964).
See also Toro Co. v. Textron, Inc., 499 F. Supp. 241, 253 n.23 (D. Del. 1980).
104. See U-Haul Int'l, Inc. v. Jartran, Inc., 522 F. Supp. 1238, 1244-45 (D. Ariz. 1981),
aff'd, 681 F.2d 1159 (9th Cir. 1982).
105. See McLean v. Fleming, 96 U.S. 245, 255 (1877) (The Court stated that the test to
utilize in determining whether a claim is merely puffing is the effect on "the ordinary
purchaser in the exercise of ordinary care and caution in such matters."); See 1A R.
CALLMANN, supra note 2, § 5.14, at 88.
106. See, e.g., Bose Corp. v. Linear Design Labs, Inc., 467 F.2d 304 (2d Cir. 1972);
Testing Sys., Inc. v. Magnaflux Corp., 251 F. Supp. 286 (E.D. Pa. 1966); Smith-Victor
Corp. v. Sylvania Elec. Prods., Inc., 242 F. Supp. 302 (N.D. Ill. 1965).
107. E.g., Testing Sys., Inc. v. Magnaflux Corp., 251 F. Supp. 286, 289 (E.D. Pa. 1966)
(The defendant falsely advertised that the U.S. Government tested its product and the
plaintiffs, finding the former 60% better than the latter.).
 Loyola University Law Journal [Vol. 15

making the statement possesses the facts necessary to substan-

tiate its truth. 10 8 Additionally, although a buyer may not be per-
suaded by the boast that one product is the best, he may be per-
suaded by the claim that one article is better than the other.
Thus, it has been held that it is more than mere puffing when
the seller compares his product with another and asserts that his
goods are better than those of an identified competitor. 0 9 A
defendant's assertion that his advertisement was not false but
merely boasted about the quality of his product has been a fre-
quent defense to false advertising claims. However, courts are
now taking a closer look at puffing and rejecting it as a defense
when consumer deception is apparent.

Statutory Remedies for False Advertising

Assuming that a cause of action does exist under section 43(a)
of the Lanham Act, various remedies are available to the
aggrieved competitor. The exact interaction between section 43(a)
and the remedies sections of the Lanham Act was, until recently,
unclear. Uncertainty was caused by the remedies sections' spe-
cific references to "registered mark" or some other similar term" °
whereas section 43(a) also applies to causes of action not involv-
ing federally registered trademarks., The courts have, how-
ever, interpreted section 43(a) to include both the right to an
11 3
injunction 1 2 and monetary damages.

108. In Bose Corp. v. Linear Design Labs, Inc., 467 F.2d 304, 310 (2d Cir. 1972), the
defendant advertised its loudspeaker system as the "most lifelike" and having the "most
exacting reproduction of natural sound ever heard" with "overwhelming superiority."
These claims were held to be puffing. However, the defendant's assertion that its fre-
quency response had been measured at a specific level was considered to be factual. Id. at
309-10.
109. In Davis Elecs. Co. v. Channel Master Corp., 116 F. Supp. 919 (S.D.N.Y. 1953),
the plaintiff alleged that the defendant wrongfully advertised its product as superior to
other brands, including the plaintiffs product. Allegations that the defendant's claims
were false were sufficient to rebut the defendant's motion to dismiss on the ground that
such claims were merely puffing. Id. at 922.
110. Sections 32, 33 and 37 of the Lanham Act refer to "registered mark." 15 U.S.C.
§§ 1114-1115, 1119 (1982). Sections 34 and 35 refer to "mark registered in the Patent
Office" Id. §§ 1116-1117. Section 36 refers to both terms and § 38 refers to "registration in
the Patent Office of a mark." Id. §§ 1118, 1120.
111. See supra note 56.
112. Durbin Brass Works, Inc. v. Schuler, 532 F. Supp. 41, 43 (E.D. Mo. 1982).
113. Section 35 of the Lanham Act provides for monetary relief. 15 U.S.C. § 1117
(1982). The Eighth Circuit Court of Appeals in Metric & Multistandard Components
Corp. v. Metric's, Inc., 635 F.2d (8th Cir. 1980), held that § 35 applied to causes of action
19831 False Advertising

Although section 43(a) does not specifically refer to injunctive

relief,"14 it is within the general equity power of a court to grant
appropriate injunctive relief. 115 Most courts, however, merely base
injunctive relief on section 43(a) without further explanation of
remedial authority. 116 To obtain equitable relief under section
43(a), a preponderance of the evidence must show that the falsi-
ties complained of have a tendency to deceive." 7 Upon a suc-
cessful showing of such consumer reaction, the plaintiff has
demonstrated the likelihood of deception and consequently the
likelihood of economic harm to his business.'1 8 Unlike the com-
mon law, there is no requirement that the plantiff prove actual
loss.1 1 9 Injunctive relief may be granted even where the pecuni-
ary injury to the plaintiff may be slight and the possibility of
20
recovery of damages in the future is speculative.'

brought under § 43(a). The court stated:

Although the matter is not free from doubt, we are not persuaded by [the argu-
ment that § 35 applies only to cases involving registered marks]. A number of courts
have applied section 35 of the Act to violations under section 43(a) .... In our opin-
ion, this approach is a sound one. In the absence of any contrary indication, we are
not willing to hold that Congress intended to provide one set of remedies for infrin-
gement of registered marks and a different, potentially more comprehensive, set of
remedies for violations under section 43(a) that do not involve registered marks. It
would make no sense to assume that Congress would authorize broader relief for
claims arising out of the unlawful use of unregistered marks than for those arising
out of the infringement of registered marks.
Id. at 715 (citation omitted).
114. See supra note 56.
115. U-Haul Int'l, Inc. v. Jartran, Inc., 522 F. Supp. 1238, 1254-55 (D. Ariz. 1981), aff'd,
681 F.2d 1159 (9th Cir. 1982). Equitable causes of action are also subject to equitable
defenses, one of which is "unclean hands." This defense has been held to be applicable to
cases brought under § 43(a). Ames Publishing Co. v. Walker-Davis Publications, Inc., 372
F. Supp. 1, 14 (E.D. Pa. 1974). When applying this defense, however, the courts must look
not only to the rights of the competitors but also to the public interest. Id. See also
McNeilab, Inc. v. American Home Prods. Corp., 501 F. Supp. 517, 539 (S.D.N.Y. 1980) ("A
private party who has not acted fairly is not entitled to judicial aid enforcing fair play on
the part of another, but the public is.").
116. E.g., Durbin Brass Works, Inc. v. Schuler, 532 F. Supp. 41, 43 (E.D. Mo. 1982);
Crossbow, Inc. v. Dan-Dee Imports, Inc., 266 F. Supp. 335, 339, 341 (S.D.N.Y. 1967).
117. Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 649 (3d Cir. 1958);
Toro Co. v. Textron, Inc., 499 F. Supp. 241, 251 (D. Del. 1980). When determining whether
an advertisement has a tendency to deceive, courts generally look at the audience to
which the advertisement is directed. For example, in Ames Publishing Co. v. Walker-
Davis Publications, Inc., 372 F. Supp. 1 (E.D. Pa. 1974), magazine publishers were solicit-
ing advertisements for their respective publications. Thus, the audience was comprised of
companies that might purchase space to advertise their products. Id. at 12.
118. Ames Publishing Co. v. Walker-Davis Publications, Inc., 372 F. Supp. 1, 12-13
(E.D. Pa. 1974).
119. Id.
120. U-Haul Int'l, Inc. v. Jartran, Inc., 522 F. Supp. 1238, 1247 (D. Ariz. 1981), affd,
 Loyola University Law Journal [Vol. 15

At common law, the most difficult element a plaintiff had to

prove when seeking an injunction to prevent a defendant from
continuing his false advertising was showing that he would
suffer irreparable harm if the injunction was not granted. It was
difficult for the plaintiff to prove lost sales or damage to goodwill
as a result of a competitor's advertisement 21 because of the
large number of market variables which entered into the adver-
tising sales equation. 22 Consequently, under section 43(a), courts
have held that once it is determined that a defendant's adver-
tisement conveys a false message, irreparable injury for the pur-
pose of injunctive relief will be assumed.' 23 Sound policy reasons
exist for not requiring proof of actual loss as a prerequisite to
obtaining injunctive relief under section 43(a). Failure to prove
actual damages before an injunction is granted poses no likeli-
hood of a windfall for the plaintiff. The complaining competitor
1 24
is also entitled to a market free of false advertising.
Money damages, on the other hand, provide additional relief to
the competitor. Consequently, a plaintiff is held to a higher

681 F.2d 1159 (9th Cir. 1982); Philip Morris, Inc. v. Loew's Theatres, Inc., 511 F. Supp.
855, 858 (S.D.N.Y. 1980). As stated in Johnson & Johnson v. Carter-Wallace, Inc., 631
F.2d 186 (2d Cir. 1980):
Sound policy reasons exist for not requiring proof of actual loss as a prerequi-
site to § 43(a) injunctive relief. Failure to prove actual damages . . . poses no
likelihood of a windfall for the plantiff. The complaining competitor gains no
more than that to which it is already entitled-a market free of false advertising.
Id. at 192.
121. Philip Morris, Inc. v. Loew's Theatres, Inc., 511 F. Supp. 855, 858 (S.D.N.Y. 1980).
To obtain a preliminary injunction a plaintiff must establish irreparable harm. Cuisi-
narts, Inc. v. Robot-Coupe Int'l Corp., 509 F. Supp. 1036, 1044 (S.D.N.Y. 1981); Better
Business Bureau, Inc. v. Medical Directors, Inc., 509 F. Supp. 811, 814 (S.D. Tex. 1981),
aff'd, 681 F.2d 397 (5th Cir. 1982). Proof of sales diversion is not necessary to establish
irreparable harm for injunctive relief under § 43(a). Vidal Sassoon, Inc. v. Bristol-Myers
Co., 661 F.2d 272, 278 (2d Cir. 1981). The elements of proof necessary to obtain a prelimin-
ary injunction are not the same throughout the twelve federal circuits. For a recent dis-
cussion of these differences, see Bainton, Seizure Orders:An Innovative JudicialResponse
to the Realities of Trademark Counterfeiting,73 TRADE-MARK REP. 459, 471-75 (1983).
122. Coca-Cola Co. v. Tropicana Prods., Inc., 690 F.2d 312, 316 (2d Cir. 1982).
123. Injunctive relief is appropriate because unfair competition is not fully compensa-
ble by money damages. National Lampoon, Inc. v. American Broadcasting Co., 376 F.
Supp. 733, 750 (S.D.N.Y.), aff'd, 497 F.2d 1343 (2d Cir. 1974) (per curiam). False advertis-
ing damages a competitor's reputation in the industry. See American Home Prods. Corp.
v. Abbott Laboratories, 522 F. Supp. 1035, 1045-46 (S.D.N.Y. 1981); U-Haul Int'l, Inc. v.
Jartran, Inc., 522 F. Supp. 1238, 1241 (D. Ariz. 1981), aff'd, 681 F.2d 1159 (9th Cir. 1982).
124. Goodwill and reputation are protected under the Lanham Act. Better Business
Bureau, Inc. v. Medical Directors, Inc., 509 F. Supp. 811, 814 (S.D. Tex. 1981), affl'd, 681
F.2d 397 (5th Cir. 1982).
1983] False Advertising

standard of proof before recovering money damages. 125 Section

35 of the Lanham Act provides for a monetary recovery by a
successful plaintiff which consists of the following: (1) defend-
ant's profits; (2) any damages sustained by the plaintiff; and (3)
the costs of the action. 126 This recovery is cumulative. A court
27
may award both damages and the defendant's profits.'
Accounting for profits is an equitable remedy and it is often
justified under an unjust enrichment theory.' 28 The plaintiff
need not demonstrate any actual damages in order to obtain an
accounting for profits.' 29 Before making an award on the basis
of the defendant's profits, courts customarily require a plaintiff
to show bad faith or wilful conduct by the defendant' 30 because
13 1
the accounting is designed to deter future violations.
To obtain damages for the plaintiffs loss of business, the
aggrieved party must show that it suffered actual harm to its

125. See generally Koelemay, Jr., Monetary Relief for Trademark Infringement Under
the Lanham Act, 72 TRADE-MARK REP. 458 (1982). A plaintiff who obtains injunctive
relief is not necessarily entitled to damages. Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636,
641 (D.C. Cir. 1982).
126. Section 35(a) of the Lanham Act provides:
When a violation of any right... shall have been established in any civil
action arising under this chapter, the plaintiff shall be entitled .... subject to the
principles of equity, to recover (1) defendant's profits, (2) any damages sus-
tained by the plaintiff, and (3) the costs of the action. The court shall assess
such profits and damages or cause the same to be assessed under its direction.
In assessing profits the plaintiff shall be required to prove defendant's sales
only; defendant must prove all elements of cost or deduction claimed. In assess-
ing damages the court may enter judgment, according to the circumstances of
the case, for any sum above the amount found as actual damages, not exceed-
ing three times such amount. If the court shall find that the amount of the
recovery based on profits is either inadequate or excessive the court may in its
discretion enter judgment for such sum as the court shall find to be just, accord-
ing to the circumstances of the case. Such sum in either of the above circum-
stances shall constitute compensation and not a penalty. The court in excep-
tional cases may award attorney fees to the prevailing party.
15 U.S.C. § 1117 (1982).
127. See Borg-Warner Corp. v. York-Shipley, Inc., 127 USPQ 42, 46 (N.D. Ill. 1960),
aff'd, 293 F.2d 88 (7th Cir. 1961) (The plaintiff was awarded $2,280,000.00 in damages and
an order of accounting of the defendant's profits.).
128. Playboy Enters., Inc. v. P.K. Sorren Export Co., 546 F. Supp. 987, 997 (S.D. Fla.
1982).
129. Id. The plaintiff need only show the gross sales of the defendant's infringing
goods. The burden of proof then shifts to the defendant to demonstrate all the elements of
its claimed costs or deductions. 15 U.S.C. § 1117 (1982). See also Durbin Brass Works, Inc.
v. Schuler, 532 F. Supp. 41, 43 (E.D. Mo. 1982).
130. See, e.g., Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636, 641 (D.C. Cir. 1982); Mar-
shak v. Green, 505 F. Supp. 1054, 1061 (S.D.N.Y. 1981).
131. See, e.g., Playboy Enters., Inc. v. Baccarat Clothing Co., 692 F.2d 1272, 1279 (9th
 Loyola University Law Journal [Vol. 15

business.13 2 The Lanham Act requires that the plaintiff demon-

strate not only that the defendant's advertisement is false but
also that it actually deceived a portion of the buying public. 133 To
sustain his burden of proof, the plantiff is faced with the com-
mon law problem of proving an actual diversion of his customers
who relied upon the false advertising of the defendants. 134 How-
ever, the plaintiffs burden does not require him to produce a list
of his customers who were diverted by the defendant, thereby
proving specific loss of sales. 135 Such proof goes to the quantum
of damages and not to the very right to recover. 136 Reliance on
the defendant's deceptive statements may be shown by surveys,
37
or testimony of a dealer, distributor, or customer
Under the proper circumstances, a court may also award a
plaintiff up to three times the amount of profits made by the
defendant. 38 To award damages, however, there must be an
40
actual showing of harm. 139 Attorneys' fees also may be awarded

Cir. 1982); Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117 (9th Cir.
1968); Marshak v. Green, 505 F. Supp. 1054, 1061 (S.D.N.Y. 1981).
132. Playboy Enters., Inc. v. P.K. Sorren Export Co., 546 F. Supp. 987, 998 (S.D. Fla.
1982); Invicta Plastics (USA), Ltd. v. Mego Corp., 523 F. Supp. 619, 624 (S.D.N.Y. 1981);
Ames Publishing Co. v. Walker-Davis Publications, Inc., 372 F. Supp. 1, 13 (E.D. Pa.
1974).
133. Warner Bros., Inc. v. Gay Toys, Inc., 658 F.2d 76, 79 (2d Cir. 1981); Parkway
Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 648 (3d Cir. 1958); Skil Corp. v. Rock-
well Int'l Corp., 375 F. Supp. 777, 783 (N.D. Ill. 1974).
134. In Pennwalt Corp. v. Plough, Inc., 85 F.R.D. 257, 260 (D. Del. 1975), the court
indicated that proof of the defendant's increased sales during the period it falsely adver-
tised will be admissible for the purpose of establishing damages.
135. Id.
136. Id.
137. Schutt Mfg. Co. v. Riddell, Inc., 673 F.2d 202, 207 (7th Cir. 1982); Warner Bros.,
Inc. v. Gay Toys, Inc., 658 F.2d 76, 79 (2d Cir. 1981) (The plaintiff must present credible
evidence that the buying public was deceived.); Invicta Plastics (USA), Ltd. v. Mego
Corp., 523 F. Supp. 619, 624 (S.D.N.Y. 1981) (The plaintiff must present credible evidence
of its damages.).
138. Playboy Enters., Inc. v. P.K. Sorren Export Co., 546 F. Supp. 987, 998 (S.D. Fla.
1982). Under § 4 of the Clayton Antitrust Act, trebling of damages and awarding reaso-
nable attorneys' fees is mandatory. 15 U.S.C. § 15 (1982). However, under § 35(a) of the
Lanham Act, a court may, in its discretion, award an amount over actual damages up to
three times that amount and reasonable attorneys' fees. 15 U.S.C. § 1117 (1982).
139. Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636, 641 (D.C. Cir. 1982).
140. The "American Rule" is that attorneys' fees are not ordinarily recoverable.
Scotch Whiskey Ass'n v. Barton Distilling Co., 489 F.2d 809, 813-14 (7th Cir. 1973). In
Fleishmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 721 (1967), the Supreme
Court ruled that attorneys' fees may not be recovered under the Lanham Act. Subsequent
to this decision, § 35 of the Lanham Act was amended to allow the awarding of attor-
19831 False Advertising

but only in exceptional cases where the defendant's violation of

14 1
section 43(a) was malicious, fraudulent or wilful.

COMMON LAW CLAIM FOR DISPARAGEMENT

When an advertiser makes false statements about his competi-

tor's products he may also run afoul of the common law govern-
ing disparagement. 142 Commercial disparagement results when
the quality of the goods or services of a business have been
demeaned. 143 In a product disparagement case, liability results
only when the plantiff proves that the defendant's statements
are false. 144 Therefore, courts will not proscribe statements that

neys' fees. Act of Jan. 2, 1975, Pub. L. No. 93-600, 88 Stat. 1949, § 3 (codified as amended
at 15 U.S.C. § 1117 (1982)). Section 35(a) permits an award of attorneys' fees to the pre-
vailing party, not just to a successful plaintiff. Hairline Creations, Inc. v. Kefalas, 664
F.2d 652, 657 (7th Cir. 1981) (citing H.R. REP. No. 524, 93d Cong., 1st Sess. 5-6 (1973),
reprintedin 1974 U.S. CODE CONG. & AD.NEWS 7132, 7136).
141. Hairline Creations, Inc. v. Kefalas, 664 F.2d 652 (7th Cir. 1981). "The added
remedy was intended, however, to be 'exceptional' thereby tracking the parallel provi-
sions of the patent and copyright statutes. Id. at 657 (citing H.R. REP. No.524, 93d Cong.,
1st Sess., 2 (1973); S. REP. No. 1400, 93d Cong., 2d Sess., reprinted in 1974 U.S. CODE
CONG. & AD.NEws 7132, 7133). See also Hindu Incense v. Meadows, 692 F.2d 1048, 1051
(6th Cir. 1982); Safeway Stores, Inc. v. Safeway Discount Drugs, Inc., 675 F.2d 1160, 1169
(11th Cir. 1982); Playboy Enters., Inc. v. Chuckleberry Publishing, Inc., 511 F. Supp 486,
496 (S.D.N.Y. 1981); Invicta Plastics (USA), Ltd. v. Mego Corp., 523 F. Supp. 619, 625
(S.D.N.Y. 1981).
142. In contrast, when an advertiser makes false statements concerning a competitor
he may violate the common law governing defamation. Defamation exists when the
integrity of a business has been impugned. Testing Sys., Inc. v. Magnaflux Corp., 251 F.
Supp. 286, 291 (E.D. Pa. 1966); Montgomery Ward & Co. v. United Retail, Wholesale &
Dep't Store Employees of Am., 400 111. 38,51, 79 N.E.2d 46,53 (1948). It is often difficult to
draw the line between libel of the product and libel of its manufacturer. Testing Sys., Inc.
v. Magnaflux Corp., 251 F. Supp. 286, 291 (E.D. Pa. 1966); National Dynamics Corp. v.
Petersen Publishing Co., 185 F. Supp. 573, 575 (S.D.N.Y. 1960). However, as stated in
Black & Yates, Inc. v. Mahogany Ass'n, 129 F.2d 227 (3d Cir.), aff'd on reh'g, 129 F.2d
232 (3d Cir. 1941), cert. denied, 317 U.S. 672 (1942):
There is a clear line of demarcation between the two torts [of defamation and
commercial disparagement] which is often overlooked. The first is concerned
with interests of personality, the other with interests in property .... [T]he
action for disparagement of property has a place of its own in the law; and is
not a mere branch, or special variety, of the action for defamation of personal
reputation.
Id. at 235-36 (footnote omitted).
143. See generally Nims, Unfair Competitionby False Statements or Disparagement,
19 CORNELL L.Q. 63 (1933). One court has stated that no common law action for dispar-
agement exists in Illinois. National Educ. Advertising Servs., Inc. v. Cass Student Adver-
tising, Inc., 454 F. Supp. 71, 73 (N.D. Ill. 1977).
144. For example, in Testing Sys., Inc. v. Magnaflux Corp., 251 F. Supp. 286 (E.D. Pa.
1966), a cause of action was held to exist when the defendant published a false report that
 Loyola University Law Journal [Vol. 15

one product is better than another or is the best of its kind,

because the truth of such a proposition depends on subjective
factors which vary from person to person. 45 The plantiff must
also show an intent on the part of the defendant to cause the
plaintiff financial harm or to divert customers away from the
plaintiff.146 Finally, the necessity of pleading and proving spe-
cial damages has been the most difficult element to establish in
a cause of action for disparagement. 147 No damages are pre-
sumed.' 48 Restrictive conceptions of compensable damage for
disparagement have constituted the major obstacle to recov-
ery.1 49 Because a plaintiff in a disparagement action is seeking
vindication of his property rights, he must establish the amount
150
of his loss.
The courts have set forth rigorous standards of proof for dis-
paragement compensation demanding, inter alia, evidence of

the plaintiffs product was only 40% as effective as the defendant's product.
145. A businessman can advertise that his goods are the "best" in the market as long
as he makes no specific assertions of fact unfavorable to his competitors. This rule is
premised on practicality. The average consumer is skeptical enough to attach little
importance to a seller's boasting. See supra notes 101-09 and accompanying text.
146. Systems Operations v. Scientific Games Dev. Corp., 555 F.2d 1131, 1140 (3d Cir.
1977); Scott Paper Co. v. Fort Howard Paper Co., 343 F. Supp. 229, 233 (E.D. Wis. 1972);
RESTATEMENT (SECOND) OF TORTS § 623A (1977).
147. See Bernard Food Indus., Inc. v. Dietene Co., 415 F.2d 1279, 1284 (7th Cir. 1969);
Aerosonic Corp. v. Trodyne Corp., 402 F.2d 223, 231 (5th Cir. 1968); Scott Paper Co. v.
Fort Howard Paper Co., 343 F. Supp. 229, 232-33 (E.D. Wis. 1972); Testing Sys., Inc. v.
Magnaflux Corp., 251 F. Supp. 286, 290-91 (E.D. Pa. 1966); National Dynamics Corp. v.
Petersen Publishing Co., 185 F. Supp. 573, 574 (S.D.N.Y. 1960).
148. Systems Operations v. Scientific Games Dev. Corp., 555 F.2d 1131, 1140 (3d Cir.
1977); Scott Paper Co. v. Fort Howard Paper Co., 343 F. Supp. 229, 232 (E.D. Wis. 1972)
(must allege special damages). The requirement in a disparagement action that damage
be shown before the plaintiff is compensated guarantees that the freedom to criticize the
quality of products is not chilled in the absence of demonstrable harm stemming from the
falsehood. Testing Sys., Inc. v. Magnaflux Corp., 251 F. Supp. 286, 288-89 (E.D. Pa. 1966).
The first amendment guarantees freedom of commercial advertising. Virginia State Bd.
of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748, 759 (1976); Bigelow v.
Virginia, 421 U.S. 809, 818 (1974). However, commercial speech receives less protection
from the first amendment than other forms of speech. Central Hudson Gas & Elec. Corp.
v. Public Serv. Comm., 447 U.S. 557, 561-62 (1979).
149. Testing Sys., Inc. v. Magnaflux Corp., 251 F. Supp. 286, 290 (E.D. Pa. 1966).
150. Bose Corp. v. Consumers Union of the United States, Inc., 57 F.R.D. 528, 529 (D.
Mass. 1973). Unlike disparagement, the plaintiff in a defamation case is only required to
show communication to a third person or publication of a statement understood by those
to whom it is communicated to be defamatory in meaning. Fleck Bros. v. Sullivan, 423
F.2d 155, 156 (7th Cir. 1970). Falsity is presumed, obviating proof of scienter or actual
damages. Cantrell v. American Broadcasting Cos., 529 F. Supp. 746, 752 (N.D. Ill. 1981).
19831 False Advertising

lost contracts, employment or sales.' 5 ' For example, a plaintiff

in a disparagement action who pleads special damages in the
nature of lost sales must prove with specificity that his loss of
sales is attributable to the defendant's false statements. 15 2 Un-
fortunately, courts have failed to appreciate that the complexities
of modern marketing make it difficult, if not impossible, for a
manufacturer to identify the names of the actual or prospective
customers who were induced to divert their business as a proxi-
mate result of his competitor's disparagement. 15 3 The inflexibil-
ity of most courts in demanding such a strict standard of proof
of special damages has hampered the effectiveness of this cause
of action.
Another difficulty encountered in an action for disparagement
is obtaining an injunction. 54 The plaintiff wants the advertise-
ments stopped immediately. However, equity will not enjoin a

151. See Systems Operations v. Scientific Games Dev. Corp., 555 F.2d 1131, 1140 (3d
Cir. 1977); National Dynamics Corp. v. Petersen Publishing Co., 185 F. Supp. 573, 574
(S.D.N.Y. 1960).
152. Bose Corp. v. Consumers Union of the United States, Inc., 57 F.R.D. 528, 530 (D.
Mass. 1973); Testing Sys., Inc. v. Magnaflux Corp., 251 F. Supp. 286, 290 (E.D. Pa. 1966).
Courts recognize that factors other than disparagement may have caused the plaintiff
loss of sales. The plaintiffs loss may have resulted from a normal decline in demand for
his product. There may have been a general business recession in the plaintiffs market-
ing area or in the industry as a whole. See Comment, supra note 2, at 89.
Courts have gone as far as requiring proof of specific refusals to buy on the part of
identified customers. These courts suggest that otherwise it would be too easy to fabricate
evidence which the defendant would be unable to rebut. In Bose Corp. v. Consumers
Union, the court ruled that the plaintiff had not shown its loss with sufficient specificity
because it failed to allege as follows:
[F]acts showing an established business, the amount of sales for a substantial
period preceding the [defendant's] publication, the amount of sales subsequent
to the publication, facts showing that such loss in sales were [sic] the natural
and probable result of such publication, and facts showing that plaintiff could
not allege the names of particular customers who withdrew or withheld their
custom.
57 F.R.D. at 530 (quoting Erick Bowman Remedy Co. v. Jensen Salsbery Laboratories, 17
F.2d 255, 261 (8th Cir. 1926)).
153. As stated in Systems Operations, Inc. v. Scientific Games Dev. Corp., 555 F.2d
1131 (3d Cir. 1977):
As a nation, we have evolved since the industrial revolution from a simple
agrarian society into a highly industrialized country with dynamic and com-
plex commercial interests. One would expect that such an evolution would be
attended by comparable activity in commercial law, and specifically in the law
of product disparagement. Surprisingly, this has not been the fact. The enor-
mous growth in commercial and industrial activity has not had a similarly
prolific effect on the number of product disparagement cases.
Id. at 1139.
154. See Davis Elecs. Co. v. Channel Master Corp., 116 F. Supp. 919, 922 (S.D.N.Y.
 Loyola University Law Journal [Vol. 15

libel, and hence, courts have held that equity jurisdiction does
not extend to cases involving the false representations of the
quality of another's goods unless there is some other basis for
equitable jurisdiction. 155 The reason equity will not enjoin such
actions is predicated on three theories. The first theory contends
that equitable enjoinder of libel violates the constitutional guar-
antees of freedom of speech and press. 156 The second theory
states that equitable enjoinder violates the constitutional guar-
antee of a trial by jury because libel is an issue to be determined
by a jury. The third theory maintains that equity jurisdiction
does not extend to such cases because equity does not interfere to
protect rights which are purely personal in nature. Therefore, to
obtain an injunction to stop a competitor's false representations,
a plaintiff should predicate his action upon an alternative the-
ory, such as a claim for unfair competition.
In Black & Yates, Inc. v. Mahogany Association, 57 the plain-
tiff was engaged in the business of selling a hardwood grown in
the Philippines which it called "mahogany."158 The plaintiff
sought to enjoin the defendant association, a group of sellers 16 of0
wood 159 which traditionally had been known as mahogany,
61
from circulating statements disparaging the plaintiffs product.'
The trial court dismissed the complaint on the basis, inter alia,
16 2
that equity has no jurisdiction over disparagement.
The Court of Appeals for the Third Circuit reversed the deci-
sion of the trial court.' 63 For the first time, a court held that an
injunction could be granted based on a cause of action for dis-
paragement, independent of a claim based on unfair competition

1953); Robert E. Hicks Corp. v. National Salesmen's Training Ass'n, 19 F.2d 963, 965 (7th
Cir. 1927).
155. See, e.g., Youngs Drug Prods. Corp. v. Dean Rubber Mfg. Co., 362 F.2d 129, 133
(7th Cir. 1966); Montgomery Ward & Co. v. United Retail, Wholesale & Dep't Store
Employees of Am., 400 Ill. 38, 42, 79 N.E. 2d 46, 48 (1948).
156. See Montgomery Ward & Co. v. United Retail, Wholesale & Dep't Store Employees
of Am., 400 Ill. 38, 41-42, 79 N.E.2d 46 (1948); Comment, The Availability of Preliminary
Injunctions Against Trade Libel, 6 U.S.F.L. REV. 418, 419 (1972).
157. 129 F.2d 227 (3d Cir.), aff'd on reh'g, 129 F.2d 232 (3d Cir. 1941), cert. denied, 317
U.S. 672 (1942).
158. Id. at 228.
159. Id.
160. Id.
161. Id. at 228-29.
162. Black & Yates, Inc. v. Mahogany Ass'n, 34 F. Supp. 450, 457 (E.D. Pa. 1940),
rev'd, 129 F.2d 227 (3d Cir.), aff'd on reh'g, 129 F.2d 232 (3d Cir. 1941), cert. denied, 317
U.S. 672 (1942).
163. 129 F.2d at 227.
1983] False Advertising

which would justify equitable jurisdiction. 164 However, the preced-

ential force of this ruling is doubtful because the court's decision
was predicated on the view that equitable relief is determined by
federal law rather than state law, 165 a view which was rejected
by the Supreme Court in Guaranty Trust Co. v. York. 166 In addi-
tion, the court weakened the precedential value of its own deci-
sion. On rehearing, although the court strongly criticized the
theories underlying equity's refusal to enjoin an action for dispar-
agement, 67 the court stated that it was "not required to depart
from severely criticized precedent"'168 because the plaintiffs
complaint was also sufficient to support a charge of unfair com-
petition which would justify injunctive relief. 69

STATUTORY CLAIM FOR DISPARAGEMENT

The Uniform Deceptive Trade Practices Act ("Uniform Act")

provides injunctive relief for false advertising. 170 An action can
be brought under the Uniform Act for both disparagement and
misrepresentation. 171 The remedy available under the Uniform

164. Id. at 231.

165. Id.
166. 326 U.S. 99, reh'g denied, 326 U.S. 806 (1945). The federal courts cannot permit
recovery if the right to relief is not available under state law, regardless of whether the
remedy sought is legal or equitable. Id. at 110. The outcome of the case should be the
same whether the action is brought in state or federal court. Id.
167. 129 F.2d 232, 233-36.
168. Id. at 236.
169. Id.
170. The Uniform Act has been adopted in a number of states. Illinois is one of the
states that has adopted the Uniform Act. ILL. REV. STAT. ch. 121'/2, §§ 311-317 (1981). For
the text of the Uniform Act and a list of the adopting states, see UNIF. DECEPTIVE TRADE
PRACTICES ACT §§ 1-9, 7 U.L.A. 35 (1978). However, the likelihood of it being adopted by
enough states to make its provisions truly uniform is slight, as a number of states have
already adopted other legislation in this area. See Sterk, supra note 4, at 380 n.6.
171. Section 2 of the Illinois statute provides in pertinent part:
§ 2. A person engages in a deceptive trade practice when, in the course of his
business, vocation or occupation, he:

(5) represents that goods or services have sponsorship, approval, characteris-

tics, ingredients, uses, benefits or quantities that they do not have or that a
person has a sponsorship, approval, status, affiliation, or connection that he
does not have;

(7) represents that goods or services are a particular standard, quality or

grade or that goods are a particular style or model, if they are of another;
(8) disparages the goods, services or business of another by false or misleadng
representation of fact;
 Loyola University Law Journal [Vol. 15

Act is limited to injunctive relief. 172 Thus, unlike the common

law, the Uniform Act expressly provides that a competitor's dis-
paragement may be enjoined in a court of equity. The Uniform
Act also does not require proof of special damages resulting from
disparagement. A competitor's disparagement of another's prod-
uct may be enjoined without proof of monetary damages or loss
of profits. 173 A plaintiff may be granted injunctive relief if the
court finds that he is "likely to be damaged by a deceptive trade
1 74
practice of another.'
Additionally, a number of states have adopted statutes, com-
monly known as anti-dilution statutes, to protect a business from
advertisements which have the likelihood of injuring its reputa-
tion.1 75 To state a claim under an anti-dilution statute, it is not
necessary to prove the existence of competition between the par-
177
ties 176 or confusion as to the source of the goods or services.

(12) engages in any other conduct which similarly creates a likelihood of con-
fusion or of misunderstanding.
ILL. REv. SWAT. ch. 1211/2,§ 312 (1981).
172. Section 3 provides that "[a] person likely to be damaged by a deceptive trade
practice of another may be granted injunctive relief upon terms that the court considers
reasonable." ILL. REV. STAT. ch. 1211/2, § 313 (1981). To obtain relief under the Uniform
Act, the plaintiff does not have to be in direct competition with the defendant. In addi-
tion, the plaintiff does not have to prove palming-off by the defendant. National Football
League Properties, Inc. v. Consumer Enters., Inc., 26 Ill. App. 3d 814, 820, 327 N.E.2d 242,
cert. denied, 423 U.S. 1012 (1975). Both individuals and businesses may utilize the Uni-
form Act. McDonald's Corp. v. Gunvill, 441 F. Supp. 71, 75 (N.D.Ill. 1977), aff'd, 622 F.2d
592 (7th Cir. 1980).
173. Section 3 provides that "[piroof of monetary damage, loss of profits or intent to
deceive is not required." ILL. REv. STAT. 1211/2, § 313 (1981).
174. See supra note 172. In Illinois, a competitor or a consumer may obtain monetary
relief, but not injunctive relief under the Consumer Fraud and Deceptive Business Prac-
tices Act. ILL. REv. STAT. ch. 1211/2, §§ 261-272 (1981).
175. See, e.g., ARK. STAT. ANN. § 70-550 (1979); CAL. Bus. & PROF. CODE § 14330 (West
1980); CONN. GEN. STAT. § 35 (1979); DEL. CODE ANN. tit. 6, § 3313 (1978); FLA. STAT. ANN.
§ 495 (West 1972); GA. CODE §§ 106-115 (1978); IDAHO CODE § 48,512 (1977); ILL. REV.
STAT. ch. 140, § 22 (1981); IOWA CODE § 548.10 (1979); MAss. GEN. LAWS ANN. ch. ll0B,
§ 12 (West 1980); Mo. ANN. STAT. § 417.061 (Vernon 1979); NEB. REv. STAT. § 87-122
(1976); N.H. REv. STAT. ANN. § 350-A:12 (1979); N.M. STAT. ANN. § 57-3-10 (1978); N.Y.
GEN. Bus. LAW § 368-d (McKinney 1968); OR. REv. STAT. § 647.107 (1971); R.I. GEN. LAwS
§ 6-2-12 (1980).
176. "The [Illinois] Anti-Dilution Statute is designed to protect a strong trade name or
mark from use by another and hence dilution regardless of competition between the par-
ties." Filter Dynamics Int'l, Inc. v. Astron Battery, Inc., 19 Ill. App. 3d 299, 314, 311
N.E.2d 386, 398 (1974) (citations omitted). See also McDonald's Corp. v. Gunvill, 441 F.
Supp. 71, 75 (N.D. Ill. 1977), aff'd, 622 F.2d 592 (7th Cir. 1980).
177. Ye Olde Tavern Cheese Prods., Inc. v. Planters Peanuts Div., Standard Brands
Inc., 261 F. Supp. 200 (N.D. Ill. 1966).
19831 False Advertising

When a violation is proven, a plaintiff is entitled to have the

78
damaging conduct enjoined.

CONCLUSION
This article has described the radical changes in the law of
false advertising. Under certain circumstances, competitors may
now obtain relief from false or misleading advertising. Formerly,
courts routinely denied a claim of misrepresentation alleged by
one competitor against another. Now, however, injunctions
against such advertising are becoming more and more frequent.
This change has evolved through the recognition by Congress
and state legislatures that harm is inflicted on competitors and
consumers by these practices. The common law restrictions have
not yet been eliminated entirely, but state and federal legislation
have opened the courtroom door to competitors who believe they
have been injured by another's misrepresentations to the public.

178. For example, ILL. REV. STAT. ch. 140, § 22 (1981) states in part: "[Tihe circuit
court shall grant injunctions, to enjoin subsequent use by another of the same or any
similar... form of advertisement if there exists a likelihood of injury to business reputa-
tion or of dilution of the distinctive quality of the ... form of advertisement of the prior
user ......