2011 Lane Reports

Do You Know What's In Your Marketing Materials?

The Lane Report, March 2011
Tuesday, March 1, 2011 6:00 am
by Cori A. Mathis

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Yummy Dough, a fairly new product out of Germany, creates a compound that kids can mold into various shapes, bake, and eat. The company behind Yummy Dough, 123 Nahrmittel GmbH, received numerous awards for the product and has been expanding distribution to other countries.

In March 2010, Hasbro, Inc. sued the makers of Yummy Dough in the United Kingdom, and won. Hasbro did not raise any legal claims against the Yummy Dough product itself or its name. Rather, Hasbro claimed that the product's label, which described Yummy Dough as “edible play dough”, infringed its trademark rights in “Play-Doh.” While some may see the product label as an accurate way to describe the product or may not have realized that “play-doh” was a proprietary term, Hasbro was able to prove that it constituted federal trademark infringement.

In a federal case in Virginia, a Judge upheld a jury verdict of $13.5 million which had been awarded to PBM Products, LLC, maker of store-brand baby formula, as damages for false and misleading claims made in a competitor's advertising. The Judge also permanently enjoined the competitor (Mead Johnson, makers of Enfamil formula) from circulating any advertisements that include claims that, “there are plenty of other ways to save on baby expenses without cutting back on nutrition” and “it may be less tempting to try a less expensive store brand, but only Enfamil LIPIL is clinically proven to improve brain and eye development.”

And you may have seen the recent advertisements for H&R Block's “Second Look Review” program, which offers a review of past tax returns for accuracy. Just a few weeks ago, Jackson Hewitt Tax Service Inc. filed suit against H&R Block claiming that those advertisements falsely claim that two-thirds of tax returns prepared by Jackson Hewitt contain mistakes. The lawsuit is currently pending in federal court in New York.

Many companies describe and advertise their products in relation to other products on the market, which is often called comparative advertising. And the United States has had a reputation for generally encouraging comparative advertising as a way to provide information to consumers that will assist them in making purchasing decisions.

However, the number of legal claims being filed for comparative advertising is on the rise, as is the amount of damages that companies are being required to pay to their competitors. By being aware of this risk and having an attorney involved in your marketing campaign, you can minimize the potential for unexpected legal claims.

This article will summarize some of the legal claims that can be brought against advertisements. However, the law in this area is very nuanced and fact-sensitive and this article is not meant to be a comprehensive discussion of the subject matter.

Generally, advertisements may be subject to trademark infringement claims, as in the case of Yummy Dough, if you use another company's trademarks in a way that is likely to cause consumer confusion regarding the source of the products. Using another company's trademarks in a way that makes it appear that the company endorses, or is affiliated with, your product could also give rise to legal claims. A false or misleading statement in an advertisement that deceives or has the tendency to deceive may be subject to a false advertising claim.

In addition, the Federal Trade Commission Act requires advertising to be:
(a) truthful and non-deceptive:
(b) advertisers to have evidence to back up their claims, and
(c) advertisements to be fair.

An advertisement is deceptive, according to the FTC's Deception Policy Statement, if it contains a representation or omission that is likely to mislead reasonable consumers, and if the representation or omission is material to the consumer's choice. Advertisers must have substantiation for their express and implied claims, typically provided through testing, before the advertisement is published. And an advertisement is unfair, according to the Federal Trade Commission Act and the FTC's Unfairness Policy Statement, if it causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid and is not outweighed by the benefit to consumers.

We encourage you to have your marketing materials reviewed by an attorney knowledgeable in this area before they are circulated, including your website, product packaging, brochures, print ads, and point-of-purchase displays. 

We would be happy to discuss these issues as they apply to your business, provide compliance training to your marketing team, or review your marketing materials.  Please call Marc Lane at (312) 372-1040 or (800) 372-1040, or e-mail him at mlane@marcjlane.com to explore all the possibilities.

Cori A. Mathis is a Principal with The Law Offices of Marc J. Lane.  Ms. Mathis is a graduate of De Paul University College of Law (J.D.) and the University of Illinois (B.A.S.).

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Chicago, Illinois 60601-2701
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Websites: www.MarcJLane.com

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