News & Events

Sixth Circuit Tracks Broader Definition of Commercial Advertising or Promotion in Lanham Act Claims for False Advertising

We’ve all been there:  an ad for a pair of shoes we looked at follows us around the Internet long after we’ve closed the window; our Gmail account delivers ads for hotels at a destination for which we’ve just booked a flight; or we get store coupons based on items we’ve purchased there in the past.  Surely this is commercial advertising, right?  Recognizing the ubiquity of tracking and big data online, the Sixth Circuit recently agreed in the context of a Lanham Act claim.

In Grubbs v. Sheakley Group, Inc., 807 F.3d 785 (6th Cir. 2015), the plaintiff companies (“Tri-Serve”) were professional employment organizations, to which employers could outsource administrative tasks such as payroll and benefits.  Defendant Angelia Strunk-Zwick managed the PEOs and was subject to a non-compete agreement.  Eventually, though, Strunk-Zwick started providing consulting services to a competitor firm, the Sheakley Group of Companies (“Sheakley”).  A Sheakley executive suggested that Strunk-Zwick contact the Tri-Serve clients to inform them that it was “partnering” with Sheakley and that they could transition to Sheakley.

Strunk-Zwick did so, emailing a potential client that “[W]e will be moving our offices over the weekend,” and giving her new contact information at a Sheakley domain name.  She also sent an email to twenty-two Tri-Serve clients, informing them, “We are moving!” and “partnering with Sheakley HR and moving our offices.”  Only it wasn’t Tri-Serve that was moving—it was Strunk-Zwick.  Even after moving, Strunk-Zwick continued to use the Tri-Serve name.

Plaintiffs brought suit alleging trade name infringement, false advertising, RICO, and RICO conspiracy claims, among others.  Although the Sixth Circuit’s opinion touched on numerous issues, its discussion of the false-advertising claim was especially interesting.

The federal Lanham Act establishes liability for any person who “in connection with any goods or services . . . uses in commerce any . . . false or misleading description of fact . . . which . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualifies, or geographic origins of his or her . . . goods, services, or commercial activities.”  15 U.S.C. § 1125(a). The question before the Sixth Circuit was whether the emails Strunk-Zwick sent constituted false advertising made in “commercial advertising or promotion.”

So what is “commercial advertising or promotion”?  Did the emails to the potential and current Tri-Serve clients count?  After all, they didn’t reach or weren’t calculated to reach the entire professional-employment-organization industry.  And, as the court noted, the “touchstone” of whether something is “commercial advertising or promotion” is whether the advertising is part of an “organized campaign to penetrate the relevant market.”

But the Sixth Circuit recognized that an “organized campaign” in 2015 might well look different than it has in years past. “[P]roducers today employ data as never before to track our consumption habits, especially on the internet, and send out personalized promotional material accordingly,” and rather than junk mail, newspaper ads, or television commercials, we may be more likely to see search-history-based internet advertising, Facebook targeted ads, emails from airlines, and ads for retail “friends and family” sales.  By using these forms of advertising, advertisers target discrete areas of the market with personalized messages, rather than by simply flooding the market.  “In other words, the most focused advertisements or promotions may not be widely disseminated at all.”

The court ultimately found that requiring “widespread dissemination” of commercial advertising or promotion for the purposes of false-advertising claims failed to account for the way advertising has shifted.  The Sixth Circuit therefore defined “commercial advertising or promotion” as (1) commercial speech; (2) for the purpose of influencing customers to buy the defendants’ goods and services; (3) that is disseminated either widely enough to the relevant purchasing public to constitute advertising or promotion with in that industry or to a substantial portion of the plaintiff’s or defendant’s existing customer or client base.

Based on this definition, the letter to the Tri-Serve clients was held to be a “commercial promotion.”  This opinion, in broadening the definition of commercial advertising or promotion, opens up new avenues for false-advertising claims under the Lanham Act and may prove useful to small businesses whose competitors act on a small but targeted scale.

Diana M. Comes

Diana Comes