Presenting a live 90 ‐ minute webinar with interactive Q&A Challenging Competitors' g g p Comparative Advertising Evaluating Legal Options to Respond to Competitors' False or Misleading Marketing TUES DAY, JANUARY 11, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Barry M. Benj amin, Partner, Kilpatrick Townsend & Stockton , New Y ork Christopher A. Cole, Partner, Manatt Phelps & Phillips , Washington Randall K. Miller, Partner, Arnold & Porter , McLean, Va. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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“Challenging Competitor Comparative Advertising Claims” January 11, 2011 Barry M. Benjamin Bbenjamin@kilpatricktownsend com Bbenjamin@kilpatricktownsend.com 212.775.8783 4
INTRODUCTION • Comparative Ad claims rising not just in ways • Comparative Ad claims rising, not just in ways that hit major media • Generic drugs – database equivalency g q y claims, patent overlay • Regulated industries like construction and building materials competitor claims non- building materials, competitor claims non compliance with building codes • Woodworking tool manufacturer’s former bl d blade supplier advertises awards, actually li d ti d t ll tool maker that won awards 5
• Competitor X rolls out offending ads, your marketing clients are screaming at you ‘DO SOMETHING!!’ • What do you do? 6
1. Do Nothing. Least expensive in terms of l legal fees, but can company stand it? l f b t t d it? 2. Non-legal remedies – counter advertising campaign i 3. Legal remedies: • C Cease and Desist letter / Pick up Telephone d D i t l tt / Pi k T l h • Network Challenge • • Drop a Dime: Squeal to the government Drop a Dime: Squeal to the government • NAD • Federal Action 7
1. Do Nothing. Least expensive in terms of legal fees, but can company stand it? Does General Mills Does General Mills have to do anything in response to this? in response to this? 8
• Kelloggs’ ads - cereal “clinically shown to improve kids’ attentiveness by nearly 20%” improve kids attentiveness by nearly 20% • Study actually showed - Only half showed any improvement in attentiveness; only 1 in 7 improved by 18% or more and only 1 in 9 i d b 18% d l 1 i 9 improved by 20% or more • Kids who ate Frosted Mini-Wheats were compared against kids who ate nothing or only had water • FTC settlement (April 2009) and $10 5 • FTC settlement (April, 2009) and $10.5 million class action settlement (Nov. 2010) (plus $$$ for lawyers in the amount of ???) 9
2. Non-legal remedies – counter advertising campaign • November 18, 2009: “ AT&T loses request for injunction against request for injunction against Verizon's Map for That ads” • • The next day: The next day: 10
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Before discussing Legal Remedies, consider i important issues before taking action: t t i b f t ki ti 1. Most likely result – offending ad stops, that’s it 2 2. M Monetary damages possible, but not likely t d ibl b t t lik l 3. Legal action expensive, likely won’t recover legal fees, costs for surveys, etc. y , 4. Counterclaim guaranteed 5. Insurance coverage issues 6. Discovery is painful 7. Prepare for publicity 12
• Legal remedies: – Cease and Desist letter / Pick up Telephone – Network Challenge – Drop a Dime: Squeal to the government – NAD – Federal Action 13
Cease and Desist letter / Pick up T l Telephone h • Counterpart at competitor, develop good relationship d l ti hi • Inexpensive; No publicity • No enforcement, ad continues to run during negotiations • No surprise if file action • If no resolution, lost time 14
Network Challenge • Inexpensive • Confidential • Enforcement – if successful network will require Enforcement if successful, network will require changes to ad • No discovery, sophisticated reviewers, no surveys required required • BUT: only applies to specific network • Inconsistent decisions among networks w/r/t same ad g • Huge number of channels not under Network umbrella 15
Drop a Dime: Squeal to the Gov’t • If taken up by gov’t, ad likely stops If t k b ’t d lik l t • Confidential while investigation conducted, but public when complete or if administrative but public when complete or if administrative complaint filed • Inexpensive to challenger p g • BUT: will gov’t be interested? • No control over investigation, no updates g p from gov’t on what they are doing • S…….L…….O…….W……. 16
NAD Challenge • National Advertising Division of the Council of • National Advertising Division of the Council of Better Business Bureaus • Relative to Federal court litigation, g inexpensive • Experienced lawyers on staff • Takes 3 4 months possibly longer • Takes 3-4 months, possibly longer • Voluntary tribunal, need advertiser’s consent to participate p p • Only get two submissions and one meeting with NAD lawyer 17
NAD Challenge • Filing fees in the $$$ thousands • Filing fees in the $$$ thousands • No discovery, no depositions, no subpoenas • No monetary damages No monetary damages • Non-binding decisions, but if non-compliance, NAD may refer to FTC • Burden of proof – only whether ad claims B d f f l h th d l i were substantiated or not, disting. from Lanham Act where B/P is falsity • Proceeding confidential, but decision is not • Consumer survey evidence optional 18
Federal Action – Lanham Act • “Nuclear Option” • Most publicized most expensive but if Most publicized, most expensive, but if successful, best results • Turn things over to Randy to discuss • Turn things over to Randy to discuss…. 19
L Lanham Act h A t Randy Miller, Arnold & Porter LLP Randall.Miller@aporter.com 703.720.7030 20
Lanham Act -- more potent over past 10 years Courts more willing to find liability Courts more willing to enjoin major campaigns 21
Rise of Necessary Implication Doctrine Prilosec “One Pill. 24 Hours. Zero Heartburn” Mylanta Nighttime Nicoderm Sleep Disturbance 2d Circuit adopts -- Time Warner Cable 22
“Adver “Advertisin tising” is g is Broadl Broadly Defined y Defined Traditional advertising Traditional advertising l l Other promotional l communications l Verbal statements l Emails l PowerPoint Presentations 23
G Greater Possibility of Money Damages in t P ibilit f M D i Lanham Act Cases PBM / Infant Formula Bracco / X-Ray Splenda Settlement 24
25 “Just as effective as floss” Just as effective as floss LISTERINE:
Splenda: “Made From Sugar” “More Natural Than Competition” p “Artificial Sweetener” Artificial Sweetener 26
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Lanham Act Hurdles to Entry Winter case Irreparable harm will not be presumed, must be supported with evidence Surveys usually needed, surveys more susceptible to Daubert attack ibl D b k Defenses of unclean hands, voluntary cessation 28
Ra Rapid Pace p id Pace Liti Litigation g ation TRO/Pl Expedited Discovery Advance Planning Desirable 29
Cost of Lanham Act Cases / Many Reasons to Avoid Lanham Act Lawsuit Rambo tactics expedited discovery fast-paced motions practice intense and fast moving battle of experts publicity / counterclaims / class action lawyers p blicit / co nterclaims / class action la ers monitoring 30
Sometimes You Have to Litigate Unreasonable adversary Compromise not Compromise not possible / Impasse Need to “send Need to send message” – To adversary – To other potential adversaries 31
S Sometimes You Have to File Lanham Act ti Y H t Fil L h A t Suit Despite Costs Need for speed Adversary’s campaign causing too much Adversary s campaign causing too much immediate market loss 32
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