IP & Technology Litigation Alert: Prior Litigation Between Competitors Relevant to Establish Liability and Fashion Remedies in False Advertising Suit


The U.S. Court of Appeals for the Fourth Circuit recently issued a unanimous decision upholding a $13.5 million jury verdict and permanent injunction in a federal false advertising suit involving comparative advertisements targeting a direct competitor. PBM Products, LLC v. Mead Johnson & Co., ---F.3d----, No. 10-1421, 2011 WL 1491066 (4th Cir. Apr. 20, 2011). The opinion is noteworthy for a variety of reasons, in particular, for upholding the trial court’s decision to allow evidence of two prior litigations between the named parties, both producers of baby formula. The Fourth Circuit agreed that the earlier suits, which were settled early and not tried on the merits, were relevant to determine the defendant’s intent in making the misleading advertisements.

The Court of Appeals confirmed that defendant’s intent - as shown by prior false advertising litigation - may reduce the plaintiff’s burden of proof in establishing consumer confusion and deception. Serial litigants are similarly at a disadvantage in the remedies phase where evidence of intent can support issuing an injunction. Here, the court affirmed the permanent injunction, despite the fact that defendants had discontinued the direct mailer advertisement before trial and promised not to reissue it. The Court showed little tolerance for companies deliberately engaged in aggressive advertising campaigns directly aimed at competitors, particularly when “the misleading information pertains to issues of public health.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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