Is your business compliant with the Lanham Act? This federal statute governs trademark law and extends to other critical areas such as false advertising, cybersquatting, false endorsement, and false designation of origin.
Compliance with the Lanham Act protects your business from potential lawsuits by competitors for false or misleading advertising that could harm their interests. Since many of its provisions overlap with the Federal Trade Commission (FTC) Act, following the Lanham Act’s rules can also help ensure FTC compliance.
In this article, we’ll explore the Lanham Act, its scope, the damages plaintiffs can claim, and its statute of limitations. We’ll examine how it regulates false advertising and marketing, as well as the consequences of non-compliance. Finally, you’ll discover how your business can align with both the Lanham Act and the FTC Act to minimize the risk of legal challenges to your advertising practices.
What Is the Lanham Act and What Does it Protect?
The Lanham Act—also known as the Lanham Act of 1946 or the Trademark Act of 1946—is a federal statute that primarily governs trademark law. It serves as the statutory foundation for U.S. trademark law at the federal level.
The act covers trademark registration, maintenance, and protection, providing a federal cause of action for claims of registered and unregistered trademark infringement and dilution.
Beyond trademark-related matters, the Lanham Act also addresses false advertising. Overlapping with the Federal Trade Commission (FTC) Act, it enables competitors to sue your company for false or misleading advertising that could harm their businesses.
In addition to the above, the Lanham Act also offers legal recourse for the following claims:
- False designation of origin
- False or misleading descriptions
- Cybersquatting
- False endorsement
In what follows, we will focus primarily on false advertising, misleading marketing, and FTC compliance under the Lanham Act.
How Does the Lanham Act Govern False Advertising?
Under Section 43(a) (15 U.S.C. § 1125(a)), the Lanham Act governs false advertising by providing a federal cause of action against businesses or individuals who use false or misleading statements in their commercial advertising or promotion. The act is designed to protect both competitors and consumers from deceptive practices that can harm businesses or create consumer confusion.
Under the Lanham Act, false advertising lawsuits can range from traditional print and TV ads to radio commercials and online advertisements. Basically, any promotional material designed to influence consumers’ purchasing decisions with sufficient dissemination to the relevant public could be considered.
Learn more about truth in advertising here.
Who Can Sue Under the Lanham Act?
In general, any business in commercial competition with another company may bring or face a lawsuit for false advertising under the Lanham Act. However, individual consumers must seek enforcement through the FTC or pursue claims under state consumer protection laws.
Normally, the plaintiff must prove that the challenged advertising claim is indeed false or misleading through testing or other proof.
Suppose your company operates a crypto exchange that claims that it has the most users in the U.S.. To challenge that claim successfully in court, a competitor must serve with evidence that there is another exchange platform with more U.S. customers.
If your ads include truthful but negative statements—or it is impossible to prove whether they are true or false—your competitors won’t be able to take legal action against your business. However, if your advertisement’s language is truthful but has a misleading message, plaintiffs could assert literal or implied claims in court.
What Damages Can Plaintiffs Claim Under the Lanham Act of 1946 in False Advertising Cases?
In false advertising cases, plaintiffs can generally claim the following damages under the Lanham Act: actual damages, defendant’s profits, corrective advertising costs, and attorney’s fees.
Actual Damages
Competitors can sue your company for the actual damages they suffered due to false advertising. These may include lost sales or profits, which could be the result of diverting customers from the plaintiff’s business.
The claimant could also claim reputational damages under the Lanham Act if the false marketing harmed your competitor’s brand reputation.
In any case, plaintiffs can only recover actual damages if there is a direct connection between the false advertising and the harm suffered.
Defendant’s Profits
Under Section 35(a) of the Lanham Act (15 U.S.C. § 1117), plaintiffs may recover the profits your business earned due to the false advertising. This is particularly useful in cases where the plaintiff cannot precisely calculate their own losses or the defendant gained an unfair competitive advantage from the false claims.
The purpose of such claims is to prevent your business from unfairly benefiting from false advertising. The court may adjust this amount to ensure fairness if a full recovery of profits would be excessive.
Corrective Advertising Costs
Plaintiffs may recover costs associated with corrective advertising, which refers to efforts to counteract the harm caused by the defendant’s false advertising. For example:
- Running advertising campaigns to repair the plaintiff’s damaged reputation.
- Publicizing the truth about the plaintiff’s products or services.
Courts often recognize that these costs are a necessary consequence of false advertising.
Attorney’s Fees
In exceptional cases, the prevailing party may recover reasonable attorney’s fees. However, this mostly applies when the false advertising was particularly egregious or when the lawsuit was filed or defended in bad faith.
What Remedies Can Plaintiffs Obtain Under the Lanham Act?
In addition to the monetary compensation explored earlier, plaintiffs can seek multiple forms of legal relief in false advertising cases under the Lanham Act:
- Injunctive Relief: Courts can issue orders to stop your business from continuing false advertising, requiring you to cease the campaign and also potentially mandating you to publish corrective statements.
- Corrective Actions: As a defendant, your business can be ordered by the court for public corrections, the removal of harmful advertisements, or retraction notices.
- Declaratory Relief: One of the remedies a court can issue under the Lanham Act includes the declaration of the plaintiff’s rights. For example, ruling that your conduct as the defendant was unlawful.
What Is the Lanham Act’s Statute of Limitations?
The Lanham Act does not specify a statute of limitations for claims, including trademark infringement and false advertising. Instead, courts typically apply the most relevant state statute of limitations for similar claims, such as unfair competition, fraud, or deceptive practices. These often range from 2 to 4 years, depending on the state.
That said, courts may use laches as the primary guide for determining timeliness, focusing on whether the plaintiff unreasonably delayed filing and whether that delay caused prejudice to the defendant.
The discovery rule might also apply, meaning that the statute of limitations for the false advertising case could be when your competitor discovered, or reasonably should have discovered, your business’s harmful or misleading ads.
What Are the Consequences of False Advertising and Marketing?
False advertising and deceptive marketing practices under the Lanham Act can lead to significant legal, financial, and reputational consequences for your business. These consequences not only aim to rectify the harm caused to competitors but also deter future violations and ensure fair competition in the market.
The consequences of false advertising or marketing under the Lanham Act may include:
- Legal consequences like injunctions and corrective actions
- Monetary damages, such as the disgorgement of profits, actual damages, and corrective advertising costs
- Reputational harm, including diminished consumer trust, industry blacklisting, and negative publicity
- Competitive consequences, such as a loss of market share and increased regulatory scrutiny
- Potential civil penalties due to concurrent legal actions under state laws or related federal statutes like the FTC Act
Ensure Your Business’s Compliance With the Lanham Act and the FTC Act
Navigating the complex requirements of the Lanham Act and the FTC Act is essential for protecting your business from costly lawsuits, regulatory penalties, and reputational harm. From trademark law to false advertising and marketing compliance, adhering to these federal statutes ensures fair competition and safeguards your hard-earned profits.
However, compliance is not just about avoiding violations—it’s about building a trustworthy and sustainable brand. Whether it’s reviewing advertising campaigns, ensuring your website and social media practices align with the law, or mitigating potential risks in promotional strategies, proactive compliance is the key to success.
Gordon Law’s seasoned attorneys have over 10 years of experience focusing on FTC defense and marketing compliance, helping businesses like yours avoid millions in penalties. Our team works with ecommerce businesses, affiliates, and digital marketers to ensure that your campaigns meet the requirements of both the Lanham Act and FTC regulations.
After reviewing your ads, we’ll deliver a risk analysis tailored to your campaigns, providing actionable recommendations to tweak your message and avoid legal pitfalls. If you’re facing challenges, our attorneys are prepared to:
- Negotiate with regulators to minimize disruption to your business
- Reduce penalties, including mitigating or reversing FTC asset freezes
- Prevent costly litigation through effective consent order negotiations
Whether you need a comprehensive compliance review or robust defense against an ongoing investigation, Gordon Law is here to help. With our unparalleled experience in advertising compliance and marketing law, we can help you protect your business and ensure its continued success.
Schedule a consultation and take the first step toward securing your business’s compliance and future growth!
