What is the Lanham Act on Unfair Competition?

Outperforming the competition has always been the goal of American businesses, but using unfair tactics to infringe on and harm your competitor is prohibited. Much of this is spelled out in the Lanham Act, which was signed into law by President Truman in 1946. Although there are many ways to unfairly thwart a business competitor, the Lanham Act focuses on trademark and trade dress infringement and is the law that created a national system for registering trademarks.

Trade dress refers to a product’s overall distinctive image and is itself a trademark, which are words or symbols that distinguish a company’s product. Both can be registered, protecting them from infringement.

Prior to the Lanham Act, competitors copied trademarks and sold counterfeit goods with few or no consequences. It also took on unfair competition in the form of false advertising, which occurs when a competitor confuses customers into thinking a product is something else because of misleading descriptions or false statements of fact. However, customers cannot bring a legal action against the perpetrator of false advertising, only the competitor being harmed can.

Unfair Competition

Unfair competition comes in many forms and is essentially the dishonest or illegal actions of a party that causes economic damages to another party’s business. The way unfair competition is perceived changes over time. For example, advancing technology has changed it dramatically since the Lanham Act, but some common examples of unfair competition include:

  • Making false representations about a competitor’s products or services
  • Stealing a business’s trade secrets
  • Trade libel, which is making defamatory statements that are untrue about a competitor’s products or services
  • Former employees absconding with a company’s confidential information and using it to entice customers to patronize their new employer
  • Trademark infringement

State law governing employment can also come into play in some of these situations, such as employees breaching agreements to refrain from stealing customers. Some states also abide by the Uniform Deceptive Trade Practices Act, all of which protect businesses when they must battle unfair competition.

Unfair Competition for Trademark Infringement

The original focus of the Lanham Act’s unfair competition was trademark infringement, which continues today as the most common reason businesses litigate against competitors. Trademarks identify a brand clearly so the public associates it with the company. If it does, and your plan is to use the trademark in the marketplace, you can register it with the United States Patent and Trademark Office (USPTO), which then allows you to sue an infringer in federal court.

Although the premise of a trademark infringement case is the confusion it causes consumers, you may also prevail for dilution, which is where no confusion exists, but your company is still harmed. There could be a weakening of the connection between your products and your company, for instance, if another company in a different industry begins using your trademarked name. Tarnishment occurs when a trademark is used by another in an objectionable way, such as putting a similar trademark on an inferior product.

False Advertising as Unfair Competition

Specific elements of false advertising must be present for a lawsuit under the Lanham Act to progress in this category. A competitor must mislead or lie about facts concerning another’s business or products. The deception must reach a substantial number of people who are likely consumers; and it cannot be a small point, it must be material enough to influence the marketplace. Also, the marketplace must involve interstate commerce, and the plaintiff must be expected to suffer economic injury because of the competitor’s deception.

Cease and Desist Letters for Lanham Act Violations

The first step an intellectual property attorney will take after identifying a Lanham Act violation is to send the perpetrator a cease-and-desist letter. These formal missives disclose that you are aware of what your competitor has done and will sue if they do not stop, and these are effective more than 95 percent of the time.

However, some competitors are nefarious and will deny the charge. The denouement for a Lanham Act violation is federal litigation. Reach out to the Lomnitzer Law Firm if you need to escalate your response to a trademark violation under the Lanham Act.