Commercial disparagement under the common law allows for cause of action for when a defendant makes a false, misleading, or deceptive representation about another’s goods or services.
In Minnesota, under the common law a claim of product disparagement “requires allegations that the defendant made a false statement tending to disparage the plaintiff’s products or services, causing the plaintiff to incur special damages.” See Advanced Training Sys. v. Caswell Equip. Co., 352 N.W.2d 1, 7-8 (Minn. 1984); Imperial Developers v. Seaboard Sur. Co., 518 N.W.2d 623, 28 (Minn. Ct. App. 1994).
Minnesota’s Uniform Deceptive Trade Practices Act (“MUDTPA”) says that when in the course of business, vocation, or occupation it is unlawful for a person to “disparage the goods, services, or business of another by false or misleading representation of fact.” Minn. Stat. § 325D.44, Subd. 1 ¶ 8.
False Statement/Fact: A defendant’s statements can be spoken, written, or even nonverbal conduct as long as the statement itself sets forth a false statement made to consumers. But, the statements must be a fact and cannot be merely “puffery.” “Puffery includes exaggerated blustering or boasting and vague, subjective statements of superiority. Am. Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387, 391 (8th Cir. 2004).
Special Damages: Special damages is arguably the most important of the elements under the common law and means that a “plaintiff must be able to prove special damages in the form of pecuniary loss directly attributable to defendants false statements.” LensCrafters, Inc. v. Vision World, Inc., 943 F. Supp. 1481, 1490 (D. Minn. 1996). But, the more modern view is that the plaintiff show evidence of a general decline of business as long as they are able to link that loss to the defendants disparaging statements. Caswell, 352 N.W.2d at 7.
Product Disparagement under the Lanham Act
In 1988, Congress amended Section 43(a) of the Lanham act to include causes of action for disparaging misrepresentations about a plaintiff’s goods or services. Section 43 specifically states that a defendant
[W]ho, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another’s persons goods, services, or commercial activities,
shall be liable in a civil action….
Most noteworthy about Section 43(a) that a disparagement claim can only brought forth against misrepresentations in “commercial advertising or promotion.” Therefore, a cause of action under Section 43(a) for product disparagement cannot be brought against a defendant’s speech.
First Amendment Considerations: It is not hard to see that Section 43(a) of the Lanham Act seeks to limit freedom of speech. The Lanham Act’s mirrors the claim for libel this way. The seminal case in libel actions is New York Times vs. Sullivan, 376 U. S. 254 (1964). The New York Times rule was developed from this case which aims to strike a balance between libel and freedom of the press. This case also established the “actual malice standard,” which means that a plaintiff must establish actual malice in publishing press reports about public officials before it can be considered libel. Id.
The case of U.S. Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898 F.2d 914 (3rd. Cir. 1992) first dealt with this case head on. This case dealt with defamatory statements made in comparative advertising campaigns of a health insurer and a health maintenance organization. The court found that the speech was commercial in nature, thereby diminishing its protection under the First Amendment, and,
[W]hile the speech here is protected by the First Amendment, we hold that the First Amendment requires no higher standard of liability and that mandated by the substantive law for each claim. The heightened protection of the actual malice standard is not necessary to give adequate breathing space to the freedoms protected by the First Amendment.
Id. at 937 (internal quotations omitted).