Thursday, October 01, 2009

Sales Representatives' Statements Could Constitute Advertising Under Lanham Act

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Dental equipment companies Dentsply and Tulsa Dental Products could have engaged in commercial advertising or promotion under the Lanham Act by encouraging their sales representatives to contact all of the customers of a small competitor (Guidance Endodontics) and make false and disparaging statements about its business, the federal district court in Albuquerque has ruled.

The element of “commercial advertising or promotion” was not controlled purely by the instances of disparaging statements for which there was direct evidence. Both direct and circumstantial evidence were to be considered in determining whether there had been sufficient dissemination of the statements at issue.

Guidance Endodontics presented evidence of the following:

(1) Three specific instances of a representative of Dentsply or TDP contacting customers of Guidance, making a false statement that Guidance could no longer provide certain products, and, in two cases, attempting to persuade the customer to buy the defendants’ products instead;

(2) Dissemination of the same false information among the defendants’ sales representatives and other employees;

(3) A rash of mysterious telephone calls inquiring whether Guidance could still supply certain products; and

(4) An internal policy of extremely competitive marketing on the defendants’ part.

Based on this evidence, viewed in the light most favorable to Guidance, and on the fact that Guidance and the defendants shared target markets, the court held that Guidance created genuine issues of material fact as whether the defendants had made false or misleading representations constituting commercial advertising or promotion within the meaning of the Lanham Act.

The court further held that New Mexico law was applicable to the dispute, as the place where the injury occurred, and that Dentsply and Tulsa Dental Products could have violated the New Mexico Unfair Practices Act. Knowledge of the falsity of the sales representatives’ statements was imputed to the defendants.

The decision is Guidance Endodontics, LLC v. Dentsply International, Inc., CCH Advertising Law Guide ¶63,569.

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