A federal appeals court recently upheld that a nutritional supplement maker can sue the author and publisher of the "NutriSearch Comparative Guide to Nutritional Supplements" for false advertising under the Lanham Act.
“The Lanham Act is best known for being the primary federal trademark statute in the United States. In addition to the trademark provisions, Section 43(a) of the Lanham Act creates a cause of action for false advertising and prohibits any person from misrepresenting his or another person’s goods or services in ‘commercial advertising or promotion,’” explained Attorney Pooja Nair, partner at Ervin Cohen & Jessup LLP in Los Angeles.
Background
NutriSearch Corporation published a guidebook that compared and reviewed directly marketed nutritional supplements, initially claiming that the reviews were independent.
“Plaintiff Ariix alleged that NutriSearch had an undisclosed financial arrangement with Ariix competitor Usana, in which the NutriSearch CEO was paid inflated speaking fees. The district court first considered the case dismissed because it found that Guide was not commercial advertising under the Lanham Act, and would therefore be entitled to First Amendment protection,” explained Nair. “However, the Ninth Circuit appellate court reversed and held that the Guide was commercial speech, and not protected by the First Amendment. Therefore, the Lanham Act applied and the First Amendment did not shield Nutrisearch from plaintiff’s claims.”
Opinion
The majority wrote that the NutriSearch Guide is "a trusted name among sales representatives" in that industry and NutriSearch "portrays itself as an independent company that presents only objective data and scientific analyses to the public.”
In its first five printings, the Guide included a statement that its "research, development, and findings are the sole creative effort of the author and NutriSearch Corporation, neither of whom is associated with any manufacturer or product represented in this guide."
It later removed that statement in the sixth printing, published shortly after Ariix filed suit in 2017. Ariix's lawsuit alleged that MacWilliam cooked up the Guide to boost Usana sales while he was a sales representative there and later founded NutriSearch to appear unbiased.
Ariix alleged that MacWilliam or NutriSearch would "tweak" the system to ensure Usana had sole possession of the top spot and added an "Editor's Choice" category to stand out after other companies earned equally strong ratings.
Industry implications
Aaron Gott of Bona Law, who argued the appeal for Utah-based Ariix, called the decision "significant" because even though such tactics are widespread, the Ninth Circuit had not previously addressed the issue.
“Company-created nutritional supplement guides or review platforms that are part of a company’s marketing tools should be clearly identified as marketing materials, and those would be subject to Lanham Act regulations and treated as advertisements. Claims made in company-created materials should be closely scrutinized, and most companies already do a close review of their advertising materials,” said Nair.
Nair explained that while company nutritional guides that make claims or evaluate competitors are subject to Lanham Act litigation from competitors is consistent with prior case law, “What’s new here is that guides created by third-party companies that may be sponsored or connected to advertisers more indirectly could also be subject to the Lanham Act.”
Is this the final word?
“I would expect more guidance from the courts on this issue. The lower court still has to decide some of the unresolved issues in the case. Additionally, the case was decided by a divided Ninth Circuit court, and other appellate courts may disagree. It may also be appealed to the Supreme Court,” said Nair.
NutriSearch's attorneys at Parsons Behle & Latimer did not respond to requests for comment.
