ABSTRACT

Plaintiff alleged that its direct competitor contacted members of plaintiff’s alliance of accounting firms and used plantiff’s name in connection with marketing efforts targeted to member firms. The court held that defendant’s actions would be a Section 43(a) violation if defendant had gained the interest of the alliance members through a false claim of association with plaintiff or its services. Nonetheless, the court denied summary judgment because defendant alleged that its use of plaintiff’s mark was not deceptive, but rather a nominative fair use, which the court recognized as a complete defense to a Section 43(a) claim.

CASE SUMMARY

FACTS

Plaintiff BDO Seidman LLP (“BDO”) offers accounting, tax, and other research services to accounting firms. BDO also acts as the administrator of an association of accounting firms and their vendors, known as the Alliance. Defendant Alliantgroup, L.P. (“Alliantgroup”) also offers accounting, tax, and other research services to accounting firms, and accordingly competes with BDO in that market. In 2008, Alliantgroup began a marketing campaign in which Alliantgroup employees would call and/or email prospective clients and state that “I am calling because you are part of the BDO Alliance and we are having great success with BDO Alliance firms,” and/or “we are currently getting very successful results with a number of BDO Alliance firms, including . . . .” The correspondence included the names of several Alliance members and noted that these firms agreed to act as references for Alliantgroup. Subsequently, BDO received inquiries from Alliance members regarding Alliantgroup’s relationship to the Alliance and to BDO. In response, BDO sent a mass email to all Alliance members noting that: (1) there was no relationship between the Alliance, BDO, and Alliantgroup; (2) Alliantgroup’s marketing materials were misleading; (3) the references identified by Alliantgroup were investigated by BDO and were false; and (4) in light of Alliantgroup’s “deceptive tactics,” BDO recommended against doing business with Alliantgroup. Alliantgroup responded with an open letter from one of its customers, a member of the Alliance, who vouched for the company.

BDO sued Alliantgroup for unfair competition under Section 43(a) of the Lanham Act and the Texas antidilution statute. Alliantgroup counterclaimed for common-law defamation, business disparagement, and tortious interference with contract. BDO moved for summary judgment on all claims except the Texas antidilution statute. Alliantgroup moved for partial summary judgment on the Texas antidilution statute and its counterclaims. The court denied BDO’s summary judgment motion on the Section 43(a) claims and Alliantgroup’s motion on the antidilution claim, but granted summary judgment in favor of BDO on Alliantgroup’s common-law claims.

ANALYSIS

After reviewing the summary judgment standard regarding material facts and ruling in favor of BDO on several evidentiary objections, the court turned to the Section 43(a) claim. BDO argued that the use of its name and the Alliance name by Alliantgroup, together with the names of Alliance members, some of whom had not given permission to Alliantgroup to identify them as a reference, constituted a false or misleading representation of fact likely to deceive recipients of Alliantgroup’s marketing materials. Additionally, BDO argued that the use of BDO’s name by a competitor in this context created a false association between the companies. The court agreed that if “Alliantgroup had gained Alliance members’ interest through a false claim to association with BDO or BDO’s Alliance services, this would be a Section 43(a) violation.” Alliantgroup responded by providing evidence that none of the statements in its materials were false or deceptive, and that it had the right to use the BDO name in a nominative manner, never suggesting an affiliation between Alliantgroup and BDO or the Alliance. Calling the nominative-fair-use defense “a bedrock principle of the Lanham Act,” the court held that the interpretation of the actual content of Alliantgroup’s marketing (e.g., whether it was deceptive or nominative) was an issue of material fact not subject to summary judgment. The court reached the same conclusion as to BDO’s claim under the Texas antidilution statute.

Finally, the Court rejected each of Alliantgroup’s counterclaims, granting BDO’s summary judgment motion. Regarding the defamation claim, the court held that the mass email sent by BDO to Alliance members was protected under the common-interest privilege, finding that BDO and the Alliance members had a shared interest in preventing third parties from falsely claiming an association with the Alliance. The business disparagement and tortious interference with contract claims were both dismissed on the basis that BDO’s mass email to Alliance members was made without actual malice, as BDO presented evidence that it investigated Alliantgroup’s marketing materials before sending the email.

CONCLUSION

This decision confirms that nominative fair use may allow competitors to include each other’s names in marketing materials, including to inform a competitor’s customers that other customers have enjoyed the goods/services of the firm now soliciting their business, where such use is not misleading or likely to cause confusion as to affiliation or sponsorship. It is also interesting to compare this court’s declaration that the nominative-fair-use defense is “a bedrock principle of the Lanham Act” with the Eastern District of Virginia’s treatment of that same doctrine in the Lorillard case summarized later in this newsletter