In a case involving advertising claims by competitors in the wood preservative industry, the U.S. Court of Appeals for the Eleventh Circuit upheld a finding of infringement under the Lanham Act for false advertising. Osmose, Inc. v Viance, LLC, Case No. 09-15563 (11th Cir., July 30, 2010) (Anderson, J.).

Appellant Viance sought reversal of a preliminary injunction entered against it in a false advertising suit under § 43(a) of the Lanham Act. Viance, the owner of the ACQ process for wood preservation using copper, sought to discredit a new competing process called MCQ introduced by Osmose. Viance tested the Osmose product and concluded that the ACQ process resulted in higher copper concentrations in the wood than the MCQ process. These findings were presented at a research conference. Seeking long-term data, Viance conducted a field test with the MCQ product using an expert who concluded the MCQ stakes showed signs of decay in a preliminary evaluation but failed to conduct further review. Viance then conducted an extensive in-service survey of MCQ treated wood that found minimal premature decay. Despite the results of its investigation, Viance issued a pair of press releases containing statements relating to its testing and concerns about MCQ treated wood. In response, Osmose issued its own press releases criticizing the studies. Timber Products, the party that conducted the in service testing under Viance’s direction, also issued a press release clarifying the scope and limitations of the study and distanced itself from the Viance conclusions. Viance was also asked to abandon its advertising campaign by a group in the pressure treated wood community.

Osmose sued Viance under §43(a) of the Lanham Act and for false advertising under Georgia law, seeking injunctive relief prohibiting Viance from making false statements regarding MCQ. Following the grant of a temporary restraining order (TRO), Viance counterclaimed seeking to prevent Osmose from making false statements to bolster its MCQ products and also sought a TRO, which was denied. The court subsequently granted Osmose a preliminary injunction and denied Viance’s motion for the same. Viance appealed.

Viance challenged the lower court on four grounds: that its advertisements were not literally false, that the district court abused its discretion by not awarding Viance an injunction, that the district court abused its discretion in finding the balance factors favored Osmose and that the injunction violated Viance’s First Amendment rights because it was not limited to advertising or promotional activity.

To prevail on its false advertising claim. Osmose was required to show that Viance’s tests on MCQ did not support its conclusions. The court concluded Viance’s statements were unambiguous establishment claims, not unactionable opinion, and were not supported by investigation. As such, the Court concluded that the lower court did not clearly err in its findings. The Court went on to find that Viance had deceived consumers, that the deception was material to purchasing decisions involved interstate commerce and that Osmose was harmed by the deception. In considering the injunction, the Court upheld the findings that Osmose had a substantial likelihood of success on the merits, that Osmose would suffer irreparable harm, that the harm to Osmose if an injunction issued was less than that the harm to Viance if the injunction issued; and that the injunction did not disserve the public interest.

With respect to Viance’s First Amendment claim, the court found the injunction was overbroad in that it was not limited to advertising or promotional statements and remanded the case for consideration of the proper scope of the injunction.

Practice Note: This case makes it clear that the underlying basis for advertising claims should be carefully scrutinized, particularly when maligning a competitor’s product. The outcome of this case might have been very different if Viance had limited its statements to the facts established its investigation.