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THE LOW DOWN ON PRODUCT DISPARAGEMENT …

The recent events surrounding the on-again, off-again relationship between Ogden’s Own Distillery and the Idaho State Liquor Division (ISLD) over the “tastefulness” of Ogden’s Own’s “Five Wives Vodka” (see Idaho Business Review, June 6, 2012 edition) brings to mind a familiar tune:

Home, home on the range

Where craft beers and vodkas hold sway

May there never be heard

A disparaging word, and

May the labels all be OK.

In addition to the constitutional challenges that were raised by Ogden’s Own’s legal counsel in a letter to the ISLD last week regarding the Idaho agency’s summary denial of the distillery’s efforts to have its novel spirits authorized for sale in Idaho, attorney Jonathan Turley accused the ISLD of publicly disparaging the product – a charge that could potentially lead to costly legal action.

So, what is “product disparagement”? It’s a false statement about a product that hurts its maker. Victims of product disparagement may sue the person engaging in disparagement under both state product disparagement laws and the Lanham Act, the federal law that protects a company’s trademarks.

In Idaho, it is a violation of the Idaho Consumer Protection Act to disparage “the goods, services, or business of another by false or misleading representation of fact.” Section 48-603(8), Idaho Code. In addition, as noted in a 1992 Idaho Attorney General’s Opinion, apart from a claim under the Idaho Consumer Protection Act, a business may make a successful common law claim for product disparagement if it can prove that a statement made about its product (1) is false; (2) the person making the statement intended the statement to cause financial loss to the business, or reasonably should have known that the statement would cause such loss; (3) the business sustained a measurable monetary loss; (4) the statement is not protected by a court-recognized privilege; and (5) the person making the statement either knew that the statement is false or acted in reckless disregard of its truth or falsity.  That last element is called “actual malice” and is intended to afford a First Amendment “freedom of speech” protection to persons who are simply engaging in the free exchange of information regarding products that are offered for sale (e.g., Consumer Reports), rather than attempting to intentionally harm a product’s standing in the marketplace by spreading false information.

Here are some examples of potential product disparagement conduct:

  • False claims about a product by a competitor or other party
  • Using anonymous comments or pseudonyms to make false claims about a competitor in online product or service reviews
  • Setting up false rating and review Web sites to disparage a competitor
  • Using a competitor’s logo or trademark in a negative context
  • Posting a Web page, comment or other publication associating a competitor’s product with negative ideas or images
  • Tampering with competitors’ online listings, Web site or other advertising

The statement of mere opinion regarding the quality of a product is not actionable.  But stating an opinion about a product as if it is fact crosses the line.

The bottom line: Don’t badmouth your competitors; don’t attempt to mislead your competitors’ customers; don’t exaggerate the facts to bolster your opinion of a product; and don’t judge a bottle of vodka by its label.

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Molly O’Leary represents business and telecommunications clients throughout Idaho, and is the Managing Principal of BizCounselor@Law, PLLC.  In addition, she is a Past President of the Idaho State Bar and a current member of the Statewide Advisory Counsel for the Idaho Small Business Development Center. You may follow her on Twitter: @BizCounselor.

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