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Single Communication-Based False Advertising Claim Permitted to Proceed

A recent decision out of the District of Massachusetts serves as a reminder that a court may consider even a single communication by an advertiser made directly to a consumer to be advertising under the Lanham Act, particularly where the advertiser competes in a limited market. Allscripts Healthcare v. DR/Decision Res., No. CV 19-11038-NMG, 2020 WL 837444 (D. Mass. Feb. 20, 2020).

As background, Allscripts, a healthcare information technology company that collects and licenses anonymized patient-level data from a collection of medical practices, agreed to license its data to DRG, a healthcare data and consulting firm.  Several years later, Allscripts filed a lawsuit alleging that DRG was sublicensing Allscripts’ data in violation of their agreement.  DRG counterclaimed, alleging that an Allscripts subsidiary, Veradigm, which competes directly with DRG, violated the Lanham Act by informing one of DRG’s customers that it “should be concerned about DRG’s sustained ability to sell electronic health records data.”

After failed cross motions for preliminary injunctions, Allscripts moved to dismiss DRG’s counterclaim, arguing among other things that the alleged false statements did not qualify as commercial product advertisement under the Lanham Act.

The court denied the motion, holding that Allscripts’ statements constituted commercial advertising or promotion because the statements were allegedly made “for the express purpose of influencing customers to discontinue their relationships with DRG in favor of competitor Veradigm.”  Although Allscripts argued DRG’s claim must be dismissed because DRG identified only one instance of an alleged misrepresentation, the Court, quoting a Ninth Circuit decision, noted that where the market for a product is limited (as it is for the services provided by DRG and Veradigm), “even a single [solicitation] to an individual purchaser may be enough to trigger the protections of the Lanham Act.”  See Costal Abstract Serv. v. First Am. Title Ins., 173 F.3d 725, 735 (9th Cir. 1999).  In addition, the Court gave no weight to Allscripts’ argument that DRG failed to plead facts sufficient to identify the allegedly false statement, holding that DRG pleaded facts sufficient to survive a motion to dismiss by identifying the “particular occasion on which [the] statement was made.”

While we noted in a recent post that the definition of commercial advertising under the Lanham Act is not without limits, Allscripts provides a reminder that a false advertising claim under the Lanham Act can be sustained even when the misleading statement does not fall neatly within the traditional understanding of commercial advertising.  Watch this space for further developments.

© 2020 Proskauer Rose LLP. National Law Review, Volume X, Number 107
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About this Author

Lawrence I Weinstein, False Advertising and Trademark Copywright Law, Proskauer
Partner

Larry Weinstein is a Partner in Proskauer's Litigation Department. He is co-head of the firm’s Intellectual Property Litigation Group, and also co-head of the firm’s False Advertising & Trademark Practice. Larry is both a distinguished trial lawyer and counselor, whose practice covers a broad spectrum of intellectual property law, including Lanham Act false advertising and trademark cases, consumer class action cases, NAD and FTC proceedings, and trade secret and copyright litigations, as well as sports, art and other complex commercial cases.

212-969-3240
Alexander Kaplan, Proskauer law firm, Litigation Attorney, New york office,
Partner

Alexander Kaplan is a partner in the Litigation Department. Alex is a commercial litigator and trial lawyer with broad expertise in intellectual property litigation and counseling. He has substantial experience in the fields of copyright, trademark, advertising and trade secrets law, representing clients in a wide array of fields and industries.

Copyright/Entertainment

In copyright and related entertainment matters, Alex has represented various major record labels, music publishing companies and recording artists, as well as other media and entertainment...

212-969-3671
Associate

Marc Palmer is an associate in the Litigation Department. He earned his J.D. from Boston College Law School, where he was an articles editor of the Boston College Law Review. While in law school, he interned at an automotive startup working on intellectual property and technology licensing matters. Prior to law school, Marc worked as a mechanical design engineer in the industrial gases industry. 

+1.212.969.3584
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