Appeals from the United States District Court for the Central District of California. D.C. No. CV-91-05991-AWT. A. Wallace Tashima, District Judge, Presiding.
Before: James R. Browning, William A. Norris, and Stephen Reinhardt, Circuit Judges.
Omicron is a national distributor of the dietary supplement Food Source One. Group W, which distributed Food Source One for Omicron, began preparing to market a new, competing product called Food Plus. Omicron learned of this new venture and terminated Group W on October 23, 1991. That same day, Omicron sent a letter to retail pharmacists who carried Food Source One. Omicron's letter was titled "Counterfeit Food Source One & Copyright Infringement," and advised the retail pharmacists that Omicron intended to "vigorously defend its copyrights, trade dress and product integrity." The letter described three suits Omicron had filed charging unfair trade practices in connection with marketing Food Source One substitutes and concluded with this warning and request:
Beware of anyone attempting to sell you a product they say is "just like Food Source One" or "replaces Food Source one." Please help us protect your rights as a retailer and the integrity of our products. Call me . . . if you have any question of whether any product may be illegal infringement on Food Source One.
The letter made no explicit reference to Food Plus.
After a bench trial, the district court concluded that the letter was false or misleading because it implicitly, and falsely, suggested that Food Plus infringed intellectual property rights associated with Food Source One. In reaching this Conclusion, the court relied in part on its finding that Omicron learned of Group W's plan to begin marketing Food Plus four days before sending the letter. The court also noted that the description of previous litigation was inaccurate because one of the three cases discussed did not involve Food Source One. The court concluded Omicron had violated section 43(a) of the Lanham Act. Omicron appeals.
To prevail on its claim under section 43(a) of the Lanham Act, Group W must show that 1) Omicron made false or deceptive advertisements and representations to customers; 2) those advertisements and representations actually deceived a significant portion of the consuming public; and 3) Group W was injured by Omicron's conduct. See Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197, 208 (9th Cir. 1989).*fn1
A. False Statement about Previous Litigation
Omicron's false statement that it had brought three cases specifically concerning infringement of Food Source One does not give rise to liability under the Lanham Act. Because Group W claims damages in the form of lost profits, it cannot establish causation unless it can show that the false statement about litigation caused the damage by influencing pharmacists to forego purchasing Food Plus. See Harper House, 889 F.2d at 210; cf. U.S. Healthcare, Inc. v. Blue Cross, 898 F.2d 914, 922 (3d Cir. 1990) (holding that defendant is not liable under the Lanham Act unless the false statement was material because it would be likely to influence the purchasing decision). The record contains no evidence that the erroneous statement had that impact. The fact that Omicron filed two rather than three enforcement suits would be unlikely to influence pharmacists' purchasing decisions - the message that Omicron was willing to defend its intellectual property rights in its products, including Food Source One, would be the same in either case. Accordingly, the false statement about previous litigation "likely had little or no causal connection with any damage [Group W] might have suffered." Harper House, 889 F.2d at 210.
B. Implicit Reference to Food Plus
Although Omicron's letter contains no literally false statement about Food Plus, "the Lanham Act encompasses more than blatant falsehoods. It embraces innuendo, indirect intimations, and ambiguous suggestions evidenced by the consuming public's misapprehension of the hard facts underlying an advertisement." Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272, 277 (2d Cir. 1981) (internal quotation omitted); see Better Business Bureau of Metropolitan Houston, Inc. v. Medical Directors, Inc., 681 F.2d 397, 400 (5th Cir. 1982). Omicron's letter warned pharmacists to "beware" of anyone attempting to sell a product "just like Food Source One" or one that "replaces Food Source one." In ...