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Time Warner Cable Inc. v. Directv, Inc.

497 F.3d 144 (2d Cir., August 9, 2007)

Second Circuit holds plaintiff Time Warner Cable Inc. (“Time Warner”) likely to prevail on false advertising claims advanced under Section 43 of the Lanham Act as a result television advertisements defendant Directv ran, which were found to be literally false.  Affirming the decision of the District Court, the Second Circuit held that, when seen in context, these advertisements falsely claim that the quality of the picture a user of an HD TV receives from Directv is better than the picture received from Time Warner cable.  Irreparable injury was presumed because, even though the advertisements at issue did not directly refer to Time Warner, the viewing audience would see the advertisement as targeted at plaintiff.  As a result, the Second Circuit affirmed so much of the District Court’s decision that enjoined Directv from further publication of these offending advertisements in markets where Time Warner operates.

In reaching this result, the Second Circuit held that an “advertisement can be literally false even though it does not explicitly make a false assertion, if the words or images, considered in context, necessarily and unambiguously imply a false message.”

The Second Circuit held, however, that internet banner advertisements that promoted Directv’s products, while literally false, constituted non-actionable puffery, because they made claims so exaggerated that no consumer could rely on them.  The banner advertisements at issue depicted a split screen.  One side of the screen presented a clear, crisp picture that was represented to be the picture a user would view if receiving his signal from Directv.  The other side of the screen contained a picture that was blurry and pixilated, which was represented as the picture the consumer would see if receiving a signal from “other tv”, or “basic cable.”  The ads urged consumers to “find out why Directv’s picture beats cable.”  While this depiction was literally and demonstrably false, because the pictures from both sources were equivalent, the Second Circuit held it was so exaggerated as to constitute non-actionable puffery on which no consumer could rely.  As a result, the Second Circuit reversed so much of the District Court’s decision which enjoined Directv from continuing to run these banner advertisements. 

Said the Court: “[T]he category of non-actionable puffery encompasses visual depictions that, while factually inaccurate, are so grossly exaggerated that no reasonable consumer would rely on them in navigating the marketplace.”
 Time Warner and Directv are direct competitors, who each seek to deliver television and video programming to consumers.  Both providers deliver HD signals of equivalent quality to consumers.

In an effort to promote its services, Directv began a “source matters” advertising campaign, which sought to promote Directv as the preferred source for such programming signals.

At issue were three advertisements Directv ran as part of this campaign.  The first was a television advertisement that featured the actress Jessica Simpson, portraying her character as Daisy Duke from the movie the Dukes of Hazzard.  In the ad, Ms. Simpson says “Hey, 253 straight days in the gym to get this body, and you’re not gonna watch me on Directv HD?  You’re just not gonna get the best picture out of some fancy big screen TV without Directv.  It’s broadcast in 1080i.  I totally don’t know what that means, but I want it.”  The ad closes with a narrator saying “For an HD picture that can’t be beat, get Directv.”

The second television advertisement at issue featured William Shatner as Captain James T. Kirk of Star Trek fame.  In the advertisement, Shatner says:  “I wish he’d just relax and enjoy the amazing picture clarity of the Directv HD we just hooked up.  With what Starfleet just ponied up for this big screen TV, settling for cable would be illogical.”  Mr. Spock then clears his throat and Shatner continues “What, I can’t use that line?”  A narrator then says “for an HD picture that can’t be beat, get Directv.”

The final advertisements at issue were internet banner advertisements.  These advertisements start by displaying an image so highly pixilated it is impossible to discern what is being shown.  On top of this image appear the words “Source matters.”  The screen then splits in two.  One side is labeled “other TV” and displays a pixilated, blurry image.  The second is labeled Directv, and displays a sharp and clear image.  The banner advertisements then invite uses to “find out why Directv’s picture beats cable.”

Claiming these advertisements falsely depicted its products as being inferior to those offered by Directv, Time Warner commenced suit, charging Directv, inter alia, with false advertising in violation of the Lanham Act.  The District Court agreed, and, on Time Warner’s application, enjoined Directv from running any of the advertisements at issue in the markets in which Time Warner operates. 

As explained below, the Second Circuit held plaintiff likely to prevail on its claims with respect to the television advertisements, and enjoined Directv from continuing to run these advertisements.  Finding the banner advertisements non-actionable puffery, however, the Second Circuit vacated the injunction issued by the District Court with respect to those advertisements.

The Lanham Act prohibits companies from misrepresenting the nature, characteristics or qualities of either their own, or their competitor’s products, in commercial advertisements.  15 U.S.C. Section 1125(a)(1). 

A plaintiff can prevail on a Lanham Act false advertising claim by showing either that the challenged advertisement is literally false, or is likely to mislead consumers.  In either event, the false or misleading representation must involve “an inherent or material quality of the product.”

To determine whether a challenged advertisement is literally false, the Second Circuit adopted what is known in other circuits as the ‘false by necessary implication doctrine’.  As explained by the Court, “under this doctrine, a district court evaluating whether an advertisement is literally false ‘must analyze the message conveyed in full context, … i.e. it ‘must consider the advertisement in its entirety … If the words or images, considered in context, necessarily imply a false message, the advertisement is literally false and no extrinsic evidence of consumer confusion is required. … However, ‘only an unambiguous message can be literally false.’  Therefore, if the language or graphic is susceptible to more than one reasonable interpretation, the advertisement cannot be literally false. … There may still be a ‘basis for a claim that the advertisement is misleading,’ but to resolve such a claim, the district court must look to consumer data to determine what ‘the person to whom the advertisement is addressed find[s] to be the message.”  In other words, in such circumstances, a plaintiff seeking to establish that the advertisement is misleading must submit evidence, such as consumer surveys, that demonstrate that consumers are likely to be mislead thereby.

Applying this test, the Second Circuit held that Time Warner was likely to prevail on its claim that both television advertisements were literally false.  The Jessica Simpson advertisement was literally false because it advised consumers that “you’re just not gonna get the best picture out of some fancy big screen TV without Directv.”  Said the Court: “This claim is flatly untrue; the uncontroverted factual record establishes that viewers can, in fact, get the same ‘best picture’ by order HD programming from their cable service provider.”

The Court also held that the Shatner commercial similarly is literally false.  “Shatner’s assertion that ‘settling for cable would be illogical,’ considered in light of the advertisement as a whole, unambiguously made the false claim that cable’s HD picture quality is inferior to that of Directv’s.”

The Court held that, in the circumstances of this case, plaintiff Time Warner was entitled to a presumption that these advertisements would cause it irreparable injury.  The Second Circuit accordingly enjoined Directv from continuing to publish these advertisements.

Irreparable injury will be presumed in comparative advertisements cases “where the plaintiff demonstrates a likelihood of success in showing literally false the defendant’s comparative advertisement which mentions the plaintiff’s product by name. … [In such circumstances, injury can be presumed] because a false ‘comparison to a specific competing product necessarily diminishes that product’s value in the minds of the consumer.’”

The advertisements in question did not specifically reference Time Warner.  However, because cable operators possess a monopoly in the geographical region in which they operate by virtue of the governmental franchise that grants them that right, a reference to cable in the geographic region in which Time Warner operates by necessity refers to Time Warner.  As such, held the Court, the Shatner’s commercial’s reference to ‘cable’ necessarily implies ‘Time Warner’ in the geographic region in which it operates, and irreparable injury to it from the challenged advertisement is thus presumed.

The same is true of the Simpson commercial.  Surveys showed that approximately 90% of households have either cable or satellite service.  As such, held the Court, “it would be obvious to consumers that Directv’s claims of superiority are aimed at diminishing the value of cable – which … is synonymous with [Time Warner] in the areas covered by the preliminary injunction …”.  As a result, like the Shatner commercial, it was presumed that the Simpson commercial would cause Time Warner irreparable injury and the Court accordingly enjoined Directv from continuing its publication.

The Second Circuit did, however, reverse so much of the District Court’s decision that enjoined Directv from continuing to publish the challenged banner advertisements.  The banner advertisements were admittedly literally false – the picture produced by a connection to cable TV is not highly pixilated, or blurry, as depicted in the advertisements.  However, the Second Circuit held that the advertisements constitute non-actionable puffery.  As explained by the Court “if a visual representation is so grossly exaggerated that no reasonable buyer would take it at face value, there is no danger of consumer deception and hence, no basis for a false advertising claim.”  Non-actionable puffery can take two forms “a general claim of superiority over comparable products that is so vague that it can be understood as nothing more than a mere expression of opinion … [and] an exaggerated, blustering, and boasting statement upon which no reasonable buyer would be justified in relying.”

The Court held that Directv’s banner advertisements constituted such an exaggerated statement on which no reasonable consumer could rely.  These advertisements are “not even remotely realistic” – no one, held the Court, could believe that the picture produced by cable was as poor as depicted.  As a result, the Court found Time Warner unlikely to prevail on its false advertising claim with respect to the internet banner advertisements at issue, and vacated so much of the decision of the District Court below that had enjoined their continued publication.

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