Nathan Economists Examine Corrective Advertising for Lanham Act Damages News Feed

Determining the cost of advertising to counter the negative financial effects of trademark infringement or false advertising requires more complicated analysis than commonly applied, according to Nathan economists D. Scott Bosworth, Russell W. Mangum, and Eric C. Matolo.

Writing in the journal The Trademark Reporter, they explore the many complications, noting the existence of “common, but unsupported presumptions and inaccurate, conclusory arguments that can lead to flawed calculations of corrective advertising damages.”

Companies suing under the Lanham Act, the chief U.S. trademark law, can seek remedial payment for anticipated costs of ads and other messages to end consumer confusion caused by “false messages”—the trademark infringement or false advertising.

A key challenge, according to the authors, is going beyond crude measures and determining how and to what degree consumers acted on the false messages. What the defendant spent, for example, on advertising to deliver allegedly false messages should not necessarily determine what the plaintiff must spend to reverse consumer “misimpressions” created by those messages, the economists wrote.

A detailed analysis of the “content, effectiveness, and audience of the false messages is important to undertaking a reasonable and reliable evaluation of the cost of corrective advertising,” they write. The medium used by a company to correct false messages can vary and will affect costs—and the medium may differ from what the defendant used to disseminate the allegedly false messages.

Corrective advertising as a remedy gained increased attention in 2014 when a jury awarded $60.7 million to the moving and storage company PODS Enterprises LLL, mostly for corrective advertising, in an infringement lawsuit against U-Haul over use of the term “pods.” U-Haul at first appealed. Then U-Haul’s parent company, Amerco, settled the case last year for $41.4 million, according to Amerco’s most recent annual report.

Corrective Advertising in Lanham Act Damages: The Use and Misuse of Past Advertising Expenditures, by D. Scott Bosworth, Russell W. Mangum, and Eric C. Matolo, in TMR, Vol 107, 761–775.

D. Scott Bosworth

Russell W. Mangum

Eric C. Matolo

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