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Time Warner Cable, Inc. v. DIRECTV, Inc. - 497 F.3d 144 (2d Cir. 2007)

Rule:

Under the "false by necessary implication" 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 and not engage in disputatious dissection. 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 finds to be the message. In short, where the advertisement does not unambiguously make a claim, the court's reaction is at best not determinative and at worst irrelevant. 

Facts:

Defendant DIRECTV, Inc. ("DIRECTV") and plaintiff Time Warner Cable, Inc. ("TWC") were major players in the multichannel video service industry. TWC was the second-largest cable company in the United States, serving more than 13.4 million subscribers. Like all cable providers, TWC operated through franchises let by local government entities. At the time of the instant lawsuit it was the franchisee in the greater part of New York City. DIRECTV was one of the country's largest satellite service providers, with more than 15.6 million customers nationwide. Because DIRECTV broadcasted directly via satellite, it was not subject to the same franchise limitations as cable companies. As a result, in the markets where TWC was the franchisee, DIRECTV and other satellite providers posed the greatest threat to its market share. TWC filed a lawsuit against DIRECTV in federal district court alleging DIRECTV committed false advertising under § 43(a)(1) of the Lanham Act, 15 U.S.C.S. § 1125(a)(1). On TWC's motion, the district court granted TWC a preliminary injunction enjoining DIRECTV from disseminating, in any market in which TWC provided cable service, certain television commercials and Internet advertisements in which DIRECTV claimed that its high-definition ("HD") picture quality was superior to TWC's HD picture quality. The district court found that statements in the commercials made the literally false claim. DIRECTV filed an interlocutory appeal.

Issue:

Did the district court err in holding that statements in the commercials made the literally false claim that DIRECTV's HD was superior to TWC's HD in picture quality?

Answer:

No.

Conclusion:

The court affirmed in part and reversed in part the district court's order and remanded the case for further proceedings. The court ruled, inter alia, that the district court properly found that the claim that a viewer could not get the best picture without DIRECTV's satellite service was likely to be proven literally false. The district court's finding that DIRECTV's claim that settling for cable would be "illogical" unambiguously made a false claim was not clearly erroneous given that the assertion was preceded by a statement praising the amazing picture clarity of DIRECTV's HD. Finding that the Internet advertisements' depictions of the cable industry's picture quality were so grossly exaggerated that no reasonable consumer would have relied on them, the court held that the district court clearly erred in rejecting DIRECTV's puffery defense. Although the commercials did not mention TWC by name, the presumption of irreparable harm applied because the commercials necessarily diminished the value of TWC's product.

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