Takedown Notice Falsely Alleging Counterfeiting Is Adequate Basis for False Advertising Claim

April 6, 2022

Douglas R. Wolf

Author: Brian Darville, Oblon, McClelland, Maier & Neustadt, LLP
Verifier: Doug Wolf, Wolf Greenfield

In a dispute between two competing cosmetics companies, a federal court in Florida recently held that an allegedly fraudulent Amazon takedown notice, falsely claiming that genuine products were infringing and counterfeit, was an adequate basis for a false advertising claim under the Lanham Act. Verbena Prods. LLC v. BeSweet Creations, Inc., 2022 U.S. Dist. LEXIS 27936 (S.D. FL Feb. 16, 2022).

The plaintiff, Verbena Products, LLC dba Beautyvice, sued the defendant, BeSweet Creations, Inc. dba Sugarbearhair (Sugar Bear) and Nicole Johnson, Sugar Bear’s owner, CEO, president, director, and assistant secretary, because Sugar Bear sent a report signed by Ms. Johnson to Amazon falsely claiming that two of Beautyvice’s Amazon Marketplace listings for Sugar Bear—branded products were counterfeit products. Sugar Bear’s report stated that the disputed listings are “unsafe to consume as it is not the real product” and “counterfeit fake.” It also stated that Beautyvice is “selling product that 100% replicates our trademark and label but it is not our product.” The report closed with, “Please protect Amazon customers by removing this seller from Amazon.”

Amazon removed the two disputed listings, which were for products that Beautyvice lawfully purchased prior to being resold legally on Amazon Marketplace.

Beautyvice sued for false advertising under the Lanham Act, alleging that Sugar Bear’s statements deceived Amazon and are likely to deceive and confuse the public (Amazon Marketplace users) into believing that the plaintiff’s products are counterfeit when the products are genuine Sugar Bear products for resale. Beautyvice further alleged that the false “statements were made ‘in commercial promotion of [Sugar Bear]’s own products in direct competition with’” Beautyvice’s products in an attempt to divert sales away from Beautyvice and toward Sugar Bear. Specifically, Beautyvice alleged that its reputation and sales were injured by Sugar Bear’s false statements to Amazon, which stated a claim for false advertising.

The court denied Sugar Bear’s motion to dismiss Beautyvice’s false advertising claim, ruling that the Lanham Act’s broad false advertising provisions do not require a plaintiff to prove enforceable trademark rights in a mark or name. The court held that Beautyvice had alleged an injury to its reputation and sales, and that reputational injury flowed directly from the defendant’s deceptive advertising.

The court further held that Ms. Johnson was rightly named as a party because she directed and participated in the false advertising and could be held personally liable without Beautyvice having to pierce the corporate veil. Under US law, “piercing the corporate veil” refers to a situation in which courts put aside limited liability and hold a corporation’s shareholders, officers, or directors personally liable for the corporation’s actions. However, because Ms. Johnson personally participated in the unlawful false advertising, she could be held personally liable without the required evidentiary showing for piercing the corporate veil. The court otherwise dismissed several of Beautyvice’s state law claims under Florida’s single action rule and allowed the federal false advertising claim and remaining state law claims to proceed.

This article was first published by the International Trademark Association on inta.org.