Business v. Business Defamation & Unfair Competition

business defamation unfair competitionA North Carolina jury ruled in favor of a software company that sued a competitor for unfair competition and business defamation. A product newsletter anchors this business-on-business lawsuit, and it serves as cautionary tale for what not to do when trying to gain market dominance.

Software Co. v. Software Co. – A Tale of Business-on-Business Defamation

EMove Inc and SMD Software Inc are direct competitors. Both companies make software programs used by self-storage/moving businesses. Several years ago, EMove did a mailer extolling the virtues of its products. In it, EMove mentioned rival SMD and made claims about EMove’s alleged superiority.

Now, it’s not unusual for competitors to call each other out in marketing materials, but there is a line that can’t be crossed. Here’s what EMove did wrong:

  1. Inflated the price of SMD’s products;
  2. Inaccurately stated what was and what wasn’t included in SMD’s services; and
  3. Inaccurately stated that SMD didn’t offer certain services when it did.

Notice how nothing on that list is an opinion. Under United States defamation law, opinion is not considered defamation, but making a false statement of fact is. If EMove would have said something general like, “Our customers think we’re better than the competition,” then it would have probably been in the clear. But SMD executives crossed the marketing Rubicon. Once they started making provably false statements about SMD, the defamation line was crossed.

In the lawsuit, SMD alleged:

  1. Defamation,
  2. Tortious Product Disparagement,
  3. False Advertising (Lanham Act violations), and
  4. Various North Carolina fair competition laws.

This lawsuit is 6-years-old and originally included U-Haul. U-Haul litigated their way out of it early on – and it looks like doing so save that company a whole lot of money, because the jury said that EMove had to hand over $1.7 million for misleading customers about SMD via their product marketing materials.

Business-on-Business Defamation and Unfair Competition: What Are The Differences?

In today’s Internet-based marketplace, defamation and unfair competition often go together like strawberries and cream. Businesses clawing for market dominance engage in high-tech disparagement schemes; social nemeses sometimes give in to revenge urges in ill-reasoned online smear campaigns (it is known). If either happens to you, legal options are available. For example, you can:

1) File A Business Defamation Claim: File a business defamation lawsuit if the facts of your case fit. In order to move forward with a defamation lawsuit, you must be able to prove:

  1. Your competitor lied about you, your product or your company;
  2. The lie caused material harm or severe reputation harm;
  3. It was read or heard by more than one person;
  4. The statements were made negligently.

2) Allege Lanham Act Violations: The Lanham Act is the country’s chief intellectual property and business competition law. Many acts of unscrupulous competition fall under the Lanham Act; it’s best to talk to an attorney about your specific issues to see if you have a strong claim under this statute. The Lanham Act also covers intellectual property concerns, which can sometimes be used in business on business lawsuits.

3) Move Forward With Tortious Interference Claims: Tortious interference claims involve instances where one party interferes with an agreement between two other parties.

Contact a Business-on-Business Defamation Lawyer

Various state laws also apply in many unfair competition lawsuits. It’s best to speak with an attorney about the specifics of your situation to get a more nuanced read on your legal options.

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