A North Carolina jury ruled in favor of a software company that sued a competitor for unfair competition and business defamation. A product newsletter is at the center of this business-on-business lawsuit, and it serves as an “unfair competition” cautionary tale.
Software Co. v. Software Co. – A Tale of Business-on-Business Defamation
EMove Inc (“Emove”) and SMD Software Inc (“SMD”) are direct competitors. Both companies make software for the self-storage/moving industry. Several years ago, Emove did a mailer extolling the virtues of its products, and in it mentioned rival SMD.
Now, it’s not unusual for competitors to use each other in marketing materials, but there is a line that can’t be crossed. Here’s what Emove did wrong:
- Inflated the price of SMD’s products;
- Inaccurately stated what was and what wasn’t included in SMD’s services; and
- 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 defamatory; making a false statement of fact is. If Emove had said something general like, “Our customers think we’re better than the competition” — no biggie.
In the lawsuit, SMD alleged:
- Tortious Product Disparagement,
- False Advertising (Lanham Act violations), and
- Various North Carolina fair competition laws.
The jury’s verdict? 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?
Defamation and unfair competition go together like strawberries and cream. Businesses clawing for market dominance do engage in disparagement schemes. But you can fight back.
1) File A Business Defamation Claim: File a business defamation lawsuit if you have a solid case. To win, you must be able to prove that:
- Your competitor lied about you, your product, or your company;
- The lie caused material harm or severe reputation harm;
- It was read or heard by more than one person;
- The statements were made negligently.
2) Allege Lanham Act Violations: The Lanham Act is the country’s chief intellectual property and business competition law.
3) 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 unfair competition lawsuits. It’s best to speak with an attorney about the specifics of your situation for a more nuanced read on your legal options.