Antitrust Law Daily Wrap Up, ADVERTISING—D.N.J.: Native ad provider’s Lanham Act claims proceed against competitor, (Apr 18, 2016)

By Greg Hammond, J.D.

A native advertising provider failed to demonstrate that dismissal of Lanham Act false advertising claims was appropriate for a lack of personal jurisdiction, improper venue, immunity under § 230 of the Communications Decency Act, or for failure to state a claim under the Lanham Act. The federal district court in Trenton, New Jersey, consequently denied the provider’s motion to dismiss (Congoo, LLC v. Revcontent LLC, April 15, 2016, Shipp, M.).

Congoo, LLC, doing business as AdBlade, is a provider of “native advertising,” which integrates online advertising in published content on various internet news and information sites. Alleging that competitor Revcontent LLC published or caused to be published false and misleading native advertising, Congoo filed false advertising claims under the Lanham Act. Revcontent moved to dismiss, and Congoo moved for preliminary injunction.

Personal jurisdiction. The court first denied the motion to dismiss on jurisdiction grounds, finding that Congoo presented sufficient allegations to present a prima facie case for the exercise of personal jurisdiction over Revcontent. In particular, Congoo alleged that Revcontent and its CEO: (1) made regular contact with employees of publishers in New Jersey, including Forbes magazine, regarding the content and placement of advertising and about Congoo’s business; (2) directly solicited New Jersey businesses, including NewsZoom, to switch their advertising to Revcontent; and (3) created advertising content that specifically targeted New Jersey customers.

Venue. Second, Revcontent failed to demonstrate that venue was improper in New Jersey because Congoo adequately alleged that a substantial part of the events giving rise to the Lanham Act claims occurred in New Jersey. Such events included Revcontent’s solicitation of New Jersey businesses through the use of allegedly false and misleading advertising practices and Revcontent’s close interaction with New Jersey businesses regarding the content and placement of ads.

Immunity. Revcontent also failed to establish that it was entitled to immunity under § 230 of the Communications Decency Act, which grants immunity to interactive computer service providers that publish harmful information that is generated by a third party. Congoo disputed that Revcontent is merely an “interactive computer service provider.” The court agreed that Congoo sufficiently pleaded that Revcontent was responsible in part for the development of the subject advertisements. As such, Revcontent did not establish that it was entitled to immunity, and the motion to dismiss was denied.

Lanham Act claims. Lastly, the court found that Congoo sufficiently pleaded that Revcontent made a false advertising statement and that Congoo has standing under the Lanham Act. Congoo’s allegations were sufficient to demonstrate that Revcontent and its CEO participated in or contributed to the use of false and misleading statements, including allegations that: (1) defendants have employed the stated false and misleading representations in advertising to generate greater income from their ads and those of defendants’ advertisers; and (2) defendants, in connection with their services, have used and continue to use false and misleading descriptions of fact and false and misleading representations of fact in commercial advertising that misrepresent the nature, characteristics, and qualities of their services or commercial activities.

With regard to standing, Congoo adequately pleaded an injury to commercial interest in sales or business reputation proximately caused by Revcontent’s misrepresentations, according to the court. Congoo claimed that the defendants—by their false and misleading representations in ads—have been able to generate greater income from ads and thereby to offer their services at more attractive rates to Congoo’s publishers than Congoo could because Congoo does not employ false and misleading representations in its ads.

Preliminary injunction. The court also determined that issues of disputed fact warranted an evidentiary hearing with regard to whether preliminary injunction is appropriate. In particular, the court identified two disputed facts, including: (1) with regard to the likelihood of success on the merits, Revcontent’s assertion of § 230 immunity requires resolution of the parties’ dispute as to Revcontent’s role in the creation and development of the ads at issue; and (2) the issue of irreparable harm requires the resolution of the parties’ dispute as to whether Congoo’s alleged market loss is purely economic and reparable loss.

The case is No. 16-401 (MAS)(TJB).

Attorneys: Charles Patrick Kennedy (Lerner, David, Littenberg, Krumholz & Mentlik, LLP) for Congoo, LLC. Christopher A. Barbarisi (K&L Gates LLP) for Revcontent LLC.

Companies: Congoo, LLC; Revcontent LLC

Cases: Advertising NewJerseyNews