Antitrust Law Daily Wrap Up, ADVERTISING—E.D.N.C.: Court sets limits on testimony of comparative advertising expert witness, (May 12, 2014)

By Edward L. Puzzo, J.D.

In a claim of defamation in comparative advertising, the plaintiff's expert witness may testify as to industry standards, but may not testify in a way that might mislead the jury as to the law governing the case, the federal district court in New Bern, North Carolina has ruled (SMD Software, Inc. v. EMove, Inc., May 7, 2014, Flanagan, L.).

Background. SMD Software, Inc. and SiteLink Software, LLC brought an action against U-Haul International, Inc. and two subsidiaries (EMove, Inc. and A&M Associates), alleging Lanham Act false advertising, state unfair trade practices, and defamation, regarding it's "SiteLink" software products for operators of self-storage facilities. Plaintiffs alleged that U-Haul, in its advertising brochures for its competing "WebSelfStorage" software, made defamatory misrepresentations about plaintiff's "SiteLink" software in comparison charts.

On March 29, 2013, the court partially excluded reports and testimony of the expert witnesses for both plaintiffs and defendants. Subsequently, plaintiffs sought to call seven new witnesses who purportedly knew of alleged post-discovery false advertising by defendant EMove. They also sought the testimony of three new witnesses with knowledge of the self-storage industry, purportedly to replace their lost opportunity to cross-examine EMove's expert who had died. On October 10, 2013, the court allowed plaintiff to call only one of its proposed witnesses, and one witness EMove did not object to, because plaintiff's witness requests were ruled in violation of the court's scheduling order and untimely.

Plaintiff next sought reconsideration of its ruling that plaintiff expert Dr. Didow was barred from discussing applicable legal standards in his testimony. The court responded that it did not so rule, and sought to clarify its ruling.

Under Fourth Circuit precedent, the court explained, opinion testimony stating a legal standard, or which draws a legal conclusion by applying law to facts, is generally inadmissible. However, the line is not always clear between impermissible testimony about what the law is, and permissible expert testimony about standard industry practice.

Permissible expert testimony. Here, the court previously held that Dr. Didow would not be allowed to testify as to potentially applicable legal standards, such as a method of calculating damages under the Lanham Act, nor as to statements by the Marketing Research Association on what type of comparative advertising raises a presumption of injury. The court did not find good cause to reconsider this ruling. However, the court recognized that a witness may refer to the law in expressing his expert opinion without rendering that testimony inadmissible. Such references to applicable legal standards would only be inadmissible if they were either unhelpful to the jury or posed a threat of confusing the jury as to applicable standards.

In this case, Dr. Didow may testify as to industry standards for comparative advertising, or general industry advice on how to avoid liability, but may not testify as to the law governing this case. For testimony as to how the Lanham Act influences industry standards, Dr. Didow may not testify as to what the legal standards are under the Lanham Act sections at issue in this case.

The defendants alleged that Dr. Didow in his report had already impermissibly opined as to the governing law in this case, with various publications appended to his report. The court would not address the admissibility of the publications appended to Dr. Didow's report, but reiterated that he was prohibited from testifying as to industry standards regarding claim substantiation. The court advised defendants to raise timely objections at trial if Dr. Didow engaged in such testimony.

The case is Civil Action No. 5:08-CV-403-FL.

Attorneys: Catharine B. Arrowood (Parker Poe Adams & Bernstein) for SMD Software, Inc. and Sitelink Software, LLC. Christopher A. Page (Young, Moore & Henderson) for eMove, Inc. and Web Team Associates.

Companies: SMD Software, Inc.; Sitelink Software, LLC; eMove, Inc.; Web Team Associates

Cases: Advertising NorthCarolinaNews