Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Pa.: Rival alumni association could have violated Lanham Act, (Jun 4, 2014)

By Thomas Long, J.D.

The operator of the Valley Forge Military Academy and College (“Academy”) and the schools’ alumni association adequately pleaded Lanham Act trademark infringement, dilution, and false advertising claims against a rival alumni association that allegedly used the plaintiffs’ service marks in promotional materials and fundraising campaigns, the federal district court in Philadelphia has decided (Valley Forge Military Academy Foundation v. Valley Forge Old Guard, Inc., June 2, 2014, Surrick, R.).

Plaintiff Valley Forge Military Academy Foundation (“Foundation”) is a Pennsylvania non-profit corporation that operates the Academy. The Foundation and co-plaintiff Valley Forge Military Academy and College Alumni Association (“Alumni Association”) are the owner and licensee, respectively, of various federally-registered and common-law service marks, including “Valley Forge Military Academy,” “Valley Forge Military College,” “Valley Forge Military Academy & College,” “Valley Forge Military Academy & College Alumni Association,” and “Valley Forge Experience,” which they use to promote the Academy. The Foundation also asserts that it has acquired significant goodwill and public recognition of other marks, such as “Lieutenant General Milton G. Baker Founder’s Society,” “Baker Founder’s Society,” and “Founder’s Society.”

Defendant Valley Forge Old Guard (“Old Guard”) is a Pennsylvania non-profit corporation that has been critical of the plaintiffs over the last several years. According to the plaintiffs, the Old Guard and its officers have used the plaintiff’s marks to pass off the Old Guard as the official alumni association of the Academy, in the course of fundraising efforts for the Old Guard. The plaintiffs filed a complaint that included federal claims under the Lanham Act for trademark infringement, false designation and unfair competition, dilution, and false advertising, as well as parallel state causes of action. The defendants moved to dismiss.

Lanham Act claims—commercial speech. The defendants contended that all of the Lanham Act claims had to be dismissed because their statements were protected by the First Amendment. The defendants argued that their speech was not “commercial” and therefore did not fall within the coverage of the Lanham Act.

According to the court, the plaintiffs adequately pleaded that the defendants had engaged in commercial speech. The Old Guard and other defendants allegedly competed with the Alumni Association for fundraising and alumni services. The defendants allegedly used the plaintiffs’ marks in an advertisement that referred to a specific service by sending an e-mail to 4,000 individuals that promoted the defendants’ alumni services and explicitly solicited funds. The alleged activities by the defendants would have the requisite economic motivation to qualify as commercial speech, in the court’s view.

Trademark infringement and unfair competition. The plaintiffs sufficiently stated claims for trademark infringement and unfair competition, the court decided. The defendants’ alleged use of the plaintiffs’ marks to provide alumni services and to solicit funds for such services constituted providing services in for purposes of the Lanham Act. The term “services” as used in the Lanham Act should be interpreted broadly.

The plaintiffs adequately pleaded that their marks were valid and legally protectable. They asserted that the marks were either inherently distinctive or had acquired secondary meaning.

The defendants argued that there could be no likelihood of confusion because they disseminated messages that were critical of the plaintiffs. However, the plaintiffs asserted that the defendants competed with them in the market for fundraising and alumni association services and directed their activities toward the same customers. According to the plaintiffs, much of the information distributed by the defendants was not, in fact, critical of the plaintiffs. Therefore, the court rejected the defendants’ argument.

In addition, the court declined to find, as a matter of law, that a disclaimer on the defendants’ website was sufficient to dispel confusion. There was other material on the site that could cause confusion, including a mission statement that was similar to that of the Alumni Association, the text of the Academy’s alma mater, and pictures of the Academy’s campus. In addition, there was no evidence that the defendants used the disclaimer in the course of their allegedly infringing e-mail campaigns and press releases.

Dilution. The court rejected the defendants’ contention that the dilution claims must be dismissed because the plaintiffs’ marks were not famous. The court stated that it was required, at this stage, to accept the plaintiffs’ well-pleaded facts, and the plaintiffs sufficiently alleged that the marks were famous. Specifically, they claimed the marks were used continuously since 1928 to advertise and promote the plaintiffs’ services, had been used extensively by the press in connection with the plaintiffs, and were known throughout the world as identifying the plaintiffs.

False advertising. The defendants contended that the plaintiffs could not establish a false advertising claim under Sec. 43(a)(1)(B) of the Lanham Act because the literature distributed by the defendants did not constitute commercial advertising or promotion. According to the defendants, they were non-profit entities exercising their right to criticize the current administration, and their speech had no commercial purpose. However, the court previously determined that the defendants had engaged in commercial speech within the coverage of the Lanham Act.

Furthermore, the court said, the Lanham Act’s false advertising provision was broad enough to support, in the context of non-profit fundraising, a claim of false and misleading statements about the services represented by a protected mark. The plaintiffs alleged that the defendants competed with them in a commercial market for alumni services and that the defendants made false and misleading statements in promoting their services. The plaintiffs sufficiently alleged that the defendants had made a false or misleading statement of fact in commercial advertising or promotion to allow the claim to go beyond the motion to dismiss stage, the court concluded.

The case is Civil Action No. 09-2373.

Attorneys: Michael C. Petock (Petock & Petock, LLC) for Valley Forge Military Academy Foundation and Valley Forge Military Academy & College Alumni Association. David J. Shannon (Marshall Dennehey Warner Coleman & Goggin) for Valley Forge Old Guard, Inc.

Companies: Valley Forge Military Academy Foundation; Valley Forge Military Academy & College Alumni Association; Valley Forge Old Guard, Inc.

Cases: Advertising PennsylvaniaNews