Antitrust Law Daily Wrap Up, ADVERTISING—WDMo: Tax Preparer H&R Block Denied Injunction Restraining Ad Campaign by TurboTax Software Provider Intuit, (Jan 30, 2013)

By Peter Reap, J.D., LLM

Tax preparers H&R Block Eastern Enterprises, Inc., HRB Innovations, Inc., and H&R Block Enterprises LLC (collectively, “H&R Block”) were not likely to succeed on the merits of a claim that competitor Intuit, Inc., maker of TurboTax tax preparation software, is committing false advertising in violation of the Lanham Act by broadcasting a new national advertising campaign (the “Campaign”), the federal district court in Kansas City, Missouri, has decided (H&R Block Eastern Enterprises, Inc. v. Intuit, Inc., January 29, 2013, Gaitan, F.). Furthermore, the other factors used to determine whether to grant a temporary restraining order either weighed in favor of Intuit, or were neutral. Therefore, H&R Block’s request for a temporary restraining order was denied.

Specifically, H&R Block asked the court for an order restraining Intuit from: (1) broadcasting, publishing, or disseminating, in any form or in any medium, the advertisements comprising the advertising Campaign referenced in its complaint; (2) broadcasting, publishing, or disseminating, in any form or in any medium, any promotional or advertising materials containing any use of H&R Block’s intellectual property, including without limitation the “H&R Block” name and other federally registered trademarks owned by H&R Block, in a manner that is likely to cause confusion, or to cause mistake, or to deceive; and (3) broadcasting, publishing, or disseminating, in any form or in any medium, any advertisement that claims, directly or implicitly, that: (a) more people filed their tax returns through Intuit than through H&R Block and other major tax return preparation companies combined; (b) H&R Block relies upon temporary and seasonal workers while Intuit does not; and (c) H&R Block’s tax preparers are untrained, unqualified, or inexperienced.

H&R Block’s Allegations

H&R Block complaint contains claims for false advertising and trademark infringement under federal law and a claim for unfair competition under both federal and Missouri common law. In addition to injunctive relief, H&R Block asks for the profits Intuit derives from its unlawful conduct, trebled damages pursuant to the Lanham Act, and exemplary and punitive damages as the court finds appropriate to punish Intuit’s misconduct and deter any future willful misconduct.

As detailed in H&R Block’s complaint, the Campaign allegedly uses H&R Block’s trademark in a manner that casts false and misleading aspersions on H&R Block’s services and personnel by suggesting, and in some cases asserting, that: (1) TurboTax is used and thus, trusted by more U.S. taxpayers than the “in-store” services of H&R Block and all other major retail office tax preparation services combined; (2) H&R Block recruits principally tax preparers with no experience; and (3) H&R Block tax preparers are not adequately trained and credentialed, and merely seasonal employees, while the advisors made available by TurboTax to answer customer questions are “real tax experts.”

H&R Block contends that the Campaign currently is comprised of at least two televised advertisements, called “Master Plumber” and “Return Expert,” respectively. Since January 21, 2013, these television advertisements have aired and continue to be aired hundreds of times in media markets nationwide, including Kansas City, Missouri, on a broad range of television stations. Intuit is misusing H&R Block’s protected Mark in the Campaign and misleading the public regarding the nature and qualities of the parties’ products and services, according to the complaint.

Analysis

The Eighth Circuit uses a four-prong test consisting of the Dataphase factors to determine whether to grant a temporary restraining order, the court observed. The Court considers: (1) the threat of irreparable harm to the movant; (2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that the movant will succeed on the merits; and (4) the public interest.

The standard for demonstrating a false advertising claim under the Lanham Act is: (1) Defendant made false statements of fact about its own or another's product; (2) the statement "actually deceived" or had the "tendency to deceive a substantial segment" of its audience; (3) the deception created was material; (4) defendant caused the statement to enter interstate commerce, and (5) plaintiffs have been or are likely to be injured as a result of the false advertisement.

H&R Block has failed to sufficiently demonstrate a probability of success at showing that the advertisements at issue are “literally false,” and has not provided sufficient evidence that the statements “actually deceived” or had a tendency to deceive their audience, the court determined. In addition, H&R Block has not provided sufficient evidence that the deception created (if any) was material to a substantial segment of the intended audience.

The other Dataphase factors either favored Intuit, or were neutral, the court held. Thus the request for a temporary restraining order was denied and the parties were directed to submit a proposed scheduling order for a preliminary injunction hearing.

Attorneys: Adam A. Levine (O'Melveny & Myers LLP) for H&R Block Eastern Enterprises, Inc. Bernard J. Rhodes (Lathrop & Gage LLP) for Intuit Inc.

Companies: H&R Block Eastern Enterprises, Inc.; HRB Innovations, Inc.; H&R Block Enterprises LLC; Intuit, Inc.

Cases: Advertising MissouriNews