False Advertising: "Havana Club" Is Made in Puerto Rico? – Literally False Claims Can Be Cured By Carefully Crafting Advertising Messages "As a Whole"

The Third Circuit declares that when "no reasonable interpretation of the [advertising] as a whole could lead to the conclusion that it is false and misleading," a consumer survey (purportedly showing consumer deception) can be ignored and there can be no liability for false advertising under the Lanham Act.  Pernod Ricard USA, LLC v. Bacardi U.S.A., Inc., Case No. 10-2354, 2011 U.S. App. LEXIS 16046 (3^rd Cir., Aug. 4, 2011).

In the continuing battle in the lengthy rum wars, Pernod Ricard USA, LLC ("Pernod") brought its latest lawsuit against Bacardi U.S.A., Inc. ("Bacardi"), alleging that Bacardi is falsely advertising the geographic origin of its "Havana Club" brand rum under Section 43(a) of the Lanham Act, 16 U.S.C. §1125(a)(1)(B).  On the front of the "Havana Club" rum bottle, Bacardi confirms that "Havana" is merely the "BRAND" of the rum.  Bacardi clarifies that the rum is actually not Havana-made rum at all; rather, Bacardi admits that the rum is actually "Puerto Rican Rum."

Section 43(a)(1)(B) states, in part, that:

"(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . .

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. §1125.  To establish a false advertising claim under the Lanham Act, a plaintiff must prove:  (1) that defendant has made false or misleading statements about his or her own products (or another's product); (2) that there is actual deception or a tendency to deceive a substantial portion of the intended audience; (3) that the deception is material in that it is likely to influence purchasing decisions; (4) that the advertised goods traveled in interest commerce; and (5) that there is a likelihood of injury (declining sales, loss of good will, etc.).  As to the second element, actual deception or a tendency to deceive is generally presumed if a plaintiff proves that an advertisement is unambiguous and literally false.  If the advertising message is literally true or ambiguous, then proof of actual deception or a tendency to deceive must be shown.  Such proof is usually presented through the use of a properly-conducted consumer survey.

Here, as one would anticipate, Pernod had the consumer perception survey evidence that consumers interpreted the label and brand name to mean that the rum was Cuban rum.  In other words, Pernod submitted a consumer survey at the trial that purported to show that the "Havana Club" label conveyed an implied inaccurate message to a sufficient number of consumers.  The United States District Court for the District of Delaware admitted the consumer survey into evidence, but found it to be irrelevant because the advertising for the "Havana Club" rum was not false or misleading as a matter of law.  More specifically, the District Court held that "[t]he Havana Club label clearly and truthfully provides the origin of defendant's rum, and is not deceptive," as the label states the contents of the bottle to be "Puerto Rican Rum" and confirms that the rum is "distilled and crafted in Puerto Rico."  Id. at *16.  Rather than finding the consumer survey to be lacking because of survey design or some other flaw, the District Court admitted the survey as evidence, but determined that, since no false or misleading statement was made by Bacardi as a matter of law, no survey evidence was needed and the presented survey need not be considered by the Court in reach the decision.  2011 U.S. App. LEXIS 16046, *14.

The Third Circuit affirmed, holding "that the Havana Club label, taken as a whole, could not mislead any reasonable consumer about where Bacardi rum is made, which means that survey evidence has no helpful part to play on the question of what the label communicates regarding geographic origin."  Id. *17-18.   No doubt understanding the unusual holding of allowing courts to ignore properly-constructed consumer surveys on the question of consumer perception, the Third Circuit cautioned that:

"[O]ur holding today is not as a license to lightly disregard survey evidence about consumer reactions to challenged advertisements.  Before a defendant or a district judge decides that an advertisement could not mislead a reasonable person, serious care must be exercised to avoid the temptation of thinking, 'my way of seeing this is naturally the only reasonable way.'  Thoughtful reflection on potential ambiguities in an advertisement, which can be revealed by surveys and will certainly be pointed out by plaintiffs, will regularly make it the wisest course to consider survey evidence."

Id. *27.

This case highlights a couple of important issues.

First, no matter how well-constructed and how compelling the results might be, consumer survey evidence might be ignored by a court, when the advertising taken "as a whole" communicates a truthful message to consumers.  Lanham Act attorneys need to step back and take a look at the advertising as a whole and demonstrate why the advertising is false or misleading.  Relying on consumer survey evidence to care the day on the meaning of the advertising claim might not be enough.

Second, advertisers (and those reviewing advertising copy) can use the lessons of the Pernod case to cure otherwise literally false messages.  It is not unusual for advertising claims (including brand names) to communicate a false message to consumers when read in isolation.  Such literally false advertising claims, however, can be cured when properly-crafted advertising claims, so that when read in context, the advertising communicates no false or deceptive message.