Potential Lanham Act Reverberations: "Malicious" And "Threat" Are Statements Of Fact, Not Opinion

• Published date: 26 June 2023
• Subject Matter: Antitrust/Competition Law, Media, Telecoms, IT, Entertainment, Technology, Antitrust, EU Competition , Advertising, Marketing & Branding, Security
• Law Firm: Winston & Strawn LLP
• Author: Ms Susannah P. Torpey and Brandon W. Annette

On June 2, 2023, the Ninth Circuit overturned a district court's dismissal of a false advertising claim brought by Enigma Software Group USA LLC (Enigma) under Section 43(a) of the Lanham Act, 15 U.S.C. ' 1125(a)(1)(B) (the Lanham Act).¹ Enigma's allegations against a competitor in the computer security space, Malwarebytes, Inc. (Malwarebytes), concern Malwarebytes' designation of Enigma's programs as "malicious" and a "threat." After the district court found that such terms were "non-actionable statements of opinion" under the Lanham Act, the Ninth Circuit reversed and held that they were actionable statements of fact. As the dissent warned, this ruling sends a "chilling message to cybersecurity companies" that classify programs as malware.² And outside this context, this decision may have broader implications for the scope and definition of provable statements of fact under the Lanham Act.

In the Ninth Circuit, a plaintiff bringing a false advertising claim must, among other factors, allege that the defendant made a false statement of fact in a commercial advertisement.³ An actionable statement of fact must be "specific and measurable," and "capable of being proved false or of being reasonably interpreted as a statement of objective fact."⁴ In finding that the terms "malicious" and "threat" met the standard for an actionable statement of fact, the court explained that the terms were "substantively meaningful and verifiable in the cybersecurity context" and "make[] a claim as to the specific or absolute characteristics of a product."⁵ In doing so, the court acknowledged that the terms "admit of numerous interpretations," but argued that the context in which the words appear is "paramount."⁶ For example, Malwarebytes' anti-malware program labeling Enigma's software as "malicious" and a "threat" would reasonably be interpreted by Malwarebytes' customers as the identification of malware, and "whether software qualifies as malware is largely a question of objective fact."⁷ The dissent argued that these terms, even in the commercial context, were protected as "subjective expressions of opinion."⁸

This ruling is likely to have substantial implications for cybersecurity companies. As the dissent warns, "civil liability may now attach if a court later disagrees with your classification of a program as 'malware.'"⁹ Eric Goldman, associate dean and professor at Santa Clara University School of Law, says the decision invites competitors to "use litigation as a...