Interference with a Contract or Economic Advantage
by
Charles Lamson
The tort (a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act) of interference with a contract or economic advantage basically occurs when a business relationship has been formed and in some way a third-party causes one party to end that business relationship. If injured, the other party to the business relationship may have a cause of action against the party causing the breakup. This tort could also be the result of unjustified interference with a person's reasonable expectation of future economic advantage.
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Traditionally, proof of this tort only required showing that the defendant knowingly interfered with a business relationship. However, more and more states require that the intentional interference be improper. Improper interference can occur because of an improper motive, an improper means, or by acting other than in the legitimate exercise of the defendant's own rights. Defendants who protect their economic or safety interests or assert honest claims are not acting improperly.
In a free market economy, competitors inevitably injure one another. Courts do not hold such injury tortious, even when intentional, if the action was taken to advance a person's economic interest and results from the competitive economic system.
However, if a person justifiably interferes with another's business relationship or reasonable expectation of future economic advantage, there is a tort. Interference with leasing opportunities, with the opportunity of buying and selling goods or services, and with the hiring of employees are examples of the types of interference that can be actionable.
Confusion About a Product
A person may commit a tort by intentionally causing confusion about another's product. This could be done by making false statements about another's product or by representing goods or services as being the goods or services of someone else.
Injurious Falsehood. When a person makes false statements of fact that degrade the quality of another's goods or services, the tort of injury of false communication occurs. The false statement must be made to a third person. This is called communication. The hearer must understand the statement to refer to the plaintiff's goods or services and to degrade their quality. The injured party must also show the statement was a substantial element in causing damage. In some states the plaintiff must identify specific customers lost as a result of the statement.
Finally, the statement must have been made maliciously. Malice can always be shown by proving that the statement was made as a result of ill will, spite, or hostility with the intention of causing harm to the plaintiff. In some jurisdictions, the plaintiff need only show that the false statement was made knowing it was false or with reckless disregard as to its truth or falsity.
Confusion of Source. The tort that occurs when a person attempts to represent goods or services as being the goods or services of someone else is confusion of source. The law of assumes customers would be confused as to the source of the goods or services. Actual confusion need not be shown. This tort occurs from trademark or trade name infringement or unfair competition.
Trademarks. Federal law defines a trademark as a word, name, symbol, device, or any combination adopted and used by a person to identify and distinguish goods, including a unique product, from another's goods and to indicate the source of the goods. A trademark indicates that goods carrying that mark all come from one source. A trademark or trade name gives the owner the exclusive right to use a word or device to distinguish a product or a service.
Not all words or symbols qualify for protection as trademarks. Only those marks used by a business in a way that identifies its goods or services and differentiates them from others are entitled to protection. The mark generally must be inherently distinctive, which means the mark is unique, arbitrary, and non-descriptive.
A mark that is not so distinctive may be a trademark if it has acquired a secondary meaning. A secondary meaning is a special portrayed meaning developed by usage that distinguishes the goods or services in such a way as to warrant trademark protection. A generic term can be protected if it has acquired a secondary meaning. If the right to trademark protection is based on the doctrine of secondary meaning, the geographical area of protection will be limited to the area in which the Mark has such a secondary meaning.
Marks that are fanciful, arbitrary, or suddenly suggest something about the product can be protected. Protected marks include words such as Ivory for soap, the letters S and ECI, Abbreviations for nicknames such as Coke, made up words such as Exxon and Rolex, and the shapes of packages and products. Generic terms such as superglue and soft soap cannot be trademarks.
A trademark may be registered or unregistered. A trademark registered under the federal trademarks law provides the holder with all the rights and remedies of that law. The holder of an unregistered trademark also has some rights under the federal law and rights provided by the common law. Many states also have trademark laws, however, they vary greatly. In some states the holder of a mark may not get greater protection by registering than the common law affords an unregistered mark.
Trademark or trade name infringement is the unauthorized use or confusingly similar imitation of another person's mark or name. If the imitation is likely to cause confusion or mistake or deceive people, courts will halt use of the imitation. Courts examine a number of factors when deciding whether a likelihood of confusion between two marks exist. Although the various courts do not always use the same factors, those factors most commonly considered include:
The imitation of another's trademark is not always done to cause confusion and does not always lead to infringement. However, where the imitation is for the purpose of jest for commentary, the parody is successful only when there is no confusion and therefore no infringement.
When infringement is a tort, rather than a crime, the holder of the trademark or name has the duty of bringing any legal action to stop the alleged infringement and recover damages.
Trademarks identify and distinguish tangible goods, service marks identify and distinguish services. However, the same legal principles govern trademark infringement and service mark infringement.
The owner of a trademark is protected from unauthorized use of the trademark even when confusion might not result. Trademark or trade name dilution is "the lessening of the capacity of a famous mark to identify and distinguish goods of services." This could be done either by what is called blurring or by tarnishing a trademark. Blurring means to diminish the selling power of a trademark by unauthorized use on noncompeting products. A blurring use would occur if someone produced McDonald's light bulbs are Chrysler tires, for example. Tarnishing a trademark occurs when the mark is used in a disparaging manner or on low-quality goods. The owner of a trademark or name may get an injunction against anyone's commercial use of the trademark or name.
Unfair Competition. Unfair competition exists when the total impression a product gives to that customer results in confusion as to the origin of the product. The impression of a product includes its packaging, size, color, shape, design, wording, any decorative indicia, and name. When unfair competition is claimed, the total physical damage conveyed by the product and its name are considered together.
*SOURCE: LAW FOR BUSINESS, 15TH ED., 2005, JANET E. ASHCROFT, PGS. 24-28*
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