The business world can be cutthroat, with various startups rushing to be the first to market a new product or increase their customer base. Companies may utilize various tactics to gain an edge on their competition. However, it’s imperative that they don’t run afoul of state or federal law with their actions; otherwise, they may face unfair competition litigation.
Defining unfair competition
Any deceptive or unethical business practices that have the potential of harming consumers or other companies may constitute unfair competition. Some examples may include:
- The misappropriation of intellectual property like trademarks or trade secrets
- Unauthorized substitution of a company’s product or service
- False advertising
Any situation in which a company or individual seeks some financial gain by representing someone else’s intellectual property as their own may also constitute unfair competition.
Laws prohibiting unfair competition
Two federal laws, 15 U.S.C. §1125(a) and the Lanham Act §43(a) (the latter also known as the Commerce Clause), prohibit unfair competition. These laws describe how company owners have the right to pursue litigation against anyone who violates their intellectual property rights. They also clarify what constitutes false advertising and how it is unlawful.
A different federal law, the Uniform Trade Secrets Act, outlines the illegality of sharing trade secrets without prior authorization from the IP holder. This same law also clarifies that it’s unlawful for anyone to manufacture counterfeit products.
Oregon Revised Statutes 646 describes the state’s prohibitions on unfair competition. In addition, chapter 19.86 of the Revised Code of Washington describes what constitutes unfair competition per state law.
What rights do intellectual property holders have?
Many state statutes require IP holders to send cease and desist letters to entities they believe have violated their rights before pursuing litigation. Should that entity’s unlawful actions persist, seeking injunctive relief may be necessary. Factors that may impact the outcome in cases like these include:
- Whether there’s proof that a defendant willfully engaged in unfair competition
- How long the alleged impropriety lasted
- The amount of damages the alleged wronged party suffered
A successful outcome in an unfair competition case hinges on a plaintiff’s ability to present evidence at trial proving that the defendant violated their rights and that they suffered financial harm as a result.
