Under the Lanham Act, any person who makes false or misleading descriptions of fact in commercial advertising “shall be liable in a 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(a)(1)(B).

“To invoke the Lanham Act's cause of action for false advertising, a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant's misrepresentations.” Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 140 (2014). A plaintiff bringing a Lanham Act claim “cannot obtain relief without evidence of injury.” Id.

“Educated. Tested. Verified. Certified.”

The International Association of Certified Home Inspectors (“InterNACHI”) alleged that the tagline, “Educated. Tested. Verified. Certified.” used by the American Society of Home Inspectors (“ASHI”) was false advertising because ASHI's membership includes so-called “novice” inspectors who have yet to complete training or become certified.

ASHI has three membership classes: (1) associate, (2) inspector, and (3) certified inspector. ASHI requires no formal professional qualifications to join as an associate, but associates must complete the organization's standards of practice and ethics modules within one year of joining the organization. To attain inspector or certified inspector status, a member must pass a national or state home inspector exam, conduct a specific number of home inspections, and submit home inspection reports for verification, in addition to completing the ASHI standards of practice and ethics modules. All ASHI members who have held their membership for one year or more are also required to complete continuing education requirements to maintain good standing.

InterNACHI alleged ASHI's tagline was misleading which harmed InterNACHI because novice inspectors were incentivized to join ASHI due to its willingness to advertise uncertified associate members as home inspectors. This was a counterclaim asserted by InterNACHI in response to a defamation claim that ASHI had brought against InterNACHI.

In support of its counterclaim, InterNACHI submitted evidence consisting of: (1) a survey showing that consumers may be deceived by ASHI's tagline; (2) a substantial increase in ASHI's associate membership after ASHI posted the slogan on its website; and (3) a declaration by InterNACHI's founder stating that ASHI's slogan is harmful to InterNACHI.

Judge Jackson of the District of Colorado granted summary judgment in favor of ASHI because InterNACHI failed to show it had suffered an injury to a commercial interest in reputation or sales.

On appeal, the Tenth Circuit affirmed. Am. Society of Home Inspectors Inc. v. Int'l Association of Certified Home Inspectors, No. 21-1087 (10th Cir. Jun. 14, 2022).

Survey Results

InterNACHI hired an expert to design and conduct a survey of consumers regarding ASHI's slogan. Based on the survey results, the expert determined that 72.4% of those surveyed thought all home inspectors advertised on ASHI's website possessed the qualities described in the tagline. The expert concluded the “net level of deception is 15.2%” after accounting for guessing and other survey noise.

The Tenth Circuit held that “[w]hile the survey results might be helpful in determining whether consumers have been deceived by ASHI's tagline, the results do not shed any light on whether home inspectors are more likely to join ASHI instead of InterNACHI due to ASHI's tagline.”

No Inference from Increased Associate Membership

InterNACHI also argued that ASHI's false tagline lured novice home inspectors away from InterNACHI because in the five years after ASHI began using the tagline, ASHI's associate membership roughly doubled in size.

But the Tenth Circuit declined to infer that InterNACHI was harmed by ASHI's increase in associate membership.

At best, the membership spike shows that ASHI benefitted from the tagline—though ASHI claims the increase in membership is attributable to other causes. For example, around the time ASHI began using the tagline, ASHI also started offering reduced and free memberships to students. Additionally, ASHI issued memberships to former members of the National Association of Home Inspectors, the national home inspector association that shut down in 2016.

Moreover, there was no evidence that InterNACHI's own membership levels were affected by ASHI's tagline.

An Insufficient Declaration

InterNACHI also submitted a declaration by its founder, Nick Gromicko, in which he alleges harm to InterNACHI caused by ASHI's tagline. But the Tenth Circuit noted that “Gromicko does not explain why the slogan is harmful to InterNACHI, nor does he offer any factual support for his claim that the slogan injured InterNACHI.”

An unsupported and conclusory declaration that speculates harm is insufficient to avoid summary judgment.

No Presumption of Harm

InterNACHI also argued that even if it has not demonstrated an injury to a commercial interest, harm should be presumed because InterNACHI is ASHI's sole competitor in the national home inspector market.

The Tenth Circuit held that such a presumption was not justified here.

[T]he fact that InterNACHI is ASHI's competitor is insufficient on its own to apply a presumption of harm. InterNACHI still must show that “injury would . . . likely flow” from ASHI's tagline. See id. To hold otherwise would mean that “a plaintiff might enjoy a windfall from a speculative award of damages by simply being a competitor in the same market.” Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1334 (8th Cir. 1997). While we may presume harm in certain cases—such as those where a business compares its product to that of its direct competitor or disparages its direct competitor's product in an advertisement—we will not apply the presumption of harm based solely on the fact that the plaintiff and defendant are in competition with each other. Here, ASHI's tagline does not reference InterNACHI or disparage InterNACHI memberships.

Moreover, although ASHI and InterNACHI are competitors, home inspectors are free to join both associations.

A Lack of Evidence

To survive summary judgment against its false advertising claim under the Lanham Act, InterNACHI needed to present evidence that it suffered harm to a reputational or commercial interest as a result of ASHI's alleged false advertising.

To be clear, we are not faulting InterNACHI for failing to provide a quantum of damages. This level of specificity is not required at the summary judgment stage. The problem is that instead of putting forth any evidence demonstrating that it was injured by ASHI's tagline, InterNACHI relies solely on speculation and conjecture to establish harm. Based on this lack of evidence, no reasonable jury could conclude that InterNACHI was injured by ASHI's tagline.

Thus, the Tenth Circuit affirmed the summary judgment of no false advertising in favor of ASHI.

The attorneys at Thomas P. Howard, LLC are experienced in enforcing trademarks or defending against infringement claims in litigation nationwide including in Colorado.