How Not To Market Your Business Online (Even If It Works): Claims Against Fake Review Sites And Stolen Obituary Photos Survive Motion To Dismiss

Despite celebrity endorsements from the likes of Dennis Miller and Alan Thicke, all that glitters isn't gold when it comes to the marketing of precious metal investments. In March 2014, American Bullion, Inc., which is in the business of encouraging individuals to convert their retirement savings to gold and silver, brought suit against its competitor, Regal Assets, LLC, in the Central District of California, alleging a host of unsavory internet marketing practices. Last month, the Court ruled that American Bullion had indeed stated valid claims for, among other things, false advertising and trade libel. A motion for a preliminary injunction is now pending.

American Bullion's Allegations

According to American Bullion's complaint, Regal operates on a performance-based affiliate marketing program. Affiliates (i.e., individuals and companies with their own websites) promote Regal's products and are compensated through commissions based on the number of clients they refer. American Bullion alleges that Regal's unscrupulous use of this model has led to a number of illegal internet marketing practices, including:

Websites representing themselves as independent affiliate entities, which are in fact operated solely by Regal, and which "recommend" Regal but warn potential customers against American Bullion. Websites owned by independent affiliates, but the contents of which are actually written by Regal. This includes fake reviews with false assertions that American Bullion was the defendant in a "Ponzi like scheme" lawsuit, and that falsely identify the owner of American Bullion as a man charged with fraud by the US Commodity Futures Trading Commission in 2010. Affiliate websites which fail to disclose the compensation they receive from Regal. Misleading links from affiliates which divert traffic from American Bullion. For example, a now-defunct blog called "silvergoldweekly.com" instructed users to "Click here to visit American Bullion," but the hyperlink instead directed the reader to Regal's website. False Advertising and Trade Libel Claims Survive

On July 15, 2014, Judge Dean D. Pregerson (who, in an arresting typo, signed his order under the name "Dead D. Pregerson") denied Regal's motion to dismiss. As to American Bullion's false advertising counts (under Section 43 of the Lanham Act and California state law), Regal had argued that American Bullion failed to state a claim because the alleged false statements did "not appear to be...