In a case that pitted two sellers of construction equipment against each other — I Dig Texas, LLC v. Creager — the U.S. Court of Appeals for the Tenth Circuit was tasked with excavating the truth behind claims of false advertising and copyright infringement. The court had to dig deep to determine whether there was a solid foundation for the allegations that I Dig Texas had built its profits on the back of Creager’s copyrighted photographs and whether I Dig Texas’s “Made in the USA” claims were as sturdy as the skid steer attachments they sold.

I Dig Texas used copyrighted photographs of Creager’s products — which were made in China — in its advertisements. These advertisements stated I Dig Texas’s products were made in the United States and encouraged consumers to purchase its skid steer attachments rather than Creager’s foreign-made attachments.

I Dig Texas filed a lawsuit against Creager Services in state court, asserting several state-law claims. In response, Creager filed counterclaims, including federal claims for copyright infringement under the Copyright Act and false advertising and false designation of origin under the Lanham Act, as well as state-law claims. The case was removed to federal court.

Creager argued that I Dig Texas infringed on its copyrights by using photographs of Creager’s products and sought only actual damages. To recover profits from the alleged infringement, Creager needed to prove a connection between I Dig Texas’s use of the copyrighted images and any profits earned. The court found that Creager failed to provide evidence linking I Dig Texas’s use of the photographs to any increase in profits. Consequently, the court affirmed summary judgment in favor of I Dig Texas on the copyright infringement claim.

Regarding the Lanham Act claims, Creager contended that I Dig Texas’s advertisements misrepresented the origin of its products by stating they were made in the United States. However, the court determined that the advertisements were ambiguous because they could refer to either the origin of the components or the assembly location of the final product. Since some of I Dig Texas’s products were assembled in the United States, even if they contained foreign components, the court found that the advertisements were not literally false. Likewise, the court ruled that the use of patriotic symbols in the advertisements was ambiguous and could not render them literally false.

The Key Takeaways

• To prove copyright infringement and recover the infringer’s profits in the Tenth Circuit, a plaintiff must establish a clear connection between the defendant’s use of the copyrighted material and any profits earned.
• Under the Lanham Act, advertisements claiming a product is “made in the USA” or “American-made” — or using patriotic symbols — cannot be considered literally false if they are determined to be ambiguous. If a product is assembled in the United States but contains foreign components, the Tenth Circuit considers the claim ambiguous because it could refer to either the origin of the components or the assembly location.

This decision highlights a somewhat counterintuitive result in the application of the Lanham Act to false advertising claims. While businesses are generally advised to craft clear and unambiguous advertising language to avoid potential legal issues, in this case, the ambiguity in I Dig Texas’s advertisements actually worked in its favor. By using language that could be interpreted in multiple ways, I Dig Texas avoided a finding of literal falsity under the Lanham Act.

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