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A trial began Monday in federal court in Brooklyn, N.Y., pitting Verizon’s yellow pages unit against its chief independent rival, Yellow Book USA. Verizon Directories Corp., a subsidiary of Verizon Communications, claims that a Yellow Book advertising campaign begun in 2002 violates state and federal laws against false and misleading advertising. In the first stage of the trial, Verizon seeks a permanent injunction to stop Yellow Book’s campaign, which it says is built around the false claim that Yellow Book’s directories are more heavily used than Verizon’s. Long-Island based Yellow Book counters that Verizon has consistently lost market share in the “yellow pages” wars to smaller, more nimble competitors and is exploiting the judicial system to resist competition. Its campaign, waged in print, on television, on radio and on billboards, was aimed at raising brand awareness rather than falsely depicting the relative popularity of the competing directories, Yellow Book maintains. The case is before Eastern District of New York Judge Jack Weinstein. He will first decide whether an injunction is appropriate. If Verizon wins, a second phase before a jury will address damages. Both parties had multiple lawyers at the counsel tables, and the courtroom was full of attorneys, paralegals and summer associates. Boxes of documents occupied two rows of seats normally reserved for spectators. Also in attendance was Yellow Book’s CEO, Joseph Walsh Dan Webb of Winston & Strawn delivered a systematic opening statement for Verizon, including strikes aimed at countering Yellow Book’s main arguments. Lawyers from the New York office of Kirkland & Ellis and Schlam Stone & Dolan joined Webb’s team, which is based in Washington, D.C. Using a multimedia presentation of computer slides and replays of TV ads, Webb delivered a two-hour opening that described Yellow Book’s advertising campaign from its beginning. In 2001, he explained, Yellow Book’s market research showed that Verizon dominated the directory market. Instead of improving its position through legitimate means, he said, Yellow Book resorted to deception in which it told consumers, advertising agents and small businesses that consumers use its directories more than Verizon’s. “Fake it ’til you make it,” is one of Yellow Book’s core values, said Webb. Yellow Book thinks that if it says something often enough, people will believe it, he said. FRIGHTENED COMPETITORS Webb showed Weinstein the first of Yellow Book’s three TV commercials. They all depict fearful executives of a competing company — Verizon is not named — complaining about Yellow Book’s quality and popularity. “More people choose Yellow Book, not the Other Book,” one says. Another says, “Today, people are choosing the Yellow Book, not that Other Book.” Its last commercial, depicting a contest between phone directories in a wind tunnel, shows Yellow Book withstanding high-speed winds as its competitors fly off into oblivion. This commercial ended with “Consumers keep choosing Yellow Book yellow pages.” The exact words used by Yellow Book are critical to Verizon’s case. It must prove that the statements are literally false under the federal Lanham Act. This led Webb to venture into a tricky point of contention. What exactly do these phrases mean? Do they claim that Yellow Book is more popular among consumers than Verizon’s directory? Or do they mean something else? In their statements, lawyers for both sides spent a significant amount of time parsing phrases from advertising. Citing testimony from depositions, they offered Weinstein alternative meanings using Yellow Book’s intent and the overall context to buffer their claims. Yellow Book says it never claimed its product out-circulated Verizon’s. If the ads are found literally false, Weinstein can enjoin Yellow Book from continuing the campaign without examining the ads’ effects. If not, the issue becomes whether Yellow Book’s statements were “implicitly false” because they misled consumers. To lay the foundation for the use of this alternative doctrine, Webb began to introduce Weinstein to a myriad of surveys conducted by independent and internal groups purporting to show harm to Verizon’s image among customers. The ads represented a small part of a comprehensive campaign targeting advertisers, small businesses, and consumers, said Webb. Yellow Book’s sales staff, he said, made similar false statements in soliciting clients away from Verizon. Before finishing, Webb asked the court for a permanent injunction against the alleged false ad campaign, new ads to clear the misperception created by Yellow Book and attorney fees available under the Lanham Act when parties act in bad faith. He also asked for treble damages, a figure that could potentially reach hundreds of millions of dollars. YELLOW BOOK’S STATEMENT Victor Kovner of Davis Wright Tremaine, representing Yellow Book, depicted Verizon as a corporate giant intent on putting “out of business its principal competitor.” Verizon “will not tolerate” competition, he said, and has therefore “taken language out of context to subscribe a sinister meaning.” Kovner repeated this theme throughout his opening, alleging that Verizon has resorted to exploitative litigation to win in court what it cannot win through fair competition. Rather than a comprehensive recitation, Kovner offered an attack on a number of Verizon claims. Verizon cannot identify a single advertiser misled by Yellow Book’s ads to switch away from Verizon’s directory, he said. Verizon’s growing losses in the directory market, he said, had nothing to do with deceptive advertising. Verizon’s market share, he said, fell since the mid-1990s due to poor marketing decisions and higher prices. Full-page ads in Verizon cost $100,000 while Yellow Book charged $20,000, he cited as an example. In an acquisition campaign in the 1990s, Yellow Book accumulated a large percentage of the national phone directory market, said Kovner. The ad campaign at issue was not intended to deceive consumers but to build brand awareness that reflected the strengthened position. “We never claimed greater usage,” he said in explaining Yellow Book’s thinking. And Yellow Book never targeted Verizon directly in its ads, he said, instead using the generic term the “other book” to describe competitors. Verizon, he declared, referring to company documents found in discovery, has contemplated litigation to bring down smaller independent competitors in the phone directory market. “They’re using this suit for their integrated merchandising plan to serve an anti-competitive goal,” Kovner said.

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