It is all too easy to get caught up in the hype of new technology. While getting excited about innovative software is not a crime, overstating your product’s capabilities might be. Tech companies in the United States should understand various laws regarding misleading, deceptive, or false advertising. Aside from simply alienating your customers and generating bad press, overstating your capabilities may also lead to legal consequences. In the past few years, numerous tech companies have faced these types of consequences. If your tech company faces legal penalties for overstating its product capabilities  or privacy compliance position, it might be time to contact an experienced technology lawyer. 

Gun Detection Company Faces Numerous Lawsuits for Overstating its Capabilities

In April of 2024, a group of investors filed a class action lawsuit against a company that develops gun detection technology. This same company recently made headlines after its firearm scanners were demonstrated by the Mayor of New York City. According to the class action lawsuit, the tech does not function in the same way as its advertisements suggest. The company claims that it has developed advanced AI technology and sensors to detect concealed firearms. One key feature is the ability to distinguish between weapons and other metal objects. In other words, this is an improved type of metal detector. 

Investors are not the only ones raising the alarm. The company is also being investigated by the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC). Both federal organizations are careful not to reveal any details, but the news has sparked concern among shareholders. 

Another lawsuit involves a stabbing incident in New York. The school had installed the company’s weapon detectors, assuming that it could detect concealed blades. However, a student walked through the detectors without incident and subsequently stabbed a victim. An investigation by the school district determined that there was some miscommunication about whether the scanners could detect knives. When asked directly, the company declined to comment on this capability. Earlier investigations have determined a success rate of about 50% when it comes to detecting knives. The school replaced the scanners after the stabbing incident. 

Tech Companies are Constantly Facing Legal Issues for Overstating Capabilities

Over the past few years, numerous companies have faced consequences for overstating product capabilities. An obvious example is Theranos, a blood testing company that sparked insane hype in the biotech world. Eventually, it became clear that the product was never actually functional. In 2023, the CEO of this company was sentenced to 11 years and three months in prison for fraud. 

Another popular subject in today’s tech world is self-driving software. Various auto companies have faced legal challenges for overstating the capabilities of this software. The “fine print” often makes it clear that human supervision is required at all times – and that drivers must keep their hands on the wheel. On the other hand, advertising materials often paint a very different, “hands-off” picture. Injured plaintiffs and federal authorities alike have linked these advertisements to serious crashes. 

Artificial Intelligence has emerged as a major buzzword in the tech world. Software companies are scrambling to implement AI features into their products. Even non-tech companies are all too eager to adopt AI. This has led to the phenomenon of “AI-washing” – the practice of overstating AI capabilities. Sometimes, companies point to AI features that do not actually exist. 

AI-washing may constitute false advertising, but it can also lead to serious reputational harm. When customers or investigators discover the truth about an alleged AI feature, it may be difficult to avoid bad press. Companies should avoid this situation by being as truthful as possible about their AI capabilities. 

Sustainability is another popular catchphrase in the tech industry. Like AI-washing, greenwashing involves misleading statements or features that suggest a commitment to sustainability. Like all false or misleading statements, greenwashing can be illegal in the business world. This strategy can also backfire in spectacular fashion, alienating sustainability-focused customers and ruining a company’s reputation. 

Are There Laws Against Overstating Tech Capabilities?

Overstating your technology’s true capabilities may lead to penalties under US law. Consumer protection laws ban deceptive descriptions, deceptive measurements, and deceptive comparisons. The Lanham Act also allows people to sue your tech company for false advertising – as long as the content misrepresents the nature, characteristics, or qualities of your product. Individual states and international jurisdictions may have their own laws on deceptive marketing for technology. 

For example, the United Kingdom’s Automated Vehicles Bill suggests prison time for misleading advertising. This Bill, which has not yet been passed, would ban specific catchphrases in commercials for self-driving vehicles. 

Not all misleading words may lead to legal consequences, however. The United States allows deceptive statements to appear in “editorial content” but not advertising content. You may also use misleading or deceptive content if it qualifies as “puffery.” For example, you might claim that your video game engine is “more awesome than any other.” This general, opinion-based statement is clear puffery. More importantly, consumers are not likely to take it seriously. 

When in Doubt, Rely on Data

Tech companies usually have access to extensive data. When it comes to advertising and marketing, a solid plan is to use your data to back up any claims you make. With this strategy, it is very difficult to face consequences for overstating capabilities. As long as it was collected in a legitimate way, data doesn’t lie.

Privacy Overstatement

The same concept hold true with regard to overstating you position in your Privacy Policy. The FTC look at these policies when they are considering enforcement action, if you say you only retain data for the shortest period of time aas necessary for a stated purpose, and later that data is used by your firm or another firm, that is considered a deceptive practice under the FTC. States continue to implement state privacy regulations, and its important to track some of the variance, in the new Maryland privacy regulation it mandates data minimization, up to now, that has generally just been viewed as a best practice. However, in States like California or Maryland if you collect too much data for your intended purpose, or you retain that data for longer than reasonably necessary, you will have potential state privacy regulation violations to deal with.

Work With an Experienced Technology Lawyer Today

If your tech company is facing legal action for false advertising or deceptive marketing, consult with a technology lawyer to assess your options. Overstating the capabilities of your technology can certainly lead to consequences, but penalties are far from guaranteed. With an experienced technology lawyer at your side, you can push back and protect your company from both financial and reputational damage. A technology attorney can also check your advertising materials for problematic statements before you publish them. Reach out to John P. O’Brien today to discuss your company’s unique needs in more detail.