AT&T Surrender in Verizon Case Proves an Old Marketing Rule Against Lawsuits

(MoneyWatch)  AT&T (T) has caved in its legal war with Verizon (VZ) over the latter's ads that claimed it had the best 3G network coverage. BNET suggested that AT&T's legal strategy was suicidal back on Nov. 19 because AT&T's own briefs admitted that Verizon's claims about the size of its 3G network were "literally true based on square miles." Verizon's tagline is: "5X More 3G Coverage."

It's a rare triple for Verizon in back-to-back legal wins: It won the initial ruling for a temporary injunction that AT&T wanted. It won a separate ruling over Sprint (S). And now this.

The wins underline an old marketing axiom that advertisers routinely forget in the heat of battle: Consumers don't care about lawsuits no matter how important they seem to clients, and fighting them only distracts management from their primary purpose, building the brand.

On top of that, lawsuits open marketers to discovery -- the legal process in which both companies ransack each other for damaging information. Your own skeletons are as likely to emerge from the closet as your enemies' are.

The best example of this was probably the completely bonkers lawsuit between Pizza Hut and Papa John's in the early 2000s. Pizza Hut wanted to prevent Papa John's from using the slogan "Better Ingredients. Better Pizza." The companies took their dispute to the U.S. Supreme Court (it was personal; both companies are based in Louisville, Ky.). Thankfully, the Supremes turned them down but not before their legal papers described how both chains actually make their pizzas -- with frozen dough, water from the tap, and a special chemical to make weeks-old tomato sauce taste "fresh."

When AT&T admitted that its 3G network covered only 75 percent of Americans to Verizon's 91 percent in this current case, it was the cellphone equivalent of the smell of month-old red paste. For Verizon, it must smell like victory.

Hat tip to CNET.

• Related:
• Verizon Victory Over Sprint Follows Defeat of AT&T in Legal War Over Ads
• In Ad Fight, AT&T Admits Its Coverage Is Inferior to Verizon's, But Sues Anyway