Negative online reviews can scare off potential customers, and now they could land companies in legal hot water, following a judge's decision to admit an anonymous review from Yelp.com as evidence in an infringement case.

The decision was part of a case involving two competing health club chains. YouFit, a Florida-based health club chain, sued two of its former franchisees for trademark infringement after they opened their own chain of “Fit U” health clubs.

Earlier this month, U.S. District Judge James Whittemore granted YouFit's request for a preliminary injunction. One factor in his decision was an anonymous Yelp review in which a purported gym-goer reported being confused by similarities between the two health clubs. The review reads, in part:

I am soo confused. I was a member at Youfit in [Arizona] and when I moved back to [California] I saw this place by my house and thought great my gym is here! When I went into the gym, I realized it was called Fit U. They use the same basic color scheme on their sign and the motto seemed the same…Seemed very similar to me as when I was a member at Youfit. Very confusing and a big let down.

Whittemore said in his ruling that, although such anonymous postings were not “conclusive evidence of actual confusion, they are indicative of potential consumer confusion.”

Attorneys for Fit U argued that the Yelp posting constituted hearsay, and should not be admitted as evidence. But Whittemore found that the online comment was not hearsay because it was used, not “to prove the truth of the matter asserted in the comment,” but to “demonstrate the consumer's confusion.”

The Yelp reviewer in question, Scott R., registered for the site last August, and has posted just one review, according to his online profile.

Read more at the Wall Street Journal Law Blog.

For more InsideCounsel coverage of Yelp, see:

Companies could face suits for paying for positive online reviews

Village Voice sues Yelp over use of the words “best of”

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