Game On: U.S. Supreme Court Relaxes Standards for False Advertising Claims

by Wendel, Rosen, Black & Dean LLP
Contact

If a competitor circulates false advertising about your products you can sue under federal Photo of Lexmark Ink Cartridgelaw, but what do you do when the person making the false claim is not a competitor? Sue them anyhow.

What’s False Advertising?

Under the typical case, a company sues its competitor for making a false claim about either the competitor’s products or its own products. Remember the viral (and false) rumor that Taco Bell’s beef contained sawdust? If Del Taco ads repeated that rumor, Taco Bell could sue under federal law. Likewise, if Puma falsely claimed its running shoes included tufts of cheetah fur that made you run faster, Nike could sue Puma for false advertising.

Supreme Court Expands Standing

The Supreme Court’s recent decision expands the reach of false advertising claims to advertisers who do not compete with the victim. The Court clarified and expanded the standing requirement for filing such claims for products or services in interstate commerce under the Lanham Act (15 U.S.C. § 1125(a)). This is important because a plaintiff without standing (the right to sue) quickly finds himself knocked out of court.

Anything That’s Fit to Print?

The Court’s decision involved toner cartridges for printers, the ones you always need to replace when you are finally printing something for work, instead of Game of Thrones maps, pictures of kittens or directions to the bowling alley. Defendant Lexmark sells printers and replacement cartridges and sought to control the replacement cartridge market for its printers. Plaintiff Static Control reverse-engineered Lexmark’s microchips, creating functional equivalents without copying/infringing Lexmark’s intellectual property, that effectively replaced the chips on Lexmark cartridges. But Static Control didn’t actually manufacture replacement cartridges. However, Static Control’s chips enabled other companies (Lexmark competitors) to sell generic cartridges, which liberated consumers from purchasing Lexmark’s more expensive replacement cartridges. Unhappy about lost market share, Lexmark sent notices to most of the replacement cartridge manufactures, alleging that using Static Control’s chips was illegal. Static Control sued Lexmark claiming false advertising under the Lanham Act, the trial court dismissed the lawsuit, the Sixth Circuit reinstated the lawsuit and the Supreme Court affirmed, allowing Static Control to continue to prosecute its claims against Lexmark.

New Standing Standard

Prior to this decision, the thirteen federal circuit courts (12 plus the Federal Circuit) had applied a smorgasbord of standing requirements, which generally limited standing to direct competitors. But the Court reviewed the circuits’ standing requirements and unanimously voted “none of the above.” Instead, the Court held that a plaintiff has standing if: (A) it suffers an injury to its commercial interest in reputation or sales, and (B) the injury flows directly from the deception caused by the defendant’s advertising:, which occurs when the deception causes consumers to withhold trade from the plaintiff. In the Lexmark case, Static Control had standing because Lexmark’s (allegedly) false statements influenced Static Control’s customers (Lexmark’s competitors) to stop purchasing Static Control’s chips. The Court reinstated Static Control’s lawsuit, even though Lexmark does not directly compete with Static Control. If Static Control ultimately prevails, the court could force Lexmark to stop making false statements, issue “corrective” advertising and pay damages and attorneys’ fees.

What’s Next?

So, advertisers and other commercial “speakers” beware. If you make false claims that injure companies selling products or services interstate, even if those companies are not your competitors, you’re exposing yourself to liability under the Lanham Act. And if a company makes false claims that impact your business, feel free to make a federal case out of it. Of course, you can also make a state case out of it, as many states have their own false advertising/competition laws, like California’s which begins at Business and Professions Code section 17200.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wendel, Rosen, Black & Dean LLP | Attorney Advertising

Written by:

Wendel, Rosen, Black & Dean LLP
Contact
more
less

Wendel, Rosen, Black & Dean LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!