Supreme Court Espouses Standard for False Advertising Standing

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Summary

The ongoing saga between Lexmark International and Static Control Components was kept alive by the Supreme Court in its March 25, 2014, unanimous decision affirming Static Control’s standing to bring a false advertising claim against Lexmark International. Lexmark Int’l, Inc. v. Static Control Components, Inc., Docket Number: 12-873. In so doing, the Court has articulated a uniform standard to be applied when determining whether a plaintiff may bring a claim, expanding the scope of the Lanham Act.

Analysis
The federal Lanham Act, 15 U.S.C. 1125(a), provides a powerful tool for businesses to enforce their intellectual property and related rights. Among its stated purposes is to “protect persons engaged in [interstate commerce] against unfair competition.”

In 2002, Lexmark, a manufacturer of laser printers, sued Static Control, a manufacturer of  components for remanufacturers, for copyright infringement and violation of the Digital Millennium Copyright Act. Static Control had successfully reverse-engineered microchips that permitted competitors in the printer ink business to manufacture refurbished ink cartridges that can be used in Lexmark printers. In response, Lexmark sent letters to users of refurbished cartridges proclaiming that Static Control’s microchips were illegal. Static Control counterclaimed that Lexmark’s letter writing campaign constituted false or misleading advertising under the Lanham Act and caused Static Control lost sales and damage to its business reputation.

The trial court applied the “prudential standing” multifactor balancing test to determine that Static Control lacked the right to bring its claim. The Sixth Circuit reversed, applying a “reasonable interest” test to permit standing to sue. Other Circuits had employed different tests to determine whether companies other than direct competitors could sue for false advertising.

In affirming Static Control’s standing, the Supreme Court applied traditional statutory interpretation to determine the Lanham Act’s “zone of interests,” abrogating both the amorphous “prudential standing” doctrine that gave courts the discretion to dismiss lawsuits and the “direct competitor” doctrine applied in other circuits. In its analysis, the Court recognized that the unfair competition statute is concerned with damage to business reputation and sales. Standing requires a plaintiff to demonstrate proximate cause - that it was injured by deceptive advertising that caused consumers to not buy its products or services. Static Control sufficiently alleged that Lexmark’s statements were false and that it was harmed as a result of those statements. The “zone of interests” standard expands the number of companies that can sue for false advertising under the Lanham Act.

 

Topics:  False Advertising, Lanham Act, Lexmark, Lexmark v Static Control Components, SCOTUS

Published In: Civil Procedure Updates, Communications & Media Updates, Constitutional Law Updates, Intellectual Property Updates

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.

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