Supreme Court Rules That A Non-Competitor Has Standing To Assert False Advertising Claims

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On March 25, the U.S. Supreme Court held that a company has standing to assert a false advertising claim against a non-competitor under Section 43(a) of the Lanham Act if it can "show economic or reputational injury flowing directly from the deception wrought by the defendant's advertising." In determining whether an injury is within a "zone of interest," a plaintiff "must allege an injury to a commercial interest in reputation or sales." The court noted that such occurs when "deception of consumers causes them to withhold trade from the plaintiff" (Lexmark Int'l, Inc. v. Static Control Components, Inc., U.S., No. 12-873, 3/25/14). In doing so, the court closed a significant split among various circuit courts by declining to adopt any of the following existing alternate approaches:

  • the "reasonable interest" test used by the Second and Sixth Circuits
  • the "direct competitor" test used by the Seventh, Ninth, and Tenth Circuits
  • a five-part balancing test used by the Third, Fifth, Eighth and Eleventh Circuits

The District Court initially dismissed that claim, agreeing that Static Control lacked standing to assert its claim. The Sixth Circuit used the "reasonable interest" test to conclude that Static Control had sufficiently asserted a claim based on Lexmark's statements, and thus revived the claim. Employing its own "economic reputational injury flowing directly from deception" test, the U.S. Supreme Court agreed that Static Control had standing to assert its claim under the Lanham Act.

This new ruling means that organizations must be mindful of a widening circle of those who could bring claim under the newly-expanded application of the Lanham Act.

Topics:  Competition, False Advertising, SCOTUS

Published In: Business Torts Updates, Civil Procedure Updates, Communications & Media 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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