Lanham Act False Advertising Claims Not Limited to Competitors

March 25, 2014

The Supreme Court unanimously held that a plaintiff need not be a competitor of the defendant in order to bring a federal false advertising claim. Instead, the plaintiff must allege that the false or misleading advertising proximately caused injury to its commercial interest in reputation or sales. Lexmark International, Inc. v. Static Control Components, Inc. No. 12-873 (2014). In affirming the Sixth Circuit’s ruling, the Court resolved a split among the circuits, rejecting both the view of the Seventh, Ninth and Tenth Circuits, which limited standing to competitors of the defendant, and the balancing test borrowed from antitrust law and applied by the Third, Fifth, Eighth and Eleventh Circuits.

The Court also rejected "prudential standing," a court-created doctrine that incorporates as one of its principles the idea that a litigant should not be able to rely on another person’s legal rights. The Court endorsed instead the "zone of interests" analysis, which examines whether a substantive statute grants a particular class of persons the right to sue. In making that determination, a court may not "apply its independent policy judgment," or "limit a cause of action that Congress has created, merely because ‘prudence’ dictates," according to Justice Scalia, writing for the Court.

Plaintiff Lexmark sued Defendant Static Control for infringing its patent and copyright on a component of its printer ink cartridges. Static Control counterclaimed alleging that Lexmark’s advertisements falsely represented that selling cartridges containing Static Control’s microchips was illegal. Lexmark argued that since Static Control was not a competitor, it lacked standing to assert that claim. In light of the Supreme Court’s decision, Static Control and other non-competitors have standing to bring false advertising claims, but must be prepared to plead and prove that the defendant’s misrepresentations proximately caused damage to their commercial reputation or sales.

If you have questions about the implications of the Lexmark decision for your business, please contact an attorney in our Trademark & Copyright Practice Group.

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