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Intellectual Property

LaFrance on Standing to Bring False Advertising Claims under the Lanham Act: Lexmark Int'l, Inc. v. Static Control Components, Inc.


Who has standing to bring a false advertising claim under the Lanham Act? In Lexmark Int'l, Inc. v. Static Control Components, 2014 US LEXIS 2214 (Mar. 25, 2014), the Supreme Court ended a three-way circuit split, and held that standing is not limited to direct competitors [an enhanced version of this opinion is available to subscribers]. Instead, a party has standing if it suffers a business injury that is proximately caused by the defendant's false statements.

I. Background

Lexmark International makes laser printers and toner cartridges. To prevent remanufacturers from refilling and reselling used toner cartridges in competition with its new cartridges, Lexmark embeds microchips in its printers and toner cartridges so that the printers will reject cartridges that do not contain a matching chip. Static Control figured out how to replicate those chips, and sells them to remanufacturers to help make their secondhand cartridges compatible with Lexmark printers.

When Lexmark sued Static Control for infringing the copyright in its microchip computer code, Static Control counterclaimed for false advertising under § 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) [an annotated version of this statute is available to subscribers]  . According to Static Control, Lexmark falsely informed remanufacturers that Static Control's chips infringed Lexmark's intellectual property rights and violated certain licensing agreements. Static Control asserts that these false statements caused the remanufacturers to believe that Static Control was engaging in illegal activity, thus damaging Static Control's business and reputation.

After the Sixth Circuit rejected Lexmark's copyright infringement claims, see Lexmark Int'l v. Static Control Components, Inc., 387 F.3d 522 (6th Cir. 2004) [enhanced version], the district court dismissed the false advertising counterclaim, holding that Static Control lacked standing under § 43(a)(1)(B). However, the Sixth Circuit reversed, holding that Static Control had established standing by demonstrating a "likelihood of injury and causation" arising out of Lexmark's misleading statements, 697 F.3d 387, 410 (6th Cir. 2012) [enhanced version], because Static Control "alleged a cognizable interest in its business reputation and sales to remanufacturers and sufficiently alleged that these interests were harmed by Lexmark's statements to the remanufacturers that Static Control was engaging in illegal conduct," id. at 411.

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