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Under the test for Lanham Act standing, a plaintiff must show: (1) a commercial injury based upon a misrepresentation about a product; and (2) that the injury is "competitive," or harmful to the plaintiff's ability to compete with the defendant.
Defendants owned and managed DMV.org, a for-profit website with a mission to save consumers “time, money, and even a trip to the DMV.” Consumers would visit DMV.org for help in renewing driver’s licenses, buying car insurance, viewing driving records, beating traffic tickets, registering vehicles, and even finding DUI/DWI attorneys. Some consumers mistakenly believe that the site is run by their state’s department of motor vehicles (DMV). Plaintiffs TrafficSchool.com, Inc. and Drivers Ed Direct, LLC, who was marketing and selling traffic school and driver’s ed courses directly to consumers, compere with DMV.org for referral revenue. Plaintiffs claimed that defendants violated federal and state unfair competition and false advertising laws by actively fostering the belief that DMV.org was an official state DMV website, or was affiliated or endorsed by a state DMV. After a trial, the district court held that the defendants violated section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), but rejected plaintiffs' claim under California's unfair competition statute, Cal. Bus. & Prof. Code § 17200. The court issued an injunction ordering DMV.org to present every site visitor with a splash screen bearing a disclaimer. The court, however, denied monetary relief and declined to award attorney’s fees sought by plaintiffs, holding that the plaintiffs failed to prove that they have suffered an injury in fact and lost money or property as a result of defendants’ actions. Both parties appealed.
The Court held that a false advertising plaintiff need only to believe that he was likely to be injured in order to bring a Lanham Act claim. Moreover, the district court made its findings of no injury when it analyzed plaintiffs' state-law unfair competition claim. These findings conclusively establish that plaintiffs didn't have standing to bring their state-law claim; but because California's unfair competition law defined “injury in fact” more narrowly than Article III, the findings did not necessarily preclude Article III standing. In Jack Russell Terrier Network of Northern California v. American Kennel Club, Inc., 407 F.3d 1027, 1037 (9th Cir. 2005), the Court held that in order to have standing under the Lanham Act, a plaintiff must show a commercial injury based upon a misrepresentation about a product, and that the injury was 'competitive,' or harmful to the plaintiff 's ability to compete with the defendant. In this case, plaintiffs introduced volumes of evidence showing that they compete with defendants and that DMV.org were probably misleading consumers. Because the Court presumed commercial injury in this case, plaintiffs have met both prongs of Jack Russell's test for Lanham Act standing. Anent the second issue, the Court held that the district court committed no error in holding that defendants violated the Lanham Act since it has been established that the DMV.org site deceived a substantial segment of its audience. Plaintiffs' evidence also showed that a "recommended by DMV" endorsement will affect purchase decisions, and that plaintiffs were likely to suffer injury when consumers visit DMV.org instead of their competing sites.