LaFrance on Standing to Bring False Advertising Claims under Section 43(a) of the Lanham Act

LaFrance on Standing to Bring False Advertising Claims under Section 43(a) of the Lanham Act

Lexmark Int'l Inc. v. Static Control Components, Inc., 697 F.3d 387 (6th Cir. 2012)

 Excerpt:

In the never-ending toner wars, ink will once again be spilled as the Supreme Court considers a false advertising dispute in Lexmark Int'l Inc. v. Static Control Components., 697 F.3d 387 (6th Cir. 2012) [an enhanced version of this opinion is available to lexis.com subscribers], cert. granted, 133 S.Ct. 2766 (June 3, 2013). The Court has been asked to address the question of standing: Can a Lanham Act false advertising claim be brought only by a defendant's direct competitors, or is some other kind of "harm" sufficient to confer standing? The opinion in this case is expected to resolve a three-way circuit split.

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 (SCC) 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 SCC for infringing the copyright in its microchip computer code, SCC 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 lexis.com subscribers] . According to SCC, Lexmark falsely informed remanufacturers that SCC's chips infringed Lexmark's intellectual property rights and violated certain licensing agreements. SCC asserts that these false statements caused the remanufacturers to believe that SCC was engaging in illegal activity, thus damaging SCC'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 SCC lacked standing under § 43(a)(1)(B). However, the Sixth Circuit reversed, holding that SCC 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), because SCC "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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