A few weeks ago, the Supreme Court decided a case that clarifies the pleading requirements for a plaintiff who makes a claim for false advertising under the Lanham Act. As the guardians of your company's intellectual property, knowing the new standard is paramount. Here's a breakdown of the Supreme Court's decision so you can determine whether to pursue, or defend, any federal false advertising claims.
Lexmark manufactures laser printers, and they are made to work only with Lexmark toner cartridges. An aftermarket has developed where third parties acquire, refurbish and resell Lexmark cartridges. To combat this, Lexmark developed a prebate program giving customers a discount up front, for the promise to return the cartridge to Lexmark, rather than a remanufacturer.
To ensure this, it created a microchip for the cartridges that would disable the cartridge once it was emptied. Static Control developed a microchip that mimicked Lexmark's; Lexmark distributed a letter to its customers saying that they were legally bound to return the cartridges to Lexmark, and sent a letter to remanufacturers saying it was illegal to sell refurbished cartridges, and that it was illegal to use Static Control's microchip.
Lexmark sued Static Control for copyright infringement because of the mimic microchips, alleging violations of the Copyright Act of 1976 and the Digital Millennium Copyright Act; Static Control counter-claimed alleging false advertising under the Lanham Act. Lexmark filed a motion to dismiss Static Control's false advertising claim, and the court granted the motion. On appeal, the Sixth Circuit reversed applying the Second Circuit's "reasonable interest test."
Lexmark appealed, and the question before the court was what analytic framework applied to a standing determination, that is, whether Static Control could sue Lexmark.
It's a Statutory Issue
Both parties framed the issue as one of "prudential standing" -- which the Court led by Justice Scalia, rejected. Instead, Justice Scalia characterized the issue as one of statutory interpretation. He stated, "We do not ask whether in our judgment Congress should have authorized Static Control's suit, but whether Congress in fact did so."
The New Standard
Rejecting the three different tests used among various sister circuit's, the Court instead adopted a two part test that applies to statutory violations. To adequately plead a claim of false advertising under the Lanham Act, a plaintiff must show that his interests "fall within the zone of interests protected by the law invoked," and must show proximate cause -- that is, the plaintiff's injuries "are proximately caused by violations of the statute."
Finding that Static Control adequately pleaded the two requirements, the Court affirmed the Sixth Circuit's decision, effectively giving Static Control its day in Court.
This case provides excellent guidance for attorneys who pursue and defend Lanham Act cases. Before there were three different tests, and the applicable test depended on the circuit you were in. Now, there is uniformity in the pleading requirements for false advertising claims under the Lanham Act.
Do you find the Court's guidance helpful? Let us know @FindLawLP on Twitter.
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