The Supreme Court has announced that it will hear arguments as to whether Static Control Components has standing under the Lanham Act to bring false advertising claims against Lexmark International. The Court’s announcement comes over ten years after Lexmark first filed claims against Static Control.
It all started in 2002, when Lexmark sued Static Control for patent and copyright infringement. In response, Static Control filed counterclaims under the Lanham Act for false advertising. The Lanham Act states, in part, that anyone engaged in false advertising shall be liable to “any person who believes that he or she is or is likely to be damaged by such” advertising. But what is required to show that you are “likely to be damaged” by false advertising? As it turns out, the answer to this question varies by circuit.
The Seventh, Ninth, and Tenth Circuits use a categorical test. In order to bring a claim for false advertising against a company, you must be a direct competitor of that company. Under this approach, Static Control’s claim would be dismissed because Static Control is not a direct competitor of Lexmark. Static Control only manufactures microchips to go inside toner cartridges, while Lexmark is a wholesale producer of printers, toner cartridges, and other related products.
The Third, Fifth, Eighth, and Eleventh Circuits rely on well-established factors that govern standing under antitrust law. Such factors include the nature of the alleged injury, the extent to which the false advertising clearly caused the claimant’s injury, the existence of more direct victims, and whether the claimant is an actual consumer or competitor in the market. It is less clear how Static Control would fair under this approach.
Finally, the Second and Sixth Circuit subscribe to the “reasonable interest” test. This test does not require a showing of actual losses as a result of the allegedly false advertising. Instead, claimants need only show that false advertising likely caused them injury. It was under this test that the Sixth Circuit found Static Control did have standing under the Lanham Act.
It is unclear which approach the court will favor to resolve this circuit split. The benefit of the categorical test, like all categorical tests, is clarity and predictability. The multi-factored approach lends itself to flexibility, but will likely result in higher litigation costs pre-discovery. The reasonable interest test appears to cast the widest net in terms of potential claimants. Only time will tell how the Supreme Court will resolve this issue.