How Much 'Competition', If Any, Is Required To Establish Standing In Lanham Act False Advertising Cases—The Supreme Court May Be Interested In Resolving The Three-Way Circuit Split

Lanham Act false advertising law is largely consistent among the various federal circuit courts. However, one area of Lanham Act jurisprudence where the federal appellate courts do not see eye-to-eye concerns who has standing to sue under the Lanham Act's false advertising prong. This month, the United States Supreme Court signaled that it may finally weigh in to resolve a three-way circuit split regarding who has standing to bring such a claim.

Background

Lexmark International, Inc. ("Lexmark") produces laser printers and toner cartridges for those printers. Lexmark developed microchips for both the toner cartridges and the printers so that Lexmark printers will reject any toner cartridges not containing a matching microchip. Lexmark had obtained patent protection for certain aspects of the cartridges. Static Control Components, Inc. ("Static Control") identified how to replicate the microchips and sell the microchips to re-manufacturers.

Lexmark sued Static Control for copyright violations related to its source code. Static Control counterclaimed for, inter alia, false advertising under the Lanham Act. The U.S. District Court for the Eastern District of Kentucky dismissed all of Static Control's counterclaims.1

On August 29, 2012, the Sixth Circuit reversed the dismissal of Static Control's false advertising counterclaim.2 Static Control had alleged that Lexmark engaged in false advertising when it "falsely informed customers that Static Control's products infringe Lexmark's purported intellectual property," thus causing Static Control's customers to believe that Static Control is engaged in illegal conduct, and thereby damaging its business and reputation.3

The Sixth Circuit had previously held in Frisch's Restaurants. Inc v. Elby's Big Boy of Steubenville, Inc. that a Lanham Act claimant only needs to demonstrate a likelihood of injury andcausation to establish standing.4 The Court of Appeals in Static Control recognized that other federal circuits to have addressed the issue have applied a more rigorous standard. The Seventh, Ninth and Tenth Circuits use a categorical test, permitting Lanham Act suits only by an actual competitor of the advertiser.5 The Third, Fifth, Eighth and Eleventh Circuits use the five factor test identified in Associated General Contractors, Inc v. California State Council of Carpenters, 459 U.S. 519 (1983), which examines 1) the nature of plaintiff's alleged injury; 2) the directness or indirectness of the...