Supreme Court’s Lexmark Decision Creates Uniform Federal False Advertising Standing Requirement

On March 25, the Supreme Court issued its opinion in Lexmark International v. Static Control Components, ruling that Static Control may proceed with its false advertising counterclaim under Section 43(a) of the Lanham Act against Lexmark even though the parties are not direct competitors. This decision resolved a longstanding split among the circuit courts over Section 43(a)'s standing requirement, in which certain circuits-including the Ninth Circuit—had applied a more restrictive test that allowed only actual competitors to sue under the law.

The Supreme Court unanimously held that a plaintiff who alleges injury to a commercial interest in reputation or sales flowing directly from the defendant's actions in violation of the statute falls within the "zone of interests" Section 43(a) was designed to protect, and thus has standing to assert a claim, regardless of whether the parties are in direct competition. The opinion by Justice Scalia rejected all current tests in various circuits as well as the parties' proposals, fashioning a new national standard. While the new standing requirement applies explicitly to only federal false advertising claims, the Court's analytical process in formulating this standard, which rested strongly on the language of the statute, may apply equally to other federal statutory torts.

Case Background

Lexmark manufactures and sells printer cartridges and offers cartridge replacement services to customers. Lexmark developed and sold special toner cartridges in an attempt to compete with cartridge "remanufacturers," which offer competing cartridge replacement services. Lexmark cartridges contained a microchip with software that disabled cartridges when they became empty, so that customers would have to turn to Lexmark for replacement cartridges. Respondent Static Control does not itself manufacture or refurbish cartridges for Lexmark printers. Instead, it supplies components that remanufacturers use to refurbish used Lexmark cartridges and sell them in competition with Lexmark. Static Control furnished remanufacturers a microchip designed to mimic the disabling microchip in Lexmark cartridges. Lexmark, in an attempt to prevent use of Static Control's microchips, warned its customers that they were legally bound by the terms of their license agreement to return their used cartridges to Lexmark for replacement. Lexmark also sent letters to remanufacturers stating that their use of Static Control's microchips was...