Direct competition not required to assert Lanham Act false advertising claim

By Dan Larsen
April 2, 2014

There is little debate that the Lanham Act, 15 USC 1125(a), entitles direct competitors to sue each other for false advertising, while consumers (including business consumers) lack standing to sue under the Act.  For parties that are neither competitors nor consumers, however, the landscape has been far from clear.  In Lexmark International v. Static Control Components, Inc., the United States Supreme Court last week clarified that the class of plaintiffs entitled to assert a false advertising claim under the Lanham Act includes any party that suffers injury to a commerical interest in reputation or sales flowing directly from the deception.   

Lexmark manufactures and sells laser printers, including the toner cartridges for those printers.  Static Control does not sell printers or toner catridges but it manufactures a microchip that remanufacturers may use to refurbish Lexmark toner catridges.  Although Lexmark and Static Control are not direct competitors, Static Control sells its microchips to Lexmark's competitors.  Lexmark allegedly informed consumers that it was illegal to use Static Control's microchips to refurbish Lexmark toner catridges, and then sued Static Control for copyright infringement.  Static Control countersued Lexmark under the Lanham Act for false advertising.  The District Court dismissed Static Control's counterclaim on the ground that only a direct competitor has standing to sue. 

The Supreme Court ruled that direct competition is not required to assert a Lanham Act false advertising claim, and that Static Control stated a claim for relief against Lexmark where Lexmark disparaged Static Control and its products, thereby causing injury to Static Control's reputation.     

Target of social media criticism can sue for defamation, Oregon Court of Appeals holds

By Lori Bauman
March 31, 2014

The Oregon Court of Appeals recently held that a business owner can pursue a defamation claim against an individual who posted a negative on-line review.  In Neumann v. Liles, plaintiff, who operates a wedding venue, was the target of a review on google.com calling her, among other things, "two faced, crooked, and . . . rude."  She sued the author of the review, who had been a guest at a wedding hosted at plaintiff's venue.

The on-line critic in response filed a "special motion to strike" under Oregon's SLAPP statute.  SLAPP stands for "strategic lawsuit against public participation," and the anti-SLAPP statute creates a procedure for dismissing at an early stage an unfounded lawsuit designed to quash speech or activism on issues of public interest.  While the statute protects certain speech-related activities, it does not shield defendants who engage in defamatory speech. 

According to the Court of Appeals, the trial court should not have granted the anti-SLAPP motion to strike the complaint because plaintiff had offered sufficient evidence that the review was in fact defamatory.  While defendant claimed that the review represented his opinion and was merely "figurative, rhetorical, or hyperbolic," the Court of Appeals concluded that most of the post was "nonrhetorical and factual" and contained specific, potentially defamatory, statements about plaintiff's honesty and business ethics.  Accordingly, the trial court should have allowed the case to proceed to trial.

Oregon Supreme Court addresses seller's UCC remedies

By Lori Bauman
March 28, 2014

When a party refuses to perform its contract to purchase goods, the Uniform Commercial Code entitles the aggrieved seller to sell the goods to another buyer and recover damages from the defaulting party.  Often the seller must sell at less than the contract price and then recover as damages the different between the unpaid contract price and the resale price.  The UCC offers as an alternative measure of damages the difference between the contract price and the market price for the goods.

What the UCC does not make clear is whether the seller may recover the difference between the unpaid contract price and the market price in circumstances where the market price damages would exceed resale price damages.  Last week the Oregon Supreme Court held that the jilted seller may in fact recover market price damages, even if those damages would cause the seller to recover more than the actual loss suffered. 

In Peace River Seed Co-operative, Ltd. v. Proseeds Marketing, Inc., the court considered the relevant text, context and legislative history to conclude that "an aggrieved seller can seek [market price] damages even if the seller has resold the goods and market price damages exceed resale price damages."  The court noted that a fixed price contract always requires the parties to bear the risk of market price fluctuations.  Subjecting the buyer to damages based on market price is consistent with that risk.