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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.