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Supreme Court Affirms that Indirect Competitors Can Allege False Advertising Claims

Posted on Mar 31, 2014 in Blog

The Supreme Court has affirmed that false or misleading advertising claims under the Lanham Act can be brought by plaintiffs other than direct competitors. In Lexmark Int’l, Inc. v. Static Control Components, Inc., No. 12-873 (2014) , the Supreme Court declined to adopt any of the different circuit court tests for a cause of action under the Lanham Act: (1) the multifactor balancing test, (2) the direct-competitor test and (3) the reasonable interest test. Instead, the Supreme Court espoused the principles of “zone of interest” and “proximate cause.” A plaintiff has a cause of action under the Lanham Act if the cause of action falls within the zone of interest of the Lanham Act in that there is “an injury to a commercial interest in reputation or sales” and there is a showing of “proximate cause”. Ordinarily, this can be shown with evidence of “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff.” In this case, Static Control, a non-direct competitor who sold microchips allowing remanufacturers (the direct competitors of Lexmark) to refurbish Lexmark toner cartridges, has a cause of action under the Lanham Act alleging that Lexmark falsely advertised that Static Control infringed Lexmark’s patents, where the microchips were necessary for and only used to refurbish Lexmark toner cartridges.

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