The Supreme Court announced yesterday that next term it will
consider what is required to establish standing to sue for false
advertising under Section 43(a)(1)(B) of the Lanham Act, an issue
that has long clouded the case law and confounded litigants.
Section 43(a), on its face, creates a cause of action for "any
person who believes that he or she is or is likely to be
damaged." The courts, however, have traditionally
interpreted this term narrowly to provide standing only for
business entities facing commercial or competitive injury as a
result of false advertising. Although it is now well-settled
that consumers do not have standing to sue for
false advertising under section 43(a), the parameters of commercial
or competitive injury have long been a murky matter. Next
fall, the Supreme Court may clarify that issue with a decision that
could have an important impact on whether non-competitors and
non-competing entities (e.g., trade associations) will
have standing to sue for false advertising under federal law.
Last August, in Static Control Components, Inc. v. Lexmark
International, Inc., the Sixth Circuit revived a false
advertising counterclaim brought by Static Control alleging that
Lexmark had falsely informed customers that Static Control had
engaged in illegal conduct by selling products that infringed
Lexmark's patent rights. The Eastern District of Kentucky
had previously dismissed Static Control's counterclaim for lack
of Lanham Act standing, finding that Static Control had failed to
allege sufficient facts to satisfy the Supreme Court's
multi-factor test for antitrust standing under AGC v. Cal. State Council of
Carpenters, which several circuits have adopted in
deciding Lanham Act standing. Citing a prior opinion, the
Sixth Circuit ruled that the test for Lanham Act standing in that
Circuit is not the same as antitrust standing, but rather involves
determining whether the claimant has a "reasonable
interest" to be protected and a reasonable basis for believing
that the interest is likely to be damaged by the alleged false
advertising. Applying this "reasonable interest"
test, the Sixth Circuit found that Static Control had sufficiently
alleged a cognizable interest in its business reputation, which was
likely to be harmed by Lexmark's representations to
consumers.
The Sixth Circuit's Static Control decision leaves a
three-way circuit split among the federal appellate courts
regarding the proper test for Lanham Act false advertising
standing. The Third, Fifth, Eighth, and Eleventh Circuits
apply the Supreme Court's antitrust standing analysis from AGC
when deciding Lanham Act standing issues, while the Seventh, Ninth,
and Tenth Circuits follow a narrower approach by allowing only
direct competitors to sue for false advertising under the Lanham
Act. The Second and Sixth Circuits apply the "reasonable
interest" approach identified in Static Control,
which seems to represent the most permissive standard for Lanham
Act standing.
In my experience, it is often a futile exercise to forecast which
way the Supreme Court will fall on an issue, so I will not venture
a guess in this posting. However, it is worth noting that the
Third Circuit's Conte Brothers decision applying the
antitrust standing analysis to Lanham Act false advertising cases
was authored by none other than Justice Samuel Alito during his
tenure on that court. We will continue to monitor the case
and report on the decision next term.
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