In what many are calling a “game changing” decision, on March 25, 2014, the Supreme Court articulated the requirements for standing in false advertising cases brought under the Lanham Act in Lexmark v. Static Control, 572 U.S. ____ (2014). The long-running dispute between Static and Lexmark relates to the replacement toner market for printers. Lexmark is in the business of selling single-use toner cartridges that are controlled by a microchip in the cartridge. Static Control meanwhile sells replacement microchips companies that re-manufacture cartridges and allow Lexmark’s product to be reused despite Lexmark’s intent that the cartridges be single use. The two companies thus do not “directly” compete with one another. Static, nevertheless, brought a Lanham Act claim against Lexmark alleging that Lexmark had falsely advertised that Static’s microchips were illegal. The Sixth Circuit applied the Second Circuit’s “reasonable interest to be protected” test and found that Static had standing to bring its suit.

When Lexmark appealed the ruling to the Supreme Court, it gave the High Court the opportunity to resolve a circuit split on what test should be used to determine standing in Lanham Act false advertising cases. For example, the Second applied the “reasonable interest” test, while, in the Ninth Circuit, a plaintiff had to prove that it was a “direct competitor.” Still other circuits applied a multi-factor test adapted from anti-trust law.

In affirming that Static had standing, the Supreme Court eschewed each of these tests and fashioned a new standard, which many are calling the “zone of interest” test. Under this approach, in order to have standing, a plaintiff must plead and (ultimately prove) that it (1) falls “within the zone of interests protected by the law invoked” and (2) has suffered an injury “proximately caused” by the actual statute-violating conduct. Accordingly, standing under the Lanham Act requires “an injury to a commercial interest in reputation or sales…flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.”

Contact senior associate Joseph Grasser in our Northern California offices for more information.