Non-Direct Competitors May Sue Under The Lanham Act, Doctrine Of Prudential Standing Eliminated

The Supreme Court of the United States swept away the different standards for Lanham Act prudential standing previously applied by the courts of appeals, and expressly discarded the amorphous concept of prudential standing in all federal statutory cases.

In Lexmark International, Inc. v. Static Control Components, Inc., decided on March 25, 2014, the Supreme Court of the United States held that the right to bring false advertising claims under the Lanham Act is not limited to direct competitors. Justice Scalia, writing for a unanimous court, applied "traditional principles of statutory interpretation" to determine that Static Control—a manufacturer of parts used by Lexmark's competitors to refurbish and sell toner cartridges—fell within "the class of plaintiffs whom Congress has authorized to sue" under the false advertising provision of the Lanham Act, 15 U.S.C. § 1125(a).

Lexmark is a laser printer company that manufactures the only new toner cartridges that work with its printers, though it competes with other manufacturers in refurbishing used cartridges. To exclude this competition, Lexmark equipped its cartridges with a microchip that causes the cartridges to shut down once they run out of toner. When customers return the spent cartridges to Lexmark, Lexmark replaces the microchips and re-sells the cartridges. Static Control reverse-engineered the microchips and sells them to the third parties that compete with Lexmark for sales of replacement toner cartridges.

In 2002, Lexmark sued Static Control for copyright infringement—a claim that the U.S. Court of Appeals for the Sixth Circuit rejected. Lexmark Int'l, Inc. v. Static Control Components, Inc., 387 F.3d 522 (6th Cir. 2004). Static Control counterclaimed for false advertising under the Lanham Act, 15 U.S.C. § 1125(a), alleging that (1) notices included on the packaging of Lexmark's cartridges falsely represented to customers that they were legally bound to return the spent cartridges to Lexmark only, and (2) Lexmark sent letters to its competitors that refurbish cartridges (i.e., Static Control's customers) falsely stating that it was illegal to use Static Control's microchips to refurbish Lexmark cartridges. The district court dismissed Static Control's false advertising claims for lack of "prudential standing," holding that there were "more direct plaintiffs in the form of remanufacturers of Lexmark's cartridges" who could bring these claims, but the Sixth Circuit reversed...

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