'Made In The USA'* (*Unless Sold In California): The Kwikset Decision And Its Implications On U.S.-Marked Goods

On January 27, the California Supreme Court issued an opinion in the case Kwikset v. Benson. The question answered by the Court here was facially narrow: whether an individual possessed standing to sue a company under a state unfair competition law. However, the implications of this case may have a nationwide impact on companies that use "Made in the USA" markings for their goods. As a brief background, Kwikset Corporation is a manufacturer of locksets. It had marked these products as "Made in the USA," even though some of its locksets contained screws or pins made in Taiwan and some subassemblies were manufactured in Mexico. James Benson, a California resident, purchased these locksets with the misleading origin markings before learning of the foreign parts and manufacturing. Benson sued Kwikset under California's Unfair Competition Law (UCL), specifically CA Bus. & Prof. Code § 17533.7, which makes it unlawful to sell or offer for sale in California "any merchandise on which . . . there appears the words 'Made in the U.S.A.,' 'Made in America,' 'U.S.A.,' or similar words when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States." While the case was pending, California passed Proposition 64, which required that private plaintiffs in UCL and false advertising suits must show "lost money or property" from the unfair business practices in order to have standing to sue. Before, such plaintiffs had standing simply by acting "for the interests of itself, its members or the general public." The state appeals court determined that, because Kwikset's locks worked properly, Benson suffered no financial loss, and therefore could not sue under the UCL. The Supreme Court reversed, determining that Benson paid more for the locksets than he may have been willing to pay if the locksets had been labeled accurately. To the Court, the economic harm suffered—the "lost money or property" required under Proposition 64—is the same whether or not the products are "functionally equivalent."

What is the significance of this case in the international trade context?

First, it is important to understand that "Made in the USA" claims or markings are regulated by the federal government. The Federal Trade...