US Supreme Court will decide standing factors in Lanham Act claims

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The U.S. Supreme Court has agreed to decide the factors that determine whether a party has standing to sue for false advertising under the Lanham Act.

The court took up a case Monday in which Sanford, N.C.-based Static Control Components Inc., a manufacturer of component and microchips for toner cartridges, alleges that laser printer manufacturer Lexmark violated the act by falsely telling consumers that Static Control violated Lexmark’s patents and licensing agreement.

A federal trial court ruled that Static Control did not have standing to sue because it did not have antitrust standing, but the 6th U.S. Circuit Court of Appeals reversed.

The circuits are split over the appropriate framework for determining standing under the act, some employing antitrust standing and some permitting Lanham Act standing only by actual competitors.

“The 6th Circuit adopted a particular standard under the Lanham Act and other circuits use different language to describe standing. It’s unclear whether the circuits are applying different standards or merely using different ways of saying the same thing,” said William London III, general counsel for Static Control.

The dispute arose over the competitive toner cartridge remanufacturer industry. Remanufacturers acquire used toner cartridges, refill them with ink and resell them to printer owners at a lower price than new cartridges.

Lexmark began putting a patented microchip in its toner cartridges to disable use after it runs out of toner. Static Control does not manufacturer or remanufacture toner cartridges, but it is the leading maker and seller of the components and microchips in such cartridges. Static Control created a microchip that could replace the Lexmark chip and allow a remanufacturer to resell the cartridge.

Lexmark sued Static Control for patent infringement. Static Control countersued for federal and state antitrust violations including claims of false advertising under the Lanham Act.

In deciding the standing issue, the 6th Circuit surveyed its sister circuits.

“Static Control maintains that the test in this circuit is not the same as the test for antitrust standing. [We] held that [in a trademark dispute] a Lanham Act claimant need not demonstrate actual losses as a result of the defendant’s misleading use of the claimant’s trademarks in its advertisements, only a ‘likelihood of injury and causation. …’

It noted that the 3rd, 5th, 8th and 11th Circuits all reference antitrust standing in deciding Lanham Act standing.

“The Second Circuit has further described its approach, called the ‘reasonable interest’ approach, as finding that the claimant has standing if the claimant can demonstrate (1) a reasonable interest to be protected against the alleged false advertising and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising. … Lexmark urges us to follow one of the narrower approaches adopted by our sister circuits. The 7th, 9th and 10th Circuits use a categorical test, permitting Lanham Act suits only by an actual competitor making an unfair-competition claim. … Static Control’s claim is for false advertising and would fail under this stricter standard, because Static Control and Lexmark are not actual competitors,” the court said.

Concluding that its earlier decision in the Lanham Act trademark dispute carried the same standing rules as a false advertising claim under the act, the court held that “Static Control alleged a cognizable interest in its business reputation and sales to remanufacturers and sufficiently alleged that these interests were harmed by Lexmark’s statements to the remanufacturers that Static Control was engaging in illegal conduct. This is sufficient to state a claim under the Lanham Act.”

A decision from the U.S. Supreme Court is expected next term.