25
Mar/14

Lexmark: Standing Under 43(a) False Advertising: “Zone of Interests” plus “Proximate-Cause”


First, a shout out to Prof Tushnet, of 43(b)log, whose article is cited with approval in this case.

Lexmark manufactures toner cartridges. Cartridges can be re-filled by ‘re-manufacturers’, so Lexmark inserted a microchip that prevented re-use (unless the consumer returned the cartridge to Lexmark). A ‘shrink-wrap’ license prohibited the consumer from submitting the cartridge to re-manufacturers. Static manufactured a chip that allowed re-manufacture of Lexmark cartridges despite the presence of Lexmark’s chip. Lexmark brought various claims against Static. Static brought counterclaims under the false advertising prong of 43(a), alleging that Lexmark made two false statements that injured Static’s business:

1. That consumers were legally obligated to return the cartridges solely to Lexmark; and
2. That Static’s chips were illegal.

Static claimed that it sold fewer chips because as a result of those false statements, consumers purchased fewer re-manufactured cartridges.

Lexmark argued that because Static was not a direct competitor of Lexmark, Static did not have standing under 43(a).

Held: The ‘direct-competitor’ test is rejected. Static properly pled the elements of a Lanham Act false advertising claim. It properly alleged that its injuries were in the zone of interests that 43(a) seeks to protect. It further properly alleged that its injuries were proximately caused by a violation of the statute – namely that the deception of the re-manufacturers caused them to withhold trade from Static (which it will have to establish at trial).

lexmark v static

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