As a result of the false advertising case between Static Control and Lexmark, the court has streamlined tests for future similar cases, allowing indirect competitors to bring a case forward.
The National Law Review and Mondaq reported on the US Supreme Court’s decision to create a “new, simpler rule” for determining whether entities have standing in false advertising claims under the Lanham Act; with the decision resulting from the ongoing false advertising case between Static Control and Lexmark.
Prior to the decision, different circuit courts used three different tests to determine if a plaintiff had standing for false advertising; including a “multifactor balancing approach”, a “reasonable interest” test, and the requirement for plaintiffs to be direct competitors.
In creating the uniform rule, it has “expanded the scope of parties permitted to bring false advertising suits” as “indirect competitors” are now able to bring suit; with the new rule also “potentially increasing the liability from false advertising suits for entities doing business within the United States”.
It was held that to have standing in a false advertising suit, a plaintiff must plead “an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations”; with the court ruling that when applying this new test, Static Control’s alleged injuries – namely lost sales and reputational damage – are protected under the Lanham Act, and that the injuries were as a result of Lexmark’s “misrepresentations”, despite the two companies not being direct competitors.
As a result of the new test, businesses now need to be “cautious to avoid exposure to unnecessary liability for false advertising when making statements about a commercial entity’s products or services”, even if they are not a direct competitor; with the court stating: “[W]hen a party claims reputational injury from disparagement, competition is not required for proximate cause; and that is true even if the defendant’s aim was to harm its immediate competitors, and the plaintiff merely suffered collateral damage.”
If a false advertising claim is successful, the plaintiff “may be entitled to injunctive relief, damages, corrective advertising, attorneys’ fees or other equitable remedies at the discretion of the court”.