A recent decision by the United States Supreme Court held that competitors are not the only ones that can sue for false advertising. The ruling is part of a legal battle dating back to 2002 between two companies that are not even direct competitors. On one side is Lexmark, a printer and related supplies manufacturer, and on the other, Static Control Components, a microchip manufacturer. The decision is both noteworthy and significant as it marks one of those rare occasions where the Court takes on a false advertising case and changes the law of the land.
This case concerns the traditionally high margin supplies business. Static Control's microchips are embedded in ink cartridges sold by Lexmark's competitors, enabling consumers to bypass Lexmark's single-use mechanism, which was designed to promote Lexmark's sales. Lexmark lost its bid to have Static Control's activity declared illegal in 2004, and the remaining dispute centered on Lexmark's public statements about Static Control's microchips. Specifically, Static Control claimed that Lexmark's warning letters and statements to consumers and remanufacturers concerning the legal legitimacy of using the microchips were false and misleading under Section 43(a) of the Lanham Act. Lexmark countered, arguing Static Control lacked the right to sue (in legal parlance, "standing") under 43(a).
The ensuing legal battle saw the district court's decision (finding in favor of Lexmark) reversed on appeal by the Sixth Circuit. The United States Supreme Court subsequently granted Lexmark's request to review whether or not Static Control had standing and ruled that it did.
There are some important, practical lessons here. Among the most significant is that even companies that are not direct competitors need to be careful about what they say about each other. This point may not have been clear, but it should be now. Sales and marketing personnel should be advised of this, and marketing materials should be vetted by legal counsel to further minimize the risks.
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