Supreme Court issues decision in Lanham Act false advertising case

With a ruling in favor of Static Control Components, Inc. on March 25, 2014, the U.S. Supreme Court resolved a three-way split among the circuit courts concerning who has standing under the false advertising section of the Lanham Act, 15 U.S.C. § 1125(a) to bring a false advertising claim and what test courts should use to determine standing. Prior to the Supreme Court's ruling, three very different tests, all with their flaws, existed:

(1) the multifactor balancing test that often resulted in unpredictable rulings;

(2) the strict direct competitors test that over emphasized unfair competition and limited the pool of litigants to direct competitors, despite the broad language of the Lanham Act; and

(3) the reasonable interest test that was overly vague and therefore often led to inconsistent decisions.

In Lexmark the Court dismissed all three tests and started from scratch. The Court went back to basics and established the "zone-of-interest" test with a proximate cause requirement. The law is now clarified and simplified so that, to have standing, a party must suffer an injury that falls within the zone of interests protected by the statute, namely, an injury to a commercial interest in reputation or sales, which must "flow directly from the deception wrought by the defendant's advertising."

False advertising claims may now be brought by direct and indirect competitors alike. While this may cause an increase in litigation, the law is now clear and preferable to the muddled situation that existed before. The clarification provided by the Supreme Court should aid in preventing drawn out litigations over standing due to forum shopping.