Determining trademark standing in the wake of Lexmark.

• Author: Brennan, John L.

INTRODUCTION

In 2002, Lexmark International, Inc., a manufacturer and seller of laser printers, sued Static Control Components, Inc., which for years has manufactured and sold "components necessary to remanufacture Lexmark ['s] [toner] cartridges." (1) Lexmark installs microchips, identifiable by printers, in its toner cartridges. In order to prevent third parties from remanufacturing and reselling the cartridges, Lexmark began to place in each of its discounted "Prebate" cartridges a microchip that would disable the cartridge once it runs out of toner. Static Control effectively thwarted this effort by "develop[ing] a microchip that could replace the microchip on the Prebate toner cartridges, permitting a third party to remanufacture and sell the toner cartridge again." (2) When Lexmark sued Static Control for violations of copyright laws and the Digital Millennium Copyright Act, Static Control filed counterclaims for false advertising and violation of antitrust law. (3)

When the Supreme Court issued an opinion in this case twelve years later, it did not address the merits of any of these claims. (4) Instead, the sole issue for the Court to decide was whether Static Control was authorized to sue Lexmark for false advertising under section 43(a) of the Lanham Act. (5) The Court decided that Static Control could indeed sue. (6) In reaching that conclusion, the Court decided an issue over which the federal courts of appeals had previously been split--namely, the standard by which courts should judge whether a plaintiff has standing to sue under section 43(a). (7)

Although the Court's decision in Lexmark has resolved the debate over the issue of standing for false advertising claims, it remains unclear whether the Court's holding also extends to trademark infringement suits brought under section 43(a). The Court did not explicitly address this question in its opinion, and district courts thus far have differed in their interpretations of the decision's scope.

This Note addresses that ambiguity and aims to resolve it. It examines relevant statutory language, case law, and scholarly criticism, and ultimately contends that the standard articulated in Lexmark should apply to both types of claims. Part I provides background regarding the history of the Lanham Act, looking particularly at the ways in which courts have treated trademarks and false advertising differently. Part II discusses the Lexmark decision and the recent district court cases that have addressed its holding. Part III examines the text of both the Lanham Act and the Supreme Court's opinion in Lexmark in order to determine the decision's scope, and concludes that Lexmark's holding applies equally to false advertising and trademark claims. Finally, Part IV, which is divided into two subsections, advances policy-based arguments for such a uniform application of the Lexmark standard. Generally, Part IV discusses the expansive nature of modern trademark law and explores the ways in which Lexmark's standing requirement might serve as a narrowing force. First, Section IV.A laments the lack of a materiality requirement in trademark law and demonstrates how Lexmark's proximate cause requirement might make up for that absence. Section IV.B focuses specifically on one area of application in trademark law--the initial interest confusion doctrine--and suggests that Lexmark, if properly applied, could possibly eliminate this doctrine.

1. BACKGROUND

   Enacted in 1946, the Lanham Act provides federal protection against unfair competition. (8) Section 43(a) of the Act establishes private causes of action against trademark infringement and false advertising. (9) Section 43(a) (1) (A) provides a remedy for trademark infringement against behavior that "is likely to cause confusion" as to the origin of goods or services, while section 43(a)(1)(B) protects against false advertising by prohibiting misrepresentations "in commercial advertising or promotion" about either one's own goods or services or another person's goods or services. (10) The statute makes clear that any person who violates either of these provisions "shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act." (11)

   Over the years, federal courts in the United States have developed various doctrines in order to guide themselves in adjudicating claims arising under the Lanham Act. (12) Interestingly, these courts often have applied divergent standards to trademark infringement and false advertising claims, even though the two causes of action arise out of the same section of the Lanham Act.

   Rebecca Tushnet has comprehensively detailed these differences in application. (13) In one article, for instance, she highlights what she terms the "overexpansiveness" of trademark law by contrasting the treatment of trademark claims with that of false advertising claims. (14) She notes first that, when adjudicating infringement claims, courts assess likelihood of confusion by using multifactor tests. (15) Through the use of these tests, she argues, "almost any association between a trademark owner and a defendant may sow confusion." (16) In contrast to the imprecise balancing tests employed in trademark cases, courts use "rigid doctrinal categories" when addressing false advertising claims. (17)

   Another divergence in application discussed by Professor Tushnet is courts' treatment of materiality in Lanham Act cases. (18) In addressing false advertising claims, courts impose a materiality requirement to ensure that the alleged false statement is "likely to affect a reasonable consumer's purchasing decision." (19) Courts adjudicating trademark claims, on the other hand, impose no such requirement. (20)

   The third major area of difference between trademark and false advertising doctrines that Professor Tushnet identifies is standing. (21) Plaintiffs who sue for trademark infringement may do so rather easily under the lax standing requirements imposed by courts. (22) In false advertising cases, however, courts have applied much stricter standards to determine whether a plaintiff has standing to sue. (23)

   Professor Tushnet offers heavy criticism of these variances in application. (24) Whatever the merits of her arguments, her article makes clear one obvious truth: courts, for whatever reasons, have chosen to treat the two parts of section 43(a) quite differently. This Note attempts to question the extent to which that practice should continue, in light of a recent Supreme Court holding.

2. THE LEXMARK DECISION AND THE RESULTING AMBIGUITY

   Prior to the Supreme Court's decision in Lexmark, federal courts differed in their application of standing requirements for false advertising cases. As the Court pointed out in the unanimous Lexmark opinion, the various circuit courts of appeals seemed to apply three distinct standards. (25) The Seventh, Ninth, and Tenth Circuits allowed only direct competitors of defendants to maintain false advertising suits. (26) The Second Circuit, meanwhile, used a "reasonable interest" test to determine standing. (27) Finally, the Third, Fifth, Eighth, and Eleventh Circuits employed a multifactor balancing test to determine whether a plaintiff had standing. (28) When Static Control initially tried to bring a claim for false advertising, the district court opted to apply that multifactor balancing test, concluding that Static Control did not have standing to sue. (29) After Static Control appealed the dismissal of its claim, the Sixth Circuit instead applied the Second Circuit's reasonable interest test and reversed the lower court's dismissal. (30) After granting certiorari, the Supreme Court set out to resolve this dispute regarding which standard to apply. (31)

   The Court began its opinion by clarifying that, contrary to arguments made by Lexmark, the question at issue involved the statutory scope of the Lanham Act, rather than Static Control's "prudential standing" to bring a claim. (32) Writing for the Court, Justice Scalia acknowledged the principles traditionally associated with prudential standing, (33) but insisted that Lexmark's reliance on this doctrine was misplaced. (34) Instead, Justice Scalia explained, the question of whether a plaintiff falls within a "zone of interests" protected by a particular statute is a question of statutory interpretation, not of prudential standing. (35) The Court made clear, then, that the question at issue in this case was "a straightforward question of statutory interpretation"--ostensibly, whether Congress authorized Static Control to sue under section 43(a) of the Lanham Act. (36)

   In order to resolve that question, the Court looked first to the statutory language. After all, the statute itself appears to state rather clearly who is authorized to bring a claim--namely, "any person who believes that he or she is or is likely to be damaged by" a defendant's false statement or representation. (37) The Court insisted, however, that this language should not be read so broadly that the statute "'allow[s] all factually injured plaintiffs to recover.'" (38) Rather, there exist two limitations--zone of interests and proximate cause--upon the statute's scope. (39)

   The first principle enumerated by the Court is that "a statutory cause of action extends only to plaintiffs whose interests 'fall within the zone of interests protected by the law invoked.'" (40) Each statute requires a different zone-of-interests analysis, and the Lanham Act's protected interests can be gleaned most easily from the text of section 45, which lays out the Lanham Act's purpose. (41) In light of that purpose, the Court concluded that a plaintiff's interests fall within the zone of interests of the Lanham Act only if he "an injury to a commercial interest in reputation or sales" is alleged. (42)

   Next, the Court noted that "a statutory cause of action is limited to plaintiffs whose injuries are proximately caused by violations...