Intellectual Property: The Lanham Act

Landmark Lanham Decisions from the 2013-2014 Term of the United States Supreme Court

Intellectual property cases have become a hot topic the United States Supreme Court. Ten of the sixty-nine cases that the United States Supreme Court heard in 2013 and 2014 dealt with intellectual property issues. Two of those decisions dealt directly with the Lanham Act: POM Wonderful LLC v. Coca-Cola, Co. and Lexmark International, Inc. v. Static Control Components, Inc.

POM Wonderful v. Coca-Cola, Co.

Most of you are probably familiar with both of the companies involved in this litigation. POM makes a wide variety of pomegranate. One of those varieties is a pomegranate- blueberry juice. Minute Maid, which is owned by Coca-Cola, has a juice that it markets as “pomegranate-blueberry” juice even though there is only 0.3% pomegranate juice and 0.2% blueberry juice. The remaining 99.5% is “other juices,” mostly apple and grape.

POM sued under the Lanham Act’s private right of action claiming that Coca-Cola’s misleading label was hurting its sales. The one major problem for POM was that juice labels are regulated by the Food and Drug Administration. The lower courts ruled in favor of Coca-Cola’s argument that regulation by the FDA precluded POM’s Lanham Act claim.

The arguments at the Supreme Court level were based upon statutory interpretation of both the Lanham Act and the Food Drug and Cosmetics Act. Supreme Court reversed the Ninth Circuit and ruled in favor of POM. Specifically, the Supreme Court stated,

“[a] holding that the FDCA precludes Lanham Act claims challenging food and beverage labels would not only ignore the distinct functional aspects of the FDCA and the Lanham Act, but also would lead to a result that Congress likely did not intend.”

In the opinion, Supreme Court only discusses the narrow statutory issue in this case and avoids discussions on general issues of statutory construction. Regardless, this case demonstrates the expansion of a plaintiff’s private right of action under the Lanham Act.

You can read the full opinion here.

Lexmark International, Inc. v. Static Control Components, Inc.

Lexmark is a manufacturer of printers. Static Control makes a wide range of technology products, including microchips that it sells to third-party companies for use in remanufactured toner cartridges.

Lexmark began a rebate program where it would sell ink cartridges for much cheaper if customers agreed to use the cartridge only once and return it to Lexmark for recycling in an effort to control the recent trend of reusing and refilling old cartridges, which could end up in the hands of competitors.

Lexmark’s cartridges also included a computer chip that would prohibit a Lexmark cartridge to be reused with that printer. Static Control developed its own computer chip that mimicked Lexmark’s chip. Lexmark sued alleging copyright infringement. Static Control counterclaimed alleging false advertising under the Lanham Act regarding Lexmark’s statements on the legality of refurbished cartridges.

The district court initially held that Static Control lacked standing for the Lanham Act claim, but was reversed by the Sixth Circuit and held that there was standing based on the Second Circuit’s “reasonable-interest” test. Under a “reasonable-interest” test, a commercial plaintiff needs to only demonstrate (1) a reasonable interest to be protected against the alleged false advertising and (2) a reasonable basis for believed that the interest is likely to be damaged by the alleged false advertising.”

The Supreme Court declined to adopt the “reasonable-interest” test, nor other tests used in other circuits. The Supreme Court’s instead ruled that

“[t]o invoke the Lanham Act’s cause of action for false advertising, a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.” Injury is “proximately caused” when “deception of consumers causes them to withhold trade from the plaintiff.”

It was considered unusual that this Court would potentially open the door to more lawsuits under the Lanham Act and that it rejected all lower Circuit’s previous tests regarding standing on this issue. But, holding that “proximate cause” is needed may actually make it more difficult for plaintiff’s to prove standing.

You can read the full opinion here.


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