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SUPREME COURT OF THE UNITED STATES
_________________
No. 12–873
_________________
LEXMARK INTERNATIONAL, INC., PETITIONER v.
STATIC CONTROL COMPONENTS, INC.
on writ of certiorari to the united states
court of appeals for the sixth circuit
[March 25, 2014]
Justice Scalia
delivered the opinion of the Court.
This case requires us
to decide whether respondent, Static Control Components, Inc., may
sue petitioner, Lex- mark International, Inc., for false
advertising under the Lanham Act, 15 U. S. C.
§1125(a).
I. Background
Lexmark manufactures
and sells laser printers. It also sells toner cartridges for those
printers (toner being the powdery ink that laser printers use to
create images on paper). Lexmark designs its printers to work only
with its own style of cartridges, and it therefore dominates the
market for cartridges compatible with its printers. That market,
however, is not devoid of competitors. Other businesses, called
“remanufacturers,” acquire used Lex- mark toner
cartridges, refurbish them, and sell them in competition with new
and refurbished cartridges sold by Lexmark.
Lexmark would prefer
that its customers return their empty cartridges to it for
refurbishment and resale, rather than sell those cartridges to a
remanufacturer. So Lexmark introduced what it called a
“Prebate” program, which enabled customers to purchase
new toner cartridges at a 20-percent discount if they would agree
to return the cartridge to Lexmark once it was empty. Those terms
were communicated to consumers through notices printed on the
toner-cartridge boxes, which advised the consumer that opening the
box would indicate assent to the terms—a practice commonly
known as “shrinkwrap licensing,” see, e.g., ProCD, Inc.
v. Zeidenberg, 86 F. 3d 1447, 1449 (CA7 1996). To enforce the
Prebate terms, Lexmark included a microchip in each Prebate
cartridge that would disable the cartridge after it ran out of
toner; for the cartridge to be used again, the microchip would have
to be replaced by Lexmark.
Static Control is not
itself a manufacturer or remanufacturer of toner cartridges. It is,
rather, “the market leader [in] making and selling the
components necessary to remanufacture Lexmark cartridges.”
697 F. 3d 387, 396 (CA6 2012) (case below). In addition to
supplying remanufacturers with toner and various replacement parts,
Static Control developed a microchip that could mimic the microchip
in Lexmark’s Prebate cartridges. By purchasing Static
Control’s microchips and using them to replace the Lexmark
microchip, remanufacturers were able to refurbish and resell used
Prebate cartridges.
Lexmark did not take
kindly to that development. In 2002, it sued Static Control,
alleging that Static Control’s microchips violated both the
Copyright Act of 1976, 17 U. S. C. §101
et seq., and the Digital Millennium Copyright Act, 17
U. S. C. §1201 et seq. Static Control
counterclaimed, alleging, among other things, violations of
§43(a) of the Lanham Act, 60Stat. 441, codified at 15
U. S. C. §1125(a). Section 1125(a) provides:
“(1) Any person
who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol,
or device, or any combination thereof, or any false designation of
origin, false or misleading description of fact, or false or
misleading representation of fact, which—
“(A) is
likely to cause confusion, or to cause mistake, or to deceive as to
the affiliation, connection, or association of such person with
another person, or as to the origin, sponsorship, or approval of
his or her goods, services, or commercial activities by another
person, or
“(B) in
commercial advertising or promotion, misrepresents the nature,
characteristics, qualities, or geo- graphic origin of his or her or
another person’s goods, services, or commercial
activities,
“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.”
Section 1125(a) thus creates two distinct bases
of liability: false association, §1125(a)(1)(A), and false
advertising, §1125(a)(1)(B). See Waits v. Frito-Lay, Inc., 978
F. 2d 1093, 1108 (CA9 1992). Static Control alleged only false
advertising.
As relevant to its
Lanham Act claim, Static Control alleged two types of false or
misleading conduct by Lexmark. First, it alleged that through its
Prebate program Lexmark “purposefully misleads
end-users” to believe that they are legally bound by the
Prebate terms and are thus required to return the Prebate-labeled
cartridge to Lexmark after a single use. App. 31, ¶39. Second,
it alleged that upon introducing the Prebate program, Lexmark
“sent letters to most of the companies in the toner cartridge
remanufacturing business” falsely advising those companies
that it was illegal to sell refurbished Prebate cartridges and, in
particular, that it was illegal to use Static Control’s
products to refurbish those cartridges. Id., at 29, ¶35.
Static Control asserted that by those statements, Lexmark had
materially misrepresented “the nature, characteristics, and
qualities” of both its own products and Static
Control’s products. Id., at 43–44, ¶85. It further
maintained that Lexmark’s misrepresentations had
“proximately caused and [we]re likely to cause injury to
[Static Control] by diverting sales from [Static Control] to
Lexmark,” and had “substantially injured [its] business
reputation” by “leading consumers and others in the
trade to believe that [Static Control] is engaged in illegal
conduct.” Id., at 44, ¶88. Static Control sought treble
damages, attorney’s fees and costs, and injunctive relief. [
1 ]
The District Court
granted Lexmark’s motion to dismiss Static Control’s
Lanham Act claim. It held that Static Control lacked
“prudential standing” to bring that claim, App. to Pet.
for Cert. 83, relying on a multifactor balancing test it attributed
to Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459
U. S. 519 (1983) . The court emphasized that there were
“more direct plaintiffs in the form of remanufacturers of
Lexmark’s cartridges”; that Static Control’s
injury was “remot[e]” because it was a mere
“byproduct of the supposed manipulation of consumers’
relationships with remanufacturers”; and that Lexmark’s
“alleged intent [was] to dry up spent cartridge supplies at
the remanufacturing level, rather than at [Static Control]’s
supply level, making remanufacturers Lexmark’s alleged
intended target.” App. to Pet. for Cert. 83.
The Sixth Circuit
reversed the dismissal of Static Control’s Lanham Act claim.
697 F. 3d, at 423. Taking the lay of the land, it identified
three competing approaches to determining whether a plaintiff has
standing to sue under the Lanham Act. It observed that the Third,
Fifth, Eighth, and Eleventh Circuits all refer to “antitrust
standing or the [Associated General Contractors] factors in
deciding Lanham Act standing,” as the District Court had
done. Id., at 410 (citing Conte Bros. Automotive, Inc. v. Quaker
State-Slick 50, Inc., 165 F. 3d 221, 233–234 (CA3 1998);
Procter & Gamble Co. v. Amway Corp., 242 F. 3d 539,
562–563 (CA5 2001); Gilbert/Robinson, Inc. v. Carrie
Beverage-Missouri, Inc., 989 F. 2d 985, 990–991 (CA8
1993); Phoenix of Broward, Inc. v. McDonald’s Corp., 489
F. 3d 1156, 1162–1164 (CA11 2007)). By contrast,
“[t]he Seventh, Ninth, and Tenth [Circuits] use a categorical
test, permitting Lanham Act suits only by an actual
competitor.” 697 F. 3d, at 410 (citing L. S. Heath &
Son, Inc. v. AT&T Information Systems, Inc., 9 F. 3d 561,
575 (CA7 1993); Waits, supra, at 1108–1109; Stanfield v.
Osborne Industries, Inc., 52 F. 3d 867, 873 (CA10 1995)). And
the Second Circuit applies a “ ‘reasonable
interest’ approach,” under which a Lanham Act plaintiff
“has standing if the claimant can demonstrate
‘(1) a reasonable interest to be protected against the
alleged false advertising and (2) a reasonable basis for
believing that the interest is likely to be damaged by the alleged
false advertising.’ ” 697 F. 3d, at 410
(quoting Famous Horse, Inc. v. 5th Avenue Photo Inc., 624
F. 3d 106, 113 (CA2 2010)). The Sixth Circuit applied the
Second Circuit’s reasonable-interest test and concluded that
Static Control had standing because it “alleged a cognizable
interest in its business reputation and sales to remanufacturers
and sufficiently alleged that th[o]se interests were harmed by
Lexmark’s statements to the remanufacturers that Static
Control was engaging in illegal conduct.” 697 F. 3d, at
411.
We granted certiorari
to decide “the appropriate ana- lytical framework for
determining a party’s standing to maintain an action for
false advertising under the Lanham Act.” Pet. for Cert. i;
569 U. S. ____ (2013). [
2
]
II. “Prudential Standing”
The parties’
briefs treat the question on which we granted certiorari as one of
“prudential standing.” Because we think that label
misleading, we begin by clarifying the nature of the question at
issue in this case.
From Article
III’s limitation of the judicial power to resolving
“Cases” and “Controversies,” and the
separation-of-powers principles underlying that limitation, we have
deduced a set of requirements that together make up the
“irreducible constitutional minimum of standing.” Lujan
v. Defenders of Wildlife, 504 U. S. 555, 560 (1992) . The
plaintiff must have suffered or be imminently threatened with a
concrete and particularized “injury in fact” that is
fairly traceable to the challenged action of the defendant and
likely to be redressed by a favorable judicial decision. Ibid.
Lexmark does not deny that Static Control’s alle- gations of
lost sales and damage to its business reputa- tion give it standing
under Article III to press its false-advertising claim, and we are
satisfied that they do.
Although Static
Control’s claim thus presents a case or controversy that is
properly within federal courts’ Article III jurisdiction,
Lexmark urges that we should decline to adjudicate Static
Control’s claim on grounds that are “prudential,”
rather than constitutional. That request is in some tension with
our recent reaffirmation of the principle that “a federal
court’s ‘obligation’ to hear and decide”
cases within its jurisdiction “is ‘virtually
unflagging.’ ” Sprint Communications, Inc. v.
Jacobs, 571 U. S. ___, ___ (2013) (slip op., at 6) (quoting
Colorado River Water Con-servation Dist. v. United States, 424
U. S. 800, 817 (1976) ). In recent decades, however, we have
adverted to a “prudential” branch of standing, a
doctrine not derived from Article III and “not exhaustively
defined” but encompassing (we have said) at least three broad
principles: “ ‘the general prohibition on a
litigant’s raising another person’s legal rights, the
rule barring adjudication of generalized grievances more
appropriately addressed in the representative branches, and the
requirement that a plaintiff’s complaint fall within the zone
of interests protected by the law invoked.’ ” Elk
Grove Unified School Dist. v. Newdow, 542 U. S. 1, 12 (2004)
(quoting Allen v. Wright, 468 U. S. 737, 751 (1984) ).
Lexmark bases its
“prudential standing” arguments chiefly on Associated
General Contractors, but we did not describe our analysis in that
case in those terms. Rather, we sought to “ascertain,”
as a matter of statutory interpretation, the “scope of the
private remedy created by” Congress in §4 of the Clayton
Act, and the “class of persons who [could] maintain a private
damages action under” that legislatively conferred cause of
action. 459 U. S., at 529, 532. We held that the statute
limited the class to plaintiffs whose injuries were proximately
caused by a defendant’s antitrust violations. Id., at
532–533. Later decisions confirm that Associated General
Contractors rested on statutory, not “prudential,”
considerations. See, e.g., Holmes v. Securities Investor Protection
Corporation, 503 U. S. 258 –268 (1992) (relying on
Associated General Contractors in finding a proximate-cause
requirement in the cause of action created by the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18
U. S. C. §1964(c)); Anza v. Ideal Steel Supply
Corp., 547 U. S. 451, 456 (2006) (affirming that Holmes
“relied on a careful interpretation of §1964(c)”).
Lexmark’s arguments thus do not deserve the
“prudential” label.
Static Control, on the
other hand, argues that we should measure its “prudential
standing” by using the zone-of-interests test. Although we
admittedly have placed that test under the “prudential”
rubric in the past, see, e.g., Elk Grove, supra, at 12, it does not
belong there any more than Associated General Contractors does.
Whether a plain- tiff comes within “the ‘zone of
interests’ ” is an issue that requires us to
determine, using traditional tools of statutory interpretation,
whether a legislatively conferred cause of action encompasses a
particular plaintiff’s claim. See Steel Co. v. Citizens for
Better Environment, 523 U. S. 83 , and n. 2 (1998);
Clarke v. Securities Industry Assn., 479 U. S. 388 –395
(1987); Holmes, supra, at 288 (Scalia, J., concurring in judgment).
As Judge Silberman of the D. C. Circuit recently observed,
“ ‘prudential standing’ is a misnomer”
as applied to the zone-of-interests analysis, which asks whether
“this particular class of persons ha[s] a right to sue under
this substantive statute.” Association of Battery Recyclers,
Inc. v. EPA, 716 F. 3d 667, 675–676 (2013) (concurring
opinion). [
3 ]
In sum, the question
this case presents is whether Static Control falls within the class
of plaintiffs whom Congress has authorized to sue under
§1125(a). In other words, we ask whether Static Control has a
cause of action under the statute. [
4 ] That question requires us to determine the meaning of
the congressionally enacted provision creating a cause of action.
In doing so, we apply traditional principles of statutory
interpretation. We do not ask whether in our judgment Congress
should have authorized Static Control’s suit, but whether
Congress in fact did so. Just as a court cannot apply its
independent policy judgment to recognize a cause of action that
Congress has denied, see Alexander v. Sandoval, 532 U. S. 275
–287 (2001), it cannot limit a cause of action that Congress
has created merely because “prudence” dictates.
III. Static Control’s Right To Sue Under
§1125(a)
Thus, this case
presents a straightforward question of statutory interpretation:
Does the cause of action in §1125(a) extend to plaintiffs like
Static Control? The statute authorizes suit by “any person
who believes that he or she is likely to be damaged” by a
defendant’s false advertising. §1125(a)(1). Read
literally, that broad language might suggest that an action is
available to anyone who can satisfy the minimum requirements of
Article III. No party makes that argument, however, and the
“unlikelihood that Congress meant to allow all factually
injured plaintiffs to recover persuades us that [§1125(a)]
should not get such an expansive reading.” Holmes, 503
U. S., at 266 (footnote omitted). We reach that conclusion in
light of two relevant background principles already mentioned: zone
of interests and proximate causality.
A. Zone of Interests
First, we presume
that a statutory cause of action extends only to plaintiffs whose
interests “fall within the zone of interests protected by the
law invoked.” Allen, 468 U. S., at 751. The modern
“zone of interests” formulation originated in
Association of Data Processing Service Organizations, Inc. v. Camp,
397 U. S. 150 (1970) , as a limitation on the cause of action
for judicial review conferred by the Administrative Procedure Act
(APA). We have since made clear, however, that it applies to all
statutorily created causes of action; that it is a
“requirement of general application”; and that Congress
is presumed to “legislat[e] against the background of”
the zone-of-interests limitation, “which applies unless it is
expressly negated.” Bennett v. Spear, 520 U. S. 154, 163
(1997) ; see also Holmes, supra, at 287–288 (Scalia, J.,
concurring in judgment). It is “perhaps more
accurat[e],” though not very different as a practical matter,
to say that the limitation always applies and is never negated, but
that our analysis of certain statutes will show that they protect a
more-than-usually “expan[sive]” range of interests.
Bennett, supra, at 164. The zone-of-interests test is therefore an
appropriate tool for determining who may invoke the cause of action
in §1125(a). [
5 ]
We have said, in the
APA context, that the test is not “ ‘especially
demanding,’ ” Match-E-Be-Nash-She-Wish Band of
Pottawatomi Indians v. Patchak, 567 U. S. ___, ___ (2012)
(slip op., at 15). In that context we have often
“conspicuously included the word ‘arguably’ in
the test to indicate that the benefit of any doubt goes to the
plaintiff,” and have said that the test “forecloses
suit only when a plaintiff’s ‘interests are so
marginally related to or inconsistent with the purposes implicit in
the statute that it cannot reasonably be assumed
that’ ” Congress authorized that plaintiff to sue.
Id., at ___ (slip op., at 15–16). That lenient approach is an
appropriate means of preserving the flexibility of the APA’s
omnibus judicial-review provision, which permits suit for
violations of numerous statutes of varying character that do not
themselves include causes of action for judicial review. “We
have made clear, however, that the breadth of the zone of interests
varies according to the provisions of law at issue, so that what
comes within the zone of interests of a statute for purposes of
obtaining judicial review of administrative action under the
‘ “generous review provisions” ’
of the APA may not do so for other purposes.” Bennett, supra,
at 163 (quot- ing Clarke, 479 U. S., at 400, n. 16, in
turn quoting Data Processing, supra, at 156).
Identifying the
interests protected by the Lanham Act, however, requires no
guesswork, since the Act includes an “unusual, and
extraordinarily helpful,” detailed statement of the
statute’s purposes. H. B. Halicki Productions v. United
Artists Communications, Inc., 812 F. 2d 1213, 1214 (CA9 1987).
Section 45 of the Act, codified at 15 U. S. C.
§1127, provides:
“The intent of this chapter is to
regulate commerce within the control of Congress by making
actionable the deceptive and misleading use of marks in such
commerce; to protect registered marks used in such commerce from
interference by State, or territorial legislation; to protect
persons engaged in such commerce against unfair competition; to
prevent fraud and deception in such commerce by the use of
reproductions, copies, counterfeits, or colorable imitations of
registered marks; and to provide rights and remedies stipulated by
treaties and conventions respect- ing trademarks, trade names, and
unfair competition entered into between the United States and
foreign nations.”
Most of the enumerated purposes are relevant to
false-association cases; a typical false-advertising case will
implicate only the Act’s goal of “protect[ing] persons
engaged in [commerce within the control of Congress] against unfair
competition.” Although “unfair competition” was a
“plastic” concept at common law, Ely-Norris Safe Co. v.
Mosler Safe Co., 7 F. 2d 603, 604 (CA2 1925) (L. Hand, J.), it
was understood to be concerned with injuries to business reputation
and present and future sales. See Rogers, Book Review, 39 Yale
L. J. 297, 299 (1929); see generally 3 Restatement of Torts,
ch. 35, Introductory Note, pp. 536–537 (1938).
We thus hold that to
come within the zone of interests in a suit for false advertising
under §1125(a), a plaintiff must allege an injury to a
commercial interest in reputation or sales. A consumer who is
hoodwinked into purchasing a disappointing product may well have an
injury-in-fact cognizable under Article III, but he cannot invoke
the protection of the Lanham Act—a conclusion reached by
every Circuit to consider the question. See Colligan v. Activities
Club of N. Y., Ltd., 442 F. 2d 686, 691–692 (CA2
1971); Serbin v. Ziebart Int’l Corp., 11 F. 3d 1163,
1177 (CA3 1993); Made in the USA Foundation v. Phillips Foods,
Inc., 365 F. 3d 278, 281 (CA4 2004); Procter & Gamble Co.,
242 F. 3d, at 563–564; Barrus v. Sylvania, 55 F. 3d
468, 470 (CA9 1995); Phoenix of Broward, 489 F. 3d, at 1170.
Even a business misled by a supplier into purchasing an inferior
product is, like consumers generally, not under the Act’s
aegis.
B. Proximate Cause
Second, we generally
presume that a statutory cause of action is limited to plaintiffs
whose injuries are proxi- mately caused by violations of the
statute. For centuries, it has been “a well established
principle of [the common] law, that in all cases of loss, we are to
attribute it to the proximate cause, and not to any remote
cause.” Waters v. Merchants’ Louisville Ins. Co., 11
Pet. 213, 223 (1837); see Holmes, 503 U. S., at 287 (Scalia,
J., concurring in judgment). That venerable principle reflects the
reality that “the judicial remedy cannot encompass every
conceivable harm that can be traced to alleged wrongdoing.”
Associ- ated Gen. Contractors, 459 U. S., at 536. Congress, we
assume, is familiar with the common-law rule and does not mean to
displace it sub silentio. We have thus construed federal causes of
action in a variety of contexts to incorporate a requirement of
proximate causation. See, e.g., Dura Pharmaceuticals, Inc. v.
Broudo, 544 U. S. 336, 346 (2005) (securities fraud); Holmes,
supra, at 268–270 (RICO); Associated Gen. Contractors, supra,
at 529–535 (Clayton Act). No party disputes that it is proper
to read §1125(a) as containing such a requirement, its broad
language notwithstanding.
The proximate-cause
inquiry is not easy to define, and over the years it has taken
various forms; but courts have a great deal of experience applying
it, and there is a wealth of precedent for them to draw upon in
doing so. See Exxon Co., U. S. A. v. Sofec, Inc., 517 U. S.
830 –839 (1996); Pacific Operators Offshore, LLP v.
Valladolid, 565 U. S. ___, ___ (2012) (Scalia, J., concurring
in part and concurring in judgment) (slip op., at 3).
Proximate-cause analysis is controlled by the nature of the
statutory cause of action. The question it presents is whether the
harm alleged has a sufficiently close connection to the conduct the
statute prohibits.
Put differently, the
proximate-cause requirement generally bars suits for alleged harm
that is “too remote” from the defendant’s
unlawful conduct. That is ordinarily the case if the harm is purely
derivative of “misfortunes visited upon a third person by the
defendant’s acts.” Holmes, supra, at 268–269;
see, e.g., Hemi Group, LLC v. City of New York, 559 U. S. 1
–11 (2010). In a sense, of course, all commercial injuries
from false advertising are derivative of those suffered by
consumers who are deceived by the advertising; but since the Lanham
Act authorizes suit only for commercial injuries, the intervening
step of consumer deception is not fatal to the showing of proximate
causation required by the statute. See Harold H. Huggins Realty,
Inc. v. FNC, Inc., 634 F. 3d 787, 800–801 (CA5 2011).
That is consistent with our recognition that under common-law
principles, a plaintiff can be directly injured by a
misrepresentation even where “a third party, and not the
plaintiff, . . . relied on” it. Bridge v. Phoenix
Bond & Indemnity Co., 553 U. S. 639, 656 (2008) .
We thus hold that a
plaintiff suing under §1125(a) ordinarily must show economic
or reputational injury flowing directly from the deception wrought
by the defendant’s advertising; and that that occurs when
deception of consumers causes them to withhold trade from the
plaintiff. That showing is generally not made when the deception
produces injuries to a fellow commercial actor that in turn affect
the plaintiff. For example, while a competitor who is forced out of
business by a defendant’s false advertising generally will be
able to sue for its losses, the same is not true of the
competitor’s landlord, its electric company, and other
commercial parties who suffer merely as a result of the
competitor’s “inability to meet [its] financial
obligations.” Anza, 547 U. S., at 458. [
6 ]
C. Proposed Tests
At oral argument,
Lexmark agreed that the zone of in- terests and proximate causation
supply the relevant background limitations on suit under
§1125(a). See Tr. of Oral Arg. 4–5, 11–12,
17–18. But it urges us to adopt, as the optimal formulation
of those principles, a multifactor balancing test derived from
Associated General Contrac-tors. In the alternative, it asks that
we adopt a categorical test permitting only direct competitors to
sue for false advertising. And although neither party urges
adoption of the “reasonable interest” test applied
below, several amici do so. While none of those tests is wholly
without merit, we decline to adopt any of them. We hold instead
that a direct application of the zone-of-interests test and the
proximate-cause requirement supplies the relevant limits on who may
sue.
The balancing test
Lexmark advocates was first articulated by the Third Circuit in
Conte Bros. and later adopted by several other Circuits. Conte
Bros. identified five relevant considerations:
“(1) The
nature of the plaintiff’s alleged injury: Is the injury of a
type that Congress sought to redress in providing a private remedy
for violations of the [Lanham Act]?
“(2) The
directness or indirectness of the asserted injury.
“(3) The
proximity or remoteness of the party to the alleged injurious
conduct.
“(4) The
speculativeness of the damages claim.
“(5) The
risk of duplicative damages or complexity in apportioning
damages.” 165 F. 3d, at 233 (citations and internal
quotation marks omitted).
This approach reflects a commendable effort to
give content to an otherwise nebulous inquiry, but we think it
slightly off the mark. The first factor can be read as requiring
that the plaintiff’s injury be within the relevant zone of
interests and the second and third as requiring (somewhat
redundantly) proximate causation; but it is not correct to treat
those requirements, which must be met in every case, as mere
factors to be weighed in a balance. And the fourth and fifth
factors are themselves problem- atic. “[T]he difficulty that
can arise when a court attempts to ascertain the damages caused by
some remote action” is a “motivating principle”
behind the proximate-cause requirement, Anza, supra, at
457–458; but potential diffi- culty in ascertaining and
apportioning damages is not, as Conte Bros. might suggest, an
independent basis for denying standing where it is adequately
alleged that a defendant’s conduct has proximately injured an
interest of the plaintiff’s that the statute protects. Even
when a plaintiff cannot quantify its losses with sufficient
certainty to re- cover damages, it may still be entitled to
injunctive re- lief under §1116(a) (assuming it can prove a
likelihood of future injury) or disgorgement of the
defendant’s ill-gotten profits under §1117(a). See
TrafficSchool.com, Inc. v. Edriver Inc., 653 F. 3d 820, 831
(CA9 2011); Johnson & Johnson v. Carter-Wallace, Inc., 631
F. 2d 186, 190 (CA2 1980). Finally, experience has shown that
the Conte Bros. approach, like other open-ended balancing tests,
can yield unpredictable and at times arbitrary results. See, e.g.,
Tushnet, Running the Gamut from A to B: Federal Trademark and False
Advertising Law, 159 U. Pa. L. Rev. 1305, 1376–1379
(2011).
In contrast to the
multifactor balancing approach, the direct-competitor test provides
a bright-line rule; but it does so at the expense of distorting the
statutory language. To be sure, a plaintiff who does not compete
with the defendant will often have a harder time establishing
proximate causation. But a rule categorically prohibiting all suits
by noncompetitors would read too much into the Act’s
reference to “unfair competition” in §1127. By the
time the Lanham Act was adopted, the common-law tort of unfair
competition was understood not to be limited to actions between
competitors. One leading authority in the field wrote that
“there need be no competition in unfair competition,”
just as “[t]here is no soda in soda water, no grapes in grape
fruit, no bread in bread fruit, and a clothes horse is not a horse
but is good enough to hang things on.” Rogers, 39 Yale
L. J., at 299; accord, Vogue Co. v. Thompson-Hudson Co., 300
F. 509, 512 (CA6 1924); 1 H. Nims, The Law of Unfair Competition
and Trade-Marks, p. vi (4th ed. 1947); 2 id., at 1194–1205.
It is thus a mistake to infer that because the Lanham Act treats
false advertising as a form of unfair competition, it can protect
only the false-advertiser’s direct competitors.
Finally, there is the
“reasonable interest” test applied by the Sixth Circuit
in this case. As typically formulated, it requires a commercial
plaintiff to “demonstrate ‘(1) a reasonable
interest to be protected against the alleged false advertising and
(2) a reasonable basis for believing that the interest is
likely to be damaged by the alleged false
advertising.’ ” 697 F. 3d, at 410 (quoting
Famous Horse, 624 F. 3d, at 113). A purely practical objection
to the test is that it lends itself to widely divergent appli-
cation. Indeed, its vague language can be understood as requiring
only the bare minimum of Article III standing. The popularity of
the multifactor balancing test reflects its appeal to courts tired
of “grappl[ing] with defining” the
“ ‘reasonable interest’ ” test
“with greater precision.” Conte Bros., 165 F. 3d,
at 231. The theoretical difficulties with the test are even more
substantial: The relevant question is not whether the
plaintiff’s interest is “reasonable,” but whether
it is one the Lanham Act protects; and not whether there is a
“reasonable basis” for the plaintiff’s claim of
harm, but whether the harm alleged is proximately tied to the
defendant’s conduct. In short, we think the principles set
forth above will provide clearer and more accurate guidance than
the “reasonable interest” test.
IV. Application
Applying those
principles to Static Control’s false-advertising claim, we
conclude that Static Control comes within the class of plaintiffs
whom Congress authorized to sue under §1125(a).
To begin, Static
Control’s alleged injuries—lost sales and damage to its
business reputation—are injuries to precisely the sorts of
commercial interests the Act protects. Static Control is suing not
as a deceived consumer, but as a “perso[n] engaged in”
“commerce within the control of Congress” whose
position in the marketplace has been damaged by Lexmark’s
false advertising. §1127. There is no doubt that it is within
the zone of interests protected by the statute.
Static Control also
sufficiently alleged that its injuries were proximately caused by
Lexmark’s misrepresentations. This case, it is true, does not
present the “classic Lanham Act false-advertising
claim” in which “ ‘one competito[r] directly
injur[es] another by making false statements about his own goods
[or the competitor’s goods] and thus inducing customers to
switch.’ ” Harold H. Huggins Realty, 634
F. 3d, at 799, n. 24. But although diversion of sales to a
direct competitor may be the paradigmatic direct injury from false
advertising, it is not the only type of injury cognizable under
§1125(a). For at least two reasons, Static Control’s
allegations satisfy the requirement of proximate causation.
First, Static Control
alleged that Lexmark disparaged its business and products by
asserting that Static Control’s business was illegal. See 697
F. 3d, at 411, n. 10 (noting allegation that Lexmark
“directly target[ed] Static Control” when it
“falsely advertised that Static Control infringed
Lexmark’s patents”). When a defendant harms a
plaintiff’s reputation by casting aspersions on its business,
the plaintiff’s injury flows directly from the
audience’s belief in the disparaging statements. Courts have
therefore afforded relief under §1125(a) not only where a
defendant denigrates a plaintiff’s product by name, see,
e.g., McNeilab, Inc. v. American Home Prods. Corp., 848 F. 2d
34, 38 (CA2 1988), but also where the defendant damages the
product’s reputation by, for example, equat-ing it with an
inferior product, see, e.g., Camel Hair and Cashmere Inst. of Am.,
Inc. v. Associated Dry Goods Corp., 799 F. 2d 6, 7–8,
11–12 (CA1 1986); PPX Enterprises, Inc. v. Audiofidelity,
Inc., 746 F. 2d 120, 122, 125 (CA2 1984). Traditional
proximate-causation principles support those results: As we have
observed, a defendant who “ ‘seeks to promote his
own interests by telling a known falsehood to or about the
plaintiff or his product’ ” may be said to have
proximately caused the plaintiff’s harm. Bridge, 553
U. S., at 657 (quoting Restatement (Second) of Torts
§870, Comment h (1977); emphasis added in Bridge).
The District Court
emphasized that Lexmark and Static Control are not direct
competitors. But when 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. Consider two rival carmakers who purchase airbags for their
cars from different third-party manufacturers. If the first
carmaker, hoping to divert sales from the second, falsely proclaims
that the airbags used by the second carmaker are defective, both
the second carmaker and its airbag supplier may suffer reputational
injury, and their sales may decline as a result. In those
circumstances, there is no reason to regard either party’s
injury as de- rivative of the other’s; each is directly and
independently harmed by the attack on its merchandise.
In addition, Static
Control adequately alleged proximate causation by alleging that it
designed, manufactured, and sold microchips that both (1) were
necessary for, and (2) had no other use than, refurbishing
Lexmark toner cartridges. See App. 13, ¶31; id., at 37,
¶54. [
7 ] It follows from
that allegation that any false advertising that reduced the
remanufacturers’ business necessarily injured Static Control
as well. Taking Static Control’s assertions at face value,
there is likely to be something very close to a 1:1 relationship
between the number of refurbished Prebate cartridges sold (or not
sold) by the remanufacturers and the number of Prebate microchips
sold (or not sold) by Static Control. “Where the injury
alleged is so integral an aspect of the [violation] alleged, there
can be no question” that proximate cause is satisfied. Blue
Shield of Va. v. McCready, 457 U. S. 465, 479 (1982) .
To be sure, on this
view, the causal chain linking Static Control’s injuries to
consumer confusion is not direct, but includes the intervening link
of injury to the remanufacturers. Static Control’s
allegations therefore might not support standing under a strict
application of the “ ‘ “general
tendency” ’ ” not to stretch proximate
causation “ ‘ “beyond the first
step.” ’ ” Holmes, 503 U. S., at
271. But the reason for that general tendency is that there
ordinarily is a “discontinuity” between the injury to
the direct victim and the injury to the indirect victim, so that
the latter is not surely attributable to the former (and thus also
to the defendant’s conduct), but might instead have resulted
from “any number of [other] reasons.” Anza, 547
U. S., at 458–459. That is not the case here. Static
Control’s allegations suggest that if the remanufacturers
sold 10,000 fewer refurbished cartridges because of Lexmark’s
false advertising, then it would follow more or less automatically
that Static Control sold 10,000 fewer microchips for the same
reason, without the need for any “speculative . . .
proceedings” or “intricate, uncertain inquiries.”
Id., at 459–460. In these relatively unique circumstances,
the remanufacturers are not “more immediate victim[s]”
than Static Control. Bridge, supra, at 658.
Although we conclude
that Static Control has alleged an adequate basis to proceed under
§1125(a), it cannot obtain relief without evidence of injury
proximately caused by Lexmark’s alleged misrepresentations.
We hold only that Static Control is entitled to a chance to prove
its case.
* * *
To 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 mis- representations. Static Control has
adequately pleaded both elements. The judgment of the Court of
Appeals is affirmed.
It is so ordered.