Lexmark International v. Static Control Components

On March 25, 2014, the United States Supreme Court unanimously decided Lexmark International, Inc. v. Static Control Components, Inc., a case about alleged unfair competition involving false and misleading advertising.  Here is how the decision syllabus describes the posture of the case:

Petitioner Lexmark sells the only style of toner cartridges that work with the company’s laser printers, but “remanufacturers” acquire and refurbish used Lexmark cartridges to sell in competition with Lexmark’s own new and refurbished ones.  Lexmark’s “Prebate” program gives customers a discount on new cartridges if they agree to return empty cartridges to the company.  Each Prebate cartridge has a microchip that disables the empty cartridge unless Lexmark replaces the chip.  Respondent Static Control, a maker and seller of components for the remanufacture of Lexmark cartridges, developed a microchip that mimicked Lexmark’s.  Lexmark sued for copyright infringement, but Static Control counterclaimed, alleging that Lexmark engaged in false or misleading advertising in violation of §43(a) of the Lanham Act, 15 U.S.C. §1125(a), and that its misrepresentations had caused Static Control lost sales and damage to its business reputation.  The District Court held that Static Control lacked “prudential standing” to bring the Lanham Act claim, applying a multifactor balancing test the court attributed to Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519.  In reversing, the Sixth Circuit relied on the Second Circuit’s “reasonable interest” test.

The Supreme Court sided with Lexmark International's competitor, holding that "Static Control has adequately pleaded the elements of a Lanham Act cause of action for false advertising."

One importance consequence of this decision may be to extend liability for damage caused to the reputation not only of direct competitors, but to other parties suffering harm to their reputations. The Supreme Court illustrated this with a hypothetical example:

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 derivative of the other’s; each is directly and independently harmed by the attack on its merchandise.

Although this decision focuses on standing (that is, whether or not Static Control Components met the procedural requirements to sue Lexmark International), its effects may be more far-reaching for establishing a new legal standard for false advertising. As the Supreme Court stated,

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 misrepresentations.

Plaintiffs may find this a relatively easy threshold to reach.

In Lexmark International, Inc. v. Static Control Components, Inc., the Supreme Court showed its bolder side in unanimously making new intellectual property law.  A more liberal standing requirement may mean more false advertising lawsuits, less false advertising, or, more likely, a somewhat complex interaction of the two.

Cavere mala fide clamator!

Climate Scientists On Climate Change

The largest scientific organization in the world, the American Association for the Advancement of Science ("AAAS"), released a report entitled "WHAT WE KNOW:  THE REALITY, RISKS AND RESPONSE TO CLIMATE CHANGE" on March 18, 2014.  The report begins decisively:

The overwhelming evidence of human-caused climate change documents both current impacts with significant costs and extraordinary future risks to society and natural systems. The scientific community has convened conferences, published reports, spoken out at forums and proclaimed, through statements by virtually every national scientific academy and relevant major scientific organization — including the American Association for the Advancement of Science (AAAS) — that climate change puts the well-being of people of all nations at risk.

Surveys show that many Americans think climate change is still a topic of significant scientific disagreement. Thus, it is important and increasingly urgent for the public to know there is now a high degree of agreement among climate scientists that human-caused climate change is real. Moreover, while the public is becoming aware that climate change is increasing the likelihood of certain local disasters, many people do not yet understand that there is a small, but real chance of abrupt, unpredictable and potentially irreversible changes with highly damaging impacts on people in the United States and around the world. [footnote removed]

As climate change continues, so do debates among voters and their representatives about what action to take, whether preventive, adaptive, or both.  The AAAS committee who wrote "WHAT WE KNOW" (a co-chair of which, James J. McCarthy, was a wonderful mentor to me at Harvard University) certainly hope their report will change the political climate of climate change.  A superb work of research and advocacy, I believe it will.

Crimea And Punishment

Within three short weeks, Crimea has undergone several seismic lurches:  (1) from RussophileYanukovychian Ukraine to (2) Maidan-revolutionary Ukraine to (3) occupation by balaklava-adorned Russophone soldiers (adorned fashion-appropriately, as the eponymous city of Balaklava (now part of Sevastopol) was located in Crimea) to (4) "independent" Crimean republic.  Next, Vladimir Putin announded on March 19, 2014, Crimea will be annexed by Russia.  What has the rest of the world done so far on Crimea?  Aside from humiliation, it has achieved little else.  This crisis seems tailor-made to illustrate the Russian maxim "о человеке судят по его поступкам."

Nevertheless, annexation of Crimea will have both immediate and longer-term consequences for Russia regardless of how the global community eventually reacts.  The first and foremost of these will be to turn the Ukraine decisively towards Europe and the West.  Without Crimea's dependable reservoir of pro-Russian voters, Russia has suddenly given the Ukraine a durable political majority of pro-European citizens.  This may lead to European Union membership in the short term, and quite possibly NATO membership after that.  Perhaps more worrying for Russia are the precedents it has now set in Abkhazia, South Ossetia, and Crimea, which may encourage constituent parts of Russia to struggle more vigorously to achieve independence for themselves.  If might makes right, then the acquisition of might becomes a more important goal for Russian regions like Chechnya.  Russia has won Crimea in the short-term.  It must hope that in the fullness of time its victory does not prove Pyrrhic. 
 

PatCon 4

Patent law is one of the few areas of law that has continued to thrive throughout the financial crisis of the past half-decade.  Until recently, no regular event provided patent scholarship an exclusive home.  The Patent Conference, or PatCon, has filled this need.  Here is the official description of PatCon:

The Patent Conference is the largest annual conference for patent scholars in the world. The conference is a cooperative effort among the University of Kansas School of Law, IIT Chicago-Kent College of Law, University of San Diego School of Law, and Boston College Law School to hold an annual conference where patent scholars in law, economics, management science, and other disciplines can share their research. 

In 2010, the founders of PatCon—law professors David Olson, David Schwartz, Ted Sichelman and Andrew Torrance—realized that the growth and importance of research in the area of patents required an exclusive forum that would enable participants to share their research with other experts and explore links across the legal and business side of patents.

PatCon 4 will be hosted by the University of San Diego School of Law on April 4 and 5, 2014. The conference website has full details.

Entrepreneurshipcare?

The White House has released a video suggesting that Obamacare should make it easier for entrepreneurs to start new ventures without worrying about losing their medical insurance coverage.
Whether or not Obamacare will actually affect the rate or quality of entrepreneurship in the United States remains to be seen.  There are many countries with both universal medical insurance and lamentably-anemic entrepreneurship.  Nevertheless, at least aspiring firm founders can now worry less about medical insurance covering treatment for such common venture-related ailments as chronic codefinger, pitchitis, angel-round depression, and third degree burn-rate.

Thanks to Patently-O for bringing this video to my attention.

Design Patent (R)evolution

On March 5, 2014, the Stanford Technology Law Review published an article by William J. Seymour and I entitled "(R)evolution in Design Patentable Subject Matter: The Shifting Meaning of “Article of Manufacture”."  Here is the abstract of our article:

Design patents protecting electronic designs, including computer-generated imagery (CGI), have rapidly become an important and valuable intellectual property asset class. Designs for CGIs have enjoyed design patent protection since 1996, when the United States Patent and Trademark Office (USPTO) reversed its original position that CGI were not design patent eligible. Previously, the USPTO consistently rejected design applications claiming CGI for failure to meet the “design for an article of manufacture” requirement of 35 U.S.C. § 171. This USPTO policy change proved prescient and important, as the focus of design innovation has shifted from traditional, tangible articles of manufacture to designs, such as CGIs, intended mainly for evanescent, electronic display. However, the USPTO’s allowance of CGI design patents continues to be hotly debated among design patent practitioners and scholars. Remarkably, no court has directly upheld the USPTO’s determination that CGI can qualify under the “article of manufacture” requirement of § 171. Furthermore, granting design patent protection for CGI has introduced tensions into the intellectual property protection for visual subject matter law by altering the balance that had previously prevailed among copyright, trademark, and design patent protection. This Article reexamines the USPTO’s 1996 determination to permit design patents claiming CGI, considers the relative benefits and costs attending the pre- and post-1996 policies, compares the treatment of CGI under the design protection laws of other countries, and analyzes whether or not design patent law allows protection for electronic (and other evanescent) designs, such as CGI. It explores the policy rationales behind the “design for an article of manufacture” requirement in § 171, and undertakes a comprehensive review of historical cases interpreting the metes and bounds of the requirement. Then, it analyzes problems raised by CGI design patents in contemporary cases, with a particular focus on Apple v. Samsung. The Article concludes by considering whether design patent protection is a socially beneficial mechanism for incentivizing and regulating innovation in electronic designs, especially CGI.

A free PDF of the full article is available here.