No Friends in the Diamond Business.

A later-filed, Lanham Act suit between two diamond merchants, which sell ‘enhanced’ gemstones, hits on the issue of standing. In Diascience Corp. v. Blue Nile, Inc., 2009 WL 1938970 (S.D.N.Y. 2009), the district court revists the somewhat unresolved law of Lanham Act standing. Taken to an extreme, the courts could place standing in Lanham Act cases on a footing equal to antitrust standing. It could define a zone of protected commercial interests, and require that the claimant to compete in the same “relevant market” as the defendant.

The District Judge notes the 1980 2nd Circuit decision, which declined to decide whether “section 43(a)’s provision allowing suit ‘by any person who believes he is or is likely to be damaged’,” is ” a matter of standing to sue, or as an element of the substantive claim.” Some would wonder why the 2nd Circuit hasn’t answered that after nearly 30 years. It has decided that the harm that confers standing can be presumed, or if that is not triggered, then what need be shown to meet a “heightened showing of injury and causation.” Citing the most recent Supreme Court ruling on motions to dismiss, the district judge found that Diascience had pleaded enough to go forward with “discovery limited to the issue of standing.” That limitation may lack the clarity of the litigants’ gemstones, since for 29 years the 2nd Circuit hasn’t cut a line between what shows “standing” and what shows the “substantive” Lanham Act claim. Discovery on!

Another point worthy of modest surprise was the denial of a stay of this later-filed suit. In the first case, Blue Nile alleged that Diascience had “false advertising” on its website. That is different, and does “not bear on” the claim by Diascience in the later-filed case that there is “false advertising [on] Blue Nile’s website.” That distinction was enough for the judge to refuse to stay the later-filed case in the Southern District pending the upcoming trial in the earlier-filed suit in the Western District.  But, can I get it wholesale?