The Court of Appeals for the Third Circuit in American Telephone & Telegraph Company v. Winback and Conserve Program, Inc. held that a principal may be liable under Section 43(a) of the Lanham Act for its agents' foreseeable unauthorized false designations of origin upon which a third party reasonably relies.

American Telephone & Telegraph Company (AT&T) sold telecommunications services under its marks to the defendant, Winback and Conserve Program, Inc. (Winback). Winback, a re-seller of such services, in turn, offered and sold these services to individual businesses (i.e. end-users) which did not qualify for high volume discounts, through marketing agencies that employed "independent" sales representatives.

AT&T sought a preliminary injunction against Winback alleging that the sales representatives were deceiving end-users into believing that they were purchasing services from and generally dealing with AT&T rather than the re-seller Winback. The lower court held that common law agency principles applied, but refused a preliminary injunction on the grounds that AT&T had failed to establish that Winback exercised sufficient dominion over the sales representatives to constitute an agency relationship. Thus, as independent contractors, the lower court held, the sales representatives' infringing actions could not be imputed to Winback.

The Third Circuit reversed, holding that common law doctrines can apply to actions brought under a federal statute where these doctrines further the goal of the statute. In this instance, the doctrines of agency and apparent authority further the goal of the Lanham Act, namely, to provide an injured party with a remedy derived from the common law tort of unfair competition. While the lower court properly held that agency principles apply and that the sales representatives were "independent contractors" and not "servants," the lower court failed to consider whether the sales representatives acted as agents, notwithstanding that they were independent contractors.

The Third Circuit reasoned that, when a principal authorizes its agent-independent contractor to engage in commercial transactions with third parties on the principal's behalf and also receives financial benefit from that transaction, the principal may be liable under the Lanham Act, if the agent's infringing actions were foreseeable (taking into consideration such factors as whether the principal policed its agent's activities) and if a third party (without knowledge that such actions were not authorized) would reasonably rely thereon.

The Third Circuit remanded the case to the lower court to determine whether an agency relationship existed between Winback and its sales representatives (or whether the sales representatives acted with apparent authority), whether the agents' infringing actions were foreseeable and whether the end-users' reliance thereon was reasonable.