Last week, two different U.S. courts took action in cases involving the use of trademarks outside the borders of the United States, and if you aren’t confused you don’t understand territoriality.
The big news last Monday was the Supreme Court’s refusal to hear an appeal in the case of Belmora, LLC v. Bayer Consumer Care AG. You can read the Fourth Circuit opinion here. This is a case of the limits of standing to sue under the Lanham Act coming up against a really bad actor, to put it simply.
Bayer Consumer Care, a Swiss company, sells naproxen sodium pain relievers under the brand name FLANAX in Mexico. (The product is the same as ALEVE in the United States). They’ve been selling FLANAX in Mexico since 1976. In 2004, Belmora LLC started selling its own naproxen sodium pain relievers under the name FLANAX. The packaging was virtually identical to Bayer’s packaging in Mexico. Belmora marketed its product to distributors with all kinds of claims about the “topselling brand among Latinos” and declaring that “Flanax is now made in the U.S.” Did I mention these are really skeezy guys?
Belmora even had the gall to apply for registration of FLANAX at the USPTO, and got it registered. Bayer, unsurprisingly, petitioned to cancel the registration. They were successful at the Trademark Trial and Appeal Board, but the decision was reversed by the trial court at the Eastern District of Virginia. The District Court acknowledged that Belmora capitalized on Bayer’s goodwill, but distilled the question to the following:
Does the Lanham Act allow the owner of a foreign mark that is not registered in the United States and further has never used the mark in United States commerce to assert priority rights over a mark that is registered in the United States by another party and used in United States commerce?
The District Court concluded the answer was no. No use of a trademark in the U.S. or registration in the U.S. means no standing.
The Fourth Circuit reversed, concluding that the sections of the Lanham Act under which Bayer based its claim, the false association and false standing clauses in Section 43(a) and 14(3). Neither of these sections on their face require the plaintiff to have a registration in order to sue. (Other sections of the Act do require registration, and the rule is if Congress says something in one place and not in the other, then it likely meant to do it that way).
Given that Belmora maybe qualifies for the worst people in the world for trying to confuse consumers into buying different drugs than the one they wanted, this seems like it ought to be the right result. The problem is that the Second, Ninth, and Federal Circuits had already answered the question differently than the Fourth Circuit, and worse yet, using totally different reasoning. The Fourth Circuit opinion doesn’t even mention the earlier cases, or the territoriality principle that says that trademark rights generally only exist within a country’s borders to the extent protected by that country’s laws. And while Section 43(a) and 14(3) don’t require a registration, there’s a pretty good argument to be made that you have to have something. Those Sections say that the claim of false association or false advertising can be brought by anyone “who believes he or she is likely to be damaged” by the acts of the defendant. But can you suffer harm when you had no rights at all in the U.S.? On the other hand, drug companies, and car companies, and lots of other companies market products in different territories under different names. They can’t get a registration in the U.S. because they don’t want to use that mark in the U.S. Using the mark in the U.S. would, well, cause confusion, which is exactly what trademark law doesn’t want. Are we leaving a giant hole in the middle of the whole reasoning behind trademark law?
A good discussion of the earlier cases, the territoriality principle is in INTA’s Amici Brief here. But even with the amici brief, the Supreme Court was unpersuaded. Cert denied.
In the meantime, WalMart was being sued in the Western District of Arkansas by its vendor, Case-Mate, Inc. Case-Mate has been selling phone covers and accessories under the CASE-MATE mark since 2006, and has registrations for its mark in the U.S. and in Canada. Wal-Mart carries Case-Mate’s products. In 2014, Wal-Mart launched its own CASEMATE line of office supply products, and applied for registration in the U.S. and in Canada. Case-Mate opposed the registration in the U.S., and WalMart filed for declaratory judgment that its use of CASEMATE was non-infringing.
The District Court considered the extraterritoriality application of the Lanham Act, which, under Steele v. Buvola Watch Co, 344 U.S. 80 (1952), allows a U.S. corporation to make a claim against acts of infringement consummated in a foreign country by an American citizen and resident. The Second Circuit, in the 1956 case of Vanity Fair Mills v. The Eaton Co., 234 F.3d 633, had laid out the following test for whether the Lanham Act could reach activities outside the United States: (1) whether interstate commerce is affected; (2) whether the defendant is a U.S. citizen, and (3) whether resolving the dispute would create a conflict with foreign law. The Vanity Fair court had said that the second two elements were the most important. The District Court found that WalMart was a U.S. company, and that since it had not obtained a registration for its mark in Canada, that no foreign rights would be implicated. Having found no cases in which the second two elements were met and the doctrine was not applied, the Court found in favor of Case-Mate and allowed Case-Mate to enjoin the sale of WalMart’s products both in the U.S. and in Canada. The Court went further, however, and cited the 9th Circuit case of Ocean Garden v. Mark Trade Company, Inc. 953 F.2d 500 (9th Circ. 1991), which found that “an intent to harm a U.S.” was enough to find that interstate commerce is affected.
Belmora was pretty clearly out to harm Bayer’s U.S. sales. The territoriality principle at issue in the Belmora case, though, is concerned with standing, not interstate commerce. In fact, the line of cases in the WalMart decision appear nowhere in the Belmora case. Belmora dealt with a U.S. company (Bayer Consumer Care’s subsidiary, Bayer Healthcare, LLC is registered in Delaware), but a company that had no U.S. registration and therefore no U.S. rights, even though the defendant’s actions took place in the United States. CaseMate’s registration in the U.S. gave it the right to enjoin infringement not only in the U.S., but outside as well.
And all this in one week.