Foreign Trademarks and Domestic Risks

The territorial limits of trademark rights and the standing of foreign trademark owners to assert claims based on conduct in the United States pose complex issues. Navigating this area of law is key to proper trademark strategy and enforcement. A significant milestone occurred recently when the Supreme Court declined to hear an appeal of a Fourth Circuit trademark and unfair competition case with significant impact on the U.S. use of foreign trademarks.

In Mexico, Bayer Consumer Care AG (BCC) and Bayer Healthcare LLC (collectively “Bayer”) sold its naproxen sodium headache medicine (known as Aleve in the US) under the brand name “FLANAX” since 1976. Bayer made no use of FLANAX in the United States. In 2004, Belmora LLC (“Belmora”) began selling a naproxen sodium headache medicine using the mark FLANAX in nearly identical packaging in the United States in 2004, and in 2005 registered the mark.

In 2007, Bayer filed a cancellation petition before the United States Patent and Trademark Office (USPTO) Trademark Trial and Appeal Board (TTAB) based in part on the Lanham Act, claiming that Belmora had used the mark FLANAX in the United States to deliberately deceive Mexican American consumers. In 2014, the TTAB granted the cancellation petition, holding Bayer “has an interest in protecting its Mexican FLANAX mark,” and because “the reputation of the Mexican FLANAX mark does not stop at the Mexican border.” The TTAB held that Belmora’s actions meant that Bayer would lose control over its reputation and, as a result, would suffer damage sufficient to confer standing.

Belmora appealed the decision to the District Court of the Eastern District of Virginia, which consolidated the case with a separately filed false association and false advertising claim brought by Bayer. The District Court granted a motion to dismiss for lack of standing, and reversed the TTAB’s cancellation order based on Bayer’s lack of use of the mark in the United States, relying on Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014).

In Belmora LLC v. Bayer Consumer Care AG, 819 F.3d 697 (4th Cir. 2016), cert. denied, 22017 WL 737826 (U.S. Feb. 27, 2017), the Fourth Circuit reversed the district court decision, and held that Bayer, as owner of a Mexican trademark registration for FLANAX, could assert Lanham Act claims against Belmora for its registration and use of the mark FLANAX in the United States, despite Bayer having never used its mark in United States commerce.

The Court held that Bayer also had standing to seek cancellation of Belmora’s US trademark registration for FLANAX. The Fourth Circuit held that while Lanham Act section 32 relating to trademark infringement expressly required that a Plaintiff bringing a claim be the owner of a registered trademark, Section 43(a) relating to false designation of origins contained no such requirement.

The Fourth Circuit held that under Lexmark, a plaintiff had to meet two requirements: that the alleged acts of unfair competition were within the Lanham Act’s “protected zone of interests,” and that the Plaintiff was likely to be damaged by the Defendant’s use of the mark and that such use was the proximate cause of Plaintiff’s injury.

The Fourth Circuit noted that Lexmark requires that the plaintiff show “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff,” and found that that allegation of lost sales from foreign consumers living near the border who would instead purchase the products in the United States met that requirement.

The court also noted that there is no such ownership requirement for suits for unfair competition, relying on cases where parties were found to have standing to challenge use that created source confusion, despite their own marks having become generic. See, e.g., Kellogg Co. v. Nat’l Biscuit Co., 305 U.S. 111 (1938). (note that the main case cited in support of dismissal of the claims, ITC Ltd. v. Punchgini, Inc., 482 F.3d 135 (2d Cir. 2007), was decided before Lexmark, and thus likely would be decided differently today). The Supreme Court’s denial of certiorari opens up opportunities for enforcement of well-known international brand trademarks against US manufacturers, and makes it more important that US manufacturers be aware of foreign brands before selecting marks for products.

Now, particularly in light of Belmora v. Bayer, the Fourth Circuit may be an avenue for foreign registration owners to prosecute deceptive US conduct. The decision, however, does not guarantee that a foreign trademark owner would be able to enforce their rights against use in the US. The FLANAX case involved allegations of extensive passing off by Defendant and millions of dollars of advertising by Plaintiff along the border. In a case where there is less significant evidence it is not clear if the foreign rights would have sufficed.

The Fourth Circuit noted that a plaintiff “who relies only on foreign commercial activity may face difficulty proving a cognizable false association injury under § 43(a).” Thus it is very important to analyze both the rights of the foreign mark owner and the specifics of the use (or proposed use) of the same mark in the US to determine whether the US use would be allowed.

This article is a publication of MWH Law Group LLP and is intended to provide general information regarding legal issues and developments to our clients and other friends. It should not be construed as legal advice or a legal opinion on any specific facts or situations. For further information on your own situation, we encourage you to contact the author of the article or any other member of the firm.

CONTACT ATTORNEY JASON S. MARIN

JASON S. MARIN
Senior Counsel, New York
P: (414) 436-0353
E: jason.marin@mwhlawgroup.com
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