The Fourth Circuit goes One Worlder on us
Answer: If the Fourth Circuit says it’s wrong.
Question Number Two: What if Marty, John and Ron have the Second Circuit on their side?
Answer Number Two: Well, the Fourth has the Ninth on its side… plus McCarthy.
What, of course, is the doctrine of famous marks, otherwise known as the doctrine of well-known marks. And although I’ve thrown my name in there, I have no real dog in the fight, save this snarky old blog post in which I opined that, in ITC Limited v. Punchgini, Inc., 482 F.3d 135 (2nd Cir. 2007), the Second got it right, damned right, when, upholding the trial court’s reversal of the TTAB, it explained as follows:
[T]he “famous mark” doctrine is . . . a . . . “legal concept under which a trademark or service mark is protected within a nation if it is well known in that nation even though the mark is not actually used or registered in that nation,” 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 29.2, at 29-164 (4th ed. 2002). Thus, the famous marks doctrine might more aptly be described as the famous foreign marks doctrine. . . .
In applying this principle to this case, however, we identify a significant concern: nowhere in the three cited rulings does the Trademark Board state that its recognition of the famous marks doctrine derives from any provision of the Lanham Act or other federal law. Indeed, the federal basis for the Trademark Board’s recognition of the famous marks doctrine is never expressly stated. Its reliance on Vaudable [v. Montmartre, Inc., 20 Misc. 2d 757, 193 N.Y.S.2d 332 (N.Y. Sup. Ct. 1959)],suggests that recognition derives from state common law. . . .
We are mindful that Congress has not hesitated to amend the Lanham Act to effect its intent with respect to trademark protection, having done so almost thirty times since the statute took effect in 1947. See 1 McCarthy, supra, §§ 5:5-11, at 5-13-22.27. In light of these legislative efforts, the absence of any statutory provision expressly incorporating the famous marks doctrine or [international treaty] Articles 6b is and 16(2) is all the more significant. Before we construe the Lanham Act to include such a significant departure from the principle of territoriality [requiring U.S. use of a mark], we will wait for Congress to express its intent more clearly.
In other words, if Congress wanted federal law to enforce foreign trademark rights, it would have said so.
So too said the Eastern District of Virginia in 2014 in Belmora LLC. v. Bayer Consumer Care AG, 84 F. Supp.3d 490, 115 U.S.P.Q.2d 1032 (E.D. Va. 2015), in which the winning side, Belmora, was represented by Marty Schwimmer and John Welch [note this correction from the original post — RDC]. who summarized the holding, which of course cited Punchgini, on his blog.
An appeal followed. Interestingly, among the amici curiae arguing in favor of adoption of the one-world-of-trademarks doctrine was the inaptly named American Intellectual Property Law Association (I kid, I kid!), whose brief argues against a “rigid” reading of the Lanham Act. Rather, it urges that this statute passed by the United States Congress be read in the light of the “international community’s” understanding of stuff:
When a foreign mark is well known to U.S. consumers but is neither registered here nor used on products sold here, it falls within what the international community calls the well-known marks doctrine (“the Doctrine”), which seeks to prevent unfair competition with the well-known brand. . . . Harm to the U.S. reputation of a foreign brand is an appropriate basis for standing both in a cancellation proceeding under Section 14 and in a civil action under Section 43(a). . . . While a product may originate in one country, its reputation and goodwill may cross borders. If a mark has meaning to U.S. consumers, then the Lanham Act protects those consumers from being misled and deceived.
Snark aside, this last sentence contains a key point. Well, two of them.
One is that the “famous marks doctrine” is now widely known as the well-known marks doctrine because “famous marks” are, in trademark law, associated with the kind of marks entitled (under most regimes, such as the federal one in the U.S.) to protection under dilution laws.
Secondly, and more significant, substantively speaking, is that by the light of those — such as the Fourth Circuit — who subscribe to the well-known marks doctrine (not mentioned in the opinion as such, but essentially the fount of its reasoning), the disagreement here hinges not just on, let us say, a “generous” reading of the Lanham Act, but also on something different from merely imported foreign fame, as the Second Circuit would have it. Specifically, the well-known quality of that mark has to have American relevance — if not with respect to use, with respect to confusion or the capacity to mislead.
The Fourth Circuit, for its part, did not accept the proposition that, as the Second Circuit would have it, it was adding words to the Lanham Act, which nowhere authorizes the enforcement of foreign marks; or, as AIPLA would have it, that it should be less “rigid” about reading the statute.
To the contrary, the Court of Appeals took the position in Belmora LLC v. Bayer Consumer Care AG and Bayer Healthcare LLC No. 15-1335 (4th Cir. 2016), which John summarizes on his own blog here, that its reading of the Lanham Act is the rigorous one, and that it is in fact following the teaching of Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014) requiring courts to adhere to statutory language, “apply[ing] traditional principles of statutory interpretation,” and thus reasoning as follows:
Under [Section 43(a)], the defendant must have “use[d] in commerce” the offending “word, term, name, [or] symbol,” but the plaintiff need only “believe that he or she is or is likely to be damaged by such act.”
It is important to emphasize that this is an unfair competition case, not a trademark infringement case. Belmora and the district court conflated the Lanham Act’s infringement provision in § 32 (which authorizes suit only “by the registrant,” and thereby requires the plaintiff to have used its own mark in commerce) with unfair competition claims pled in this case under § 43(a). Section 32 makes clear that Congress knew how to write a precondition of trademark possession and use into a Lanham Act cause of action when it chose to do so. It has not done so in § 43(a).
See what they did there?
We will return to that, um, slight of hand shortly. Having concluded that use in United States commerce, in the trademark sense, was not required to take advantage of United States trademark law, the Fourth Circuit then asked whether the complaint states a cause of action for, as I described it above, relevance to consumers in the U.S. Unsurprisingly, the answer was, “¡Sí, Señor!”:
The complaint alleges Belmora’s misleading association with BCC’s FLANAX has caused BCC customers to buy the Belmora FLANAX in the United States instead of purchasing BCC’s FLANAX in Mexico. For example, the complaint alleges that BCC invested heavily in promoting its FLANAX to Mexican citizens or Mexican Americans in border areas. Those consumers cross into the United States and may purchase Belmora FLANAX here before returning to Mexico. And Mexican-Americans may forego purchasing the FLANAX they know when they cross the border to visit Mexico because Belmora’s alleged deception led them to purchase the Belmora product in the United States.
Although the opinion refers to both “Mexican citizens” and “Mexican Americans in border areas,” it treats them the same way. In short, the Fourth Circuit’s Belmora decision holds that in passing Section 43(a) of the Lanham Act, Congress intended to protect Mexican citizens from coming to the United States and buying merchandise bearing ersatz Mexican trademarks that have never been used in commerce in the United States before they return to Mexico, because these visitors, Congress concluded, bring their goodwill with them.
It is not so unreasonable, standing on its own. Section 43(a) is, after all, a remedial statute, and as such is entitled to broad interpretation. It does seem, after all, that Belmora is indeed leveraging the goodwill of Mexico’s Flanax — which probably really, in some ethereal way not amenable to regular old proof of “trademark use” — does exist north of the border, in order to pull a fast one on Mexican visitors to the U.S. That doesn’t seem right.
The court applied the same reasoning to Bayer’s claim for cancellation of Belmora’s registration for FLANAX, based on the broad language in Section 14(3) of the Lanham Act which “creates a procedure for petitioning to cancel the federal registration of a mark that the owner has used to misrepresent the source of goods . . . by any person who believes that he is or will be damaged . . . by the registration of a mark . . .”
“Any person,” is what it says, and here the statutory language is exactly the same as in 43(a), authorizing an action by “any person.” (We don’t think of Section 14(3), the cancellation provision, as a remedial statute the way we do 43(a) — or at least, most of us don’t. Some do, in fact, to quite an effect.)
But about 43(a) — who am I to say? about how that strange and mysterious statute tracks its non-identical twin?
I’m just asking: Is “any person” really “any person” — and if it is, how does “any person” translate to “any person who has any trademark from anywhere on earth”? Because that “any” is the one we really care about — “any trademark,” i.e., even a “trademark” that does not meet the definition of a “trademark” under U.S. law because it’s never been used in interstate commerce.
The Fourth Circuit knows better than that, and confesses as much by acknowledging, first of all, that it has in the past said as much. “Admittedly,” writes the court, “some of our prior cases appear to have treated a plaintiff’s use of a mark in United States commerce as a prerequisite for a false association claim.” Admittedly the court then cites four of its own prior decisions, but waves them away on the strength of … Lexmark?
That’s the case, the court reminds us, that requires courts to read statutes like the words in them says.
So let’s go back to the passage quoted above. Let’s break this down. The court in Belmora notes that Section 32 “authorizes suit only ‘by the registrant,’ and concludes, “Section 32 makes clear that Congress knew how to write a precondition of trademark possession and use into a Lanham Act cause of action when it chose to do so.”
But Section 32 refers only to enforcement actions brought in connection with registered trademarks. Axiomatically, these can only be brought by the registrant. Congress was, it is clear, not “writing a precondition” into the law. It was merely using the most logical and economical term available to describe the only party eligible bring a lawsuit under Section 32: The registrant.
This demonstration, therefore, does not “make clear” that Congress knows how to set a precondition or, if I may, to establish eligibility or standing to bring a lawsuit. The statutory language merely reflects the context, logic and economy of one subsection of the statute.
What does that leave us with? A few things:
- “Any person” language which courts have, in the Section 14(3) context, indeed applied quite broadly, but which they have mainly resisted applying to expand the definition, not of a person, but of an allegedly infringed trademark in a 43(a) case where the “trademark” in question has never been used in interstate commerce.
- Allegedly sneaky, misleading conduct on the part of Belmora.
- A court that wants to do the right thing, darn it, so people will like it.
And the court wants to like itself too, and maintain its judicial self-respect. For this is one of your respectable Circuit Courts of Appeal! So, pleads the Fourth in a footnote, please keep in mind that if you find the logic of our “Congress knows how” argument wanting, understand — this is a special case (citations omitted):
A plaintiff who relies only on foreign commercial activity may face difficulty proving a cognizable false association injury under § 43(a). A few isolated consumers who confuse a mark with one seen abroad, based only on the presence of the mark on a product in this country and not other misleading conduct by the mark holder, would rarely seem to have a viable § 43(a) claim.
The story is different when a defendant, as alleged here, has — as a cornerstone of its business — intentionally passed off its goods in the United States as the same product commercially available in foreign markets in order to influence purchases by American consumers. Such an intentional deception can go a long way toward establishing likelihood of confusion.
An important limitation, right? “Any person” becomes “any trademark” from “anywhere” under the new “cornerstone test” (and notice how, by the time they hit the footnote south of the Rio Grande, the “Mexican citizens or Mexican Americans in border areas” have been granted amnesty and become “American consumers”).
Pass the Flanax. Which kind?
UPDATE: Application for en banc rehearing. It is based to some extent on a very different way of looking at this decision, now that I am considerably closer to the case than when I wrote this blog post:
UPDATE II: And then some — application for cert.
UPDATE III: Cert was denied. Here’s the answer and counterclaims of Belmora.
Originally posted 2016-03-29 22:53:48. Republished by Blog Post Promoter