Court Denies Summary Judgment in Multinational Counterfeiting Case

The World in U.S. Courts: Summer 2013 - Intellectual Property (Trademark)

Zosma Ventures, Inc. v. Nazari (U.S. District Court, C.D. Cal., May 30, 2013)

The plaintiff sells dietary and nutritional supplements including fish oil. It alleged that the defendant, a former licensee, operated a multinational counterfeiting scheme from its “nerve center” in Los Angeles, in which counterfeit fish oil supplements were shipped from Canada to the U.S. and from the U.S. to Iran. The defendants moved for summary judgment, in part based on the allegation that the allegedly unlawful acts occurred outside of the U.S., and that these “extraterritorial” acts could not support a trademark infringement claim under the Lanham Act.

The trial court found that the plaintiff had made sufficient allegations of counterfeiting activity in the U.S. to proceed to trial. The court found that the extraterritorial acts also supported a claim, applying the rule that such acts could support a U.S. trademark claim when: 1) the alleged violations create some effect on U.S. foreign commerce; 2) the effect is sufficiently great to present a substantial injury to the plaintiff; and 3) the interests of and links to American foreign commerce are sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.

In applying this test, the court found that an effect on U.S. foreign commerce exists where the defendant has harmed a U.S. corporation through acts directed in the U.S., even where those acts took place in another country. The second element of the test was satisfied because the plaintiff suffered a loss of sales to allegedly counterfeit competitors. Finally, the court found that the interests of the United States as compared to those of other nations were to be judged under a seven-part test, and that the balance favored the exercise of extraterritorial jurisdiction. In reaching this conclusion the court noted that a) enforcement of the U.S. law caused no conflict with any current foreign legal proceeding; b) plaintiff is a U.S. corporation and defendants are located and do business in the U.S.; c) the plaintiff is seeking damages and injunctive relief relating to activities within the U.S.; and d) the plaintiff is alleging harm to a U.S. corporation and defendants are engaged in activities that target the U.S.

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