The World in U.S. Courts: Winter 2014 - Intellectual Property (IP)
A Singaporean financial institution (plaintiff HLF) entered into agreements with units of Morgan Stanley to distribute notes to investors. The notes ultimately proved worthless, and the investors presented claims to HLF in Singapore. HLF sued the units and Morgan Stanley (collectively, "Morgan Stanley") in federal court in New York, basing jurisdiction on a Lanham Act claim that the Singaporean investors purchased the notes as a result of Morgan Stanley’s "false advertising."
The Court applied the three-factor "Vanity Fair" test, which looks to whether the defendant is a U.S. citizen, whether there exists a conflict between the plaintiff’s trademark rights outside the U.S. and the plaintiff’s U.S. trademark, and whether the defendant’s conduct has a "substantial effect" on U.S. commerce. The court focused on the third factor, and rejected HLF’s contention that Morgan Stanley’s creation of the notes in New York was sufficient to confer jurisdiction. The court held that preparatory activity in the U.S. would not support a Lanham Act case where the "infringing" activity occurred entirely outside the U.S. Independently, even if some element of U.S. activity could suffice to establish jurisdiction, the court found that there had been no direct contact between Morgan Stanley and the investors.