District Court Finds No Lanham Act Jurisdiction Where Allegedly Infringing Fasteners Sold in Asia To Build Servers Imported Into the U.S.

The World in U.S. Courts: Winter 2014 - Intellectual Property (IP)

Southco, Inc. v. Fivetech Tech. Inc., U.S. District Court, Eastern District of Pennsylvania, Nov. 12, 2013

A U.S. district court in Philadelphia dismissed a Lanham Act suit alleging that the design on the head of a fastener made by a non-U.S. manufacturer infringed the U.S. plaintiff manufacturer’s trademark. The foreign manufacturer advertised its allegedly infringing products in catalogues available in the U.S., but had sold none of the products in the U.S. The non-U.S. manufacturer did, however, sell its fasteners to Hewlett-Packard in Asia, which used them in servers that were ultimately sold to customers in the U.S.

The key legal question is whether the defendant’s actions constituted a "use in commerce" required under the Lanham Act. The court first found that the mere availability of advertising materials failed to satisfy this test. The court then considered the applicability of the statute to conduct outside of the U.S. that may have had some effect in the U.S. Noting that different U.S. courts of appeals had formulated different tests for answering this question, the court followed the three-part "Vanity Fair" test used in the Second Circuit in New York, which considered as factors favoring jurisdiction: 1) that the defendant is a U.S. citizen; 2) that the U.S. court’s ruling would not conflict with an IP right held by the defendant outside the U.S.; and 3) that the defendant’s conduct has a "substantial impact" on U.S. commerce. In this case, the defendant was not a U.S. citizen (which disfavored the U.S. court hearing the case), and there were no potentially conflicting marks outside the U.S. (which was a neutral factor). As to the third factor—considered most important—the court found no substantial impact on U.S. commerce because U.S. commerce was not involved in making the allegedly infringing fasteners, and the U.S. purchasers of the HP servers were almost certainly indifferent to the designs on the fasteners, and probably were not even customers of the plaintiff.

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