The World in U.S. Courts: Winter 2016 - Intellectual Property – Trademarks/Lanham Act | November.10.2016
Cloud b, a US corporation, develops sound- and light-emitting products for children that are intended to promote sleep. Sound N Light (SNL), is a Hong Kong-based manufacturer with which Cloud b contracted to manufacture the products. Cloud b came to suspect that SNL had misappropriated its designs and other intellectual property and was selling counterfeit versions of Cloud b’s products directly to customers in Asia. As relevant here, Cloud b sued SNL for patent, trademark, and copyright infringement.
Cloud b’s trademark claims under the Lanham Act were based on allegations that SNL had offered to sell products covered by US trademarks held by Cloud b, with the most significant allegation that the products had been offered for sale on Alibaba and other eCommerce websites available to consumers in the US. The District Court in California noted that the Lanham Act can apply extraterritorially where (i) the alleged violation has some effect on US foreign commerce, (ii) it is significant enough to cause an injury to the plaintiff, and (iii) the US interest in the dispute is not outweighed by the interests of other countries. Specifically, the Court concluded that the plaintiff must have suffered its alleged injury in the US, and found that this requirement had not been satisfied because (i) Cloud b had not claimed that any of the subject products had actually been sold in the US, or (ii) that its alleged injury had been suffered in the US. In the course of its discussion, the Court also rejected SNL’s argument that the Lanham Act could not apply to non-US defendants that allegedly deceived consumers outside the US, concluding that a claim could exist in such case so long as a US plaintiff suffered a financial injury in the US as a result.
[Editor’s Note: The Sound N Light Animatronics case is also discussed in the Intellectual Property-Copyright and -Patent sections of this report.]