Injunction Prohibiting Use of Allegedly Infringing Marks in China Based Solely on Potential Injury to US Plaintiff in US

The World in U.S. Courts: Summer 2017 - Intellectual Property – Trademarks/Lanham Act | May.22.2017

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A.O. Smith Corp. v. USA Smith Industry Dev. Inc., US District Court for the District of Colorado, May 22, 2017

The plaintiff, A.O. Smith, is a US-based global seller of hot water heaters that owns many trademarks in the US, China, and other countries. The defendant, USA Smith Industry Dev. Inc., is ostensibly a Colorado corporation owned by a Chinese parent or affiliate that also sells water heaters in China, using trade names that allegedly resemble those of the plaintiff. A.O. Smith sued the defendant in Colorado, claiming Lanham Act violations of trademark infringement, trademark dilution, and unfair competition, as well as claims under Colorado law. The defendant did not appear, and A.O. Smith moved for entry of a default judgment, damages, and an injunction. The claims were based solely on alleged activities in China that caused A.O. Smith in the US to lose sales and suffer other injuries and expenses. Based on an allegation that the Colorado corporation’s “principal office” was in China, the Court apparently assumed that the US defendant was responsible for all of the relevant activities that occurred in China.

The Court found that it had personal jurisdiction over the Colorado defendant and that the applicability of the Lanham Act claims to alleged conduct in China went only to the merits of the Lanham Act claim, not the Court’s jurisdiction to hear the case. As to the merits, the Court concluded that A.O. Smith had alleged that the defendant’s actions would “likely cause confusion and mistake and deceive customers [apparently in China] into concluding that Defendant’s water heaters are somehow affiliated with or approved by Plaintiff.” The complaint satisfied the requirement that extraterritorial conduct have a “substantial effect on United States commerce” with allegations that that A.O. Smith in the US lost revenue through the diversion of sales and otherwise suffered unidentified “increased costs, reduced employment, and reputational harm . . . in the United States and China.”

The Court enjoined certain activities of the defendant, both in the US and China.

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