Lanham Act Claim Dismissed for Failure to Allege Facts Supporting Claim of “Substantial Effect” on US Commerce

The World in U.S. Courts: Fall 2017 - Intellectual Property – Trademarks/Lanham Act

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International Diamond Importers, Inc. d/b/a I.D.I. Design, Inc. v. Med Art, Inc., US District Court for the Southern District of New York, June 29, 2017

International Diamond Importers (IDI) is a New York-based designer, manufacturer, and seller of jewelry that enjoys US trademark and copyright protection. The defendants—a New York Corporation, a Turkish Corporation, and the Turkish citizen (Emil Güzeliş) who serves as CEO of both companies—were alleged to have infringed that IP in connection with similar jewelry sold in 2016 at an international jewelry fair in Hong Kong attended by New York buyers.

After finding that it had personal jurisdiction over all the defendants, the Court addressed the plaintiff’s infringement claims. It noted that the Vanity Fair test applicable in New York made the extraterritoriality of the Lanham Act depend on the following three factors: (i) whether the defendant is a US citizen; (ii) whether there exists a conflict between the defendant’s trademark rights under non-US law and the plaintiff’s trademark rights under US law; and (iii) whether the defendant’s conduct has a “substantial effect” on US commerce. While IDI alleged that the defendants had targeted US customers and had caused consumer confusion, their allegation of a “substantial effect” on US commerce was unsupported by any allegations of fact. The Court thus dismissed IDI’s Lanham Act claim with leave to amend to make more detailed allegations of an effect on US commerce.

[Editor’s note:  The IDI case is also discussed in the Intellectual Property – Copyright and Personal Jurisdiction sections of this report.]

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