Intellectual Property - Trademark - The World in U.S. Courts: Summer-Fall 2018

November.30.2018

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Claimed Use of US Trademark in Croatia Cannot Support Lanham Act Claim Where No Effect on US Commerce Shown

Adria MM Productions, Ltd. v. Worldwide Entertainment Group, Inc., US District Court for the Southern District of Florida, September 6, 2018

As relevant here, Worldwide, a Florida company, countersued Adria, a Croatian company, alleging violations of the Lanham Act in connection with Adria's use of Worldwide's US "Ultra" trademarks at a press conference in Croatia, pursuant to a license agreement that was the subject of the litigation. The Court observed that a trademark claim required an allegation that the defendant had used the plaintiff's mark "in commerce," a term intended to extend to the full range of commerce that the US could regulate under the US Constitution. But that use still required that there be an effect on US commerce: "While the 'use in commerce provision is broad, courts will not extend the Act extraterritorially where there is no evidence to support that use of marks abroad affected US's commerce." Worldwide had alleged neither that the press conference was broadcast to US viewers nor that it was targeted to US consumers, and the Court found that failure to preclude a Lanham Act claim. It reached the same conclusion regarding Worldwide's allegation that Adria was planning to use the "Ultra" mark for a festival in Croatia that might compete with a festival Worldwide planned to hold there.

UK Boatbuilder that Shipped Partially-Completed Products to the US and Did Not Install Allegedly Counterfeit and Infringing Plaques in Them Not Subject to Lanham Act Claim

Bruce Kirby, Inc. v. Laserperformance (Europe) Ltd., US District Court for the District of Connecticut, July 27, 2018

As relevant here, this trademark dispute involves claims that the defendants, without authorization, committed trademark counterfeiting and trademark infringement by applying plaques to sailboats using the famous "laser" design name, suggesting that the boats were authorized by the boat's designer. One defendant argued that the complaint represented an impermissible extraterritorial application of the Lanham Act.

The Court observed that the Lanham Act had been applied to activities outside the US upon consideration of three factors: Whether the defendant was a US entity (which would favor applying the law), whether the plaintiff's US trademark rights conflicted with the defendants' rights under other laws (which would not), and whether the alleged violation had a "substantial effect" on US commerce (also favoring application of the law). Two factors were undisputed: The defendants were not US companies, and neither claimed IP rights under local law. To the extent a Lanham Act could be made out, it must be on the basis of a "substantial effect" on US Commerce.

Defendant Laserperformance (Europe) (LPE) built shells of boats and shipped them to the US for finishing. Those shells did not include the subject plaques, and the Court found that LPE took no actions within the US relating to the plaques. Nor did the plaintiffs show that LPE took any action related to the plaques outside the US that had a substantial effect on US commerce. The Court thus dismissed the Lanham Act claims against LPE.

Personal Jurisdiction Asserted Over Operator of German Website Providing Cloud-Based Services Based on the Volume of Business Transacted with US Customers

Plixer International, Inc. v. Scrutinizer GmbH, US Court of Appeals for the First Circuit, September 13, 2018

The defendant, Scrutinizer, is a German company that operates in Germany an eponymous English-language website offering cloud-based website services similar to those offered by the plaintiff, Plixer, a US-based company. Plixer holds a US trademark for "Scrutinizer," and sued the Scrutinizer company in the US for violations of the Lanham Act. A preliminary issue was whether the US court could assert personal jurisdiction over Scrutinizer.

Plixer sought to assert jurisdiction under the "federal long-arm statute," Rule 4(k)(2) of the Federal Rules of Civil Procedure, which requires that: "(1) the cause of action must arise under federal law; (2) the defendant must not be subject to the personal jurisdiction of any state court of general jurisdiction; and (3) the federal court's exercise of personal jurisdiction must comport with due process." The Court of Appeals found that the first two requirements were satisfied; the issue was whether Scrutinizer had the "minimum contacts" with the US as a whole necessary to satisfy the three-part constitutional test: "that (1) its claim directly arises out of or relates to the defendant's forum activities; (2) the defendant's forum contacts represent a purposeful availment of the privilege of conducting activities in that forum, thus invoking the benefits and protections of the forum's laws and rendering the defendant's involuntary presence in the forum's courts foreseeable; and (3) the exercise of jurisdiction is reasonable."

The Court of Appeals first addressed the "purposeful availment" requiring, noting that a website operator does not necessarily open itself to litigation in every US state where its website may be accessed. Rather, construing unsettled law emanating from the US Supreme Court, the Court of Appeals found that jurisdiction may be based on its "regular flow or regular course of sales" to US customers, such that it could have "reasonably anticipated" being sued in the US. In the case at bar, Scrutinizer's US sales in three and one-half years were almost USD200,000, a figure found to meet the minimum requirement. The Court of Appeals also noted that Scrutinizer knew where its customers were located, and could have tried to block US users from accessing its website had it wanted to stay out of the US market. It also cited Scrutinizer's post-litigation application for a US trademark, which it concluded reflected a "desire to deal with" the US market.

Especially because it considered the sufficiency of Scrutinizer's contacts to be a "close call," the Court of Appeals paid particular attention to the Due Process requirement that the assertion of jurisdiction be "reasonable" even if minimum contacts existed. Factors often cited as relevant to this inquiry were found not sufficient to preclude jurisdiction: While "inconvenient" to defend itself against US litigation, Scrutinizer identified no factors that "special or unusual." And the Court of Appeals found that the US had an interest in protecting its citizens against infringement of their US trademarks.

[Editor's note: The Plixer case is also discussed in the Personal Jurisdiction/Forum non Conveniens section of this report.]

Factual Disputes Over the Effect of Ex-US Sales of Infringing Tires on the US Market Require Trial Before Applicability f the Lanham Act can be Determined

Toyo Tire & Rubber Co., Ltd. v. Doublestar Dong Feng Tyre Co., Ltd., US District Court for the Central District of California, July 26, 2018

A Japanese tire manufacturer and its US subsidiary sued Chinese tire manufacturers for using infringing trade dress on their products. The Court previously found for the plaintiffs, and in this opinion addresses the plaintiffs' claims for damages based on certain extraterritorial sales.

The Court observed that the extraterritorial application of the Lanham Act required that three factors be satisfied: "(1) the alleged violations must create some effect on American foreign commerce; (2) the effect must be sufficiently great to present a cognizable injury to the plaintiffs under the Lanham Act; and (3) the interests of and links to American foreign commerce must be sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority."

All three factors were subject to factual disputes, preventing the entry of summary judgment. As relevant here, the Court identified two facts in dispute as regards non-US sales: (1) whether some infringing tires sold outside the US were resold to US customers, and whether enough of those sales occurred that the effect on US commerce was "sufficiently great" to trigger a US claim, and (2) the extent of Toyo's actual damages from the infringement, which Toyo had supported only with evidence that its sales manager had a "gut feeling" that Toyo would have made half of the sales that had gone to the defendants.

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