Extraterritorial Application of the Lanham Act
A few weeks ago, I had the opportunity to moderate a California Lawyers Association (CLA) Intellectual Property Law Section (IP Section) Continuing Legal Education (CLE) presentation on the “Extraterritorial Applications of the Lanham Act”by Mr. Michael Keyes, Esq. In only an hour, Michael, who is a litigation partner at BigLaw, was able to summarize for the audience some of the most relevant cases as well as answer all the questions raised during the presentation regarding this interesting topic. If you are interested in learning more, I highly encourage you to take this webinar. I am quite sure that you have all been warned before about the “territorial” nature of IP rights in general and trademarks in particular.
Trademarks are territorial and must be filed in each country where protection is sought. We, IP lawyers, always warn our clients against one of the most common misconceptions about trademark rights: the notion that one automatically accrues rights abroad, when in fact intellectual property rights -- trademarks, copyrights, and patents alike -- are "territorial" in nature. Yes, that is correct, territorial in nature. In general, each country has jurisdiction over its own territory and trademarks. But this presentation showed the exceptional situations where the US Lanham Act has been applied even to the disputes that took place outside US territory.
Section 45 of Lanham Act (15 U.S.C. §1127) reads “The intent of this chapter is to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce” and as you may recall that Article 1, Section 8 of the Constitution gives Congress the Power “...To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”Michael started his presentation by presenting the well-known Steele vs. Bulova case. This case dates back to 1952. Defendant, a US citizen, had been able to register the “BULOVA” mark in Mexico, even if this registration was later cancelled. Plaintiff Bulova, the famous watch company, was the US trademark holder. Even if the Defendant did not sell watches in the US, Defendant assembled and sold watches in Mexico (parts from US and Switzerland), the Plaintiff sued for injunctive relief under the Lanham Act. The district court first dismissed for lack of jurisdiction, but the Appeals Court reversed the district court’s decision. The Supreme Court decided that the exercise of jurisdiction was proper because operations and their effects were not confined within Mexico. In the court’s words “Conduct in the US was a part of an unlawful scheme.” Take note of the main takeaway in this case: the Lanham Act “confers broad jurisdictional powers upon the courts of the United States.”
I won’t discuss many details of each one of the cases presented but I will make a mention that the different circuits adopted different tests on how to determine if the Lanham Act can be applied to the particular case. For example, while the Second Circuit Approach is known as The Vanity Fair Test because it was formulated in the case Vanity Fair Mills, Inc. v. T. Eaton Co. Ltd. 234 F.2d. 633 (2nd Cir. 1956), our Ninth Circuit (California) adopted the more flexible approach known as The Timberlane Test. This famous test was used by the Ninth Circuit in the case Timberlane Lumber Co. v. Bank of America National Trust & Savings Ass’n, 549 F.2d 597 (9th Cir. 1976). These tests in the different circuits have been evolving over the course of the years and they prove that the trend across all jurisdictions has been to extend the reach of the Lanham Act.
The three factors established by the Vanity Fair test were:
Substantial effect on US commerce;
Whether Defendant was a US citizen;
Conflict of rights with a foreign jurisdiction.
The Court in the Timberlane case also articulated a 3-part “jurisdictional rule of reasons” test:
Whether the alleged infringement creates some effect on American foreign commerce;
Whether effect is sufficiently large to present a cognizable injury to the Plaintiff; and
Whether links to American foreign commerce are sufficiently strong to justify an assertion of extraterritorial authority.
But to determine whether the third factor was present, the Timberlane Court took into consideration the degree of conflict with foreign law; the nationality of the parties; the extent to which enforcement in US would achieve compliance; the significance of effects on the US, as compared to elsewhere; whether the explicit purpose of the defendant was to harm US commerce; the foreseeability of these effects; and the relative importance of the violations within the US. Among the many questions that the audience raised during the presentation, the difference between “some” effect on U.S. commerce versus “substantial” effect on U.S. commerce was probably of most relevance. The Vanity Fair Approach looks for “substantial effect on the US Commerce”, whereas the Timberlane Approach referred to “some effect on the American foreign commerce.” So, is there a potential of forum shopping “some” effect v. substantial effect? How about personal jurisdiction? Cases such as Calvin Klein Indus., v. BFK Hong Kong, Ltd. 714 F. Supp. 78 (S.D.N.Y. 1989); C-Cure Chem. Co. v. Secure Adhesives Corp., 571 F. Supp. 808 (W.D.N.Y. 1983); Sterling Drug, Inc. v. Bayer AG, 14 F.3d 733 (2d. Cir. 1994); Les Ballets Trockadero de Monte Carlo, Inc. v. Trevino, 945 F.Supp. 563 (S.D.N.Y. 1996); Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406 (9th Cir. 1977); Ocean Garden, Inc. v. Marktrade Co., 953 F.2d 500 (9th Cir. 1991); La Quinta Worldwide LLC v. Q.R.T.M., 762 F.3d, 867 (9th Cir. 2014); Trader Joe’s Company v. Hallatt, 835 F.3d 960 (9th Cir. 2016); Updateme, Inc. v. Axel Springer SE 2017 US District LEXIS 195468 (ND Cal. 2018), to name a few, set the standards for the application of the Lanham Act outside the US territory.
Yes, you may still be able to apply the Lanham Act outside the US territory, but we warn you and advise to register your trademark rights in each jurisdiction where you do business.
If you would like to receive more information about the cases in this presentation, or if you have any questions about the Extraterritoriality of the Lanham Act, please do not hesitate to contact us.