Foreign marks may be protected in the US under 43(a), Fourth Circuit rules

Belmora LLC v. Bayer Consumer Care AG, No. 15-1335 (4th Cir.
Mar. 23, 2016)
 
Disclosure: I worked on the brief for Belmora, the loser in
this appeal. 
 
Bayer (BCC) registered FLANAX in Mexico for pharmaceutical
products, analgesics, and anti-inflammatories, with sales of naproxen sodium
under the Flanax mark in the hundreds of millions of dollars since 1976.  Some sales come near the US border, but BCC
never sells Flanax in the US and importing it would be against the law.
 

BCC Flanax
Belmora began selling naproxen sodium tablets in the US
under the Flanax mark in 2004, then registered the mark in 2005.  Belmora’s early packaging “closely mimicked”
BCC’s Mexican Flanax packaging in color scheme, font size, and typeface. Though
Belmora changed the packaging, the color scheme, font size, and typeface remain
similar to that of BCC’s Flanax.  In
addition, Belmora made statements “implying that its FLANAX brand was the same
FLANAX product sold by BCC in Mexico,” such as this in a brochure to
prospective distributors:
 
For generations, Flanax has been a
brand that Latinos have turned to for various common ailments. Now you too can
profit from this highly recognized topselling brand among Latinos. Flanax is
now made in the U.S. and continues to show record sales growth everywhere it is
sold. Flanax acts as a powerful attraction for Latinos by providing them with
products they know, trust and prefer.
 

Early Belmora Flanax

Revised Belmora Flanax

Belmora received questions regarding whether it was legal
for Flanax to have been imported from Mexico. And BCC allegedly “identified at
least 30 [purchasers] who believed that the Flanax products . . . were the same
as, or affiliated with, the Flanax products they knew from Mexico.”
 
BCC petitioned the TTAB for cancellation of Belmora’s
registration under Article 6bis of the Paris Convention “as made applicable by
Sections 44(b) and (h) of the Lanham Act” And under § 14(3) of the Lanham Act
because Belmora had used the FLANAX mark “to misrepresent the source of the
goods . . . [on] which the mark is used.”  The TTAB found that Article 6bis isn’t
self-executing, and BCC abandoned this ground on appeal so the court of appeals
didn’t reach it. The TTAB did cancel Belmora’s mark under §14(3), finding that
this wasn’t a close case; the appeal of that cancellation, and BCC’s §43
claims, all ended up before a district court that dismissed all the claims on
the ground that BCC lacked a protectable interest in the Flanax mark in the US.
 
Applying Lexmark,
the court of appeals reversed, holding that “the plain language of § 43(a) does
not require that a plaintiff possess or have used a trademark in U.S. commerce
as an element of the cause of action.” 
Instead, it’s the defendant’s
use in commerce of an offending “word, term, name, symbol, or device” or of a
“false or misleading description [or representation] of fact” “that creates the
injury under the terms of the statute.” 
So BCC had to show that it was likely to be damaged by this use.  “It is important to emphasize that this is an
unfair competition case, not a trademark infringement case.” [Mark McKenna will
be pleased. Although I think it
shouldn’t ultimately matter
, I wonder if the government will pick up on
this panel holding as it relates to Blackhorse;
if §43(a) doesn’t require trademark rights, that implies that cancellation
would not end the Washington team’s federally enforceable rights.]
 
Moreover, the relevant economic harm didn’t have to occur in
the US, because the Lanham Act covers “commerce within the control of Congress,”
and prior Fourth Circuit precedent says that includes “foreign trade.”  “Of course, any such ‘foreign trade’ must
satisfy the Lexmark ‘zone of
interests’ and ‘proximate cause’ requirements to be cognizable for Lanham Act
purposes.”
 
The court of appeals saw this case as relevantly similar to
cases protecting plaintiffs whose mark has become generic against a competitor
who “fail[s] adequately to identify itself as distinct” such that its name
causes “confusion or a likelihood of confusion.”  
 
Likewise, in a “reverse passing
off” case, the plaintiff need not have used a mark in commerce to bring a §
43(a) action. Thus, the plaintiff in a reverse passing off case must plead and
prove only that the work “originated with” him — not that he used the work
(which may or may not be associated with a mark) in U.S. commerce.
 
If use of a mark in US commerce were required for a §43(a)
claim, the genericity and reverse passing off cases couldn’t exist. [After Dastar, the court probably shouldn’t be
saying “work,” since that implies a copyrighted work, not a material object in
which a work is embodied, the only remaining target of a reverse passing off
claim.  So, does the Fourth Circuit now
have a famous foreign marks doctrine, like the Ninth?] 
 
The court of appeals commented that “[a] plaintiff who
relies only on foreign commercial activity may face difficulty proving a
cognizable false association injury under § 43(a). A few isolated consumers who
confuse a mark with one seen abroad, based only on the presence of the mark on
a product in this country and not other misleading conduct by the mark holder,
would rarely seem to have a viable § 43(a) claim.”  [Why? 
Is it the few consumers or the lack of other misleading conduct?  What if it’s a lot of consumers but an
innocent seller?] However, the court of appeals felt differently when there was
alleged intentional passing off in the US “in order to influence purchases by
American consumers,” since “intentional deception can go a long way toward
establishing likelihood of confusion.”
 
Under the circumstances, BCC could bring both false
association and false advertising claims. 
For false association, BCC was within the relevant zone of interest,
given the Lanham Act’s purpose of  “making
actionable the deceptive and misleading use of marks” in “commerce within the
control of Congress.” The complaint alleged that Belmora’s conduct caused BCC
customers to buy Belmora Flanax in the US instead of purchasing BCC’s Flanax in
Mexico. Mexican citizens or Mexican-Americans in border areas might cross into
the US and buy Belmora Flanax here before returning to Mexico, or might forego
purchasing BCC’s Flanax when they visited Mexico because they’d bought the US
Flanax instead.  “Further, by also
deceiving distributors and vendors, Belmora makes its FLANAX more available to
consumers, which would exacerbate BCC’s losses.”  For similar reasons, BCC also alleged
proximate cause.  “BCC may ultimately be
unable to prove that Belmora’s deception ‘cause[d] [these consumers] to
withhold trade from [BCC]’ in either circumstance, but at the initial pleading
stage we  must draw all reasonable
factual inferences in BCC’s favor.”
 
False advertising: Here, BCC and the US company, BHC, both
brought claims under §43(a)(1)(B), which the court of appeals also
reinstated.  BHC (maker of Aleve) brought
a “typical” false advertising claim, as a direct competitor with Belmora in the
US. “If not for Belmora’s statements that its FLANAX was the same one known and
trusted in Mexico, some of its consumers could very well have instead purchased
BHC’s ALEVE brand.”  BCC’s false
advertising claim wasn’t as typical, but still satisfied the zone of interests
test given the Lanham Act’s purpose of “making actionable the deceptive and
misleading use of marks.”
 
Beyond false association, Belmora “parlay[ed]” the Flanax
mark into misleading statements about the product’s “nature, characteristics, qualities,
or geographic origin.” Because its claims regarding popularity, trust, and a
history of quality were “anchored as a factual matter to the FLANAX mark’s
history ‘in the Latino American market,’” they weren’t puffery.
 
The court of appeals cautioned that Belmora owns Flanax as a
mark in the US.  “But trademark rights do
not include using the mark to deceive customers as a form of unfair
competition, as is alleged here.”  An
appropriate remedy might allow Belmora to use the mark, but with measures to
avoid confusion; “any remedy should take into account traditional trademark
principles relating to Belmora’s ownership of the mark,” such as altering the
font and color of the packaging, attaching the manufacturer’s name to the brand
name, or using a disclaimer.
 
The §14(3) cancellation claim was also reinstated. The TTAB
found that the preponderance of the evidence “readily establishe[d] blatant
misuse of the FLANAX mark in a manner calculated to trade in the United States
on the reputation and goodwill of petitioner’s mark created by its use in
Mexico.”  The court of appeals noted that
a cancellation petition can be filed by “any person who believes that he is or
will be damaged . . . by the registration of a mark.”  This language is similar to that interpreted
in Lexmark.  For §14(3), the petitioner must also establish
that the “registrant deliberately sought to pass off its goods as those of
petitioner.”  As with §43, §14(3) didn’t
include a requirement of use in the US.
 
The court of appeals noted that cancellation strips an owner
of “important legal rights and benefits” that accompany federal registration,
but it “does not invalidate underlying common law rights in the
trademark.”  [Note that In re Tam says otherwise, unless Belmora
can re-register once it has purged itself of the misrepresentation, as the
remedy discussion above suggests it may.] 
In a footnote, the court of appeals noted the PTO’s argument that §
14(3) might require a lesser showing of causation because it sets forth an
administrative remedy, whereas the Supreme Court based its Lexmark analysis on common law proximate cause requirements for
judicial remedies. [Again note that In re
Tam
bears on this, not just B&B
v. Hargis
.]

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