Friday, March 25, 2016

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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