Monday, February 11, 2013

single sale in US creates trademark rights against allegedly perfidious licensee

Medimport, S.R.L. v. Cabreja, 2013 WL 443975 (S.D. Fla.) (magistrate judge)

Medimport sued defendants alleging that they conspired to usurp Medimport’s business opportunities by conducting business under Medimport's registered trademark and trade name, Halimed Medical Equipment, without authorization.  Cabreja and others entered into an exclusive distribution agreement to sell Halimed products in the US, South America, and the Carribean, but then allegedly misrepresented their sales, engaging in multiple sales under the Halimed name that weren’t disclosed to Medimport.  Defendants allegedly tried to get the Halimed name for themselves through various maneuvers.  Medimport sued for unfair competition, breach of contract, fraudulent inducement, misappropriation of trade secrets, etc.

Medimport’s initial motion for preliminary injunction based on its unfair competition, state unfair trade practices, and breach of contract claims was denied.  However, the magistrate judge did find that the court had subject matter jurisdiction based on the Lanham Act claim, the sole federal claim.  Defendants argued that direct competition in US commerce was required, but the judge disagreed and held that Medimport had constitutional and prudential standing.  Even if direct competition in the US were required, competition existed between Medimport (albeit through its representative Cabreja) and Cabreja (on behalf of himself).  Medimport showed a substantial likelihood of prevailing on the merits, but failed to demonstrate irreparable harm because defendants stopped using the Halimed name and Cabreja represented that they wouldn’t restart.

On further proceedings, defendants renewed their argument that Medimport lacked rights because they weren’t using the mark in the US.  But, under the distribution agreement, Cabreja and another defendant had exclusive rights to promote and sell Halimed products in the US, and the complaint alleged that Cabreja in fact made a sale in Florida under the agreement.  That was enough for US use.

Defendants also challenged Medimport’s constitutional and prudential standing, and the judge found it worthwhile to use the awful Phoenix of Broward standard, even though this wasn’t a false advertising case.  (For Article III purposes, Medimport alleged an actual injury fairly traceable to defendants' alleged misconduct that would be redressed by the relief sought.)  Of course, the factors were useless and mechanically favored the alleged trademark owner in this trademark case: false association is the type of harm the Lanham Act aims to prevent; the injury of infringement to a trademark owner is direct; no one else has a greater interest; there’s a causal link between the alleged misconduct and the alleged harm; and there was no risk of duplicative damages from another owner.

The magistrate judge also rejected the argument that the economic loss rule barred most of Medimport’s claims, including its Lanham Act claim.  Unfortunately the reasoning was bizarre: Florida’s economic loss rule doesn’t bar intentional torts, and “[t]rademark infringement and unfair competition are intentional torts.” I’m pretty sure a better reason would be that federal trademark infringement (which does not require intent) can’t be governed by Florida rules (not to mention that Florida’s unfair trade practices statute has its own rules).  Furthermore, Medimport alleged more than just breach of contract; the allegedly deceptive acts and usurpation of corporate opportunities were enough to plead a valid FDUPTA claim.

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