No TM or false advertising claims without use of mark in US commerce

Belmora LLC v. Bayer Consumer Care AG, No.  1:14-cv-00847 (E.D. Va. Feb. 6, 2015)

 

Territoriality lives!  Belmora sells an OTC pain relief product, Flanax, in the US with a similar trade dress to, and capitalizing on the good will of, Bayer’s Flanax, sold in Mexico.  The Lanham Act does not provide Bayer with a remedy in this situation.  (Perhaps Bayer should’ve sued in NY, where state law might do so.)   [NB: Marty Schwimmer & John Welch represent Belmora.]

 

Belmora's Flanax

Belmora registered FLANAX for analgesic tablets in 2005, with use in commerce since March 1, 2004.  Bayer has used FLANAX in Mexico since the 1970s, with sales of hundreds of millions of dollars and promotion in Mexico, including major cities near the Mexico-US border. Bayer attempted registration for Flanax in 2004, but failed due to Belmora’s preexisting application. Bayer has never had FDA approval to market or sell Flanax in the US.

 

Bayer's Flanax

Belmora’s early packaging was virtually identical to Bayer’s, and the court found that Belmora copied Bayer’s logo and trade dress.  The packaging has changed but is still similar to Bayer’s, and Belmora’s marketing “often suggested a historical connection between its FLANAX and Latino customers.”

 

Bayer petitioned for cancellation in 2007.  In 2014, the TTAB cancelled Belmora’s registration under §14(3) of the Lanham Act.  Belmora appealed to the Federal Circuit, but Bayer sued Belmora; though Bayer wanted the case heard in California for obvious reasons, it was transferred to Virginia.

 

The court found that Bayer lacked standing under §43(a)(1)(A) and (B) under Lexmark.  Starting with false designation of origin: Lexmark established that the plaintiff needed to be within the Lanham Act’s zone of interests and plead proximate cause of its injuries to have standing.  The zone of interests test isn’t very demanding, and the plaintiff receives the benefit of the doubt. It “forecloses suit only when a plaintiff s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized that plaintiff to sue.”  Lexmark.

 

Nonetheless, Bayer’s interests didn’t fall within the zone of interests Congress intended to protect, because Bayer didn’t have a protectable interest in Flanax in the US.  Congress intended “to regulate commerce within the control of Congress.”  For trademarks, the purpose was to provide national protections to marks to secure to owners the benefits of their goodwill and to protect consumers. Park ‘N Fly.  “[A] key purpose of the Lanham Act is to protect the interests of those with a protectable interest in a mark,” and ownership of a mark is an element of a §43(a)(1)(A) cause of action.  Unregistered marks must be used in commerce in the US. Bayer failed to plead facts showing that it used Flanax in US commerce.  Bayer was therefore not within the class of plaintiffs Congress authorized to sue under §43(a)(1)(A).

 

Also, even if Bayer satisfied the zone of interests test, it failed to plead facts showing that Belmora’s false designation of origin proximately caused Bayer economic or reputational injury. Bayer suggested that it lost sales in the US by not being able to convert immigrating Flanax consumers to Aleve, its American counterpart to Flanax. But a core purpose of the Lanham Act is to "help assure a trademark's owner that it will reap the financial and reputational rewards associated with having a desirable name or product." To let Bayer make this argument “would require the Court to extend Lanham Act protections to an international mark that was not used in United States commerce.” The economic consequences targeted by the Lanham Act are those caused by infringement in the US.

 

The Fourth Circuit hadn’t adopted any exceptions to this rule. It hadn’t recognized the famous marks doctrine had suggested it was disinclined to do so. In addition, some courts allow extraterritorial conduct to be actionable if it has a significant effect on US commerce, since sales to foreign consumers may harm the income of an American company.  The Fourth Circuit hasn’t recognized this theory, and, even if it did, Belmora is selling to US consumers, not to foreign consumers.  “[T]he Court expressly declines to find that the loss of potential sales to immigrating consumers is the type of economic loss recognized by the Lanham Act as they are speculative.”  [Compare doctrines surrounding the likelihood of irreparable harm.]  Speculative allegations of harm are insufficient for Lanham Act standing.

 

Not only did Bayer fail to plead that Belmora proximately caused cognizable economic injury, it also failed to plead proximately caused damage to its reputation. Speaking of  irreparable harm, here’s a line we might see quoted again: “Mere confusion by itself does not amount to reputational injury—there must also be evidence of harm resulting from the use of the allegedly infringing product” (citing Haute Diggity Dog). 

 

Bayer argued that its reputation was harmed because Belmora’s deceptive marketing caused actual confusion.  Telemarketers hired by Belmora allegedly called potential distributors and suggested to them that Belmora's Flanax products were the same as those offered by Bayer in Mexico. Belmora also allegedly advertised that its Flanax was a brand that Latinos had turned to "for generations," and that "FLANAX acts as a powerful attraction for Latinos by providing them with products they know, trust, and prefer."  However, that didn’t show injury to Bayer’s reputation.  There was no evidence showing that Belmora’s products had harmed anyone, or that people had made misdirected payments.  “Without more, mere confusion by itself does not constitute reputational injury.”

 

Bayer argued that its inability to control the quality of goods sold under the Flanax brand harmed its reputation.  This “demonstrates a fundamental misapprehension of the protections of the Lanham Act.”  But quality control injury depends on ownership, and Bayer can’t bring a trademark infringement claim because it’s not an owner. Bayer pled neither actual reputational injury nor a protectable interest in a mark.

 

The court also dismissed the §43(a)(1)(B) claim on standing grounds, for the same reasons: Bayer didn’t sufficiently plead an injury to commercial interest in sales or business reputation proximately caused by Belmora’s alleged misrepresentations.

 

The court dismissed Bayer’s California state law claims for unfair competition and false advertising, declining to exercise its supplemental discretion.

 

Further, the court affirmed the TTAB’s dismissal of Bayer’s Article 6bis claim.  “[T]he Paris Convention is not self-executing and Sections 44(b) and (h) of the Lanham Act, 15 U.S.C.

§ 1126(b) and (h), do not render Article 6bis of the Paris Convention a ground for contesting trademark registration.”  Section 44 incorporates the Paris Convention only to provide foreign nationals with the necessary substantive rights. The court would not infer, “from uncertain terms in the Lanham Act, a declaration from Congress adopting the famous marks exception captured in Article 6bis, thus creating a cause of action therein.”  Such a new rule would “eviscerate” territoriality, “a principle that has been accepted  by  the  Supreme  Court  for  nearly  one  hundred  years  and  remains  essentially unassailable in each circuit court except for the Ninth Circuit.”  More definite instruction from Congress would be required to do so.

 

Then the court reversed the TTAB’s holding that Bayer had standing to seek cancellation, because Bayer lacked standing to sue under Lexmark. The TTAB had found standing based on injury allegedly caused by strikingly similar packaging and copying that was done to misrepresent a connection with Mexican Flanax. Cancellation can be sought by any person who believes they are or will be damaged by the registration, including “if the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used . . . .” Lexmark guided the standing inquiry here too, though the TTAB didn’t apply it. Again, Bayer failed the zone of interests test as well as the proximate cause test. [Interesting collapse of protection & registration, something I’m thinking a lot about.] 

 

Section 14(3), the court held, requires use of the mark in US commerce to find a misrepresentation of source. Bayer argued that the plain language of the statute didn’t require that, and that such an interpretation was inconsistent with other provisions of the Lanham Act barring registration of deceptive marks.  The TTAB found standing.  But the court was persuaded otherwise by case law and comparison to other provisions of the Lanham Act.

 

Previous misrepresentation of source cases either involved petitioners who owned a mark or were silent on the question.  Nor could Bayer rely on cases applying special standing rules to Cuban entities, because there’s a special law providing for that treatment.

 

What about the argument that some provisions, like §2(d), mention owning a mark and others, like §§43 and 14(3), do not, implying a difference between them?  “[A]lthough Section 43(a)(l)(A), by its terms, does not require use of the mark, courts have consistently required a plaintiff to use the mark in United States commerce in order to state a claim under that statute.”  Congress’s intent “to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce” was also relevant, making it appropriate to read a use requirement into §14(3) as well.  Thus, the TTAB ruling was reversed.