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Fourth Circuit Allows Lanham Act Unfair Competition Claims for Foreign Trademark Not Used in the U.S.

Fourth Circuit Allows Lanham Act Unfair Competition Claims for Foreign Trademark Not Used in the U.S.

On March 23, the Fourth Circuit held that the owner of a Mexican trademark could bring false association and false advertising claims under § 43(a)(1)(A) and (B) of the Lanham Act for unfair competition in the United States, even though the owner has not used the trademark in the U.S. Belmora LLC v. Bayer Consumer Care AG & Bayer Healthcare LLC, No. 15-1335 (Mar. 23, 2016). Since the 1970s, Bayer has owned the Mexican mark "Flanax" for naproxen sodium pain relievers, which it markets in the U.S. under the brand "Aleve." Bayer sought to reverse dismissal of its § 43(a) claims and to reinstate the U.S. Patent and Trademark Office's cancellation of Belmora's registration for its U.S. mark "Flanax" based on Belmora's misrepresenting that its U.S. products were from the same source as the longstanding Mexican brand. The court's decision for Bayer clarified that—in contrast to claims of trademark infringement—the plaintiff was not required to allege use of its foreign mark in the U.S. for unfair competition claims, as these claims implicate not just priority rights but the public's interest in freedom from misleading advertising.

The district court had previously dismissed Bayer's claims and reversed the Trademark Trial and Appeal Board's cancellation of Belmora's mark based on lack of standing. Specifically, that court had held that Bayer's claims fell outside the Lanham Act's "zone of interests" because Bayer did not have a protectable interest in the U.S., and that Bayer could not have cognizable economic loss for a mark that was not used in U.S. commerce. The Fourth Circuit, however, read the U.S. Supreme Court's decision in Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014), to require reliance on the "plain language" of Lanham Act § 43(a), which "does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action." Belmora v. Bayer, at 13. (The Court contrasted § 43(a) to § 32, which does require use in commerce of a registered mark for infringement liability.) The appellate court then used the Supreme Court's two-step framework from Lexmark to determine that: (i) protecting foreign trademark owners against unfair U.S. competition is well within the "zone of interests" protected by the Lanham Act, and (ii) Bayer adequately pled injuries proximately caused by Belmora's deceptive advertising based on consumers purchasing Belmora's "Flanax" products in the U.S. due to a perceived connection with Bayer's products in Mexico.

Further, the Fourth Circuit observed that the "zone of interests" prong of the test is not "especially demanding," and that the plaintiff is to receive the "benefit of any doubt." Id. at 15. The court also pointed out that "commerce" in the Lanham Act is an "expansive concept" that "necessarily includes" foreign commerce. Id. at 15-16 n. 5; id. at 19 n. 6.

The Fourth Circuit also made clear that cancellation of a registered mark does not eliminate a trademark owner's common law rights. Id. at 33. On remand, the district court is to keep in mind Belmora's ownership of the mark and fashion a remedy, such as a tailored injunction, directed toward its intentionally deceptive conduct. Id. at 30-31. The court also noted that allegations of unfair competition would ultimately require proof and that a plaintiff may have "difficulty proving a cognizable false association injury under § 43(a)" if relying only on foreign commercial activity. Id. at 23, n. 8. Nevertheless, the appellate court noted that "intentional deception can go a long way toward establishing likelihood of confusion." Id.

This decision should aid foreign trademark owners in prosecuting deceptive U.S. conduct by allowing them to survive early motions to dismiss if they meet the broad Lexmark two-part test. Intentional deceivers of the customers of foreign mark owners in the U.S. should not be flummoxed by the Flanax decision being used against them effectively here.

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