A key principle of trademark law is that trademark rights are tied to geography. So, to what extent can foreign trademark owners prevent registration or use of a mark in the U.S.?
This is the question the U.S. Supreme Court is being asked to consider in Belmora LLC’s recently filed petition for review. The ongoing trademark dispute involves Bayer’s ability to prevent Belmora from using the trademark Flanax in the U.S. based on Bayer’s Mexican registration for the same mark and sales in Mexico of its Mexican-trademarked product.
The case raises an important question of trademark territoriality that the Supreme Court has never addressed but is ripe for review—whether the zone of interests encompassed by Lanham Act Sections 43(a) and 14(3) extends to the foreign owner of a foreign trademark that has not registered or used the mark in the U.S.
Fourth Circuit Decision at Issue
Belmora, a small U.S. pharmaceutical company, owned a U.S. trademark registration for Flanax, under which it has marketed and sold its FDA-approved pain reliever medication in the U.S. since 2004. Belmora’s product is sold with bilingual packaging and labeling in neighborhoods with significant minority populations and Spanish speakers.
Bayer purchased the rights to the Mexican trademark for Flanax in September 2005, under which Bayer continues to sell a higher-strength over-the-counter pain reliever called Flanax in Mexico. Bayer does not own a U.S. registration for Flanax and does not sell it to American consumers. Instead, Bayer sells its pain relievers in the U.S. under the Aleve brand.
Even though Bayer does not own a U.S. trademark registration for Flanax and does not use or intend to use the mark in the U.S., it has been engaged in a decades-long legal battle with Belmora to stop its use and cancel its registration for Flanax in the U.S. based on its rights and trademark registration in Mexico.
In 2016, the U.S. Court of Appeals for the Fourth Circuit ruled in favor of Bayer, holding that the Lanham Act does not expressly require use of a U.S. trademark in U.S. commerce to bring a claim for trademark cancellation or unfair competition.
No Review Will Lead to Uncertainty
Without the Supreme Court’s guidance, the implications of the Fourth Circuit’s decision raise significant legal questions and will create uncertainty among trademark owners and practitioners as to the scope of U.S. trademark rights.
If the Fourth Circuit ruling stands, plaintiffs would no longer be required to own a trademark registration in the U.S. to bring a Lanham Act unfair competition claim and/or cancellation action against a U.S. trademark owner. Other courts will inevitably be confronted with this same question, and some will likely decide the question differently than the Fourth Circuit, creating further confusion and splits among the lower courts.
Further, without clarification from the Supreme Court, this case will significantly change the way trademark attorneys advise their clients seeking trademark protection in the U.S.
Trademark practitioners know that a trademark search is essential due diligence for any client. A search is typically targeted to the specific geographic area in which the client intends to use and register a mark. The Fourth Circuit’s ruling in creates a situation where clients may have to conduct a worldwide trademark search prior to filing a U.S. trademark application, or they would run a much greater risk of potential infringement liability based on foreign use.
Where U.S. companies have been able to rely on the territoriality principle to restrict their trademark protection to the U.S., they will now have to consider foreign use as well. This is practically and financially infeasible for most clients.
Multinational corporations may have allotted funds to protect their marks in various countries, worldwide searches are cost prohibitive for most clients. This leaves open the possibility for larger corporations with deeper pockets to take advantage of the erosion of the territoriality principle to monopolize certain marks and associated products by alleging cross-border harm.
Smaller companies would thus waste time and money in establishing and protecting marks in the U.S. only to find themselves having to defend their use against foreign owners.
Consumers, Underserved Could Be Harmed
The uncertainty created by the Fourth Circuit’s decision, if left to stand, will also directly affect the general consumer. If foreign mark owners are allowed to prevent trademark use and registration in the U.S. without entering the U.S. market, it could not only drive business away from U.S. companies, but also suppress competition and give U.S. consumers fewer options.
This is especially true for underserved communities who rely on bilingual packaging and who may face additional barriers as a result of anticompetitive efforts from foreign mark owners. Without guidance from the Supreme Court, the Fourth Circuit’s decision runs the risk of creating confusion and marginalizing consumers.
The case has been distributed to the justices and is scheduled for the court’s Nov. 12 conference.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Jeannette Maurer Carmadella is a partner at Lutzker & Lutzker LLP, a boutique law firm specializing in intellectual property in Washington, D.C. She specializes in trademark and copyright law, with emphasis on brand protection and enforcement.
Ethan Barr is an associate at Lutzker & Lutzker LLP.
The authors are trademark counsel to Belmora LLC, but have not represented Belmora in the litigation discussed in this article.