IP Watchdog..
This year saw an increased focus on the extraterritorial application of the Lanham Act, setting up a showdown at the Supreme Court in 2023. The last year also saw cases pressing the intersection of the Lanham Act with the First Amendment and artistic expression—both in the physical world and in the metaverse—and some rulings that will help clarify the likelihood of confusion analysis in various circuits.
As 2022 comes to an end, we look forward to what 2023 has in store.
Extraterritoriality Issues are Coming to a Head
The extent to which the Lanham Act reaches beyond U.S. borders was a hot topic in 2022 and will carry into 2023.
Meenaxi Enter., Inc. v. Coca-Cola Co.
In Meenaxi Enter., Inc. v. Coca-Cola Co., 38 F.4th 1067 (Fed. Cir. 2022), the Federal Circuit highlighted the high bar companies face to establish liability for infringement of a trademark that is used only outside of the United States.
Coca-Cola sought to cancel Meenaxi’s United States trademark registrations for THUMS UP and LIMCA based on Coca-Cola’s prior distribution of Thums Up cola and Limca lemon-lime soda in India and other foreign countries. Coca-Cola initially succeeded before the TTAB, and Meenaxi appealed to the Federal Circuit, which considered whether Coca-Cola had established grounds for a statutory cause of action to cancel Meenaxi’s trademarks under Section 14(3) of the Lanham Act.
The Federal Circuit held that the plain language of the statute does not require that a plaintiff possess or even use a trademark in United States in commerce. Thus, even though Coca-Cola did not own United States trademark registrations for THUMS UP or LIMCA or have any sales of those products in the United States, it was not foreclosed from seeking cancellation of Meenaxi’s U.S. trademarks. The Federal Circuit expressly noted that “the extent to which the Lanham Act applies to activities outside the United States is not a question implicated here” because Coca-Cola’s claim was based “entirely on alleged injury occurring in the United States.”
The court nevertheless reversed the TTAB because Coca-Cola was unable to identify any lost sales or reputational injury in the United States, and the court was not persuaded that members of the Indian-American population in the United States were aware of Coca-Cola’s foreign products, let alone that they would be misled into thinking Meenaxi’s beverages were the same as those sold by Coca-Cola in India.
Hetronic Int’l, Inc. v. Hetronic Germany GmbH
The Supreme Court has taken up Hetronic Int’l, Inc. v. Hetronic Germany GmbH, 10 F.4th 1016 (10th Cir. 2021), cert. granted sub nom. Abitron Austria GmbH v. Hetronic Int’l, Inc., 143 S. Ct. 398 (2022) to address whether the Lanham Act can be applied extraterritorially to a foreign defendant’s foreign sales, including purely foreign sales that never reach the United States. A key, underlying question before the Supreme Court is which framework courts should apply to determine when the Lanham Act applies to foreign conduct. Although the Supreme Court has held that the Lanham Act can apply extraterritorially in some circumstances, there is currently a circuit split as to precisely how to determine when extraterritorial application is appropriate. This disagreement amongst the circuits allows for forum shopping and Hetronic Int’l, will likely bring much needed clarity on these issues in 2023.
U.S. Plaintiff Hetronic sued foreign Defendants (who were Plaintiff’s European distributors) for “reverse engineering” Plaintiff’s products and selling their own “Hetronic” products in Europe that were indistinguishable to the average customer. At trial, Plaintiff won $115 million in damages and a worldwide inunction.
The primary issue on appeal was whether the district court erred in concluding that the Lanham Act applied extraterritorially to reach the Defendants’ foreign activities. The Tenth Circuit held that, “when the defendant is not a U.S. citizen, courts should assess whether the defendant’s conduct had a substantial effect on U.S. commerce . . . [and] only if the plaintiff has satisfied the substantial-effects test, courts should consider whether extraterritorial application of the Lanham Act would create a conflict with trademark rights established under foreign law” The court was unpersuaded by Defendants’ arguments that the Lanham Act should not apply in this case because only 3% of their foreign sales crossed into the United States. Adopting the Defendants’ position would mean that “billion-dollar-revenue companies could escape Lanham Act liability by claiming that millions of dollars of their infringing products entering the United States represented only a fraction of their sales.” The court also found that the Lanham Act applied because Defendants diverted foreign sales that otherwise would have gone to Plaintiff in the U.S., and thus constituted a substantial effect on U.S. commerce.
Courts Look to Clarify the Application of the First Amendment to the Lanham Act
The year 2022 paved the way for courts to resolve what arguably is the most important unresolved issue in trademark law: the appropriate test for balancing trademark rights with First Amendment rights. Since 1989, the predominant approach to balancing these interests has been through the “Rogers Test,” and while a plurality of circuits have adopted the Rogers Test the Supreme Court has not yet weighed in. That may be about to change.
Jack Daniel’s Properties, Inc. v. VIP Products LLC,
In November 2022, the Supreme Court granted certiorari to review the Ninth Circuit’s decision in Jack Daniel’s Properties, Inc. v. VIP Products LLC, No. 21-16969, 2022 WL 1654040 (9th Cir. 2022), which has the potential to reshape the Lanham Act’s application to expressive goods.
In VIP Prods., the Ninth Circuit summarily affirmed dismissal of Jack Daniel’s trademark infringement and dilution claims against dog toy manufacturer VIP Products. The case centered on VIP Products’ manufacture and sale of a dog chew toy called “Bad Spaniels,” which was shaped like a Jack Daniel’s whiskey bottle and displayed a “label” resembling Jack Daniel’s trade dress, but with scatological-themed jokes and puns. The district court initially found that the Bad Spaniels toy resulted in significant consumer confusion and that the jokes displayed on the toy were not protected commentary on Jack Daniel’s itself. It thus denied VIP Products’ motion for summary judgment to dismiss all of Jack Daniel’s infringement and dilution counterclaims on First Amendment grounds. The Ninth Circuit, however, reversed and remanded for the district court to apply Rogers, and on remand, the district court dismissed Jack Daniel’s claims finding the toy’s use of the Jack Daniel’s trade dress to be artistically relevant and not explicitly misleading.
The question presented to the Supreme Court is whether humorous use of another’s trademark as one’s own on a commercial product is subject to the Lanham Act’s traditional likelihood-of-confusion analysis, or instead receives heightened First Amendment protection from trademark-infringement claims. The Court may clarify the Rogers Test—for example, making clear that expression that incorporates another party’s trademark is protected by the First Amendment only to the extent that it comments on the mark or the owner of the mark. Or the Supreme Court could discard the Rogers Test and instead adopt a completely different, novel test for balancing expressive interests with the public interest in avoiding consumer confusion. In any event, artists and brands alike are closely watching VIP Products, and many will undoubtedly file amicus briefs, with the expectation that the Court’s decision will resonate far beyond VIP Products’ dog toy.
Vans, Inc. v. MSCHF Prod. Studio, Inc.
Before the Supreme Court accepted cert in VIP Prods., the Second Circuit had the opportunity to clarify the Rogers Test when Vans, Inc. sued the art collective MSCHF in the Eastern District of New York over MSCHF’s Wavy Baby artwork, in Vans, Inc. v. MSCHF Prod. Studio, Inc., No. 22-cv-2156, 2022 WL 1446681 (E.D.N.Y. Apr. 29, 2022).* That case, however, has been stayed pending the outcome of VIP Products.
Read more at https://ipwatchdog.com/2022/12/20/trademarks-2022-recounting-high-profile-trademark-developments-year/id=154453/