Antitrust Law Daily Wrap Up, ADVERTISING—4th Cir.: Lanham Act does not require trademark use in U.S. commerce, (Mar 24, 2016)

By Greg Hammond, J.D.

A district court’s order dismissing Lanham Act false advertising and false association claims, based on a requirement that a consumer health company needed to use its own trademark in commerce within the United States as a condition precedent to a § 43(a) Lanham Act claim, was reversed and remanded. The U.S. Court of Appeals in Richmond concluded that such a requirement is absent from the plain language of § 43(a) and its reading of the U.S. Supreme Court’s decision in Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 2014-1 Trade Cases ¶78,716 (Belmora LLC v. Bayer Consumer Care AG, March 23, 2016, Agee, G.).

Bayer Consumer Care AG owns the FLANAX trademark in Mexico and has sold naproxen sodium pain relievers under that mark in Mexico since the 1970s. Similarly, Belmora LLC owns the FLANAX trademark in the United States and has used it since 2004 in the sale of its naproxen sodium pain relievers. Bayer successfully petitioned the U.S. Trademark Trial and Appeal Board (TTAB) to cancel Belmora’s registration for the FLANAX mark based on deceptive use. The federal district court in Alexandria, Virginia, however, reversed the TTAB’s cancellation order and dismissed the false advertising and false association claims. Bayer appealed.

“Use in commerce” requirement. The core of the district court’s decision was its conclusion that: (1) Bayer’s claims fell outside the Lanham Act’s “zone of interests”—and were not cognizable—because Bayer did not possess a protectable interest in the FLANAX mark in the United States; and (2) a cognizable economic loss under the Lanham Act could not exist as to a mark that was not used in United States commerce.

The appellate court rejected these conclusions, finding that the plain language of § 43(a) does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action. Rather, it is the defendant’s use in commerce—whether of an offending “word, term, name, symbol, or device” or of a “false or misleading description [or representation] of fact”—that creates the injury under the terms of the statute. Moreover, the appellate court noted that § 43(a) is framed by two background principles, according the Supreme Court’s Lexmark decision, including that: (1) the claim must fall within the “zone of interests” protected by the statute; and (2) a statutory cause of action is limited to plaintiffs whose injuries are proximately caused by violations of the statute.

The district court consequently erred in requiring Bayer, as the plaintiff, to have pleaded its prior use of its own mark in U.S. commerce when it was Belmora’s use of the mark or misrepresentation that underlies the § 43(a) unfair competition cause of action, the appellate court concluded. The lower court also erred in reversing the TTAB’s decision cancelling the registration of Belmora’s FLANAX mark.

False advertising. Next, the court determined that the false advertising claim was adequately pleaded to survive Belmora’s motion to dismiss. The claim represents a “typical” false advertising case, falling within the Lanham Act’s zone of interests by “protecting persons engaged in commerce within the control of Congress against unfair competition,” the court found. In addition, if not for Belmora’s statements that its FLANAX was the same one known and trusted in Mexico, some of its consumers could very well have instead purchased Bayer’s ALEVE brand, according to the court. Those lost customers therefore demonstrated an injury to sales or reputation proximately caused by Belmora’s alleged conduct.

False affiliation. The appellate court also concluded that Bayer adequately alleged a § 43(a) false association claim to survive Belmora’s motion to dismiss. First, Bayer’s allegations demonstrate that it loses sales revenue because Belmora’s deceptive and misleading use of FLANAX conveys to consumers a false association with Bayer’s product. The allegations meet the “zone of interests” requirement because they demonstrate that the claim furthers the § 45 purpose of preventing the “deceptive and misleading use of marks” in “commerce within the control of Congress,” the appellate court found.

In addition, Bayer sufficiently alleged that its injuries were proximately caused by Belmora’s violations of the false association statute because: (1) FLANAX customers in Mexico near the border may be deceived into foregoing a FLANAX purchase in Mexico as they cross the border to shop and buy the Belmora product in the United States; and (2) Belmora was alleged to have targeted Mexican-Americans in the United States who were already familiar with the FLANAX mark from their purchases from Bayer in Mexico.

The case is No. 15-1335.

Attorneys: Bradley Louis Cohn (Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP) for Bayer Consumer Care AG and Bayer Healthcare LLC. Martin Schwimmer (Leason Ellis LLP) for Belmora LLC and Jamie Belcastro. Lewis Yelin for the U.S. Department of Justice.

Companies: Bayer Consumer Care AG; Bayer Healthcare LLC; Belmora LLC

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