By Brian Craig, J.D.
A Chinese company that distributes cosmetic products failed to sufficiently plead facts for the extraterritorial application of the Lanham Act.
Concluding that a Chinese company has failed to adequately allege the extraterritorial application of the Lanham Act, the federal district court in Tampa, Florida has dismissed the Chinese company’s claims for trademark infringement and cancellation of registered marks against a former licensee, a Florida-based cosmetics company. In granting a motion to dismiss certain claims, including cancellation of the REJUVASKIN registered trademark, the court concluded that the Chinese company failed to sufficiently state whether the Florida-based limited liability company is a United States citizen. The court, however, allowed the Chinese company an opportunity to file an amended complaint. The court also concluded that the Chinese company had not sufficiently alleged that the unregistered mark has been used in commerce because the only allegation was a secret, undisclosed shipment (Bei Jing Han Tong San Kun Ke Ji You Xian Gong Si v. Atlantic Medical Products, LLC, January 7, 2022, Honeywell, C.).
Bei Jing Han Tong San Kun Ke Ji You Xian Gong Si, also known as HemaTone Beijing Science Technology Ltd., is a Chinese company that markets and distributes medical devices and cosmetic consumer products. The Chinese company’s products include skin care lotions and scar removal gels. In 2011, the Chinese company developed the SI FU KANG mark. In. The Chinese company and a Florida-based cosmetics company, Atlantic Medical Products, LLC, then entered into a licensing agreement authorizing the Florida company to affix the Si Fu Kang mark directly on products in the United States for sale in China. In 2020, the Florida company registered the word REJUVASKIN and the SI FU KANG mark with the USPTO. The Chinese company then sued the Florida company for trademark infringement under the Lanham Act and sought cancellation of the registered marks. In addition, the Chinese company brought Florida state law claims for breach of contract, violation of the breach of the covenant of good faith and fair dealing, and violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). The Florida-based cosmetics company filed a motion to dismiss arguing that the court lacks subject matter jurisdiction and that the claims are insufficiently pled.
Subject matter jurisdiction. The court first concluded that it lacks subject matter jurisdiction over the federal claims seeking trademark infringement and cancellation of the registered marks. A court should consider the following factors when deciding whether it has jurisdiction over an extraterritorial dispute involving trademark infringement: (1) whether the defendant is a United States citizen; (2) whether the foreign activity had substantial effects in the United States; and (3) whether exercising jurisdiction would interfere with the sovereignty of another nation. Here, the complaint does not identify the Florida-based company’s members nor their citizenship as is required where a party is a limited liability company. To properly allege the citizenship of an LLC, a party must identify all of the LLC’s members and their citizenships. But the court permitted the Chinese company an opportunity to file a second amended complaint because it appears that the Chinese company can establish jurisdiction, as the Florida-based cosmetics company conceded that it is a citizen of Florida.
Sufficiency of claims. The court also concluded that the Chinese company has not sufficiently alleged that the mark has been used in commerce or that there is a likelihood of confusion to support the claims under the Lanham Act. Common-law trademark rights for unregistered trademark are appropriated only through actual prior use in commerce. The use of the mark alleged here by the Chinese company is a secret, undisclosed shipment. The court found that this is not enough and does not sufficiently allege prior use in commerce. Additionally, to prevail on a trademark infringement claim, a plaintiff must show that the unauthorized use of its mark in commerce was likely to cause confusion. Therefore, the court found that the Chinese company failed to adequately plead a claim for infringement of an unregistered trademark because it has not sufficiently alleged the requisite use in commerce. Because the Lanham Act claim fails, the court also dismissed the FDUTPA claim.
The court allowed the claims alleging breach of contract and breach of the covenant of good faith and fair dealing to proceed. Furthermore, the court granted leave for the Chinese company to file an amended complaint.
The Case is No. 3:21-CV-0947 (LEK/ML).
Attorneys: Deborah A. Gubernick (Snell & Wilmer, L.L.P.) and S. Elizabeth King (Shutts & Bowen, LLP) for Bei Jing Han Tong San Kun Ke Ji You Xian Gong Si a/k/a Hematone Beijing Science Technology Ltd. Frank R. Jakes (Johnson Pope Bokor Ruppel & Burns, LLP) for Atlantic Medical Products, LLC A Florida Ltd. Liability Co. d/b/a Scar Heal.
Companies: Bei Jing Han Tong San Kun Ke Ji You Xian Gong Si a/k/a Hematone Beijing Science Technology Ltd.; Atlantic Medical Products, LLC A Florida Ltd. Liability Co. d/b/a Scar Heal
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