United States: Fourth Circuit Extends Section 43(A) Lanham Act Standing To Companies Not Selling Their Product Or Using Their Mark In The U.S.

Last week, an appellate court held that a plaintiff has standing to bring a false association and false advertising claim under Section 43(a) of the Lanham Act, even though it did not use its mark or sell its competing product in the United States. In Belmora LLC v. Bayer Consumer Care AG, a Fourth Circuit panel reversed a district court's decision that the Lanham Act did not allow the owner of a foreign mark not registered in the United States and not used in U.S. commerce to assert priority rights over a counterparty's U.S. registered mark that is used in U.S. commerce. The Fourth Circuit ruled that while a plaintiff in a Lanham Act Section 32 trademark infringement action has standing only if it has used its mark in U.S. commerce, use of the mark in U.S. commerce is not a requirement for a Section 43(a) unfair competition claim.

Bayer has sold pain medication under the trademark "FLANAX" in Mexico since the 1970s, but never registered or used the mark in U.S. commerce, instead selling a similar medication here under the name "ALEVE." In 2004, defendant Belmora LLC registered and began using the "FLANAX" trademark in the U.S. to sell its own pain medication. Belmora's packaging for its FLANAX products was similar to Bayer's, and Belmora made marketing statements that suggested a connection to Bayer's FLANAX. For example, Belmora referred to FLANAX as a "top-selling brand among Latinos," which had "sold successfully in Mexico," and stated that Belmora was now the "direct producer[] of FLANAX in the US."

The district court dismissed Bayer's false association and false advertising claims as failing to satisfy the standards set forth in Lexmark Int'l. v. Static Control Components, 134 S. Ct. 1377 (2014). In reversing, the Fourth Circuit held that the lower court misinterpreted Section 43(a) in a manner that conflicted with its plain language and misread Lexmark. The court of appeals concluded that nothing in the text of Section 43(a) requires a plaintiff to possess or use a mark in U.S. commerce. All Bayer must prove is that it is "likely to be damaged" by Belmora's "use[] in commerce" of its FLANAX mark and related advertisements.

Furthermore, as the appeals court explained, the test for standing under Lexmark requires that: (1) plaintiff's claim must fall within the "zone of interests" protected by the statute; and (2) plaintiff's injuries must be proximately caused by violations of the statute. The court found that unfair competition claims fall within Section 43(a)'s protectable zone of interests, even if a plaintiff did not use its mark in U.S commerce, because 43(a) "goes beyond trademark protection." In addition, Belmora's misleading association with Bayer's FLANAX may cause Bayer's customers to buy Belmora's FLANAX in the U.S. instead of Bayer's FLANAX in Mexico. The false association could lead to Bayer's loss of sales revenue, which the court found to be "commerce within the control of Congress" to regulate under Section 45 of the Lanham Act, even though the loss of revenue would occur in Mexico.

With regard to the second Lexmark prong, the court found that Belmora's Section 43(a) violations proximately caused Bayer's injuries because Bayer has substantial sales in major cities near the U.S.-Mexico border and spends millions of dollars advertising in that region. In fact, Bayer specifically accused Belmora of targeting Mexican-Americans in the U.S. and near the border because those individuals are already familiar with FLANAX and would buy Bayer's product but for Belmora's alleged deception.

Where a plaintiff is not using its mark in U.S. commerce, it would seem that a plaintiff could only satisfy the injury prong of Lexmark in unusual circumstances.  But this decision serves notice that one such circumstance is where a company makes an obvious attempt to trade on the goodwill of a competitor's brand that is sold just across the border.

Fourth Circuit Extends Section 43(A) Lanham Act Standing To Companies Not Selling Their Product Or Using Their Mark In The U.S.

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