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Feb/15

EDVA Reverses FLANAX Case; No Exceptions to the Territoriality Principle


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The U.S. District Court for the Eastern District of Virginia, in a case of first impression, held that Article 6bis of the Paris Convention, the famous marks provision, does not provide trademark rights that are protectable under Section 14(3) (misrepresentation of source), Section 43(a)(1)(A) (infringement of an unregistered mark) and Section 43(a)(1)(B) (false advertising) of the United States Trademark Statute (the Lanham Act).

Although Bayer AG has never used the mark FLANAX in the United States, it alleged that a ‘significant number’ of U.S. consumers were familiar with its Mexican FLANAX brand, and that Belmora LLC’s use of the same mark for the same product had caused confusion in the U.S.

Bayer AG, through a predecessor in interest, has used the mark FLANAX in connection with Naproxen, a prescription analgesic, in Mexico, beginning in 1976. It obtained a Mexican trademark registration for FLANAX. After Naproxen was approved for OTC use in Mexico, a mass-market version of FLANAX was launched in 2001-02.

Belmora, a small U.S. pharmaceutical company seeking to introduce Spanish-language packaging to the U.S. OTC market, learned of Mexican FLANAX. Its investigation determined that Bayer was not selling the product in the U.S., had not filed for U.S. trademark protection, and had not listed its product with the FDA.

Belmora filed a U.S. application for FLANAX for Naproxen tablets in October 2003. Bayer’s predecessor, Hoffman-La Roche, filed a U.S. application for FLANAX in February 2004. Belmora’s application (and later, registration) was cited by the USPTO, and blocked the Bayer application, which it then abandoned .

Belmora began use of FLANAX in early 2004, using a similar font and package color to that used by Bayer FLANAX in Mexico.

Bayer filed a petition to cancel Belmora’s U.S. registration in June, 2007. It originally based its petition on Section 2(d), alleging prior use of a trademark in U.S. commerce (and likelihood of confusion). Its alleged prior use claim was based on a variety of trans-border activities consisting primarily of unauthorized grey goods sales by Mexican-Americans who had purchased Bayer FLANAX in Mexico and then sold it in the United States.

Bayer amended its petition to cancel twice, adding claims under the famous mark provision, Article 6bis of the Paris Convention, and under Section 14(3), which permits cancellation of a registered mark that is used to misrepresent source. The added Section 14(3) claim was based on facts disclosed in discovery, and alleged that Belmora, through use of similar trade dress as well as through certain statements in advertising, had intentionally suggested that it was related to Mexican FLANAX.

The Board ultimately rejected the Section 2(d) claim because Bayer had not made use of the FLANAX trademark in U.S. commerce. It rejected the Article 6bis claim because it concluded that Article 6bis does not create a right of action separate from the provisions of the Lanham Act.

However, the Board ruled in favor of Bayer on its Section 14(3) claim, finding that Bayer owned sufficient goodwill in the FLANAX mark and that such goodwill ‘did not stop at the border.’ [finding that Belmora had used the mark to misrepresent the source of its Naproxen Sodium pain reliever “in a manner calculated to trade in the United States on the reputation and goodwill of petitioner’s mark created by its use in Mexico.”] The Board ordered the cancellation of Belmora’s US registration.

Belmora initially elected to appeal the cancellation ruling to the United States Court of Appeals for the Federal Circuit. Although 15 U.S.C. Section 1071 provided for Bayer to either acquiesce in the selection of the CAFC as the channel for appeal, or to request that Belmora initiate a proceeding in a District Court, Bayer instead initiated its own District Court action in California. Belmora amended its election under 15 U.S.C. Section 1071, requesting a de novo appeal in the Eastern District of Virginia. The Virginia action consolidated Bayer’s claims under Lanham Act Section 43(a)(1)(A) (infringement of an unregistered trademark) and Section 43(a)(1)(B) false advertising, as well as related state claims. Bayer also cross-appealed the rejection of its 6bis claim.

Belmora moved to dismiss Bayer’s Section 14(3) and Section 43(a)(1)(A) claims on the ground that Bayer, under the Territoriality Principle, did not own protectable trademark rights in the U.S. because it had never used the mark in the U.S. Belmora moved to dismiss the Section 43(a)(1)(B) false advertising claim on the ground it was duplicative of the 43(a)(1)(A) claim in that the allegation was actually one of false association, namely that Belmora was falsely claiming an affiliation with Bayer. Finally, Belmora moved for judgment on the pleadings with regard to Bayer’s Article 6bis claim, maintaining that Article 6bis is neither a standalone basis for a cause of action under the Lanham Act nor is it incorporated in other provisions of the Lanham Act. In short, Belmora maintained that Article 6bis does not provide exception to the Territoriality Principle which requires that plaintiff have recognized trademark rights in the jurisdiction whether it seeks to enforce trademark rights.

Bayer argued alternatively that its FLANAX mark was famous in the U.S. and thus eligible for protection under 6bis, or that it owned protectable goodwill because a ‘significant number’ of Mexican-American consumers were familiar with its mark as a result of various cross-border activities such as grey goods, spillover advertising, and travel and immigration between Mexico and the U.S.

The Court stated the question as: Does the Lanham Act allow the owner of a foreign mark that is not registered in the United States and further has never used the mark in United States commerce assert priority rights over the mark that is registered in the United States by another party and used in United States commerce? The Court said no. Holding that neither fame nor ‘significant goodwill’ would constitute a source of priority rights, the Court dismissed the infringement and misrepresentation claims. Furthermore, the absence of prior trademark rights deprived Bayer of standing to pursue the false advertising claims as well.

With regard to the Article 6bis action, the Court noted the ‘overwhelming authority’ that the Paris Convention is not self-executing, and that Congress has implemented portions the treaty through Section 44 of the Lanham Act. Non-U.S. practitioners are likely familiar with Section 44(d) (which implements 6 month Convention priority) and Section 44(e) (which provides for registration based on a registration from a Convention-member country).

Section 44(b) states that nationals of treaty countries are entitled to the benefits of this section under the conditions expressed herein. Furthermore, Section 44(h) provides that treaty country nationals are entitled to effective protection against unfair competition. Bayer argued that this general language imports Article 6bis protections into the Lanham Act. The Court, however, cited the decision of the U.S. Court of Appeals for the Fourth Circuit in Barcelona.com, Inc v. Excelentismo Ayuntamiento de Barcelona, 330 F.3d 616 (4th Cir,. 2003) and the Second Circuit’s decision in ITC Ltd. v Punchgini, 482 F.3d 135 (2d Cir. 2007) (the Bukhara case) to the effect that those provisions give non-U.S. parties rights that are coextensive with, not greater than, those otherwise provided under the Lanham Act.

The Court cited numerous authorities asserting that Congress could not have intended a specific exception to the Territoriality Principle, without explicitly saying so.

Accordingly, Bayer, without use of a trademark in U.S. commerce, did not have legal standing to prosecute its Federal claims, and its misrepresentation, infringement and false advertising claims were therefore dismissed. The state claims were dismissed as well.

Belmora LLC v, Bayer Consumer Care AG and Bayer Healthcare LLC, 1:14-cv-00847-GBL (EDVA Feb. 6, 2015).

Belmora, LLC was represented by Martin Schwimmer, Lauren Sabol and Lori Cooper of Leason Ellis, John Welch of Lando Anatasi, and Craig Reilly, Esq.

belmora v bayer decision EDVA Feb 2015.pdf

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