As technology evolves and the Internet becomes the most prevalent way to purchase products, importation and exportation of counterfeit goods has become an expensive problem for trademark owners. Protecting U.S. brands from foreign infringements has become an increasingly important part of brand protection and management. This article will explore three scenarios of foreign infringement, the applicability of the Lanham Act to such infringements, and the manner in which U.S. trademark owners can become alerted to such infringements to better protect their brands.
The Lanham Act generally governs activities relating to the ownership and use of trademarks in the United States. However, in certain instances, it is permissible for U.S. courts to exercise extraterritorial jurisdiction pursuant to the Lanham Act for activities that have occurred outside the country. Activities that take place on foreign soil or which benefit foreign merchants that can trigger the application of the Lanham Act generally arise in three scenarios: 1) importation of infringements into the United States; 2) infringing activity within a U.S. Foreign-Trade Zone; and 3) infringing export sales made only abroad.
Scenario 1: Importation of infringements into the United States
In this scenario, a merchant in a foreign nation labels goods with an infringing mark and transports them into the United States. These acts are clearly subject to American law and the merchant can be sued in a U.S. court, assuming one can obtain personal jurisdiction in some American court.
Scenario 2: Infringing activity within a U.S. Foreign-Trade Zone
A U.S. Foreign-Trade Zone is a government-bonded warehouse where imports are repacked, relabeled and stored duty-free for certain periods of time. In this scenario, infringing food products from a foreign nation only temporarily held in a U.S. foreign trade zone before being shipped to another foreign nation is a sufficient act in commerce to trigger subject matter jurisdiction in federal courts under the Lanham Act.
Scenario 3: Infringing export sales made only abroad
In this scenario, a merchant labels goods in the United States with an infringing mark and sends the goods into commerce for sale only in foreign nations. Although the only likely confused customers are on foreign soil, a U.S. court can have subject matter jurisdiction because the packaging, processing and transport was in the United States and the export of such goods diverted sales away from the U.S. trademark owner.
For infringement occurring in foreign nations or benefitting foreign merchants, the courts will likely consider the well-known factors laid out in Vanity Fair Mills v. T. Eaton Co.: 1) whether the defendant is a U.S. citizen; 2) whether there exists a conflict between the defendant's trademark rights under foreign law and the plaintiff's trademark rights under domestic law; and 3) whether the defendant's conduct had a substantial effect on U.S. commerce. A number of courts have determined that the third factor - substantial effect on U.S. commerce - is the critical one. For it to be met, the defendant's infringing activities must be beyond a mere presence in the United States and include such activities that affect the U.S. marketplace. Examples of such purposeful activities include: soliciting U.S. consumers to purchase infringing products; directing advertising and marketing efforts to U.S. consumers; and making decisions regarding the foreign activity in the United States.
Half the battle of preventing the importation and exportation of infringing products is becoming aware of such infringing activity as soon as possible. To do so, companies should record their U.S. registered trademarks with the U.S. Customs and Border Protection (CBP). Information to be provided as part of such registration includes the trademark and its registration number, the goods affiliated with the mark, the owner of the mark, and contact information in the event an infringement is determined. Such recordation with CBP allows for the inspection of goods being exported and imported into the United States to determine if the items bear an infringing mark. If an infringement is detected, CBP will contact the trademark owner. At that time, counsel can best evaluate the applicability of the Lanham Act and devise a strategy to prevent the sale of such products in both the domestic and foreign stream of commerce.