Gary D. Feldon, the Antitrust Model of Extraterritorial Trademark Jurisdiction: Analysis and Predictions After F. Hoffmann-la Roche

• Publication year: 2006

COMMENTS

THE ANTITRUST MODEL OF EXTRATERRITORIAL TRADEMARK JURISDICTION: ANALYSIS AND PREDICTIONS AFTER F. HOFFMANN-LA ROCHE

INTRODUCTION

Mr. Dunkin, the CEO of Dunkin's Delights Worldwide Candy Co., had an unexpected surprise on his vacation last year. Flying out of Hong Kong, he stopped in an airport shop to get a bag of Dunkin's Sweeties, his top-selling brand of candy. Aboard the plane back to the United States, he popped one into his mouth, only to have his taste buds assaulted by a flavor combining the worst elements of rotten eggs and lawn mulch. Looking more closely, he realized that he had purchased a bag of something called "Drunkin' Sweaties" made by Infringer Foods, a Chinese company traded on the New York Stock Exchange. On returning home, he discovered three things. First, he found out that Infringer Foods selectively sells its candy to countries that have weak or ineffective trademark laws. Second, he recalled hearing that China itself has a poor reputation for cracking down on counterfeit goods,¹so relief there is highly unlikely. And finally, Dunkin learned that other U.S. travelers have purchased Drunkin' Sweaties, believing them to be Dunkin's Sweeties, and returned to the United States. Can Mr. Dunkin get legal relief in the United States?

The answer to this hypothetical question depends on a number of factors that the average law student learns about in his or her first year civil procedure class: personal jurisdiction, forum non conveniens, service of process, etc. Before any of these become relevant, however, there is a threshold question of which most people are unaware: Does U.S. trademark law even apply to Infringer Foods' actions abroad? In other words, what is the extraterritorial extent of U.S. trademark law?

Surprisingly, whether Infringer Foods' actions come within extraterritorial scope of trademark law depends mostly on where Dunkin brings suit. From the facts outlined above, he could probably get damages and an injunction in two circuits, would definitely not have a claim of action in four circuits, and even an expert in this area of law would not be able to predict the outcome of the remaining five. The stakes involved in resolving this issue are incredibly high; the circuits are split over the extraterritorial reach of the Lanham Act (the federal statute that provides trademark protection) and losses to U.S. corporations are in the hundreds of billions of dollars annually.²

Trademarks primarily serve to protect consumers from confusion in the origins of their purchases.³As a corollary, they ensure that the market rewards producers for creating products that consumers want.⁴Trademarks act as a check on unscrupulous actors in the marketplace and maintain efficiency in markets, but only when the rules are enforced. Unfortunately, because the reliability of trademarks makes it unnecessary for consumers to examine goods closely, producers of inferior goods can free-ride on the reputation of others unless the law has an effective mechanism for stopping them from doing so.⁵

When a company that uses a confusing mark or when a maker of counterfeit goods acts outside of U.S. territory, it may be not be within U.S. jurisdiction. Because not all countries provide adequate or effective recourse for trademark actions, many plaintiffs would prefer to sue in U.S. courts.⁶The extraterritorial application of trademark law is, however, a murky and, in some ways, underdeveloped area of the law.

In the approximately 125 years of federal trademark jurisprudence in the

United States, only one Supreme Court case, Steele v. Bulova Watch Co., Inc. has ever dealt with the extraterritorial scope of U.S. trademark law.⁷In interpreting the Lanham Act, the statute that codifies trademark law, Steele made it clear that trademark owners can sue⁸in U.S. courts for some, but not all, infringement occurring abroad.⁹The circuit courts of appeals have interpreted the Steele decision in a variety of ways, leading to enormous inconsistency in the tests used by different circuits for when extraterritorial jurisdiction is appropriate under the Lanham Act.¹⁰

When there is a split among circuit courts on a matter of substance, the Supreme Court should grant certiorari to resolve the issue.¹¹The First Circuit's recent decision in McBee v. Delica Co. has added yet another test for finding extraterritorial jurisdiction to the panoply already applied across the country, making the need for the Supreme Court to resolve the divide even more pressing.¹²In addition to the steady increase in suits seeking extraterritorial application of the Lanham Act,¹³major changes in international intellectual property law create an increased need for the Supreme Court to grant certiorari.¹⁴The absence of any relevant legislative history or Supreme Court cases with clear precedential value makes the issue a particularly difficult one to resolve in a principled fashion.

One tactic that courts have used when forced to make and justify a decision in an underdeveloped area of law is to look to similar areas of law and draw applicable analogies.¹⁵The extraterritorial application of trademark and antitrust laws are closely tied both for historical reasons and because of the similarity in public policies underlying them.¹⁶The Supreme Court's decision in Steele and important decisions in the First, Second, Fifth, and Ninth Circuits have all drawn guidance from comparisons to the extraterritorial application of antitrust law.¹⁷

Recently in F. Hoffmann-La Roche Ltd. v. Empagran S.A. the Supreme Court resolved another circuit split over the extraterritorial application of U.S. antitrust law.¹⁸Important not only for its immediate effect, the F. Hoffmann- La Roche Court also applied some very progressive and controversial principles about the relationship between U.S. law and foreign nations in deciding the case.¹⁹

Because of the need for resolution and the similarities between extraterritoriality under antitrust and trademark law, it is likely that the Supreme Court will apply the principles embodied in decisions regarding the extraterritorial application of antitrust laws, particularly F. Hoffmann-La Roche and Hartford Fire Insurance Co. v. California, when it grants certiorari on the extraterritorial scope of the Lanham Act.²⁰This Comment argues that the adoption of the extraterritoriality doctrine from antitrust into trademark is not only the most likely choice for resolving the current circuit split, but also the best one. Unlike the alternatives, the antitrust model of extraterritoriality in trademark law reflects established judicial preferences for the role of U.S. courts in the world community and in light of the modern international marketplace.

To understand the proposed change in the law and the need for a resolution of the current circuit split, it is necessary to understand the current status of the law. Part I discusses the established law on the extraterritoriality of trademark law and the approaches taken by different circuits.

Modeling one area of law on another is a somewhat unconventional approach to legal analysis, so it is worthwhile to discuss why looking beyond trademark law is valuable. Part II addresses why only looking to extraterritoriality in trademark law, the default model of legal analysis, is inadequate. This Part also addresses two other competing models, including the one adopted in this Comment.

Part III details extraterritoriality in antitrust law for purposes of comparison, focusing on recent Supreme Court decisions that resolved divisions among the circuits over issues that have parallels in trademark. It also analyzes the conceptual similarities between trademark and antitrust, justifying the comparison between these two areas of law that is the crux of this Comment.

Part IV then applies the relevant elements of antitrust extraterritoriality to trademark law and discusses what adaptations are necessary to account for differences between the two. This analysis leads to the rule proposed in this Comment.

Extraterritoriality by its nature defines the role of one sovereign state in relation to others. This relationship necessarily takes place against a backdrop of international law, so an understanding of the international regimes in place is required. Only when the proposed rule is considered in conjunction with these international regimes is it possible to gauge the actual anticipated impacts on actors in the international marketplace. Part V addresses these issues.

Finally, the Conclusion sums up the problems with the current system and the benefits of the proposed rule. It also crystallizes the issues raised throughout this Comment and lays out its conclusions.

I. STATUS OF THE LAW

To understand the need for change in the law, it is important to understand the current status of the law. Like many areas of the law, trademark law has both statutory and case law elements. The case law includes one Supreme Court case on the extraterritoriality of trademark and a plethora of circuit and district court decisions. It is necessary to analyze the relevant statutory language and to go through each of the important cases to understand the problems and divisions this Comment proposes to resolve.

A. The Lanham Act

The language of the Lanham Act itself provides neither guidance as to the extent of trademark's extraterritorial application nor indicates whether the Lanham Act was intended to have extraterritorial application at all. The jurisdictional language, found in 15 U.S.C. Sec. 1127, which discusses the intent of the act, states that it "regulate[s] commerce within the control of

Congress."²¹The full extent of the commerce power of Congress includes the power "[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."²²However, there is a general presumption against acts of Congress having extraterritorial effect that is typically only overcome by explicit indications of...