Standing Still: Denial of Certiorari in Belmora Llc v. Bayer Consumer Care Ag Leaves Question on Standing for Foreign Plaintiff's Unfair Competition Claims

• Jurisdiction: United States,Federal
• Author: ANNA RAIMER
• Publication year: 2017
• Citation: Vol. 42 No. 2

Standing Still: Denial of Certiorari in Belmora LLC v. Bayer Consumer Care AG Leaves Question on Standing for Foreign Plaintiff's Unfair Competition Claims

ANNA RAIMER
Jones Day

MEREDITH WILKES
Jones Day

On February 27, 2017, the United States Supreme Court denied certiorari in Belmora LLC v. Bayer Consumer Care AG.¹ The denial of certiorari leaves in place a holding from the United States Court of Appeals for the Fourth Circuit that a plaintiff owning only foreign trademark rights has standing to bring unfair competition and false advertising claims against a U.S. trademark owner under Section 43(a) of the Lanham Act.² The Fourth Circuit's decision relied on the Supreme Court's standing analysis for Lanham Act false advertising claims in Lexmark International, Inc. v. Static Control Components, Inc.,³ a case involving two U.S.-based companies asserting U.S.-based rights.

In Lexmark, the Supreme Court held that a plaintiff had standing to assert a false advertising claim if the injury alleged is in the "zone of interests" protected by the Lanham Act and the plaintiff otherwise pleaded proximate-cause.⁴ Using this test, the Fourth Circuit held that a foreign trademark owner's claims of deceptive conduct and false advertising fell within the zone of interests protected by the Lanham Act, and that the foreign trademark owner sufficiently pleaded proximate causation.⁵

Since the Fourth Circuit's decision stands, and until other circuits address similar Lanham Act claims, foreign trademark owners may be able to establish standing to sue under the Lanham Act without proving ownership or use of a U.S. trademark in U.S. commerce, as long as the owners adequately plead injuries proximately caused by the "zone" of deceptive conduct prohibited by the Lanham Act.

BACKGROUND AND PROCEDURAL HISTORY

Bayer has used the trademark "FLANAX" for naproxen sodium pain relievers in Mexico since the 1970s, marketing the same product as "ALEVE" in the U.S. Bayer owns a registration in Mexico for FLANAX, but does not own a registration for (or use) the mark in the U.S. Belmora has used the FLANAX mark in the U.S. since 2004, and it owns a U.S. trademark registration for FLANAX covering "orally ingestible tablets of Naproxen Sodium for use as an analgesic."⁶

Bayer successfully petitioned the Trademark Trial and Appeal Board ("TTAB") for cancellation of the FLANAX registration based on deceptive use of the mark.⁷ Following the decision, Bayer filed a separate complaint against Belmora for false association and false advertising in the U.S. District Court for the Central District of California. At the same time, Belmora appealed the cancellation by filing a civil action under Section 21(b)(1) of the Lanham Act in the U.S. District Court for the Eastern District of Virginia, arguing the TTAB erred in its determination that: (1) Bayer had standing under § 14(3); and (2) that Belmora had misrepresented the source of its goods. Bayer's case against Belmora in the Central District of California was transferred to the Eastern District of Virginia and consolidated with Belmora's appeal.⁸

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The district court dismissed Bayer's claims and reversed the TTAB's decision, granting Belmora's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) and its Rule 12(c) motion for judgment on the pleadings on the trademark cancellation claim.⁹ The district court considered the "single question" of whether the Lanham Act allows the owner of a foreign mark, which is not used or registered in the U.S., to assert priority over a mark that is registered and used in the U.S. by another party.¹⁰ Under its reading of Lexmark, the district court concluded that the answer was no because there was no use of the mark in the U.S.¹¹

THE FOURTH CIRCUIT'S DECISION AND APPLICATION OF LEXMARK

On appeal, the Fourth Circuit held that the district court erred in requiring Bayer to have used the trademark in U.S. commerce to assert its claims, concluding that "the Lanham Act's plain language contains no unstated requirement that a § 43(a) plaintiff have used a U.S. trademark in U.S. commerce to bring a Lanham Act unfair competition claim."¹²

The Fourth Circuit relied upon the Supreme Court's two-step standing analysis in Lexmark International, Inc. v. Static Control Components, Inc.¹³ Specifically, pursuant to Lexmark, a plaintiff bringing a Lanham Act false advertising claim must show that: (1) the claim falls within the statute's "zone of interests," and (2) the plaintiff suffered injuries proximately caused by the unlawful conduct.¹⁴

The Fourth Circuit held that Bayer's Section 43(a) false association claim was adequately pleaded for purposes of the "zone of interests" prong because the allegations furthered the purposes of preventing "the deceptive and misleading use of marks."¹⁵ Similarly, the Section 43(a) false advertising claim fell within the Lanham Act's "zone of interests" by seeking to protect "persons engaged in commerce within the control of Congress against unfair competition."¹⁶

The Fourth Circuit also found that Bayer adequately pleaded economic and reputational injuries proximately caused by Belmora's deceptive conduct in creating a false connection between the two brands.¹⁷ For example, consumers of FLANAX products in Mexico may have been deceived into purchasing Belmora's product in the U.S., rather than waiting to buy the product on their return to Mexico.¹⁸ Likewise, the Fourth Circuit determined that allegations that Belmora used deceptive advertisements, capitalizing on Bayer's goodwill in the FLANAX mark, met the proximate cause requirement for the false advertising claim.¹⁹ For example, if Belmora had not implied in advertising that its FLANAX was the same brand trusted in Mexico, some consumers might have purchased Bayer's ALEVE product instead.²⁰

The Fourth Circuit also applied the Lexmark analysis to Bayer's Section 14(3) claim to cancel Belmora's FLANAX trademark registration, concluding that Bayer had standing to bring the claim.²¹ The court held that this cause of action also fell within the Lanham Act's zone of interests by addressing "deceptive and misleading use of marks" and that proximately-caused injury was adequately alleged.²² Therefore, the court held that the district court erred in reversing the TTAB's cancellation decision.²³

Although the Fourth Circuit's holding relied upon Lexmark, the Lexmark decision involved a dispute between two U.S. businesses and their U.S. brands. Specifically, plaintiff Static Control alleged that Lexmark disparaged its business and products by asserting that Static Control's business - selling components that allow manufacturers to refurbish Lexmark cartridges - was illegal.²⁴ Static Control's alleged "lost sales and damage to its business reputation" were "precisely the sorts of commercial interests" the Lanham Act protects.²⁵ As such, the Court held that Static Control was suing "as a 'perso[n] engaged...