Bayer feels the pain: branded Naproxen can't invoke the territoriality principle

This weblog has been existence for getting on for 12 years and many people erroneously assume that it was the first intellectual property weblog.  That is far from the case and, in particular, it was the inspiration of Marty Schwimmer's Trademark Blog that provided the impetus for the IPKat to take his first tentative paw-steps into the blogosphere.   Anyway, it is with great pleasure that the IPKat and Merpel welcome Marty has a guest contributor with the following item [Merpel calls it a "Marticle"] on a recent US District Court for the Eastern District of Virginia ruling, Belmora LLC v Bayer Consumer Care AG and Bayer Healthcare LLC, 1:14-cv-00847-GBL (EDVA Feb. 6, 2015), accessible here.  Writes Marty:

Article 6bis of the Paris Convention does not create an exception to the territoriality principle

Belmora's FLANAX ...

The US 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 trade mark 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).

Bayer, which had never used the mark FLANAX in the United States, alleged that a ‘significant number’ of US consumers were familiar with its Mexican FLANAX brand, and that Belmora's use of the same mark for the same product caused confusion in the US.

Bayer, through a predecessor in interest, had used FLANAX in connection with prescription analgesic Naproxen in Mexico since 1976 and obtained a Mexican trade mark registration for FLANAX. After Naproxen was approved for OTC use in Mexico, a mass-market version of FLANAX was launched in 2001-02.

... and Bayer's FLANAX

Belmora, a small US pharmaceutical company seeking to introduce Spanish-language packaging to the US OTC market, learned of Mexican FLANAX. Its investigation determined that Bayer was not selling in the product in the US, had not filed for US trade mark protection and had not listed its product with the US Food and Drug Administration (FDA). On this basis, Belmora filed a US trade mark application for FLANAX for Naproxen tablets in October 2003. Bayer’s predecessor, Hoffmann-La Roche, filed a US application for FLANAX in February 2004. Belmora’s application was however cited by the USPTO to block the Bayer application, which was then abandoned .

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

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

Bayer twice amended its petition to cancel, 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 Section 14(3) claim, based on facts disclosed in discovery, alleged that Belmora, through use of similar trade dress as well as certain statements in advertising, had intentionally suggested that it was related to Mexican FLANAX.

Unbranded Naproxen

The Board ultimately rejected the Section 2(d) claim because Bayer had not made use of the FLANAX trade mark in US commerce. It rejected the Article 6bis claim, concluding that Article 6bis does not create a right of action outside the Lanham Act. The Board did however ruled in favour 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 (CAFC). Although 15 U.S.C. Section 1071 provided for Bayer either to acquiesce in the CAFC appeal or to request that Belmora initiate a District Court forum, 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 trade mark) 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 trade mark rights in the US because it had never used the mark in the US. Belmora moved to dismiss the Section 43(a)(1)(B) false advertising claim on the ground it duplicated 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 a plaintiff to have recognized trade mark rights in the jurisdiction whether it seeks to enforce trade mark rights.

Bayer argued alternatively that its FLANAX mark was famous in the US 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, travel and immigration between Mexico and the US. The Court stated the question thus: 

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 answer, said the Court, was"no". Holding that neither fame nor ‘significant goodwill’ would constitute a source of priority rights, the Court dismissed the infringement and misrepresentation claims. Further, the absence of prior trade mark rights also deprived Bayer of standing to pursue the false advertising claims.

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-US 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. What's more, 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 US Court of Appeals for the Fourth Circuit decision in Barcelona.com, Inc v Excelentisimo Ayuntamiento de Barcelona, 330 F.3d 616 (4th Cir,. 2003, here) and the Second Circuit ruling in ITC Ltd v Punchgini, 482 F.3d 135 (2d Cir. 2007) (the Bukhara case, here) to the effect that those provisions give non-US 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. Thus Bayer, without use of a US trade mark in US commerce, did not have legal standing to prosecute any of its claims, and its misrepresentation, infringement and false advertising claims were therefore dismissed.

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