Developments in a long-running lawsuit that centers on “reverse-domain-name hijacking” – and one that pits Vans against Walmart over footwear that allegedly infringes its OLD SKOOL trade dress – are putting the Supreme Court’s recent decision limiting the applicability of U.S. trademark law to work. In a July 27 request for additional briefing, Judge Jeremiah McCarthy of the U.S. District Court for the Western District of New York tentatively concluded that in light of SCOTUS’s decision in Abitron Austria v. Hetronic Intl. (and the Yegiazaryan v. Smagin case right before it), Plaintiff David Michaels’s claims against Agros Trading Confectionery (“Agros”) do not “arise under” federal law, and thus, the court may lack subject matter jurisdiction to grant such relief.
Some background on Michaels v. Agros: The case got its after a World Intellectual Property Organization (“WIPO”) Administrative Panel ordered that Michaels transfer certain “Sesame Snaps” domain names in his possession to Agros. The November 2016 transfer order was based, in large part, on Agros’s ownership of Canadian trademark registrations, and followed from a 2015 default judgment in Agros’s favor from an Ontario Superior Court in a case that Michaels was not a party to. Filing this suit in December 2016, Michaels – who registered various sesamesnaps domains and holds a U.S. registration for “Sesame Snaps” – sought a declaration that he has not violated the Anti-Cybersquatting Consumer Protection Act and is the rightful owner of the domains, and damages under 15 U.S.C. § 1114(2)(d)(iv).
In an opposition memo that he lodged on July 20, Michaels pointed the Supreme Court’s decision in Abitron, as well as Yegiazaryan v. Smagin, a RICO extraterritoriality case decided just one week before Abitron. In the latter, the court “resurrected a long-disused canon of statutory construction: The presumption against extraterritorial application of U.S. statutes,” per Michaels. Meanwhile, in Abitron, the court held that provisions of the Lanham Act “are not extraterritorial,” and that a claim based on conduct that “occurred in a foreign country … involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.” Consequently, Michael argued that “foreign conduct cannot be introduced at trial to establish a Lanham Act claim under the [aforementioned Lanham Act] provisions.”
Addressing Michaels’s memo, Judge McCarthy said that the discussion of the Abitron and Yegiazaryan cases led him “to question whether this court would have subject matter jurisdiction to grant that relief.” Delving in, he stated that “whether Michaels’s claim ‘arises under’ the [Lanham Act] depends on the meaning of the word ‘mark.’” Considering 15 U.S.C. §1127, which defines mark as including “any trademark,” as well as Yegiazaryanand Abitron, Judge McCarthy “concluded that this means a trademark obtained under the laws of this country.” He further held, citing Abitron, that “each country is empowered to grant trademark rights and police infringement within its borders.” Since the WIPO decision involved Canadian trademarks, the court “tentatively conclude[d] that Michaels’ claims do not ‘arise under’ [U.S.] federal law.”
Vans v. Walmart
Not the only recent argument that has relied on Abitron, Vans cited the case in a trademark-centric squabble, in which it is accusing Walmart of engaging in “an escalating campaign to knock off virtually all of [its] bestselling shoes” in the U.S. and in other countries. In a memo in opposition lodged on July 18, Vans asserted that while the Supreme Court’s decision in Abitron “limits and clarifies the test for extraterritorial application of the Lanham Act, it does not preclude discovery into the facts and information necessary to apply that test.”
In fact, under Abitron, discovery is “necessary” in cases – like this one – where “the evidence indicates that the first sale of the infringing goods occurred domestically, the sales at issue appear to be part of a common scheme controlled by a U.S. company, and the Canadian sales are allegedly diverted sales from the U.S.,” Walmart argued. Moreover, unlike in Abitron, Vans asserted that the foreign sales at issue here “do not benefit a foreign entity” because Walmart Canada is a wholly owned subsidiary of Walmart, Inc. At a minimum, Vans has maintained that it “is permitted discovery on these allegations that Walmart’s Canadian sales fall within the scope of the Lanham Act,” and “furthermore, even without discovery, the allegations as to Walmart’s conduct already demonstrate that there was use in commerce of the infringing marks in the United States, which satisfies Abitron.”
The Zoom Out: Reflecting on the outcome in the Abitron case, Michael Best’s Landon Glover and Emily Haas stated in a recent note that it is a “significant ruling for businesses that use, license, or distribute intellectual property in a foreign country,” as it indicates that having U.S. trademark rights, alone, will generally be “insufficient to stop foreign infringement or to recover damages for foreign infringing activity in a U.S. court, [and] instead, a business that suffers foreign trademark infringement will need to appeal to the foreign jurisdiction where the infringing activity occurs.”
From a practical point of view, the SCOTUS decision makes it clear that companies will need to build and maintain a brand protection strategy both domestically and abroad to “better position themselves in the event that they face infringing activity outside the U.S.,” per Glover and Haas. This may include “taking steps to register trademarks in the foreign jurisdictions where businesses use or license those marks; monitoring use of potentially infringing marks abroad; and working with legal teams to develop a trademark protection and enforcement strategy that covers both the foreign and domestic markets in which the business operates, whether directly or through licensees.”
What is less clear, of course, is how “use in commerce” is defined, as the court provides little guidance on this front in Abitron. In the very first court order to cite Abitron, which came by way of the Rockwell Automation v. Parcop S.R.L. case, the District of Delaware “distinguished the decision and rejected arguments that Plaintiff is prevented from using evidence of foreign infringing conduct to prove domestic infringement; in particular, evidence that Defendant sold counterfeit goods to customers in Europe as ‘circumstantial evidence’ of its counterfeit sales in the U.S.,” according to DLA Piper’s Marc Miller and Oscar Orozco-Botello. “We can expect that district courts” – such as the ones cited above – “will encounter similar creative arguments around foreign and domestic conduct and will begin to define what conduct constitutes a domestic ‘use in commerce’ when there is some nexus between infringement and foreign activity.”
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