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Decided: October 27, 2015

The Fourth Circuit concluded that the district court erred in reversing the U.S. Trademark and Appeal Board’s decision to cancel Belmora’s registration for the FLANAX mark based on deceptive use, and in dismissing Bayer Consumer Care AG’s false association and false advertising claim.  Therefore the court vacated and remanded the case for further proceedings.

Since the 1970’s, Bayer Consumer Care AG (“BCC”) owned the trademark “FLANAX” in Mexico and sold naproxen sodium pain relievers under that mark in Mexico and other parts of Latin America.  Belmora LLC owned the FLANAX trademark in the United States and used it in the U.S. since 2004 in the sale of its naproxen sodium pain relievers.  BCC and its U.S. sister company Bayer HealthCare LLC (“BHC,” and collectively with BCC, “Bayer”) contend that Belmora used the FLANAX mark to deliberately deceive Mexican-American consumers into thinking they were purchasing BCC’s product.  Belmora’s early FLANAX packaging closely mimicked BCC’s Mexican FLANAX in color scheme, font size and type face; Belmora made statements that its FLANAX brand was the same FLANAX produced by BCC in Mexico; and Belmora hired telemarketers to state that Belmora was “the direct producers of FLANAX in the U.S. and that “FLANAX is a very well known medical product in the Latino American market, For FLANAX is sold successfully in Mexico.”  Bayer pointed to evidence that these actions by Belmora resulted in Belmora’s distributors, vendors, and marketers believing that its FLANAX was the same or affiliated with BCC’s FLANAX.  Thus Bayer filed a petition with the U.S. Trademark Trial and Appeal Board (“TTAB”) to cancel Belmora’s registration, and also filed claims for false association and false advertising.

In dismissing Bayer’s false association and advertising claim, the district court concluded that 1) Bayer’s claims fell outside the Lanham Act’s “zone of interest”—and [were] not cognizable—“because Bayer does not possess a protectable interest in the FLANAX mark in the United States,” and 2) that a “cognizable economic loss under the Lanham Act” cannot exist as to a “mark that was not used in the United States commerce.”  However, the Fourth Circuit determined that the district court conflated the Lanham Act’s infringement provision in § 32, with unfair competition claims pled under § 43.  The plain language of § 43 does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action.  Under this section, it is the defendant’s use in commerce—Belmora’s FLANAX mark—that creates the injury under the terms of the statute.

What § 43(a) does require is that Bayer was “likely to be damaged” by Belmora’s “use [] in commerce” of its FLANAX mark and related advertisement.  The Supreme Court, in Lexmark International, Inc. v. Static Control Components, Inc., established two background principles to determine if a person met the “likely to be damaged” element of § 43(a).  First the plaintiff’s claim must fall within the zone of interest.  Second, the statutory cause of action must be limited to plaintiffs whose injuries were proximately caused by violations of the statute.  The Fourth Circuit concluded that BCC adequately pled a § 43(a) false association claim for purposes of the zone of interest prong because Belmora’s misleading association with BCC’s FLANAX caused BCC customers to buy the Belmora FLANAX in the US instead of purchasing BCC’s FLANAX in Mexico, which caused BCC to loose revenue.  Furthermore, by deceiving distributors and vendors, Belmora made FLANAX more available to consumers, which further exacerbated BCC’s losses.  The Court further concluded that BCC meet the second requirement of proximate cause because BCC identified economic or reputational injury flowing directly from the deception wrought by Belmora’s conduct.  Lastly, because the district court misinterpreted the language of the Lanham Act, the Fourth Circuit concluded that Bayer was entitled to bring its cancellation claim.

Accordingly, the Court vacated the district court’s judgement and remanded the case for further proceedings.

Full Opinion

Aleia M. Hornsby