"Versace to re-enter Japan," but does it still own its trademark there?

Posted by Charles Colman

One of the most common misconceptions about trademark rights is the notion that one automatically accrues rights abroad, when in fact intellectual property rights -- trademarks, copyrights, and patents alike -- are "territorial" in nature. "Territorial" rights apply, rather intuitively, only within the borders of the territory (typically, the country) where they are obtained.

 

So when I read that Versace has decided to "re-enter" the Japanese market, my ears perked up. If the company has good IP counsel, it undoubtedly took measures to protect its mark in Japan after it stopped doing business there in the summer of 2009. (Note: there are international protocols one can use to protect marks in certain foreign countries; direct registration with foreign governments is another option.)

 

Nevertheless, it seemed an appropriate time to point out to LOF readers, most of whom are in the U.S., that the general rule when it comes to trademark protection under the U.S. Lanham Act is "use it or lose it." Unlike copyright, for example, trademark protection stems from "use in commerce", and if you stop using your mark in commerce, you run the risk of someone else starting a business with a very similar -- perhaps identical -- name.

 

Most of the relevant case law available to U.S. lawyers involves foreign corporations attempting to enter the U.S. market and running into "senior users" of the mark. (If an American clothing company like the enthusiastically LOF-approved In God We Trust, wanted to expand into, say, Germany, and a German company had been doing business under a similar name, a German court would most likely adjudicate any dispute that arose.)

 

But let's look at a couple of reverse-scenario cases (as opposed to "reverse-case scenarios"), like the impossibly captioned case of Aktieselskabet AF 21. November 2001 v. Fame Jeans Inc.. In Fame Jeans, Danish corporation "Bestseller" had been selling "Jack & Jones" jeans since 1990, but did not decide to expand into North American until 2003. When it attempted to do so, it ran into a major obstacle in the form of Fame Jeans' prior registration of the "Jack & Jones" mark. The dispute worked its way up through the U.S. Patent and Trademark Office to the D.C. Court of Appeals, where the judge required Bestseller to show that it had used the J&J mark before the date of Fame's application. Bestseller tried to show use via sales, but the court demurred:


"Bestseller's allegations fall short of showing a sale, whether in the United States or to an American abroad, as the beginning of a continuous commercial exploitation of the Jack & Jones mark in the United States;  but they do give fair notice of a claim to analogous use.   While Bestseller clearly sells millions of dollars worth of Jack & Jones branded clothing elsewhere in the world, it fails to allege any sales in the United States or to Americans.   The closest Bestseller comes is saying this clothing 'has been available to U.S. consumers through Bestseller's foreign customers and stores as well as through re-sales on eBay.com.'  . . .  This allegation does not imply any American sales at all, much less continuous commercial sales."


On the other hand, the court found that Bestseller had alleged just enough research and marketing activity in the U.S. to give rise to a potential claim of "use in commerce" pre-dating Fame's trademark application. Separately, the court found that Bestseller had eked out a potential claim that Fame's trademark application was made without "a bona fide intent to use the mark," which -- if successfully proved on remand -- would render its registration invalid. (Civil procedure aficionados, or perhaps any lawyer who usually represents defendants, might argue that this case would come out differently today; the D.C. court's opinion predated a 2009 Supreme Court case that requires plaintiffs to pack their complaints with more details in order to survive the dreaded "motion to dismiss.")

 

By contrast, the Fourth Circuit Court of Appeals -- just next door to the D.C. Circuit -- deemed mere marketing activity insufficient to confer trademark rights, in the even-more-problematically-named International Bancorp v. Société des Bains de Mer et due Cercle des Étrangers à Monaco. Judge Luttig, writing for the majority, stated in characteristically brusque fashion that "a mark's protection may not be based on 'mere advertising.'" Yet all was not lost for the Monte Carlo Casino. The majority opinion continued:

 

"Because SBM [the foreign company] presented no record evidence that [it] did anything other than advertise the 'Casino de Monte Carlo' mark [in the U.S.], if its case rested on this alone, the plaintiff companies would have the better of the argument. . . . [However,] the record contain[s] evidence that United States citizens went to and gambled at the casino. This . . . makes unavoidable the legal conclusion that foreign trade was present here, and that as such, so also was 'commerce' under the Lanham Act."

 

Foreign companies should be wary of placing too much stock in International Bancorp, as other circuits have rejected its reasoning. (There was strong disagreement over the ruling, even at the time the Fourth Circuit issued its ruling: see egregiously overused term "vigorous dissent"; see also Justice Scalia, or more recently, Justice Stevens; see also "lawyer humor.")

 

The territoriality issue has been even further complicated by the so-called "famous marks" doctrine, which in essence, means that if a foreign mark is famous enough, that can kind-of-sort-of substitute for actual use in the U.S. But this doctrine has been recognized as a matter of federal law only in the Ninth Circuit (which, admittedly, includes the very important state of California, along with a host of other western states.)

 

The Second Circuit, however -- remember, this is the federal appellate court that covers New York -- conclusively rejected the "famous marks" doctrine as a matter of federal law just a few years ago, in ITC v. Punchgini. (The Supreme Court declined an invitation to resolve the "circuit split" that resulted from the Second and Ninth Circuits' diverging views.)

 

To make matters even more complicated, the Second Circuit in ITC included the caveat that while federal trademark law contain no "famous marks" doctrine, an appropriate foreign plaintiff might be able invoke the doctrine under New York state "misappropriation" law -- just not the party trying to use it in this case.

 

In short, the federal appellate courts are -- to use a decidedly non-technical term -- all over the place when it comes to what "use", if any, is required of a foreign corporation in order to establish "trademark priority" over a U.S. company who might otherwise be a "senior user" of a contested mark.

 

As for Versace and its renewed interest in the Japanese apparel market, who knows what measures the company took to protect its mark during its hiatus, or what Japanese courts would have to say about this hiatus. This guy might know the answer to the second question; otherwise, the magic words here, as is often the case when a party's rights hinge on non-U.S. law, are "foreign counsel."