UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

____________________________________

)

BELL HELICOPTER TEXTRON INC., )

et al., )

)

Plaintiffs, )

)

v. ) Civil Action No. 06-1694 (ABJ)

)

ISLAMIC REPUBLIC OF IRAN, et al., )

)

Defendants. )

____________________________________)

MEMORANDUM OPINION 

This action involves a motion by defendant Islamic Republic of Iran (“Iran”) under

Federal Rules of Civil Procedure 60(b)(1), (4), and (6) to vacate a default judgment entered 

against it for a violation of the Lanham Act, 15 U.S.C. § 1125 (2006). Because the Court finds 

that defendant Iran has not waived sovereign immunity, it will grant its motion to vacate the 

default judgment pursuant to Rule 60(b)(4) [Dkt. #28] and dismiss the action for lack of subjectmatter jurisdiction.1

I. BACKGROUND

On September 29, 2006, plaintiffs Bell Helicopter Textron Inc. (“Bell”) and Bell 

Helicopter Textron Canada Ltd. (“Bell Canada”) filed a complaint in this Court against 

defendants Iran, Iran Aircraft Manufacturing Company (“HESA”), and Iran Helicopter Support 

& Renewal Company (“PANHA”), alleging trademark violations under the Lanham Act. 

Compl. [Dkt. # 1] ¶ 4.2. Defendants failed to appear, and on March 31, 2009, the Clerk of the 

Court found them to be in default. [Dkt. # 11]. On October 5, 2009, the Court then assigned to 

 

1 Because the Court finds that it does not have subject-matter jurisdiction over this action, 

it will not address defendant’s other Rule 60(b) grounds to vacate. 
2

the matter conducted an evidentiary hearing pursuant to the Foreign Sovereign Immunities Act

(“FSIA”) to determine whether plaintiffs had “establishe[d] [their] claim or right to relief by 

evidence satisfactory to the court.” 28 U.S.C. § 1608(e) (2006). [Dkt. # 28-2]. After concluding

that plaintiffs had adequately established their claim for relief, the Court issued Findings of Fact 

and Conclusions of Law (“Findings of Fact”) [Dkt. # 17] and entered a default judgment against 

defendant Iran in the amount of $22,532,127.28 on February 11, 2011. Order and Judgment 

[Dkt. # 18].2

The evidentiary hearing focused on the merits of plaintiffs’ claims; plaintiffs submitted 

evidence regarding trademark infringement, dilution, and tarnishment, as well as the amount of

the damages. Transcript of Hearing (“Tr.”) [Dkt. # 28-2] at 3–4. The hearing did not 

specifically address whether the Court had subject matter jurisdiction to hear the case. Id. But 

the Findings of Fact contained the conclusion that jurisdiction was established because defendant

had waived its sovereign immunity under the FSIA since “plaintiffs have demonstrated both that 

Iran engaged in commercial activity outside of the United States and that the commercial activity 

caused a direct effect in the United States.” Findings of Fact at 5. 

Evidence presented at the hearing demonstrated that since 2001, defendant had been 

manufacturing helicopters that copied the distinctive trade dress of plaintiffs’ “Bell 206.” Tr. 

at 18; Findings of Fact at 3 ¶¶ 9–11, 15. The defendant’s aircraft, known as the “Shahed 278,”

and the militarized version, the “Shahed 285,” were marketed to foreign customers at an air show 

on an island off the coast of Iran and were advertised in international aviation magazines. Tr.

at 18. The witnesses presented expressed the belief that international customers might purchase 

 

2 Judgment was only sought and granted against defendant Iran, not defendants HESA or 

ANHA. Order and Judgment, Feb. 11, 2011. Accordingly, only defendant Iran has moved to 

vacate the default judgment. 
3

defendant’s helicopters thinking that they were actually Bell helicopters and expecting 

performance similar to that of a Bell helicopter. Tr. at 42, 48. Finding that plaintiffs’ customers 

were likely to be confused as to the source or origin of the products sold by defendant, id. at 8, 

the Court awarded plaintiffs treble damages of $19.5 million, $2.5 million in pre-judgment 

interest, and nearly $500,000 in attorney’s fees. Findings of Fact at 3, 9; Order of Default 

Judgment [Dkt. # 18].

Defendant received notice of the default judgment [Dkt. # 20] on August 17, 2011. On

February 10, 2012, it filed a motion to vacate the judgment pursuant to Federal Rules of Civil 

Procedure 60(b)(1), (4), and (6) on the grounds that the court lacked subject matter jurisdiction.

Def.’s Mem. in Supp. of Mot. to Vacate Default J. (“Def.’s Mem.”) [Dkt. # 28] at 2–3, 10.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 60(b) permits a court to relieve a party from a judgment 

or order for any one of six reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) 

newly discovered evidence; (3) fraud, misrepresentation, or other misconduct by an opposing 

party; (4) a void judgment; (5) a satisfied, released, or discharged judgment; or (6) any other 

reason justifying relief. Fed. R. Civ. P. 60(b). A motion to vacate on one of the first three 

grounds must be made within one year, and all motions must be made “within a reasonable 

time.” Fed. R. Civ. P. 60(c)(1). “The party seeking relief from judgment bears the burden of 

proof.” Norris v. Salazar, 277 F.R.D. 22, 25 (D.D.C. 2011). 

Rule 60(b)(4) applies if a judgment is void, a judgment is considered to be void “if the 

court lacked . . . subject-matter jurisdiction in the case.” Ramirez v. Dep’t of Justice, 680 F. 

Supp. 2d 208, 210 (D.D.C. 2010). “[I]f the judgment is void, relief is mandatory.” Combs v. 

Nick Garin Trucking, 825 F.2d 437, 441 (D.C. Cir. 1987). 
4

A court lacks subject-matter jurisdiction over a foreign state “except as provided . . . by 

nine specifically enumerated exceptions . . . . If no exception applies, a foreign sovereign’s 

immunity under the FSIA is complete: the district court lacks subject matter jurisdiction over the 

plaintiff’s case.” Phoenix Consulting Inc. v. Republic of Angl., 216 F.3d 36, 39 (D.C. Cir. 2000). 

III. ANALYSIS

A. Because jurisdiction has never been litigated, the Court must conduct its own de 

novo analysis of the jurisdictional question.

The Supreme Court has explained that a judgment is void under Rule 60(b)(4) if the court 

that entered it lacked jurisdiction over the case. United Student Aid Funds, Inc. v. Espinosa, 130

S. Ct. 1367, 1377 (2010). However, “[a] judgment is not void . . . simply because it is or may 

have been erroneous.” Espinosa, 130 S. Ct. at 1377 (internal citation omitted). Nor is a motion 

under Rule 60(b)(4) a substitute for a timely appeal. Id. “Instead, Rule 60(b)(4) applies only in 

the rare instance where a judgment is premised either on a certain type of jurisdictional error or 

on a violation of due process that deprives a party of notice or the opportunity to be heard.” Id.,

citing United States v. Boch Oldsmobile, Inc., 909 F.2d 657, 661 (1st Cir. 1990).3

 

3 Plaintiffs have argued that defendant’s motion under Rule 60(b)(4) is untimely. Pls.’ 

Mem. in Opp. to Def.’s Mot. to Vacate Default J. (“Pls.’ Opp.”) [Dkt. # 32] at 3 n.3. Although 

plaintiffs cite cases that held that Rule 60(b)(4) motions are generally considered to be untimely 

if they are filed three months after judgment, those cases involved grounds other than subjectmatter jurisdiction. Id., citing e.g., Brannum v. Buriltanu, No. Civ. A. 96-302, 1999 WL 680007, 

at *1–2 (D.D.C. July 28, 1999) (finding that the plaintiff’s motion for relief from judgment was 

untimely after failing to respond to defendant’s motion to dismiss after four months). But a Rule 

60(b)(4) motion attacking a default judgment for lack of subject-matter jurisdiction can be 

brought regardless of the amount of time that has passed, even if the motion is brought more than 

a year after the entry of judgment. See Practical Concepts v. Republic of Bol., 811 F.2d 1543, 

1545 (D.C. Cir. 1987) (ruling that the district court was correct to consider the merits of 

Bolivia’s Rule 60(b)(4) motion more than a year after the entry of judgment); Von Dardel v. 

Union of Soviet Socialist Republics, 736 F. Supp. 1, 8 (D.D.C. 1990) (granting the Soviet 

Union’s motion to vacate default judgment for lack of subject-matter jurisdiction more than three 

years after entry of default judgment). 
5

Here, defendant contends that the judgment is void because the Court lacked subject 

matter jurisdiction to enter it. Def.’s Mem. at 2. And the law is clear that “every federal court 

has a ‘special obligation to satisfy itself’ of its own jurisdiction before addressing the merits of 

any dispute.” Dominguez v. UAL Corp., 666 F.3d 1359, 1362 (D.C. Cir. 2012), quoting Bender 

v. Williamsport Area School Dist., 475 U.S. 534, 541 (1986).

Plaintiffs respond that a defendant cannot obtain relief from a default judgment for lack 

of jurisdiction unless “the court that rendered judgment lacked even an ‘arguable basis’ for 

jurisdiction.” Pl.’s Opp. at 4, citing Espinosa, 130 S. Ct. at 1377. Plaintiffs direct the Court to 

the following passage from Espinosa:

Federal courts considering Rule 60(b)(4) motions that assert a judgment is 

void because of a jurisdictional defect generally have reserved relief only 

for the exceptional case in which the court that rendered judgment lacked 

even an “arguable basis” for jurisdiction. Nemaizer v. Baker, 793 F.2d 58, 

65 (2d Cir. 1986); see, e.g., Boch Oldsmobile, supra, at 661–662 (“[T]otal 

want of jurisdiction must be distinguished from an error in the exercise of

jurisdiction, and . . . only rare instances of a clear usurpation of power will 

render a judgment void . . . .”).

130 S. Ct. at 1377. But plaintiffs’ argument mischaracterizes what the Supreme Court actually 

said in Espinosa. The Court did not hold that the test should be simply whether there was any 

arguable basis for jurisdiction, or that in reviewing a judgment under Rule 60(b)(4), a district 

court is limited only to those circumstances where there has been a clear usurpation of power. In 

fact, the Court expressly declined to address that question in the paragraph immediately 

following the quote provided by plaintiffs:

This case presents no occasion to engage in such an “arguable basis” 

inquiry or to define the precise circumstances in which a jurisdictional 

error will render a judgment void because [defendant] does not argue that 

[the court’s] error was jurisdictional.

Id.
6

The Third Circuit recently grappled with what Espinosa might mean in Aurum Asset 

Managers, LLC v. Bradesco Companhia de Seguros, 441 Fed. App’x 822, 824–25 (3d Cir. 

2011). In that case, a Brazilian-owned company moved to vacate a judgment enforcing an 

arbitration award against it. Id. at 823. As in this case, the motion to vacate was filed in the 

district court almost a year after the original order was entered. Id. at 823–24; Aurum Asset 

Managers, LLC v. Banco Do Estado Do Rio Grande Do Sul, Misc. No. 08-102, 2010 WL 

4027382, at *1 (E.D. Pa. 2010). The district court ruling on the motion considered the question 

of jurisdiction de novo and vacated the order on the grounds that the court lacked jurisdiction 

under the FSIA to confirm the arbitration award and enter judgment in the first place. Aurum,

2010 WL 4027382, at *7.

On appeal, the Third Circuit took note of the Supreme Court’s observation in Espinosa

that Rule 60(b)(4) had generally been applied “only in the ‘rare instance’ that there is a 

jurisdictional error,” and that the jurisdictional error must involve a “clear usurpation of power.” 

Aurum, 441 Fed. App’x at 824 (internal citation omitted). But the court noted that it was also 

compelled to follow certain well-established principles of federal jurisdiction. First, the court 

observed that “jurisdiction is a fundamental pre-requisite to the exercise of judicial power.” Id.,

citing Ex Parte McCardle, 74 U.S. 506, 514 (1869) (“Without jurisdiction the court cannot 

proceed at all in any cause.”). Second, the court noted that a defendant is “always free to ignore 

the judicial proceedings, risk a default judgment, and then challenge that judgment on 

jurisdictional grounds in a collateral proceeding.” Id., quoting Budget Blinds, Inc. v. White, 536 

F.3d 244, 259 (3d Cir. 2008).

This principle is binding in the D.C. Circuit as well. See Practical Concepts, 811 F.2d at 

1547 (“[T]he defendant may refrain from appearing, thereby exposing himself to the risk of a 
7

default judgment. When enforcement of the default judgment is attempted, however, he may 

assert his jurisdictional objection. If he prevails on the objection, the default judgment will be 

vacated.”).

The Aurum court then reconciled these two principles by articulating a rule that “the 

‘clear usurpation standard’ for vacating an order . . . only applies in circumstances in which the 

parties have had their day in court on the issue of jurisdiction such that re-litigation of the issue is 

barred by principles of res judicata.” Aurum, 441 Fed. App’x at 825 (internal citation omitted)

(italicization added).4 Ultimately, the court found that the parties in the case before it had not 

had an opportunity “to fully and fairly litigate the issue of subject matter jurisdiction,” which 

were “prerequisites to res judicata.” Aurum, 441 Fed. App’x at 825 (internal citations omitted)

(italicization added).5 Because the original determination that jurisdiction existed was made in 

 

4 The court distinguished those cases where jurisdiction had already been fully litigated at 

the outset. Aurum, 441 Fed. App’x at 825 (finding that there was no clear usurpation of authority 

because “the parties had appeared and litigated the issue of jurisdiction”), citing Marshall v. Bd. 

of Educ., 575 F.2d 417, 422 (3d Cir. 1978); United States v. Tittjung, 235 F.3d 330, 342 (7th Cir. 

2000); Nemaizer v. Baker, 793 F.2 58, 64 (2d Cir. 1986) (same). 

5 Plaintiffs cite a number of cases in which they claim that courts applied the Espinosa

standard to a Rule 60(b)(4) motion where jurisdiction had not previously been litigated. Pls.’ 

Supp. Mem. [Dkt. # 35] at 2–6. None of those cases are controlling precedent on this Court. 

Moreover, the majority of the cases address different factual circumstances than this case 

because, as defendant points out, “the party seeking Rule 60(b) relief in those cases had 

previously participated in the litigation that led to the judgment against it, as in Espinosa itself.”

Def.’s Opp. to Pls.’ Supp. Mem. at 1–4, citing, e.g., U.S. v. Zimmerman, No. 11-4604, 2012 WL 

3264876, at *3 (3d Cir. Aug. 13, 2012) (“[A]fter appearing in the case, admitting that the District 

Court had jurisdiction, allowing the District Court to enter final judgment against them, and 

failing to take a direct appeal of that final judgment, the District Court’s exercise of subject 

matter jurisdiction is res judicata.”) (italicization added). Only two of the ten cases cited by 

plaintiffs address a situation similar to this case, where defendant never appeared and jurisdiction 

had not originally been litigated. In re Bryan, 429 B.R. 1, 4 (Bankr. D. Colo. 2010); U.S. v. 

Billion Int’l Trading, Inc., No. 11-cv-2753-WSD, 2012 WL 1156356, at *1 (N.D. Ga. Apr. 5, 

2012). Because this Circuit has not adopted that approach, and the Third Circuit’s analysis is 

more consistent with the clear limits on federal jurisdiction, the Court declines to follow them. 
8

error, the circuit affirmed the district court’s conclusion that the order confirming the arbitration 

award should be vacated for lack of subject matter jurisdiction.

This Court finds the analysis set forth by the Third Circuit to be persuasive and consistent 

with the clear directives in this Circuit on the question of subject matter jurisdiction. Therefore,

the threshold issue this Court must resolve is whether the jurisdictional question in this case has 

been fully and fairly litigated. Reviewing the record in this case, the Court cannot conclude that 

it has. Defendant did not participate at all in the proceedings and so the question was never put 

directly to the court to resolve. There was a clerk’s entry of default [Dkt. # 11] and the trial court 

ordered that a hearing be held – but this hearing concerned the issue of damages only.6 Minute 

Order, July 23, 2009 (“Upon consideration of the default that was entered against defendant the 

Islamic Republic of Iran on March 31, 2009, it is hereby ORDERED that a hearing on damages 

is scheduled for September 15, 2009, at 12:30 p.m.”). At that hearing, plaintiffs submitted 

exhibits, witnesses, and a trial brief, and the Court made Findings of Fact and Conclusions of 

Law, but those were for the purpose of determining the amount of the default judgment. Minute 

Entry, Oct. 05, 2009. Although the Court made a summary finding that defendant was engaged 

in commercial activity that caused a direct effect in the United States, Findings of Fact 

[Dkt. # 17] at 5, that finding was not the subject of any sort of adversary process, and the Court 

did not elaborate upon the reasoning behind that conclusion. Since the matter has not been 

previously litigated, and certainly not “fully and fairly,” the Court will conduct a de novo review 

to determine whether it has subject-matter jurisdiction.

 

6 Although the hearing was docketed as a “damages hearing,” the transcript of the 

proceeding indicates that plaintiffs also presented evidence to support the evidentiary basis for 

plaintiffs’ claim that a trademark violation took place. Tr. at 3. 
9

B. Iran did not waive its sovereign immunity under the FSIA.

Under the FSIA, “a foreign state is presumptively immune from the jurisdiction of the 

United States courts,” and “unless a specified exception applies, a federal court lacks subjectmatter jurisdiction over a claim against a foreign state.” Saudi Arabia v. Nelson, 507 U.S. 349, 

355 (1993); see 28 U.S.C. § 1605 (2006). These exceptions provide “the sole basis for obtaining 

jurisdiction over a foreign state in the courts of this country.” Nelson, 507 U.S. at 355, quoting 

Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 443 (1989) (internal 

quotation marks omitted). In other words, the strong presumption under the FSIA is that there is 

no jurisdiction over foreign sovereigns, and American courts cannot hear a case brought against 

them unless one of the exceptions applies – even in situations where the wrongfulness of the 

foreign sovereign’s conduct is clear and indisputable.7 Plaintiffs contend that the relevant 

exception here is the commercial activity exception, which provides for jurisdiction in cases “in

which the action is based upon . . . an act outside the territory of the United States in connection 

with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the 

United States.” 28 U.S.C. § 1605(a)(2). 

1. What constitutes a “direct effect” under the FSIA?

While the record supports – and neither party disputes – the finding that Iran engaged in 

“commercial activity” in this instance, the question of whether that activity had a “direct effect in 

the United States” is more difficult. Essentially, plaintiffs argue that this Court can exercise

jurisdiction because defendant’s conduct had an effect in the United States. See Pls.’ Opp. at 5–

 

7 Because the FSIA presumes the absence of jurisdiction, plaintiffs’ many citations to 

personal jurisdiction cases and FSIA cases that simply recite personal jurisdiction cases are not 

germane. Under state long arm statutes, the presumption tends to be just the opposite: that there 

will be jurisdiction unless it offends due process. See, e.g., CYBERsitter v. China, 805 F. Supp. 

2d 958, 966–967 (C.D. Cal. 2011) (discussing personal jurisdiction test). 
10

7. But that is not the relevant inquiry. The record must establish that the conduct had a “direct”

effect before the presumption of sovereign immunity can be overcome. 

The Supreme Court has instructed that for FSIA purposes, a direct effect “follows as an 

immediate consequence of the defendant’s activity.” Republic of Arg. v. Weltover, Inc., 504 U.S. 

607, 618 (1992) (emphasis added) (internal citation and quotation marks omitted). The FSIA 

does not permit jurisdiction over foreign sovereigns when the complained of effects are 

attenuated, remote, or speculative. Id. at 618. 

A direct effect “has no intervening element, but, rather, flows in a straight line without 

deviation or interruption.” Upton v. Empire of Iran, 459 F. Supp. 264, 266 (D.D.C. 1978), aff’d 

607 F.2d 494 (D.C. Cir. 1979); Bao Ge v. Li Peng, 201 F. Supp. 2d 14, 24 (D.D.C. 2000) 

(internal citation and quotation marks omitted), quoting Princz v. Fed. Republic of Germany,

26 F.3d 1166, 1172 (D.C. Cir. 1994). Thus, as the D.C. Circuit explained in Princz, and another

court in this district reiterated in Bao Ge, an effect is not direct if “many events and actors 

necessarily intervened” between the act perpetrated overseas and the impact felt here. Princz, 26 

F.3d 1172; Bao Ge, 201 F. Supp. 2d at 24.

Following that reasoning, in Virtual Countries, Inc. v. Republic of S. Afr., 300 F.3d 230, 

238 (2d Cir. 2002), the Second Circuit determined that a press release issued by the Republic of 

South Africa did not have a direct effect in the United States because “the press release’s effect 

falls at the end of a long chain of causation and is mediated by numerous actions by third 

parties.” Id. at 237. The court found that because, at a minimum, two different groups of 

independent actors – first, the press and second, investors, potential investors, and business 

partners – were required to intervene “between the issuance of the press release and any alleged 

injurious effect on the plaintiff,” there was no direct effect in the United States. Id. “The press 
11

release’s effect thus depended crucially on variables independent of the Republic. This tangled 

causal web does not provide the requisite immediacy to establish jurisdiction.” Id. at 237–38, 

citing Weltover, Inc., 504 U.S. at 618. 

Moreover, according to the D.C. Circuit, a direct effect requires that “something legally 

significant actually happened in the United States.” Zedan v. Kingdom of Saudi Arabia, 849 

F.2d 1511, 1515 (D.C. Cir. 1988); see also Gregorian v. Izvestia, 871 F.2d 1515, 1527 (D.C. Cir. 

1989). In Zedan, the court explained that in cases where it has found direct effects, “the foreign 

sovereign caused a ‘substantial’ and ‘direct and foreseeable’ effect in the United States.” Zedan,

871 F.2d at 1515 (internal citation omitted).8 And therefore, courts have concluded that “[a]

financial loss in the United States, when all the acts giving rise to the claim occur outside this 

country, is insufficient to show the ‘direct effect’ in the United States that FSIA requires.” 

BPA Int’l, Inc. v. Kingdom of Swed., 281 F. Supp. 2d 73, 81 (D.D.C. 2003); see also Ge v. Peng,

201 F. Supp. 2d 14, 24–25 (D.D.C. 2000).

2. Plaintiffs’ theories of “direct effect”

At the outset, the Court notes that all of defendant’s actions took place outside of the 

United States. Defendant manufactured the helicopters in a plant in Iran, Tr. at 12, and it 

promoted the helicopters at an international air show that is held in Iran, which is attended by 

international customers. Findings of Fact at 3 ¶ 15. While plaintiffs expressed concern at the 

hearing that defendant would sell its helicopters to other foreign countries, Tr. at 36, 44, 46, 48, 

 

8 See also Samco Global Arms, Inc. v. Arita, 395 F.3d 1212, 1217 (11th Cir. 2005) (finding 

that alleged injuries were too indirect and speculative to constitute direct effects); United World 

Trade, Inc. v. Mangyshlakneft Oil Prod. Ass’n, 33 F.3d 1232, 1238 (10th Cir. 1994) (“Congress 

did not intend to provide jurisdiction whenever the ripples caused by an overseas transaction 

manage eventually to reach the shores of the United States.”). 
12

they cannot be sold in the United States because they do not meet American certification 

requirements. Id. at 45, 55. 

Thus, plaintiffs do not even attempt to argue that any act of legal significance happened 

in the United States. Instead, their claimed direct effects boil down to potential financial and 

reputational loss. They argue that there are four reasons why the record supports a finding of 

“direct effects” in the United States: (1) infringement of intellectual property owned by a U.S. 

company causes “direct effects” in the United States; (2) their argument is grounded in “basic 

economic logic;” (3) the financial loss by plaintiffs was so significant to rise to the level of direct 

effects; and (4) defendant’s counterfeiting caused confusion within the United States. Pls.’ Opp.

at 5–6. Defendant contends that as in Virtual Countries, this case lacks the necessary direct 

effect because plaintiffs’ alleged injury “depends on middlemen – that is, depends on consumers 

outside the United States confusing [defendant’s] products with [p]laintiffs’ products, and 

therefore electing not to purchase a Bell helicopter.” Def.’s Mem. at 5. 9

The Court will address argument each in turn. 

a. The infringement of intellectual property owned by a United States company does 

not necessarily cause a “direct effect” in the United States.

Plaintiffs contend that for purposes of trademark infringement, the location of the harm is 

the location of the harmed company, and the fact of the trade dress infringement alone 

constitutes a “direct effect” in the United States, and therefore, a waiver of sovereign immunity,

 

9 Plaintiffs claim that it is up to defendant to demonstrate that none of these arguments 

provides “an arguable basis” for jurisdiction under Espinosa, id. at 7, but as explained above, 

that is not the proper legal standard. 
13

as a matter of law. Id. at 5–6.10 In support of this argument, plaintiffs point to only one case 

involving the FSIA, CYBERsitter, 805 F. Supp. 2d at 977, which is not binding on this Court.

In CYBERsitter, a district court in California held that the misappropriation of 

copyrighted computer code and its resale in China by Chinese-owned companies had a “direct 

effect” in the United States because the owner of the code was located in the United States. 805 

F. Supp. 2d at 976–77. Therefore, the court found that China had waived its sovereign immunity

through the commercial activity exception of the FSIA. Id.11 Here, because defendant allegedly

misappropriated a trademark belonging to an American company, plaintiffs claim that there was

a “direct effect” in the United States and that Iran’s sovereign immunity has been waived.

But CYBERsitter provides little guidance because the opinion does not explain the 

reasoning behind the conclusion that there was a direct effect in the United States. The court 

simply states: “[b]ecause the locus of that injury occurred at Plaintiff’s principal place of 

 

10 Defendant submits that this is too remote, and that for confusion to be a direct effect, the 

international consumers would themselves need to be confused, come to America, and pass that 

confusion along to the point that Bell’s sales would decline more than a trivial amount. Def.’s 

Mem. at 4–5.

11 Bell cites other cases supporting the proposition that the harm caused by copyright or 

trademark infringement is inflicted at the location of the injured company, but CYBERsitter is its 

most relevant supporting case. The other cases were used to establish personal jurisdiction over 

the defendants, not subject-matter jurisdiction, and they did not involve the FSIA. See Penguin 

Grp. (USA) Inc. v. Am. Buddha, 640 F.3d 497, 500–01 (2d Cir. 2011) (holding that the district 

court had personal jurisdiction over the defendant when the site of a copyright owner’s alleged 

injury is the location of the copyright owner); McGraw-Hill Cos. v. Ingenium Techs. Corp., 375 

F. Supp. 2d 252, 256 (S.D.N.Y. 2005) (holding that because “trademark infringement cause[s] 

injury in the state where the allegedly infringed intellectual property is held,” the court had 

personal jurisdiction over the infringing party). One case cited by Bell, and the only one from 

this district, actually cuts against Bell’s argument. Nu Image, Inc. v. Does 1–23,322, 799 F. 

Supp. 2d 34, 39 (D.D.C. 2011) (“[T]he District of Columbia Circuit has held that economic 

injury does not necessarily occur where the plaintiff is domiciled, but rather that the site of the 

injury is the location of the original events that caused the alleged injury.”) (internal citation and 

quotation marks omitted). 
14

business in California, the PRC’s actions had a direct effect in the United States.” Id. at 977, 

citing Panavision Int’l v. Toeppen, 141 F.3d 1316, 1322 n.2 (9th Cir. 1998). But Panavision is a 

personal jurisdiction case that simply says that a corporation has been injured where its 

headquarters are located, so the case does not the address question that is before this Court.

Panavision, 141 F.3d at 1322 n.2. Moreover, the district court’s conclusion in CYBERsitter –

that a Lanham Act violation constitutes a direct effect for FSIA purposes – does not grapple with 

the different presumptions involved in a personal jurisdiction analysis and waiver of sovereign 

immunity analysis under the FSIA. Most important, the conclusion does not comport with the 

law in this Circuit or the Supreme Court precedent about the requirements of a direct effect,

namely, that conduct that requires the participation of a series of actors and events before the 

harm can be felt, cannot constitute a direct effect.

CYBERsitter also can be distinguished factually from the present situation because, in 

that case, the infringing company made the software available for download to individuals in the 

United States over the worldwide web. CYBERsitter, 805 F. Supp. 2d at 968. Here, it has not 

been shown that the infringing aircraft were marketed in the United States. Tr. at 44 (“Q: [C]an 

you think of any reason why the Islamic Republic of Iran would adopt Bell’s trade dress in the 

design of their own helicopter? A: The only reason I could think of and the obvious reason 

would be to introduce it into a Third World market.”). Indeed, defendant’s helicopters could not

be sold in America at all since they did not meet the strict certification requirements. Id.

b. “Economic logic” also does not establish a direct effect.

Plaintiffs next contend that “courts routinely accept arguments grounded in ‘basic 

economic logic’” and that “the general rule in economics is that price decreases with increasing 

supply.” Pls.’ Opp. at 5 (internal citation omitted). According to plaintiffs, because the supply 
15

of helicopters and parts bearing plaintiffs’ trade dress has increased in the worldwide market, 

plaintiffs’ inventory and intellectual property in the United States have been devalued. Id. at 5–

6. While it may be true that courts “routinely accept” economically logical arguments in other 

contexts, none of the cases cited by plaintiffs involve the FSIA. Id., citing Citizens for Envtl.

Quality v. United States, 731 F. Supp. 970, 993–94 (D. Colo. 1989) (involving the National 

Forest Management Act) and Adams v. Watson, 10 F.3d 915, 923 (1st Cir. 1993) (alleging 

unconstitutional enforcement of a Massachusetts milk pricing order). So while there is precedent 

to support the unremarkable proposition that courts may accept arguments that rely on basic 

“economic logic” to support a finding of harm, that precedent does not go so far as to overturn 

the presumption of sovereign immunity. Even if the Court were to adopt plaintiffs’ explanation 

of how they were harmed because it is economically sound, that would only get plaintiffs as far 

as establishing that financial losses occurred, which, the D.C. Circuit has been clear, does not in 

and of itself constitute a direct effect in the United States.

c. Bell’s financial losses do not constitute a “direct effect.”

Since financial injury alone will not suffice, plaintiffs offer up the theory that because the 

financial effect of Iran’s alleged counterfeiting was so large, it should be considered a per se 

“direct effect.” Pls.’ Opp. at 6. There is no case that stands for this proposition.

The court found that Bell was due $19.5 million in treble damages as a result of Iran’s 

counterfeiting. Findings of Fact at 9. But this is a purely financial loss, and there is no dispute 

that “mere financial loss due to commercial activity abroad is not, in itself, sufficient to form a 

“direct effect.” Millicom Int’l Cellular v. Republic of Costa Rica, 995 F. Supp. 14, 22 (D.D.C. 

1998) (internal citation omitted). Plaintiffs claim that this case involves more than just financial 

loss, because defendant “specifically targeted trade dress registered with the U.S Patent and 
16

Trademark Office, and owned by a United States corporation.” Pl.’s Opp. at 6 (internal citations 

omitted). But the case plaintiffs rely on to support the proposition that courts are willing to 

characterize effects as “direct” when they are deliberate is distinguishable. Id., citing Virtual 

Def. & Dev. Int’l, Inc. v. Republic of Mold. 133 F. Supp. 2d 1, 7 (D.D.C. 1999). In that case, the 

court found a direct effect because the complaint alleged a breach of contract and payments were 

to be made in the United States. Virtual Def. & Dev. Int’l, Inc., 133 F. Supp. 2d at 7. Also, there 

was another independent exception under the FSIA that applied because the foreign country’s 

agents were operating in the United States. Id. Neither of those considerations is present in this 

case. The other case cited by plaintiffs, Gilson v. Republic of Ir., 682 F.2d 1022 (D.C. Cir. 

1982), includes language discussing the legislative purpose underlying the FSIA that arguably 

supports plaintiffs’ argument, but it does not hold that significant financial consequences can 

supply the necessary direct effects. Id. at 1028. Indeed, the D.C. Circuit expressly stated: “[w]e 

are not making a final factual determination of whether jurisdiction exists.” Id. at 1026.

While it is true that a court can find a direct effect in the United States if a party 

demonstrates there have been other effects in addition to financial harm, nothing in the record 

supports that finding here. In McKesson HBOC, Inc. v. Islamic Republic of Iran, the D.C. 

Circuit held that Iran’s expropriation of an American corporation’s minority interest in a 

company constituted a “direct effect” in the United States. 271 F.3d 1101, 1105 (D.C. Cir. 

2001), vacated in part on other grounds. In McKesson, the court stated that although the loss of 

dividends alone was not enough to find a “direct effect” in the United States, there was also “the 

cut-off of the constant flow of capital, management personnel, engineering data, machinery, 

equipment, materials, and packaging” between the American and Iranian companies as well as

the “abrupt end of McKesson’s role as an active investor [in the foreign company]” that 
17

supported a finding of direct effects. Id. (internal citations and quotation marks omitted). In this 

case, nothing in the record from the evidentiary hearing suggests that plaintiffs remain involved 

in Iran, that there were any contractual obligations due in the United States, or that there was any

back-and-forth transmittal of materials, persons, capital, or ideas. Plaintiffs’ involvement in Iran 

ended in 1979, at the time of the Iranian Revolution, Tr. at 11,12 so the only harm to the company 

in the United States is financial loss. 

d. Plaintiffs’ claim that consumers were confused by Iran’s conduct does not 

establish a “direct effect”.

Finally, plaintiffs argue that consumers in America have been confused by defendant’s

production of helicopters with plaintiffs’ trade dress. They direct the Court to testimony from a 

domestic helicopter customer who said he “basically thought that Bell was allowing someone 

else a license to build their aircraft” when he was first shown the pictures of Iranian copies. Id.

at 42. However, the witness testified that once he read the caption underneath the picture, he was 

no longer confused as to the source of the helicopter’s origin. Id. It is true that the witness did 

go on to opine that other consumers would believe the Shaheed 278 to be a Bell product, id., but 

he made it clear that defendant’s helicopters would not be able to meet American or European 

certification requirements so they could not enter the domestic stream of commerce. Id. at 44.

At most, this testimony establishes that defendant’s conduct had an “effect” in the United 

States, but it does not, as plaintiffs claim, establish that the effect was direct as that term has been 

defined by the courts. Thus, the four theories advanced by plaintiffs are not sufficient to 

overcome the presumption of sovereign immunity in this case. 

3. The record before the Court does not establish a direct effect.

 

12 The record shows plaintiffs had a factory in Iran to manufacture helicopters for the 

Iranian government. Tr. at 12. After the Iranian Revolution, plaintiffs abandoned the factory 

and it is now being used by defendant to manufacture its helicopters. Id. 
18

Neither party focused extensively on the concept of directness in its pleadings, and 

neither undertook a close examination of the record with those legal principles in mind. So, the 

the Court conducted its own review of the transcript from the evidentiary hearing [Dkt. # 28-3],

and it concludes that there is no record evidence of any acts – much less legally significant acts –

occurring in the United States. Furthermore, the record reveals that all of the effects plaintiffs 

claim they could or did experience are dependent upon the actions of third parties and a chain of 

intervening events. Thus, the evidence is insufficient to establish the direct effect required to 

remove the protection of sovereign immunity. 

The following evidence was introduced at the hearing:

Plaintiffs’ first witness was David Chant, an attorney who represented plaintiffs in Texas. 

He testified that defendant had been displaying its helicopter prototype at an air show on an 

island of Iran where an international air show is held each year. Tr. at 18. He also testified that 

as of 2007, defendant had built at least five of the infringing helicopters, Shahed 278s. Id. at 21.

The next witness was Mahmoud Katirai, an Iranian attorney, who testified that the 

Shahed 285 and Shahed 278 (the militarized version of the Shahed 285) were in production in 

Isfahan, Iran at the time of his testimony. Id. at 24.

Douglas Jordan, an engineer for Bell Helicopter, testified about the uniqueness and 

longstanding use of Bell’s trade dress in over 10,000 helicopters. Id. at 30–31, 34. He explained 

that the trade dress is not functional, but it is a cosmetic, marketing feature that identifies 

helicopters as being manufactured by Bell. Id. at 30–31, 33.

Mr. Jordan also testified about Bell’s customers:

Q: [W]ho are Bell’s primary customers, Mr. Jordan?

A: We have both military and commercial customers; United States military, as well 

as foreign military, but we also have numerous commercial customers.
19

Q: So we – it is fair to say that Bell sells to – militarized versions of the 206 model 

series helicopters to foreign governments?

A: That is correct.

Tr. at 36. 

This is the testimony plaintiffs cite when they assert in their briefs that there is one “world-wide 

market” for Bell Helicopters. Pls.’ Opp. at 6; see also Pls.’ Supp. Mem. at 1. 

Plaintiffs’ next witness was Vernon Albert, an independent aviation safety consultant. 

He was the former vice president of Petroleum Helicopters Incorporated (a world-wide 

commercial helicopter operator), and former chair of an international trade association of 

helicopter operators and manufacturers. Id. at 37–39. He testified to the marked similarity of the 

defendant’s product, noting that when he was shown a picture of the allegedly counterfeit 

helicopter, he “basically thought that Bell was allowing someone else a license to build their 

aircraft.” Id. at 41–42. He continued:

Q: What made you think that was a Bell product or Bell licensed product?

A: Just the general profile, the appearance of the aircraft, basically, says Bell all over 

it.

Q: What specifically about that picture and design do you associate with Bell?

A: Well, the – just starting at the front of the aircraft and working back, the nose, 

windshield, and door profile, the cockpit area, is basically the same. When you 

look at the rotor head, the control rods, the upper engine cowling, and the way the 

tailpipes come out of the cowling and everything, they are identical.

Q: So is it fair to say that [with] your experience as a pilot and executive in the 

helicopter industry, you believed that a helicopter depicted in [Exhibit] 6(h) was 

indeed a Bell product?

A: Until I read the caption on it, yes, sir. 

Q: Okay. Do you think other consumers in similarly situated as you . . . would 

believe that what I represent to you as the Shahed 278 is a Bell product?
20

A: Oh, absolutely.

Id. at 42.

Based on this testimony, the Court found that someone looking at the defendant’s aircraft

would think it was a Bell product. Findings of Fact at 3. But the testimony also suggests that 

receiving a modest amount of additional information, such as reading the caption under a picture,

could clear up the confusion. In any event, even if the Court ignored the possibility that proper 

labeling would clarify any confusion about the true manufacturer of the helicopter, this testimony 

establishes only the potential confusion – the first link in the chain. More is needed before the

harm is felt in the United States.

Albert also testified that by the mid to late 1980s, Bell’s products “had accumulated a 

safety record that was second to none” and that “[i]t’s a large tool in aviation when you can 

market safety.” Id. at 43. In other words, the testimony indicated that Bell’s reputation for 

safety had economic value. Albert went on:

Q: [C]an you think of any reason why the Islamic Republic of Iran would adopt 

Bell’s trade dress in the design of [its] own helicopter?

A: The only reason I could think of and the obvious reason would be to introduce it 

into a Third World market. The – a lot of the development in our industry today is 

going into Central and South America and the African continent . . . . An aircraft 

such as this could be marketed in those areas because they don’t have to go 

through the certification process and everything that U.S. manufacturers do. The 

European manufacturers and U.S. manufacturers all go through a very stringent 

certification process. 

I run into this all over the world when I am doing my safety audits. The Eastern 

Block countries made good aircraft, but they didn’t meet the safety and 

certification standards . . . to be certified in North America and Europe. 

Consequently, you don’t see that type of aircraft operating in North America and 

Europe, but you do see them operating in Bolivia, Peru, the South African 

countries where a lot of development and growth is going on right now because 

they can be marketed less expensively, and they are readily available, and they 
21

don’t have the stringent safety standards that the Western manufactured aircraft 

do.

***

Q: Do you think that there is a substantial danger in Third World operators, say, in 

Angola or like countries that the Shahed 278 could be passed off as a Bell 206?

A: I think – for many reasons, I think that’s true.

Id. at 44–46.

In the Court’s view, this testimony strongly suggests the existence of two markets – a

market for aircraft that meet the exacting certification standards imposed in North America and 

Europe, and a Third World market for the less expensive products that do not meet those 

standards. And it supports the notion that the counterfeit items could be passed off as Bell’s, but 

not necessarily in the United States.

Albert’s testimony then turned to the issue of helicopter parts:

A: . . . Because safety being my main concern in aviation, it leads to the introduction 

of what we refer to as bogus parts. 

If an operator in a Third World country that’s not regulated like the FAA or the 

CAA looks after them can go find a less expensive part at a different source that 

fits, they can obviously get them and use them, even though that part may not be 

certified to the standard that Bell’s parts are certified to.

Also, vice versa; they could take a Bell part and put them on that aircraft, and

consequently, if it’s not maintained properly and fails, then it puts liability on Bell 

from the reverse standpoint. So there’s a major safety issue and competitive issue 

in having look-alike aircraft in a market that can serve both the East and the West. 

Id. at 46–47 (emphasis added). Even if this testimony supports the existence of a world-wide 

market – at least for parts – and it reveals the effect that the existence of counterfeit aircraft could 

have on that market and on Bell’s reputation, it does not establish a direct effect because any 

effect felt in the United States is necessarily dependent on a series of intervening acts by others: 
22

the operators who can and do use the parts interchangeably, the sources who sell them, and the 

customers who fail to maintain their aircraft properly.

Albert also testified:

Q: As a consumer of Bell products, in your estimation, do you believe that, 

particularly, in Africa and the Middle East, that countries that Bell can sell to may 

buy an Iranian version of it simply because it looks like a Bell product?

A: I would think, yes, that they would buy it because it looks alike and because they 

would expect similar performance.

Id. at 48. 

This testimony does not even establish that Third World countries do buy Bell 

helicopters; it simply states that the “countries that Bell can sell to” might buy the Iranian version 

of the aircraft based on its appearance. But Albert’s prior testimony suggested that those 

countries do not buy the more expensive, certified aircraft in the first place; they tend to buy the 

less expensive products from the Eastern Block. And even if the Court assumes that Third 

World countries are potential customers of Bell helicopters, this effect requires a chain of events 

involving a series of independent third party actors, including Third World operators, who have 

to intend to buy what they believe are Bell products and not the cheaper products, and then go on 

and actually purchase the Shaheds by mistake. The presence of the independent actors in this 

chain reinforces the conclusion that any effect is indirect, and not direct. 

Plaintiffs’ final witness was Terry Jeffcoat, the manager of spare part sales at Bell. Id. at 

49. He testified that a helicopter is “refurbished several times throughout its life,” id. at 50, and 

that replacement part sales are a “major source of revenue for Bell Helicopter,” id. at 51. He 

testified:

Q: And if a fake Bell Helicopter, shall we say, a substitute Bell helicopter enters the 

market, is that a helicopter that will displace Bell’s ability to sell spare parts?
23

A: Certainly.

Q: Bell, for example, wouldn’t sell spare parts for a Shahed 278 even if they were 

identical?

A: Not knowingly.

Id. at 51. 

The witness also addressed the lost profit that results from counterfeit products:

Q: So is it fair to say for every Bell product that’s displaced in the market by a copy, 

whether it’s commercial or a military copy, Bell would lose not only, of course, 

the sale, but also a significant amount in profit?

A: That’s true. 

Q: And how much profit per unit?

A: Two-thirds.

Q: And that would be the $500,000 number you indicated?

A: Yes, sir.

[Q]: That’s profit in spare parts; is that what you mean?

A: Yes, sir.

Id. at 52. Again, this testimony speaks to purely financial loss, and it turns on the necessary step 

of someone buying one of the infringing helicopters instead of a Bell Helicopter. Finally, 

Jeffcoat addressed the various ways that counterfeit parts enter the market and affect Bell’s sales 

or reputation, but each assertion involves some other actor and begins with the conditional word 

“if.” Id. at 52–54. Because each statement is dependent on the intervening acts of a series of 

third parties before Bell feels the effect, it is not direct. For example, the witness testified:

Q: And if bogus parts enter the Western fleet made by the Iranians, does that create a 

safety problem for Bell, for existing genuine Bell products? 

A: It could if the parts are interchangeable.
24

Q: And if Iranian versions of our product, of Bell’s product, have a poor safety 

record, is that going to reflect poorly on Bell and on the safety of our product?

A: Yes.

Id. at 54 (emphasis added).

Thus, based on all of the evidence that has been presented in these proceedings, the Court 

cannot find that plaintiffs have met their burden of establishing that there was an activity that 

caused a direct effect in the United States. Therefore, on the record before the Court, defendant

has not waived its sovereign immunity, and this Court does not have subject-matter jurisdiction 

over the claim.13

IV. CONCLUSION

The Court will grant defendant’s motion to vacate [Dkt. #28] and dismiss the default 

judgment because it is void for lack of subject-matter jurisdiction. Since the Court has 

determined that it does not have jurisdiction over the matter, it declines to rule on the other

grounds advanced by defendant under Rule 60(b)(1) and (6). A separate order will issue. 

AMY BERMAN JACKSON

United States District Judge

DATE: September 25, 2012

 

13 Defendant also argues that sovereign immunity has not been waived unless HESA, the 

instrumentality of Iran that technically manufactured and sold the helicopters, was Iran’s agent or 

acted in concert with Iranian officials to infringe the trademarks at hand. Def.’s Mem. at 8. 

However, Bell introduced evidence at the October 5, 2009 hearing that included a video of an 

Iranian general claiming that the helicopters had “been developed by our own specialists, our 

own experts” and testimony that HESA was owned by the Ministry of Defense of Iran. Tr. at 

25–26. The Court need not reach this argument because it finds that the Court lacked 

jurisdiction because Iran had not waived its sovereign immunity under the FSIA.