Opinion ID: 661455
Heading Depth: 3
Heading Rank: 1

Heading: Extraterritorial provisions of the injunction

Text: 41 The District Court broadly enjoined Bayer AG or its subsidiaries from using the Bayer name or mark in: 42 any product, institutional or company-identifying advertisement or promotional materials published or reasonably likely to be disseminated in the United States (p 1(g)(i));any employment notice ... published or reasonably likely to be distributed within the United States (p 1(g)(ii)); 43 any radio or television broadcast ... or other electronic means of mass communication received through one or more stations, channels or services, or by subscribers, within the United States (p 1(g)(iv)); or 44 any news release ... or informational materials distributed, or reasonably likely to be distributed, within the United States, or at any press conference held, or reasonably likely to be reported on, within the United States ... (p 1(g)(vi)). 45 (emphasis added). The Court allowed a few narrow exceptions to these prohibitions. Under the injunction, Bayer AG may use the mark in advertisements or employment notices: (1) in foreign print publications that have a U.S. circulation of 5,000 or less; and (2) in trade publications when the advertisements or employment notices refer only to non-pharmaceutical, non-consumer products or pharmaceutical intermediates or ingredients. With perhaps a nod towards corporate disclosure requirements, the District Court also allowed Bayer AG to use the mark in not more than two press releases a year exclusively concerning extraordinary events involving Bayer AG, such as changes in corporate control. (p 1(g)(vi)). The Court allowed an exception for press conferences held abroad and attended primarily by foreign journalists if (1) such press conferences were not conducted in English; (2) the subject of the conference did not include any discovery, invention, activity, event, product or service within the United States; or (3) the conferences related exclusively to Bayer AG's worldwide activities, without any special prominence given to either health care matters or Bayer AG's activities within the United States. 6 (p 1(g)(vi)(B)). The Court allowed the same three exceptions for press releases as long as the releases indicated that the information was Not for Distribution or Release in the United States. (p 1(g)(vi)(C)). The Court also allowed Bayer AG to use the mark in press releases exclusively concerning non-pharmaceutical, non-consumer products or pharmaceutical intermediates and ingredients, as long as these releases are disseminated only to print trade publications. (pp 1(g)(vi)(D), (E)). Notwithstanding these exceptions, Bayer AG contends that the extraterritorial injunctive provisions impair the ability of one of Europe's largest corporations to conduct its everyday business in its home country and around the world. Brief for Appellants at 15. 46 It is well-established that United States courts have jurisdiction to enforce the Lanham Act extraterritorially in order to prevent harm to United States commerce. The Supreme Court divined such a Congressional intent to project the Act extraterritorially in Steele v. Bulova Watch Co., Inc., 344 U.S. 280, 73 S.Ct. 252, 97 L.Ed. 319 (1952). In that leading case, the Court applied the Act to prevent a U.S. citizen from selling fake Bulova watches in Mexico on the ground that his use of the Bulova name diverted sales in Mexico and the United States from the American trademark holder. But courts have also recognized limits on the application of the Lanham Act beyond our borders. In Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633 (2d Cir.), cert. denied, 352 U.S. 871, 77 S.Ct. 96, 1 L.Ed.2d 76 (1956), an American clothing manufacturer that sold women's underwear in the U.S. and Canada using its Vanity Fair trademark sought to enjoin a Canadian retailer from selling women's undergarments using the same mark in Canada. We dismissed the claims against the defendant because it was a Canadian corporation using a mark to which it held presumably valid trademark rights in Canada. We explained the Supreme Court's application of the Lanham Act extraterritorially in Steele v. Bulova as resting on three factors: (1) whether the defendant's conduct has a substantial effect on United States Commerce; (2) whether the defendant is a citizen of the United States; and (3) whether there exists a conflict between defendant's trademark rights established under foreign law, and plaintiff's trademark rights established under domestic law. Id. at 642. 47 In the instant case, the District Court granted an injunction with extensive extraterritorial effects without adequately considering its power to do so under the Lanham Act. The Court did not examine the Vanity Fair factors to see whether they supported an extraterritorial injunction, nor did it explicitly eschew the Vanity Fair analysis as inadequate for the instant facts. Because the District Court failed to make the necessary findings to support the extraterritorial reach of its injunction, we vacate the injunction's extraterritorial provisions and remand for further analysis as to the scope of such extraterritorial relief as may be warranted. In this connection, the District Court may receive such additional proofs as it may deem appropriate. 48 Citing Vanity Fair, Bayer AG would have us forgo a remand in favor of a simple redrawing of the injunction to eliminate its extraterritorial provisions. Indeed, if we applied the Vanity Fair test mechanically to the instant case, we would forbid the application of the Lanham Act abroad against a foreign corporation that holds superior rights to the mark under foreign law. But such an unrefined application of that case might mean that we fail to preserve the Lanham Act's goals of protecting American consumers against confusion, and protecting holders of American trademarks against misappropriation of their marks. A more careful application of Vanity Fair is necessary because the instant case is not on all fours with Vanity Fair. In Vanity Fair, the plaintiff sought a blanket prohibition against the Canadian retailer's use of Vanity Fair in connection with the sale of defendant's products in Canada. Sterling, on the other hand, seeks to enjoin only those uses of the Bayer mark abroad that are likely to make their way to American consumers. 7 Sterling is not concerned with Bayer AG's use of the mark abroad so long as that use does not enter the channels of international communication that lead to the United States. While the stringent Vanity Fair test is appropriate when the plaintiff seeks an absolute bar against a corporation's use of its mark outside our borders, that test is unnecessarily demanding when the plaintiff seeks the more modest goal of limiting foreign uses that reach the United States. Though Congress did not intend the Lanham Act to be used as a sword to eviscerate completely a foreign corporation's foreign trademark, it did intend the Act to be used as a shield against foreign uses that have significant trademark-impairing effects upon American commerce. 49 Sterling contends that whatever issues might arise from the concurrent rights of the parties to the Bayer mark under both German and United States law have been eliminated by the decision of the Supreme Court in Hartford Fire Insurance Co. v. California, --- U.S. ----, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993). The Court there ruled that considerations of international comity were not a bar to the extraterritorial application of the Sherman Act to alleged boycotting activities with a substantial effect in the United States. Id. at ---- - ----, 113 S.Ct. at 2909-10. In the context of the case before it, the Court found no conflict warranting a declination of jurisdiction because there was no claim that conformity with the requirements of United States law required the defendants to do any act in violation of British law. Id. at ---- - ----, 113 S.Ct. at 2910-11. Though the Court's approach to the comity issue might not be limited to the antitrust context, see Restatement (Third) Foreign Relations Law Sec. 403 cmt. e (1987), we think it is not automatically transferable to the trademark context, especially where the contending parties both hold rights in the same mark under the respective laws of their countries. It is one thing for the British reinsurers in Hartford Fire to be barred under United States law from boycotting activity that they might be free to engage in without violating British law. But it is quite a different thing for the holder of rights in a mark under German law to be ordered by a United States court to refrain from uses of that mark protected by German law. In Hartford Fire, the Supreme Court appeared to recognize that a different context, such as a trademark dispute, might implicate other concerns: 50 We have no need in this case to address other considerations that might inform a decision to refrain from the exercise of jurisdiction on grounds of international comity. 51 --- U.S. at ----, 113 S.Ct. at 2911. 52 We need not go so far as to limit the District Court's jurisdiction in order to oblige it to frame more carefully the scope of its injunction in light of the concurrent rights of the parties. In establishing the parameters of injunctive relief in the case of lawful concurrent users, a court must take account of the realities of the marketplace. Restatement of the Law of Unfair Competition, Tentative Draft No. 3 Sec. 35 cmt. f (1991) (approved 1993). In today's global economy, where a foreign TV advertisement might be available by satellite to U.S. households, not every activity of a foreign corporation with any tendency to create some confusion among American consumers can be prohibited by the extraterritorial reach of a District Court's injunction. 53 Upon remand, the District Court may grant an extraterritorial injunction carefully crafted to prohibit only those foreign uses of the mark by Bayer AG that are likely to have significant trademark-impairing effects on United States commerce. If the Court finds that Bayer AG's use of the mark abroad carries such significant effects in the United States, the District Court may require Bayer AG to take appropriate precautions against using the mark in international media in ways that might create confusion among United States consumers as to the source of Bayer pharmaceutical products in the United States. It might be appropriate, to take examples offered by appellee, to prevent Bayer AG from placing a full-page Bayer advertisement in the U.S. edition of a foreign magazine or newspaper, or inviting representatives of the U.S. press to an offshore briefing in which Bayer AG distributed materials describing Bayer's analgesics products for publication in the U.S. On the other hand, it might be inappropriate, to take examples offered by the amicus curiae, to leave the injunction so broad as to ban the announcement of new medical research in Lancet, or an employment notice in Handelsblatt, or a press conference in England to publicize a new over-the-counter remedy developed in the United States, or sponsorship of a German soccer team if that team might appear, wearing Bayer jerseys, on a television broadcast carried by an American sports cable channel. 54 In fashioning the injunction, the Court should balanc[e] ... the equities to reach an appropriate result protective of the interests of both parties. Soltex Polymer Corp. v. Fortex Industries, Inc., 832 F.2d 1325, 1330 (2d Cir.1987) (emphasis in original); see also Jim Beam, 937 F.2d at 737 (counseling District Court to weigh equities in fashioning injunctive relief on remand). Where, as in the instant case, both parties have legitimate interests, consideration of those interests must receive especially sensitive accommodation in the international context. While Bayer AG suggests that we must accept these conflicts as the unavoidable result of an international community of nations in which each nation exercises the power to grant trademark rights, we prefer to allow the District Court to fashion an appropriately limited injunction with only those extraterritorial provisions reasonably necessary to protect against significant trademark-impairing effects on American commerce. 8 55 Sterling contends that if the extraterritorial provisions of the injunction cannot be sustained as a remedy for Bayer AG's Lanham Act violations, they should be sustained as a remedy for Bayer AG's contract violations. We disagree. The 1970 Agreement clearly recognized Bayer AG's exclusive rights to the Bayer mark outside the United States, Canada, and certain Caribbean nations. Indeed, it may be the case that the broad extraterritorial provisions of the injunction improperly rescind certain rights that Bayer AG purchased in the 1970 Agreement. 9 The 1964 Agreement and the 1986 modification to that Agreement restrict Bayer AG's use of the mark only inside the United States. 56 Since Sterling has not claimed that New York's unfair competition and anti-dilution laws have any broader extraterritorial reach in this case than the Lanham Act, we have no occasion to consider what relief might appropriately be predicated in a proper case on those sources of law.