Ninth Circuit affirms district court’s dismissal of SpongeBob SquarePants trademark suit against Viacom but revives claims against U.K.-based defendant on grounds that product does not need to be “used in commerce” in U.S. to sustain jurisdiction.

Gibson Guitar Corp. sued Viacom International Inc. and U.K.-based John Hornby Skewes & Co. Ltd. (JHS), asserting Lanham Act and state law claims based on the alleged unauthorized use of Gibson’s trademarks in products made and sold by JHS under a licensing agreement with Viacom. Viacom owns the rights to the animated television character SpongeBob SquarePants, and JHS promotes and sells various products, including a ukulele with a “Flying V”-styled body, using the SpongeBob trademark.

The district court held that Gibson failed to state a claim against Viacom for contributory or vicarious trademark infringement. It also dismissed the claims against JHS for lack of subject matter jurisdiction on the grounds that Gibson had not shown that the ukulele was “used in commerce within” the meaning of the Lanham act. (Read our summary of the district court’s decision, here.)

On appeal, the Ninth Circuit affirmed the district court’s dismissal of the claims against Viacom. The Ninth Circuit ruled that Gibson did not allege that Viacom exercised the requisite level of control over JHS’ production and sale of the ukulele in order to trigger liability for contributory infringement. The Ninth Circuit also concluded that Gibson failed to state a claim for vicarious infringement because the license agreement between JHS and Viacom did not reveal “a relationship” of control over the allegedly infringing activity.

The Ninth Circuit reversed and remanded the claims against JHS, however. In its dismissal, the district court considered the “use in commerce” requirement in the Lanham Act as a jurisdictional prerequisite. The Ninth Circuit held that its recent decision in La Quinta Worldwide LLC v. QRTM required reversal as that decision held that the Lanham Act’s “use in commerce” requirement was deemed to be an element of a cause of action and not a jurisdictional bar. In other words, under La Quinta, a product need not be “used in commerce” in the U.S. for the court to have subject matter jurisdiction.