A recent decision in US District Court for the Middle District of Florida may make it easier for product manufacturers to enforce their intellectual property rights against foreign infringers.
The decision in Maurer Rides USA, Inc. v. Beijing Shibaolia Amusement Equipment Co., Case. No. 6:10-cv-1718-Orl-37KRS (M.D. Fla. July 24, 2014), involved two foreign manufacturers of amusement park rides who attended an annual trade show in Florida. At the 2011 show, the Plaintiffs — an Italian manufacturer and its US distributor — observed the Defendant — a Chinese manufacturer — distributing promotional materials that depicted knock-off versions of the Plaintiffs’ rides. In response, the Plaintiffs filed a Lanham Act unfair competition action in Florida and served process on the Defendant while they were at the trade show.
After the Defendant failed to appear in court in Florida to defend against the Lanham Act claim, the court entered default judgment for the Plaintiffs and enjoined the Defendant from promoting imitation rides in Florida. In addition, after an evidentiary hearing, the court awarded the Plaintiffs monetary damages based on profits that the Defendant made from overseas sales of the infringing products.
The next year, when the Defendant returned to Florida for the annual trade show, they appeared in court and moved to set aside the default judgments for lack of personal jurisdiction. According to the Defendant, the court could not have personal jurisdiction under Florida’s long arm statute because no tortious conduct occurred and, even if it had occurred, it would have occurred outside of Florida. The court rejected that argument, noting that unfair competition in violation of the Lanham Act is considered tortious conduct for the purposes of Florida’s long arm statute; also, because promotional materials were distributed in Florida, the tortious conduct occurred in Florida. The court emphasized that, in order for unfair competition to occur, there does not need to be an actual sale or a bona fide offer to sell an infringing product. Rather, a violation occurs simply by using a false designation of origin that “affects” interstate commerce.
Despite upholding the exercise of personal jurisdiction over the Defendant, and finding that the exercise of personal jurisdiction was appropriate under the Due Process clause, the court nonetheless overturned the award of monetary damages. The court noted that the relevant conduct in the Plaintiffs’ Lanham Act claim was the Defendant’s distribution of infringing promotional materials at the Florida trade show. The Lanham Act, however, did not confer subject matter jurisdiction over the extraterritorial dispute involving unfair competition. Here, because the Defendant was not a US entity, and because the Plaintiffs failed to provide any evidence that the overseas infringing sales had a substantial effect on US commerce, it was inappropriate for the court to award monetary damages based on overseas sales of infringing products. Absent additional evidence of US impact, the only appropriate remedy in this case was an injunction against the Defendant to prevent distribution of infringing promotional materials.
This case offers a potential roadmap for intellectual property owners who are seeking to combat counterfeiting, piracy, and trade dress infringement by international actors. According to the decision, the Lanham Act could provide a basis to obtain personal jurisdiction over such international actors and, with enough evidence of an impact of infringement on US commerce, it might also be possible to obtain monetary damages against international infringers.