A court in the Southern District of New York enjoined the defendants from selling fashion apparel in the United States that allegedly infringed the plaintiff’s trademarks, but it declined to exercise extraterritorial jurisdiction to stop the defendants from using their Hong Kong website to continue selling the same apparel to the rest of the world. See Juicy Couture, Inc. v. Bella Int’l Ltd. , No. 12 Civ. 5801, 2013 U.S. Dist. LEXIS 34846 (S.D.N.Y. Mar. 12, 2013). The court reasoned that it had to “proceed with caution in determining” whether to apply the Lanham Act extraterritorially because the parties were currently litigating in Hong Kong over whether the defendants had valid trademark rights there.
This case illustrates the difficulties U.S. companies can face when trying to stop infringing conduct that is happening abroad. Though trademark owners may use the Lanham Act to enjoin infringing activities outside the United States, U.S. courts will grant this relief only when the trademark owner can show it is necessary to prevent harm to commerce in the United States. Because this can be a tough standard to meet, it is important for U.S. businesses to consider the need for registering their trademarks domestically as well as internationally and for having a strategy to enforce their trademark rights in foreign countries.
Lanham Act Can Reach Infringing Activities Outside the United States
More than 60 years ago, the U.S. Supreme Court held that the Lanham Act “confers broad jurisdictional powers upon the courts of the United States,” and could reach infringing activities in foreign countries. Steele v. Bulova Watch Co., 344 U.S. 280, 283 (1952).1 Because the Supreme Court did not set forth a precise test for when a district court may exercise jurisdiction over such activities, the circuit courts of appeal have established different tests for determining when extraterritorial application of the Lanham Act is appropriate. The most well-known test was articulated by the Second Circuit in Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633 (2d Cir. 1956). The so-called “Vanity Fair factors” look at:
- The citizenship of the defendant;
- Whether there exists a conflict between the defendant’s trademark rights under foreign law and the plaintiff’s trademark rights under U.S. law; and
- Whether the defendant’s conduct has a substantial effect on U.S. commerce.
Juicy Couture’s Trademark Infringement Claims and Defendants’ Hong Kong Website
In Juicy Couture, Inc. v. Bella Int’l Ltd., Juicy Couture brought a lawsuit in the United States against the defendants, asserting federal law claims for trademark infringement, trademark counterfeiting, and cybersquatting. Juicy Couture filed the suit four years after initiating a lawsuit in Hong Kong against the defendants for trademark infringement. The Hong Kong action is expected to go to trial sometime in 2013.
Juicy Couture sells fashion apparel, including its iconic velour tracksuits, in boutiques throughout the world in more than 800 specialty stores and more than 280 department stores in the United States. It owns several federally registered trademarks, including JUICY, JUICY COUTURE, JUICY GIRL, CHOOSE JUICY, JUICY BABY, and BORN IN THE GLAMOROUS USA. It maintains an online retail store and uses social media sites such as Facebook, Twitter and YouTube to market its products.
Defendants use the marks JUICY GIRL, JUICYLICIOUS, and JG in the promotion and sale of their Juicy Girl apparel and products. According to Juicy Couture, among the products sold by the defendants are velour tracksuits that copy the design of Juicy Couture’s tracksuits. Defendants have sold these products in the United States through a website maintained and operated in Hong Kong. Defendants’ total sales in 2011 were close to $13 million, but their known sales to the United States were only $3,000.
In the Hong Kong action, Juicy Couture has submitted evidence showing that it registered a number of trademarks in Hong Kong in 2000, including JUICY, JUICY JEANS, and JUICY COUTURE. It claims that the defendants did not begin importing, advertising, or selling Juicy Girl brand clothing in Hong Kong before 2000.
Extraterritorial Application of Lanham Act to Activities on Hong Kong Website “Inappropriate”
Though the court granted a preliminary injunction prohibiting sales in the United States based on Juicy Couture’s infringement claims, the court concluded that it was inappropriate to prohibit the defendants from selling their Juicy Girl products through the Hong Kong website to consumers in other countries, primarily in Hong Kong, the People’s Republic of China and Macao.
First, the court found that the citizenship of the defendants weighed against exercising jurisdiction because five of the six defendants were not U.S. citizens and the lone defendant that was a U.S. citizen had no control over the defendants’ operations and no role in the infringing conduct.
Second, the court found that a potential conflict with foreign law weighed against exercising jurisdiction because “[p]resumably, the outcome of the Hong Kong action will determine whether Defendants have enforceable intellectual property rights to the Juicy Girl mark in that country.” Juicy Couture, No. 12 Civ. 5801, slip op. at 21. According to the court, “[t]he Lanham Act should not be applied extraterritorially against defendants ‘acting under presumably valid trade-marks in a foreign country.’” Id. (quoting Vanity Fair, 234 F.2d at 643).
Third, the court found that the defendants’ activities on the Hong Kong website did not have a substantial effect on U.S. commerce because the only evidence of sales to the United States totaled only $3,000 worth of products, a portion of which consisted of sales made to Juicy Couture’s investigators. Here, Juicy Couture presented evidence showing that a Google search for “Juicy Girl” brought up the Hong Kong website as the second unpaid hit and that the website was available in English. The mere fact that a foreign website is accessible in the United States, however, does not necessarily demonstrate that the allegedly infringing conduct has a harmful effect on U.S. commerce. Juicy Couture, No. 12 Civ. 5801, slip op. at 23; see also Int’l Academy of Business and Financial Management v. Mentz, No. 12-cv-463, 2013 U.S. Dist. LEXIS 7714 (D. Colo. Jan. 18, 2013) (dismissing counterclaim for service mark infringement against foreign parties even though defendants’ registered service marks appeared on their website because such conduct did not have a substantial or significant effect on U.S. commerce).
Based on these findings, the court concluded that “the Lanham Act should not be applied extraterritorially to enjoin the Defendants’ activity on the HK website, or any other websites hosted abroad,” at the preliminary injunction stage. Juicy Couture, No. 12 Civ. 5801, slip op. at 24. However, the court left open the possibility of granting a permanent injunction at the conclusion of the case if further discovery or other information warranted reconsideration of the issue.