Bell Helicopter Textron, Inc. v. Islamic Republic of Iran., No. 06-1694, (D.C. Cir. 2013) [click for opinion]
Bell Helicopter Textron, Inc., sued Iran for trademark infringement under the Lanham Act based on Iran's use of Bell's distinctive helicopter feature—a feature that supposedly set its brand apart from other manufacturers. Iran failed to appear and a default judgment was entered. Iran later moved pursuant to Federal Rule of Civil Procedure 60(b)(4) to vacate the default judgment as void due to lack of subject matter jurisdiction based on Iran's immunity under the Foreign Sovereign Immunities Act (“FSIA”). The district court agreed with Iran; Bell appealed.
Bell argued that the motion was not made within a reasonable time. The D.C. Circuit rejected the argument because Rule 60(b)(4), which provides relief from a final judgment if the judgment is void, is not subject to a reasonable-time restriction. The court also rejected Plaintiff’s argument that a judgment should be upheld as long as there is an arguable basis for the court's subject-matter jurisdiction. In rejecting this argument, the court confirmed its prior holdings that non-appearing parties may obtain de novo review of jurisdictional challenges when appearing for the first time.
The court then considered the challenge to the district court’s finding that Iran was immune from suit under the FSIA. A foreign state is generally immune from the jurisdiction of U.S. courts, unless an exception applies. Bell argued that Iran was subject to the FSIA's commercial-activity exception, 28 U.S.C. § 1605(a)(2), which gives the United States jurisdiction if an action takes place outside the United States in connection with a “commercial activity of the foreign state” that causes a “direct effect in the United States.” A direct effect is one which has no intervening element, but that flows in a straight line without deviation or interruption.
Interference with a property right does not necessarily demonstrate a “direct effect” under FSIA, nor is the “direct effect” requirement satisfied when a plaintiff’s U.S. citizenship is the only connection between the commercial activity and the United States. Bell argued that the direct effect in the U.S. from Iran’s alleged infringement of Bell’s intellectual property were both financial and reputational. But the court found the physical similarity between the parties' products, and the potential financial and reputation loss, remote and speculative and insufficient to qualify as a “direct effect.” Bell offered no evidence Iran had sold or advertised its product in the United States, that customers were likely to encounter Iran's product in the regular course of doing business, that any customer bought Iran's product thinking it was Bell's, or that any customer even considered buying Iran's product over Bell's. Nor was there evidence that any customer refrained from buying Bell's product because an association between the two products tainted its reputation. The court recognized that it was conceivable that Bell's interests could be harmed by Iran's product, but that was not enough to satisfy the “direct effect” requirement of FSIA.
In sum, there was no evidence that Iran's product affected Bell's sales, and the evidence offered to show the effect of Iran's product in the U.S. was “too remote and attenuated to satisfy the direct effect requirement of FSIA” or “too speculative to be considered an effect at all.” Accordingly, the court affirmed the judgment of the district court vacating the default judgment.