Intellectual Property – Unfair Competition Claim for Drug-Name Use

Belmora LLC v. Bayer Consumer Care AG v. Belmora LLC (Lawyers Weekly No. 001-060-16, 35 pp.) (Agee, J.) No. 15-1335, March 23, 2016; USDC at Alexandria, Va. 4th Cir.

Holding: In this Lanham Act case asserting unfair competition in the use of the “Flanax” trademark for pain medication sold in the U.S. and in Mexico, the 4th Circuit says Bayer is entitled to bring its unfair competition claims under Lanham Act § 43(a) and its challenges to cancellation of a trademark under § 14(e); the contrary judgment of the district court is vacated, and the case is remanded for further proceedings.

‘Flanax’ Ownership

Bayer Consumer Care (BCC) owns the trademark “Flanax” in Mexico and has sold naproxen sodium pain relievers under that mark in Mexico and elsewhere in Latin America since the 1970s. Belmora LLC owns the “Flanax” trademark in the U.S. and has used it here since 2004 in the sale of its naproxen sodium pain relievers. BCC and its U.S. sister company Bayer Healthcare LLC (BHC, and together with BCC, ‘Bayer’) contend that Belmora used the Flanax mark to deliberately deceive Mexican-American consumers into thinking they were purchasing BCC’s product.

BCC successfully petitioned the U.S. Trademark Trial and Appeal Board (TTAB) to cancel Belmora’s registration for the Flanax mark based on deceptive use. Belmora appealed the TTAB’s decision to the district court. In the meantime, BCC filed a separate complaint for false association against Belmora under § 43 of the Lanham Act, 15 U.S.C. § 1125, and in conjunction with BHC, a claim for false advertising. After the two cases were consolidated, the district court reversed the TTAB’s cancellation order and dismissed the false association and false advertising claims. On appeal by Bayer, we vacate the district court’s judgment and remand for further proceedings.

The district court dismissed Bayer’s false association and false advertising claims because, in its view, the claims failed to satisfy the standards set forth in Lexmark Int’l Inc. v. Static Control Components Inc., 134 S. Ct. 1377 (2014). The district court concluded that Bayer’s claims fell outside the Lanham Act’s “zone of interests” – and are not cognizable – because Bayer does not possess a protectable interest in the Flanax mark in the U.S. The district court also concluded that a cognizable loss under the Lanham Act cannot exist as to a “mark that was not used in” U.S. commerce.

‘Use in Commerce’ Test

Significantly, the plain language of § 43(a) does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action. Under § 43(a), it is the defendant’s use in commerce – whether of an offending “word, term, name, symbol or device” or of a false or misleading description or representation of fact – that creates the injury under the terms of the statute. Here, the alleged offending “word, term, name, symbol or device” is Belmora’s Flanax mark.

It is important to emphasize that this is an unfair competition case, not a trademark infringement case. Belmora and the district court conflated the Lanham Act’s infringement provision in § 32 with unfair competition claims pled in this case under § 43(a).

The district court erred in requiring Bayer, as plaintiffs, to have pled its prior use of its own mark in U.S. commerce when it is defendant’s use of a mark or misrepresentation that underlies the § 43(a) unfair competition cause of action. Having made this foundational error, the district court’s resolution of the issues requires reversal.

The complaint alleges Belmora’s misleading association with BCC’s Flanax has caused BCC customers to buy the Belmora Flanax in the U.S. instead of purchasing BCC’s Flanax in Mexico. We conclude that BCC has adequately pled a § 43(a) false association claim for purposes of the zone of interest prong. BCC also has alleged economic or reputational injury flowing directly from the deception wrought by defendant’s conduct.

We conclude the Lanham Act permits Bayer to proceed with its claims under § 43(a) – BCC with its false association claim and both BCC and BHC with false advertising claims. We are not concluding that BCC has any specific trademark rights to the Flanax mark in the U.S. Belmora owns that mark. But trademark rights do not include using the mark to deceive customer as a form of unfair competition, as is alleged here.

We further conclude that the Lanham Act authorizes BCC to bring its § 14(3) action against Belmora. BCC’s cancellation claim falls within the Lanham Act’s zone of interests because it confronts the “deceptive and misleading use of marks.” The district court erred in reversing the TTAB’s decision cancelling the registration of Belmora’s Flanax mark.

Vacated and remanded.