9th Circuit panel upholds geographical limitation on trademark infringement damages as to U.S.-made products marketed and sold exclusively offshore

The Lanham Act is a collection of federal statutes that allows trademark owners the right to sue and recover damages from those who infringe their trademark by marketing and selling similar products under a brand name that creates a “likelihood of confusion” in the minds of consumers. However, the right to collect damages from an infringer is limited by geography and the sovereign rule of other nations.

In 2023, the U.S. Supreme Court decided Abitron Austria GmbH v. Hetronic International, Inc., holding that the trademark infringement provisions of the Lanham Act are not extraterritorial and extend only to claims where the claimed infringing use in commerce is domestic. Thus, if the infringing conduct occurs both domestically and outside the U.S., the U.S. trademark holder is allowed to only recover damages for infringing acts that occur within the United States and may not recover damages for infringement that takes place abroad. (See our previous article about the Abitron holding shortly after it was issued in June 2023, including a recommendation that trademark holders obtain trademark registration in jurisdictions outside the U.S. where they do or anticipate doing business.)

In modern-day commercial markets, goods are routinely manufactured and transported within one country and ultimately sold in others. So, what happens when a company manufactures and transports products in the U.S. that allegedly infringe another U.S. company’s trademark, but then markets and sells the products exclusively outside the U.S.?  Earlier this week, the 9th Circuit Court of Appeals considered that question in Doctor’s Best, Inc. v. Nature’s Way, LLC. The three-judge 9th Circuit panel applied the Supreme Court’s ruling in Abitron requiring an infringing “use in [domestic] commerce” and upheld a summary judgment against the U.S. trademark holder Nature’s Way, finding there was no genuine issue of material fact that would prove that the alleged infringer Doctor’s Best committed any infringing act in the U.S., where it made and transported its “Nature’s Day” vitamin supplement products, but marketed and sold them exclusively in three Asian countries.

The 9th Circuit panel affirmed the district court’s summary judgment in favor of Doctor’s Best, Inc., on its claim for a declaratory judgment of non-infringement, and on Nature’s Way Products, LLC’s counterclaim for trademark infringement under the Lanham Act.

Facts and Procedural Background of Doctor’s Best v. Nature’s Way

Nature’s Way owns federal registration from the USPTO of its trademark “Nature’s Way” for use on its nutritional supplements, which it sells in all 50 states. Doctor’s Best, a California-based competitor, developed a new line of branded nutritional supplements it called “Nature’s Day,” and sought a U.S. trademark for that brand name. Its “Nature’s Day” mark appeared on goods that were manufactured in California and transported within the United States, but were then sold and marketed exclusively to consumers in China, South Korea, and Taiwan.

When Doctor’s Best applied for federal registration of its “Nature’s Day” supplement products in the USPTO, Nature’s Way opposed the application, whereupon Doctor’s Best filed an action in the U.S. District Court for the Central District of California, seeking a judicial declaration that its “Nature’s Day” trademark used for its supplement products brand did not infringe Nature’s Way’s federally registered trademark.  Nature’s Way answered the complaint and filed a counterclaim seeking damages from Doctor’s Best for trademark infringement under the Lanham Act.

Before Nature’s Way had propounded any discovery, Doctor’s Best moved for summary judgment under FRCP Rule 56, and submitted a declaration from a Doctor’s Best executive establishing that while the company did manufacture, bottle, label and transport “Nature’s Day” products within the U.S., it did not market or sell them stateside, nor did it have any plans to do so.  The declaration also established that Doctor’s Best’s marketing channels were separate from those used by Nature’s Way. Nature’s Way was unable to proffer any evidence to contradict these crucial points, and the court denied its request for additional time in which to conduct discovery. In ruling on the motion, the district court first applied the extraterritoriality framework of the Supreme Court’s Abitron decision to determine which of Doctor’s Best’s activities were actionable under the Lanham Act. It first determined that Doctor’s Best’s acts of manufacturing, bottling, labeling and transport of its “Nature’s Day” product in the U.S. qualified as a “use in commerce” for purposes of triggering the provisions of the Lanham Act. Then, turning to the Doctor’s Best executive’s declaration, the district court found that, when applying the Sleekcraft multi-factor test for determining a likelihood of confusion among consumers, these non-marketing/non-sales U.S. activities could not support such a jury finding as to U.S. customers.

“There is no evidence that Nature’s Way and Nature’s Day products are marketed or sold in overlapping marketing channels. NWP markets and sells Nature’s Way products in all fifty states, but DB does not sell Nature’s Day products to consumers on U.S. soil or through U.S. e-commerce platforms, and does not market the brand in the U.S., including through Doctor’s Best’s websites and social media accounts.”

In its de novo review of the district court’s grant of summary judgment, the 9^th Circuit panel found these uncontroverted facts outcome-determinative, and that the district court had properly applied the Sleekcraft factors in concluding that Nature’s Way could not show a likelihood of consumer confusion as to marketing and sales made exclusively outside the U.S.  The appellate panel agreed with the district court that no rational jury could find that Doctor’s Best’s domestic conduct infringed Nature’s Way’s protected trademarks, and therefore Doctor’s Best was entitled to a declaratory judgment of non-infringement, as well as judgment against Nature’s Way’s affirmative claims against it for trademark infringement under the Lanham Act.

Specially concurring, Judge Ikuta wrote that she concurred in the result. She noted that Doctor’s Best’s transport of Nature’s Day supplements in the United States constituted a domestic use in commerce, and agreed that the evidence in the record did not create a genuine issue of material fact as to whether this transport caused a likelihood of domestic confusion. Judge Ikuta was also of the view that under Abitron, the panel properly rejected Nature’s Way’s arguments that there could be a Lanham Act violation based on the U.S. activities of Doctor’s Best, even if the customer confusion occurred only in countries other than the U.S., since under Abitron courts now are not to consider extraterritorial consumer confusion.

Takeaways

In the two years since the Supreme Court’s Abitron decision, U.S. trademark holders have been wise to register, monitor, and manage their trademarks in any foreign jurisdictions in which they do business, and shouldn’t rely on U.S. courts to provide remedies for infringement of their marks that occurs outside the U.S. That practice should continue. The 9^th Circuit’s decision in Doctor’s Best gives some further clarification to the circumstances in which courts will look to the specific marketing channels and geographic focus of a potential infringer’s activities, with the result that marketing and sales that occur solely in foreign countries will not support a Lanham Act claim in U.S. courts. Thus, under Doctor’s Best’s rationale, if an alleged infringer manufactures in the U.S. but markets and sells its product exclusively outside the U.S., an aggrieved trademark holder must look to the law of those extraterritorial jurisdictions for relief.

The author is a California-based commercial and IP litigator with over 40 years of experience in federal and state courts in complex commercial, IP, and product liability litigation, and is in Clark Hill’s San Diego office. Clark Hill regularly counsels and represents clients in trademark, copyright, patent, and trade secrets disputes, supported by a large national footprint with offices across the United States, Dublin, and Mexico City.

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