October 13, 2003

"Commerce" Receives Expansive Interpretation by Appellate Panel

Holland & Knight Newsletter
Paul F. Kilmer

For many years, the federal courts have held that use or registration of a trademark abroad, even a very famous trademark, is ineffective to bring the mark within the definition of "Commerce with foreign nations" under the U.S. Constitution (Article 1, Section 8, Clause 3). The federal courts have therefore refused to enforce trademarks that are only used abroad, even in the face of treaty obligations such as those requiring that the U.S. protect famous marks.[1]

However, beginning in the 1960s, federal courts became more expansive in defining what constituted "commerce" and there was some thought that, if that trend continued, internationally famous marks might eventually be protected without use in the United States.[2] In recent years, the U.S. Supreme Court has contracted the scope of activities that may be governed by Congress under the "commerce clause" of the Constitution.[3] These decisions led some observers to conclude that the federal courts might be tempted to further restrict their definition of "use in commerce" in relation to trademark rights.

Therefore, when rights in the service mark CASINO DE MONTE CARLO came before the U.S. Court of Appeals for the Fourth Circuit, one of the most conservative appellate courts in the country, the odds were good that the mark, which was used to render casino services only in Monaco, would receive dismissive treatment from the panel. However, those who took the long odds would have won a fortune. International Bancorp v. Societe des Bains de Mer, __ F.3d __ [66 USPQ2d 1705](4th Cir. 2003).

In a 2-to-1 decision, the majority determined that the owner of the world-famous Casino trademark had made its case for "use" of the Casino's mark in foreign commerce with the United States and was, therefore, entitled to relief against a domain name thief even though all casino services rendered under the mark were performed exclusively in Monaco. The court noted that the Casino's owner had not registered its mark in the United States, but that it had a New York office with four employees who promoted the Casino's services to persons living in the United States and booked reservations for the Casino, and that U.S. citizens traveled to and gambled in the Casino in Monaco. This combination of advertising, promotion and travel by U.S. citizens to the Casino for purposes of gambling was found sufficient to render the Casino's services "in commerce."

The majority relied upon Congressional enactments such as the Trading With the Enemy Act and the International Emergency Economic Powers Act as authority for the power of Congress to regulate the activities of U.S. citizens abroad. The court cited United States v. Holliday, 70 U.S. 407 (1865), which relied upon Justice Marshall's opinion in Gibbons v. Ogden, 22 U.S. 1, 189 (1824), for the proposition that the foreign commerce power "must be exercised wherever the subject exists. ... The locality of the traffic can have nothing to do with the power." Thus, the fact that U.S. citizens and foreign parties are brought together as "transacting partners" was deemed a sufficient nexus for finding that "foreign commerce" exists and there is no restriction on Congress that limits the reach of its foreign commerce power to "commercial intercourse that occurs solely within the United States."

The majority concluded its "commerce" analysis by stating:

Because SBM [the Casino] used its mark in the sale and advertising of its gambling services to United States citizens; because its rendering of gambling services to United States citizens constitutes foreign trade; because foreign trade is commerce Congress may lawfully regulate; and because commerce under the Lanham [Trademark] Act comprises all commerce that Congress may lawfully regulate, the services SBM renders under the 'Casino de Monte Carlo' mark to citizens of the United States are services rendered in commerce, and the 'use in commerce' requirement that the Lanham Act sets forth for the mark's protectibility is satisfied.
The dissenting opinion noted that the Casino de Monte Carlo case was virtually identical on its facts to numerous decisions that had defined service mark use as consisting of two required prongs: advertising or promotion that uses the mark; and the rendering of services under or by reference to the mark in the United States. With those cases as precedent, the dissent would have rejected the trademark claims of the Casino.

Note that the Casino case arose under a rather strange factual background. The plaintiff was a domain name thief who had a roster of 53 Web sites whose domain names included some portion of the designation "Casino de Monte Carlo." The plaintiff had been challenged by the Casino in a domain name arbitration action before the World Intellectual Property Organization, based in Geneva. The arbitration panel ordered the plaintiff to transfer the 53 domain names to the Casino. The appeal from such an order is an action in a court of competent jurisdiction and the plaintiff/domain name thief chose to bring such an action in federal court in Virginia. It was only after the Casino counterclaimed under the Lanham Act that the plaintiff raised the "foreign commerce" issue.

Under this rather odd factual background, it is possible that the two-member appellate majority "strained" the law a bit to reach a result its members found just. After all, the plaintiff chose its forum and had no qualms about whether the Monaco-based Casino was within the jurisdiction of the Virginia federal courts. Therefore, it will be interesting to see if other courts adopt the very broad interpretation of the Commerce Clause constructed by the majority in the Casino decision or whether that decision will be limited to its facts.

[1]. (Paris Convention for the Protection of Industrial Property (Stockholm 1967), Art. 6bis). See, United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90 (1918); A. Bourjois & Company v. Katzel, 260 U.S. 689 (1923); Philip Morris, Inc. v. Imperial Tobacco Company, 251 F.Supp. 362 (E.D.Va. 1965), later op. 282 F.Supp. 931 (E.D. Va.), aff'd. 401 F.2d 179 (4th Cir. 1968), cert. den. 393 U.S. 1094 (1969); E. Remy Martin & Co. v. Shaw-Ross Intl. Imports, Inc., 756 F.2d 1525 (11th Cir. 1985); Fuji Photo Film v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591 (9th Cir. 1985)(and cases cited therein); Person's Co., Ltd. v. Christman, 900 F.2d 1565 (Fed. Cir. 1990) and Buti v. Perosa, S.R.L., 139 F.3d 103 (2d Cir. 1998)(mere advertisement of mark is not "use" in commerce). Contra (arising in New York state courts) Prunier's Restaurant & Café Inc., 159 Misc. 551, 288 N.Y.S. 529 (1936) and Vaudauble v. Montmartre, Inc., 20 Misc.2d 757, 193 N.Y.S.2d 332 (1959).

[2] See e.g., Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964) (hotel that used products that moved in interstate commerce was sufficiently "in commerce" for application of legislative power) and Katzenback v. McClung, 379 U.S. 294 (1964) (local restaurant over a mile from interstate highway found "in commerce" due to purchases of products that arrived in interstate commerce).

[3] 3. See e.g., United States v. Lopez, 514 U.S. 549 (1995).

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