Ocean Garden, Inc. v. Marktrade Co., Inc.

• Citation: 953 F.2d 500,21 U.S.P.Q.2d 1493
• Decision Date: 31 December 1991
• Docket Number: No. 91-55218,91-55218
• Parties: , 60 USLW 2496, 21 Fed.R.Serv.3d 660, 21 U.S.P.Q.2d 1493 OCEAN GARDEN, INC., Plaintiff-counterdefendant-Appellee, v. MARKTRADE COMPANY, INC.; Alberto J. Soler, Defendants-counterclaimants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 500

953 F.2d 500

13 ITRD 2246, 60 USLW 2496, 21

Fed.R.Serv.3d 660,

21 U.S.P.Q.2d 1493

OCEAN GARDEN, INC., Plaintiff-counterdefendant-Appellee, v. MARKTRADE COMPANY, INC.; Alberto J. Soler Defendants-counterclaimants-Appellants.

No. 91-55218.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 8, 1991.

Decided Dec. 31, 1991.

Harlan P. Huebner and Edouard V. Rosa, Huebner & Rosa, Los Angeles, Cal., R. Joseph Trojan, on brief, for defendants-counterclaimants-appellants.

Jeffrey M. Shohet, Anthony M. Stiegler, and Jeanne M. Malitz, Gary, Cary, Ames & Frye, San Diego, Cal., for plaintiff-counter-defendant-appellee.

Appeal from the United States District Court for the Central District of California William J. Rea, District Judge, Presiding.

Before SNEED, BEEZER and TROTT, Circuit Judges.

TROTT, Circuit Judge:

Ocean Garden Products ("OGP") was awarded a preliminary injunction preventing Marktrade, Inc. and Alberto Soler (collectively, "Marktrade") from imitating, copying, or making unauthorized use of OGP's trademarks or trade dress. Marktrade appeals the preliminary injunction. We affirm.

I

OGP markets canned fish and seafood products including Mexican abalone under the "Calmex" brand name. Marktrade markets similar products under the brand names "Sardimex" and "Seamex," and distributes "Rey Del Mar" canned abalone for export to the Far East. Marktrade uses trade dress similar to OGP's "Wheel Brand" abalone.

On May 14, 1990, OGP filed a complaint for federal and common law trademark infringement, unfair competition, unfair business practice, dilution, injunctive relief, interference with prospective economic advantage, interference with contract, unjust enrichment, and declaratory relief. On November 14, 1990, OGP filed a motion for a preliminary injunction which was granted in part on December 17, 1990. The preliminary injunction enjoined Marktrade from "imitating, copying or making any unauthorized use" of OGP's trademarks including (1) "Calmex"; (2) "Wheel Brand Ship's Wheel superimposed over a map of Baja California"; (3) "Wheel Brand Ship's Wheel superimposed over Chinese characters"; and (4) "any use of the Ship's Wheel in combination with the use of the color pink, as the background label color along with the color blue as an accent color at the top or bottom of 'Rey Del Mar' abalone cans."

On January 27, 1991, Marktrade appealed the preliminary injunction.

II

A district court's decision to grant a motion for a preliminary injunction will be upheld unless the court "applied incorrect law, relied on clearly erroneous factual findings, or otherwise abused its discretion." NEC Electronics v. Calif. Circuit Abco, 810 F.2d 1506, 1508 (9th Cir.), cert. denied, 484 U.S. 851, 108 S.Ct. 152, 98 L.Ed.2d 108 (1987). As the Seventh Circuit has noted in language particularly appropriate to this case, "[t]o be clearly erroneous, a decision must ... strike us as wrong with the force of a five-week old, unrefrigerated dead fish." Parts and Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228, 233 (7th Cir.1988). The question of whether the court has subject matter jurisdiction is a question of law and is to be reviewed de novo. Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 769 F.2d 1393, 1395 (9th Cir.1985) (citing United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984)).

III

Marktrade argues that the district court lacked jurisdiction because the canned abalone OGP complains of "is exclusively harvested, processed, and canned in Mexico by the Cooperatives, which is a Mexican association of Mexican abalone fisherman." This abalone is sold exclusively in the Far East. OGP contends there is jurisdiction on two grounds. First, OGP alleges that Marktrade's trademark and trade dress infringement affects United States foreign commerce. Marktrade orchestrates and manages its business from the United States and both OGP and Marktrade are California corporations. Secondly, it claims there is jurisdiction because the goods pass through a United States foreign trade zone in Los Angeles.

In the instant case, we find both extraterritorial jurisdiction, and jurisdiction resulting from shipment through a United States foreign trade zone.

A

The purpose of the Lanham Act is to "regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce ... to protect persons engaged in such commerce against unfair competition; to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered marks." 15 U.S.C. § 1127 (1988). In the instant case, OGP registered its trademark with the U.S. Patent and Trademark Office and was thus protected from infringement under the Lanham Act.

In interpreting the jurisdictional scope of the Lanham Act, the Supreme Court has stated that the Lanham Act provides a "broad jurisdictional grant" that extends to "all commerce which may lawfully be regulated by Congress." Steele v. Bulova Watch Co., 344 U.S. 280, 283, 286, 73 S.Ct. 252, 254, 255, 97 L.Ed. 319 (1952). "Various circuits have recognized the Supreme Court's view of the 'sweeping jurisdictional language' of the Lanham Act." Reebok Int'l Ltd. v. Marnatech Enterprises, Inc., 737 F.Supp. 1515, 1518 (S.D.Cal.1989) (citations omitted). Moreover, "Congress has the power to prevent unfair trade practices in foreign commerce by citizens of the United States, although some of the acts are done outside the territorial limits of the United States." Bulova, 344 U.S. at 286, 73 S.Ct. at 255 (citation omitted).

"[T]he Lanham Act's coverage of foreign activities may be analyzed under the test for extraterritorial application of the federal anti-trust laws set forth in Timberlane Lumber Co. v. Bank of America National Trust & Savings Ass'n., 549 F.2d 597 (9th Cir.1976) (Timberlane I )." Star-Kist, 769 F.2d at 1395. Under Timberlane I, there are three criteria that must be considered: (1) there must be some effect on American foreign commerce; (2) the effect must be sufficiently great to present a cognizable injury to plaintiffs under the federal statute; (3) the interest of and links to American foreign commerce must be sufficiently strong in relation to those of other nations. Star-Kist, 769 F.2d at 1395.

With respect to the first criterion, OGP argues that it is losing millions of dollars in revenues through trademark infringement. We find that "the sales of infringing goods in a foreign country may have a sufficient effect on commerce to invoke Lanham Act jurisdiction." Van Doren Rubber Co. v. Marnatech Enterprises, Inc., 1989 WL 223017 * 4 1989 U.S. LEXIS 17323 * 11, 13 U.S.P.Q.2d (BNA) 1587 (S.D.Cal.1989) (quoting American Rice, Inc. v. Arkansas Rice Growers Cooperative Ass'n, 701 F.2d 408, 415-16 (5th Cir.1983)). OGP also alleges a threat by Marktrade to infringe in the United States. However, there is no ground for this allegation.

As for the second criterion, OGP claims that Marktrade dilutes OGP's trademark in the United States. This is not at all clear from the facts of this case. The injury would seem to be limited to the deception of consumers in the Far East. However, both OGP and Marktrade are U.S. corporations, and there is monetary injury in the United States to OGP, which is cognizable under the Lanham Act. 15 U.S.C. §§ 1116, 1117 (1988).

OGP's claim is also very strong with respect to the third criterion. The third Timberlane factor is divided into seven components--these weigh heavily in granting extraterritorial jurisdiction in this case. See Star-Kist 769 F.2d at 1395. (1) Degree of conflict with foreign law: In the case before us, there are no pending proceedings in Hong Kong or Taiwan. Therefore this case is distinguishable from Star-Kist, where there was an ongoing petition pending in the Philippine patent office. As in American Rice:

Absent a determination by the [foreign] court that [the defendant] has a legal right to use the marks, and that those marks do not infringe [the plaintiff's] mark, we are unable to conclude that it would be an affront to [the foreign country's] sovereignty or law if we affirm the district court's injunction prohibiting the defendant from injuring the plaintiff's [foreign] commerce conducted from the United States.

American Rice, 701 F.2d at 415-16; see also Reebok 737 F.Supp. at 1520 ("[s]ince to this Court's knowledge there has been no adjudication on the merits in the Mexican courts, there is no danger at this time of this preliminary injunction interfering with the laws of a foreign nation"). (2) Nationality of the parties: Marktrade and OGP are both California corporations. (3) Extent to which enforcement is expected to achieve compliance: The injunction would be effective against Marktrade because it is a U.S. corporation which "orchestrated [its] infringing activities," Reebok, 737 F.Supp. at 1520, from the United States. Marktrade, in response, argues that the Mexican cooperative could continue infringement activities on its own. However, the facts in the record indicate extensive involvement by Soler and Marktrade in these activities. (4) Relative significance of effects on U.S. as compared to elsewhere: Here OGP is also a United States corporation, and therefore the losses involved affect a domestic corporation. (5) Explicit purpose is to harm U.S. commerce: There is evidence that Marktrade's infringing acts were intentional. See discussion infra pp. 507-508. Therefore, Marktrade's actions may be said to have the explicit purpose of harming a U.S. corporation. (6) Foreseeability of such effect: Because the above five factors weigh in OGP's favor, such effect was foreseeable. (7) Relative importance of violations within the U.S.: Again, OGP is a U.S. corporation and is hurt by the infringement. Moreover, the goods were exported through a United States...