Monday, May 11, 2015

Are the Kardashians' European Activities Beyond The Reach of a U.S. Court?


Lee Tillett owns U.S. Trademark No. 4079066 for KROMA in connection with cosmetics.  Tillett exclusively licensed the mark to Kroma Makeup EU, LLC ("Kroma EU") granting Kroma EU the right to import, distribute, and sell products using the mark in Europe.  Kroma EU's business thrived selling cosmetics under this mark.

Separately, Kim, Kourtney, and Khloe Kardashian set out to create a Kardashian-themed makeup line.  They engaged Boldface Licensing + Branding ("Boldface") to assist in this venture.  Boldface conducted a preliminary trademark search for terms like "Khroma" and "Kardashian Khroma."  Those searches revealed Tillet's trademark.  The Kardashians inquired of Boldface the propriety of using the "Khroma" mark in light of Tillet's registration.  Notwithstanding, the Kardashians eventually selected and went to market with the "Khroma" mark.

Tillett sent the Kardashian's a couple of cease and desist letters which failed to prevent the accused activity.  Instead, Boldface sued Tillett for a declaratory judgment that its actions did not infringe.  Tillett countersued for infringement (and brought the Kardashians into that dispute under a vicarious trademark infringement theory).  Tillett ultimately was awarded a preliminary injunction.  Thereafter, the case settled.  Notably, Kroma EU was not a party to that lawsuit and Tillett does not appear to have pursued a claim for damages on behalf of Kroma EU.

Kroma EU sued Tillett, the Kardashians, and Boldface in Florida for trademark infringement (direct and vicarious).  Kroma EU also sued Tillett under a promissory estoppel theory for Tillett's failure to recover Kroma EU's damages in the prior litigation.  Boldface defaulted.  The remaining defendants sought dismissal, which presented the court with four issues to resolve:

  1. Does Kroma EU have standing to bring its claim for trademark infringement?
  2. Are Kroma EU's claims barred by res judicata?
  3. Does the Lanham Act reach the Kardashian's infringing activities occuring outside the U.S?
  4. Does Kroma EU's promissory estoppel claim survive?

The court resolved these issues on the pleading stage as follows:


The Kardashian's argument was essentially that "because Tillett is the registrant and owner of the 'Kroma' mark in the United States, Tillett is the only one who can prosecute claims on the mark's behalf."  The court was not persuaded:
[S]imply because the licensor remains the owner of the trademark does not mean that he is the only person with rights in the mark to enforce. Although § 32(1) of the Lanham Act speaks of the "registrant" who may bring an action for trademark infringement, see 15 U.S.C. § 1114(1), section 43(a)—the provision through which Kroma EU asserts its infringement claims—is not so limited in scope. Specifically, § 43(a) permits "any person who believes that he or she is or is likely to be damaged" to bring a claim for infringement resulting from false association or false advertising. 15 U.S.C. § 1125(a)(1). Section 43(a) therefore affords relief to any plaintiff who shows the requisite injury from the defendant's infringing conduct, without regard to any ownership interest the plaintiff may have in the trademark. Murphy v. Provident Mut. Life Ins. Co. of Phila., 756 F. Supp. 83, 86 (D. Conn. 1990) ("[T]he question of ownership is immaterial to standing under § 43(a) . . . ."), aff'd 923 F.2d 923 (2d Cir. 1990), cert. denied 502 U.S. 814 (1991). Indeed, courts frequently find non-owners—such as manufacturers, competitors, distributors, and others—to have standing under § 43(a). See, e.g., Scotch Whisky Ass'n v. Majestic Distilling Co., Inc., 958 F.2d 594 (4th Cir. 1992) (trade association has standing), cert. denied 506 U.S. 862 (1992)Quabaug Rubber Co. v. Fabiano Shoe Co., Inc., 567 F.2d 154, 160 (1st Cir. 1977) (non-exclusive distributor has standing).
The court went on to explain the Supreme Court's recent pronouncement resolving the question of non-owner standing.  See Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014).  There, the Court formulated a two-prong test to analyze for "statutory standing".

First, the plaintiff must fall within the "zone of interests" of the statute at issue.  Second, the plaintiff must show its injuries are proximately caused by the defendant's conduct.  Here, the court quickly found Kroma EU's claim satisfied this standard because Kroma EU had an exclusive license to the mark in Europe and Kroma EU had engaged in actual commercial conduct to promote the brand abroad.  Additionally, it was clear that Kroma EU pleaded injuries proximately caused by the defendants activities.  As such, standing was proper.

Res Judicata

The court did not require much time to deal with this issue, as res judicata requires identical parties in the respective disputes and Kroma EU was not a party to the prior litigation.

Extraterritorial Reach of the Lanham Act

The Kardashians sought dismissal of the claim for failing to state sufficient conduct to hold the Kardashian's liable for vicarious trademark infringement because the claim was based on activities outside the U.S.  The court explained the law as follows:
Where trademark infringement occurs primarily in a foreign nation, the extraterritorial reach of the Lanham Act becomes a concern, as it is presumed that Congress intends to legislate "with respect to domestic, not foreign matters." Morrison, 561 U.S. at 255. Only Congress' clear, affirmative expression of its intent to give a federal statute extraterritorial consequence can rebut this presumption. Id.
The United States Supreme Court found such an intent in the Lanham Act inSteele v. Bulova Watch Co., 344 U.S. 280 (1952). In Bulova Watch, the Supreme Court recognized Congress' undeniable ability to "project the impact of its laws beyond the territorial boundaries of the United States." Id. at 282. Upon reviewing the Lanham Act's purpose and statement of broad jurisdictional scope, the Supreme Court deduced that the Lanham Act regulates not only domestic conduct, but also foreign conduct of U.S. citizens where the conduct involves U.S. commerce and does not otherwise interfere with the rights of foreign nationals in their own countries. Id. at 285-86.
The Eleventh Circuit has formulated a three factor test in resolving such issues:

  1. is the defendant a U.S. citizen?
  2. does the foreign conduct have a substantial effect on U.S. commerce?
  3. does adjudicating the claim interfere with another nation's sovereignty?

See Int'l Café, S.A.L. v. Hard Rock Café Int'l (U.S.A.), Inc., 252 F.3d 1274, 1278 (11th Cir. 2001) (per curiam) accord Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633, 642-43 (2d Cir. 1956), cert. denied 352 U.S. 871 (1956).  There was no question on the first and third factors.  As to the second, the court wrote:
the Court finds that the Kardashian Defendant's conduct has had a substantial effect on U.S. commerce.  ... When Khroma was released in Europe, the retailer backed out, stating that it did not want to be associated with the Kardashian Defendants or to be perceived as selling discount or inferior-quality products.  Other potential clients also expressed their confusion as to why Kroma was partnering with the Kardashian Defendants.
Thus, Kroma EU could proceed on its claim in the U.S.

Promissory Estoppel

Here, while Tillett may have been technically correct that Kroma EU could not proceed on a promissory estoppel theory in light of the written agreement between the parties (i.e. the license agreement), Kroma EU's claim could still proceed under a breach of contract theory.  The court is not obligated to adhere to the labels parties apply to their claims and Kroma EU will be given an opportunity to amend its claim upon a proper motion.  

Motion to dismiss, denied.

Kroma Makeup EU, Ltd. v. Boldface Licensing + Branding, Inc., Case No. 6:14-CV-1551 (M.D. Fla. Apr. 15, 2015) (J. Byron)