Atlantic Richfield Co. v. ARCO Globus International Co.
Docket: Docket No. 97-7829
Court: Court of Appeals for the Second Circuit; July 17, 1998; Federal Appellate Court
The case involves the applicability of the Lanham Act to alleged trademark infringement occurring outside the United States. Atlantic Richfield Company (Arco) appeals the dismissal of its claims against Arco Globus International Company (AGI) regarding AGI's use of the name 'Arco Globus International' in its oil and gas operations, particularly in the former Soviet Union. Arco contends that AGI’s usage infringes on its registered 'ARCO' mark under 15 U.S.C. 1114(1), violates the prohibition against false designation of origin under 15 U.S.C. 1125(a), and constitutes unfair competition and dilution.
Chief Judge Winter affirms Judge Keenan's ruling, which determined that the Lanham Act does not extend to AGI's use of the 'ARCO' mark abroad, as it lacks a substantial effect on U.S. commerce. The background reveals that Arco is a significant participant in the oil and gas sector, with extensive domestic and international operations, and that the 'ARCO' trademark has been in use since 1909. AGI, a smaller entity established in 1990, primarily engages in oil trading in Russia but lacks substantial business operations in the U.S., a point not disputed by Arco, despite its claims of AGI's more extensive domestic activities. Ultimately, the court found no violation of the Lanham Act and dismissed Arco's unfair competition and dilution claims, leading to this appeal.
The Lanham Act can apply to infringing conduct outside the U.S. if it threatens U.S. commerce, as established in Fun-Damental Too, Ltd. v. Gemmy Indus. Corp. The Supreme Court's decision in Steele v. Bulova Watch Co. is pivotal; it involved a U.S. citizen selling counterfeit Bulova watches in Mexico, with the Court ruling that the defendant’s actions had repercussions in the U.S., particularly due to component sourcing from the U.S. and resulting consumer confusion. The case identified three factors for extraterritorial application of the Act: (i) the defendant being a U.S. citizen, (ii) the presence of conflicting trademark rights under U.S. and foreign laws, and (iii) the conduct's substantial effect on U.S. commerce. In the current appeal, two of these factors are met—AGI is a U.S. citizen and there is no foreign law conflict. The key question is whether AGI's foreign activities substantially affect U.S. commerce. Arco conceded that AGI's foreign activities do not have such an effect since there is no evidence of consumer confusion in the U.S. Arco argues that AGI’s domestic activities, intended to support its foreign conduct, bring the foreign activities under the Lanham Act’s scope. However, the Bulova case does not support this claim; it required that infringing products enter the U.S. market to cause confusion. AGI's actions did not mislead U.S. consumers or diminish the value of the ARCO mark in the U.S.
AGI's domestic activities do not qualify as essential to its foreign infringing conduct under the Lanham Act. Despite having two U.S. employees and engaging in limited activities like refinery tours and bank deposits, these actions do not materially support AGI's alleged foreign infringement. Unlike cases where products were manufactured or shipped through U.S. commerce, AGI’s presence in the U.S. is insufficient to trigger the Lanham Act's extraterritorial application. The Act aims to protect domestic trademarks, and since AGI's foreign use of a mark does not mislead U.S. consumers or utilize American commerce for competition, Arco has not satisfied the substantial effect requirement. Therefore, the court affirms the decision, stating that AGI's geographic presence alone does not invoke the Act's purpose. Additionally, the court declines to resolve the dispute regarding Arco's presence in the former Soviet Union or the potential future expansion of AGI's operations into the U.S. The other Arco entity mentioned has not conducted business, and the court refrains from commenting on possible trademark violations if AGI were to enter the U.S. market. Lastly, the court clarifies that the absence of substantial effects on U.S. commerce is fatal to claims for extraterritorial application of the Lanham Act, as established in Vanity Fair.
The court referenced Sterling Drug, Inc. v. Bayer AG to illustrate that while the first two Vanity Fair factors are typically necessary for applying the Lanham Act, their absence does not preclude consideration of the case if there is a significant impact on U.S. commerce. The plaintiff sought to limit the injunction of the foreign use of a mark only when it could affect American consumers, indicating a nuanced approach to extraterritoriality. However, the court concluded that the Lanham Act does not apply to AGI's alleged infringement due to insufficient impact on U.S. commerce. Consequently, there was no need to evaluate Judge Keenan’s alternative finding regarding the lack of proof of a Lanham Act violation. Additionally, since the federal claims overlap with state law claims under New York law, and given that Arco did not argue for a broader interpretation of state law than the Lanham Act, the dismissal of the state-law claims by Judge Keenan was not reconsidered.
