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Belmora LLC v. Bayer Consumer Care AG

United States District Court, E.D. Virginia, Alexandria Division

September 6, 2018

BELMORA, LLC, Plaintiff,
v.
BAYER CONSUMER CARE AG, et al., Defendants-Consolidated Plaintiffs,
v.
BELMORA, LLC, JAMIE BELCASTRO, & DOES 1-10, INCLUSIVE, et al., Consolidated Defendants.

          MEMORANDUM OPINION

          CLAUDE M. HILTON UNITED STATES DISTRICT JUDGE.

         THIS MATTER comes before the Court on Plaintiff-Consolidated Defendant Belmora's Motion for Summary Judgment and Defendant-Consolidated Plaintiff Bayer's Motion for Summary Judgment.

         This case arises from Bayer's claims that Belmora's FLANAX trademark should be cancelled because Belmora deceived customers into thinking that its FLANAX brand of pain relief medicine is the same FLANAX brand under which Bayer has sold pain relief medicine in Mexico for decades. The Trademark Trial and Appeal Board ("TTAB") cancelled Belmora's trademark. Judge Gerald Lee of the Eastern District of Virginia reversed the TTAB's decision, which the Fourth Circuit reviewed, vacated, and remanded. The case is now remanded to this Court. The parties seek review of the TTAB decision and bring additional causes of action.

         I. Background

         Belmora is a limited liability company formed in 2002. It is owned and operated by Jamie Belcastro. Belmora operates in the United States and sells over-the-counter pain relief products under the FLANAX brand name. Belmora began selling an analgesic naproxen sodium tablet in the United States as FLANAX in 2004. On October 6, 2003, Belmora filed an application with the United States Patent and Trademark Office ("PTO") to register the FLANAX mark for the analgesic tablets. The application was published for opposition on August 3, 2004, and the PTO issued the registration for the FLANAX mark on February 1, 2005.

         Bayer Consumer Care AG, a Swiss Corporation, Bayer Healthcare LLC, a Delaware limited liability company, and predecessors have sold analgesics, pharmaceutical products, and anti-inflammatories in Mexico under the Mexican-registered trademark FLANAX since the 1970s. Bayer does not possess a trademark for FLANAX in the United States.

         Bayer attempted to register FLANAX in the United States in 2004 but the PTO rejected the application based on Belmora's preexisting efforts to register the mark. Bayer has sold hundreds of millions of dollars of FLANAX products in Mexico. Bayer promotes FLANAX in Mexico, including in major cities near the United States-Mexico border. The FLANAX brand is well-known in Mexico and other Latin American countries, as well as to Mexican-Americans and other Hispanics in the United States, but was never marketed or sold in the United States. Bayer has never received approval from the FDA to market or sell FLANAX in the United States.

         Belmora's early packaging closely mimicked Bayer's Mexican FLANAX packaging, including a similar color scheme, font size, and typeface.[1] Belmora has since changed its packaging, but this modified scheme remains similar to that of Bayer's FLANAX. In addition to similar packaging, Belmora made statements implying that its FLANAX brand was the same FLANAX product sold by Bayer in Mexico. Belmora's marketing messages often suggested a historical connection between its FLANAX and Latino customers.

         As of the mid-2000s, no manufacturer had obtained FDA approval to produce naproxen sodium in liquidgel form. As a result, naproxen sodium liquidgels were not available to U.S. customers. In 20 07, Banner Pharmacaps ("Banner") received approval from the FDA to produce naproxen sodium liquidgels and entered into a supply agreement with Bayer. Bayer has since marketed Banner-manufactured naproxen sodium liquidgels to consumers under the ALEVE brand. In 2 015, Banner sold its rights to the naproxen sodium liquidgels to Bionpharma. Bionpharma, as Banner's successor, was the only FDA approved source for naproxen sodium liquidgels. Bionpharma entered into a supply agreement with Bayer in January 2017. In addition to Bayer, Bionpharma supplies naproxen sodium liquidgels to national chains for private label sale.

         Belmora alleges that a third party, PL Developments, agreed to package naproxen sodium liquidgels that Belmora would sell to consumers as a FLANAX branded product. As the only source of naproxen sodium liquidgels, PL Developments needed to obtain the liquidgels from Bionpharma. Belmora claims that when PL Developments approached Bionpharma and informed it that Belmora was the intended re-seller of the product, Bionpharma refused to supply the product.

         Belmora also alleges that Bayer is involved in grey market product sales. Bayer de Mexico, which is not a party to this lawsuit, lawfully sells FLANAX-branded naproxen sodium products in Mexico. It licenses use of the FLANAX trademark from Bayer Consumer Care AG. As the basis for its trademark infringement, unfair competition, and Tariff Act counterclaims, Belmora alleges that Bayer is involved in the importation and sale of Mexican FLANAX in the United States.

         PROCEDURAL HISTORY

         On June 29, 2007, Bayer petitioned the TTAB to cancel Belmora's registration for the FLANAX mark. Bayer argued that Belmora's use and registration of the FLANAX mark violated Article 6bis of the Paris Convention as made applicable by sections 44(b) and (h) of the Lanham Act, in addition to violating § 14(3) of the Lanham Act. Under § 14(3) of the Lanham Act, Bayer argued that Belmora used the FLANAX mark to misrepresent the source of the goods on which the mark was used.

         The TTAB dismissed Bayer's Article 6bis claim but allowed the § 14(3) claim to proceed. In 2014, after discovery and a hearing, the TTAB issued a ruling canceling Belmora's FLANAX registration pursuant to Section 14(3) of the Lanham Act, 15 U.S.C. § 1064(3}. Bayer Consumer Care AG v. Belmora LLC, 2014 WL 167914 6 (T.T.A.B. 2 014). The TTAB concluded that Belmora had misrepresented the source of the FLANAX goods and that the facts "d[id] not present a close case." Id. at 32. The TTAB went on to say that Belmora 1) knew the favorable reputation of Bayer's FLANAX product, 2) "copied" Bayer's packaging, and 3) "repeatedly invoked" that reputation when marketing its product in the United States. Id. at 35

         Following the TTAB's ruling, Bayer filed suit in the Southern District of California alleging violations of the Lanham Act as well as three claims under California state law. See Bayer Consumer Care AG v. Belmora, LLC, No. 3:14-cv-01395 (S.D. Cal.). Shortly after, Bayer filed a notice of voluntary dismissal because the "case was filed in the wrong district." (Dkt. 37 at 3 n.2). On June 9, 2014, Bayer refiled its complaint in the Central District of California.

         Belmora appealed the TTAB's cancellation order and elected to proceed with the appeal as a civil action in the Eastern District of Virginia. Belmora argued that the TTAB erred in concluding that Bayer had standing and /or a cause of action under § 14(3) and in finding that Belmora had misrepresented the source of its goods. Belmora also sought a declaration that its actions had not violated the false association and false advertising provisions of Lanham Act § 43(a) as alleged in Bayer's California lawsuit. Bayer filed a counterclaim challenging the TTAB's dismissal of its Paris Convention treaty claims.

         The Central District of California case was transferred and consolidated with Belmora's pending action in the Eastern District of Virginia. Belmora then moved to dismiss Bayer's § 43(a) and § 14(3) claims. On February 6, 2015, the district court issued an opinion granting Belmora's motion. The district court distilled the case into a single question of:

Does the Lanham Act allow the owner of a foreign mark that is not registered in the United States and further has never used the mark in United States commerce to assert priority rights over a mark that is registered in the United States by another party and used in United States commerce?

Belmora LLC v. Bayer Consumer Care AG, 84 F.Supp.3d 490, 495 (E.D. Va., 2015) .

         The district court concluded that "[t]he answer is no" based on its reading of the Supreme Court's decision in Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377 (2014). The Court dismissed Bayer's false association and false advertising claims for lack of standing and reversed the TTAB's § 14(3) cancellation order.

         Following the district court's ruling, Bayer filed a timely notice of appeal to the Fourth Circuit. The USPTO intervened to defend the TTAB's decision to cancel Belmora's registration. The Fourth Circuit vacated and remanded Judge Lee's decision, and found that in applying the Lexmark framework, Bayer has standing to bring its unfair competition claims under the Lanham Act § 43(a) and its cancellation claim under § 14(3}. The Court ruled that "the Lanham Act authorizes [Bayer] to bring its § 14(3) action against Belmora" . . . and that "[Bayer's] cancellation claim falls within the Lanham Act's zone of interests because it confronts the 'deceptive and misleading use of marks'." Belmora LLC v. Bayer Consumer Care AG, 819 F.3d 697, 715 (4th Cir. 2016). The Court went on to say that "Bayer has also adequately pled a proximately ...


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