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Cecil McBee v. Delica Co., Ltd.

United States Court of Appeals, First Circuit
417 F.3d 107 (2005)
ELI5:

Rule of Law:

A U.S. court has subject matter jurisdiction under the Lanham Act over a foreign defendant’s extraterritorial activities only if those activities have a substantial effect on United States commerce. Comity considerations, such as potential conflicts with foreign law, are not part of the jurisdictional inquiry but are relevant to whether a court, in its discretion, should exercise jurisdiction that it possesses.


Facts:

  • Cecil McBee, a renowned American jazz musician, has an established career in the United States and has toured in Japan.
  • In 1984, Delica Co., Ltd., a Japanese corporation, began using the name 'Cecil McBee' for a line of clothing and accessories marketed to teenage girls in Japan.
  • Delica owns a Japanese trademark for 'Cecil McBee' and sells its products exclusively through retail stores located in Japan.
  • Delica operates a website for its 'Cecil McBee' brand which is written almost entirely in Japanese, hosted in Japan, and does not facilitate online sales.
  • In 1995, McBee learned of Delica's use of his name and unsuccessfully challenged Delica's trademark in the Japanese court system, which ultimately upheld Delica's registration.
  • In order to establish a basis for a U.S. lawsuit, McBee's investigators induced Delica employees to ship approximately $2,500 worth of 'Cecil McBee' products to Maine.
  • Aside from these litigation-induced sales, there is no evidence that Delica has ever sold its products in or to the United States, and the company has an explicit policy against doing so.

Procedural Posture:

  • Cecil McBee sued Delica Co., Ltd. in the U.S. District Court for the District of Maine for trademark dilution and unfair competition under the Lanham Act.
  • Delica moved to dismiss for lack of personal jurisdiction, which the district court denied.
  • Delica then moved to dismiss for lack of subject matter jurisdiction over McBee's Lanham Act claims.
  • A magistrate judge recommended dismissing claims for injunctive relief but allowing damages claims to proceed.
  • The district court judge rejected the magistrate's recommendation in part and dismissed all of McBee’s Lanham Act claims for lack of subject matter jurisdiction, finding that Delica's actions did not satisfy the 'Vanity Fair' test.
  • The district court declined to exercise supplemental jurisdiction over the remaining state law claims.
  • McBee, the appellant, appealed the dismissal to the U.S. Court of Appeals for the First Circuit.

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Issue:

Does the Lanham Act grant a U.S. court subject matter jurisdiction over the extraterritorial activities of a foreign defendant that do not have a substantial effect on United States commerce?


Opinions:

Majority - Lynch, Circuit Judge.

No, the Lanham Act does not grant subject matter jurisdiction over a foreign defendant's extraterritorial acts unless they have a substantial effect on United States commerce. The court rejects the multi-factor tests used by other circuits, such as the Second Circuit's 'Vanity Fair' test, in favor of a new framework. For foreign defendants engaging in foreign activity, the sole jurisdictional touchstone is whether the conduct has a 'substantial effect on United States commerce,' a standard borrowed from antitrust law as articulated in 'Hartford Fire Ins. Co. v. California.' If this test is not met, the court lacks jurisdiction. The court explicitly separates this jurisdictional inquiry from comity considerations, holding that potential conflicts with foreign law are prudential matters for a court to weigh when deciding whether to exercise jurisdiction it already has, not factors in determining if jurisdiction exists in the first place. Applying this framework, the court found no substantial effect from Delica's Japanese sales or its Japanese-language website, as McBee failed to provide evidence of consumer confusion or economic harm within the United States. While the court had jurisdiction over the domestic claim involving sales to Maine, that claim was dismissed as meritless because the sales were manufactured for litigation.



Analysis:

This decision establishes a new, streamlined test in the First Circuit for the extraterritorial application of the Lanham Act against foreign defendants, diverging from the more complex, multi-factor balancing tests used by other circuits. By isolating the 'substantial effects' test as the sole basis for subject matter jurisdiction and treating comity as a separate, prudential concern, the court provides a clearer and more predictable framework. This approach aligns trademark law with modern antitrust jurisprudence and clarifies the threshold a plaintiff must meet to bring foreign conduct into a U.S. court, potentially making it more difficult to sue foreign defendants for purely foreign activities that have only a tenuous connection to U.S. commerce.

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