Kondo-ing Steele v. Bulova: The Lanham Act's Extraterritorial Reach via the Effects Test

Abstract

An update of a 1952 decision by the U.S. Supreme Court, Steele v. Bulova, is arguably overdue in an era of intense globalization of commerce, especially considered in light of the subsequent changes to both jurisdictional and extraterritoriality doctrines. It has been almost seventy years since the Supreme Court has taken a hard look at the issue of the extraterritorial reach of the Lanham Act. During that period, the Court has shifted the procedural basis for extraterritorial analysis; the circuit courts' interpretation of the so-called “effects test” for extraterritoriality has resulted in some doctrinal unruliness; and Congress has amended the Lanham Act significantly to include new rights such as anti-dilution. The recent Ninth Circuit decision in Trader Joe’s v. Hallatt shows why all of these developments have now come to a head.

The Trader Joe’s court categorized the issue as a substantive one on the merits rather than jurisdictional, and found sufficient effects on U.S. commerce to merit extraterritorial application of the Lanham Act. Extraterritoriality analysis is an area where procedure and substance seem to be fused. And the effects test is a question of prescriptive jurisdiction and/or prescriptive comity, which impacts trademark policy. In its analysis of effects on U.S. commerce, the Trader Joe’s court amplified the U.S. federal version of anti-dilution law, and minimized possible statutory or common law defenses such as exhaustion. The increasingly generous extension of extraterritoriality via effects arguably creates a “glocal” form of transnational goodwill, in which a U.S. version of expansive rights is imposed on other jurisdictions. Moreover, an overly-generous quality control exception to international exhaustion undermines legitimate business models, including on-line third party sellers or others re-selling genuine goods across borders.

This Article thus argues that the Supreme Court should "kondo" the Lanham Act's extraterritorial reach, to clarify the procedural and substantive confusion that currently prevails and, importantly, the contours of the effects test itself. (Please note that this SSRN version of the Article notes a few "errata" detected after print publication.)

Keywords: Anti-Dilution, Comity, Exhaustion, First Sale, Gray Market, Extraterritoriality, Lanham Act, Merits, Pre-trial Practice, Prescriptive Jurisdiction, Rule 12 Dismissals, Subject Matter Jurisdiction, Trademark