International Bancorp, Llc v. Societe Des Bains De Mer Et Du Cercle Des Etrangers A Monaco

Plaintiff companies appeal from the district court's summary judgment that their registration and use of forty-three domain addresses infringe a foreign corporation's rights under the Lanham Act and violate the Anticybersquatting Act, where the foreign corporation advertised its trademark domestically, but only rendered services under it abroad. We conclude that the district court's judgment, although not its reasoning, was correct, and therefore affirm.

Appellee, Societe des Bains de Mer et du Cercle des Etrangers a Monaco ("SBM"), owns and operates historic properties in Monte Carlo, Monaco, including resort and casino facilities. One of its properties, a casino, has operated under the "Casino de Monte Carlo" trademark since 1863. The mark is registered in Monaco, but not in the United States. SBM promotes this casino, along with its other properties, around the world. For 18 years, SBM has promoted its properties from a New York office staffed with four employees. SBM's promotions within the United States, funded with $1 million annually, include trade show participation, advertising campaigns, charity partnerships, direct mail solicitation, telephone marketing, and solicitation of media coverage.

Appellants, the plaintiff companies, are five companies formed and controlled by a French national, which operate more than 150 web sites devoted to online gambling. Included in this roster are 53 web sites whose domain addresses incorporate some portion of the term "Casino de Monte Carlo."1 These web sites, along with the gambling software they employ, also exhibit pictures of the Casino de Monte Carlo's exterior and interior, contain renderings that are strikingly similar to the Casino de Monte Carlo's interior, and make allusion to the geographic location of Monte Carlo, implying that they offer online gambling as an alternative to their Monaco-based casino, though they operate no such facility.

When SBM learned of the plaintiff companies' web sites and their uses of the "Casino de Monte Carlo" mark, it challenged them in the World Intellectual Property Organization (WIPO). A WIPO panel ruled against the plaintiff companies and ordered the transfer of the 53 domain addresses to SBM. To escape this judgment, the plaintiff companies brought suit in federal court against SBM seeking declaratory judgment, pursuant to 28 U.S.C. § 2201(a), that they are entitled to the disputed domain names. SBM counterclaimed under the Lanham Act (15 U.S.C. § 1111 et seq.) for trademark infringement under section 1125(a);2 trademark dilution under section 1125(c); cybersquatting under section 1125(d)(1); and unfair competition in violation of section 1126(h). The district court ruled against SBM on its section 1125(c) trademark dilution claim, because SBM had not shown actual economic harm, and on its section 1126(h) unfair competition claim. But the court ruled in favor of SBM on its trademark infringement claim and on its cybersquatting claim, awarding SBM $51,000 in statutory damages and transfer of 43 of the 53 contested domain addresses.3 The plaintiff companies now appeal from that adverse judgment.

Although the district court decided this case on motions for summary judgment, factual determinations underlay its ultimate ruling (e.g., findings as to likelihood of confusion and secondary meaning). The plaintiff companies contend that the court exceeded its summary judgment authority by resolving such questions of fact. Two factors present in this case justify the judicial posture taken by the court, however. First, the parties, having prepared for a bench trial, agreed to submit the voluminous record to the court for dispositive decision at the time of the summary judgment motions, see J.A. at 1002-03 (the court: "there is really no reason why the Court should not dispose of this matter on the current record; isn't that right?" Attorney for the plaintiff companies: "I believe that's correct, your Honor." Attorney for SBM: "I think that sounds sensible, your Honor." Attorney for defendant Levy: "That's exactly what I would ask for, your Honor." The court: "All right.").

Secondly, the court's disposition of the case was consistent with the fact that the parties did not contradict one another's proffered facts, but only disputed the inferences that a fact finder would draw from those underlying facts. With the parties' voluntary submission of the record, comprised of only uncontroverted proffers, before it, and being en route to a bench trial anyway, the court properly proceeded to judgment in the case. Cf. Matter of Placid Oil Co., 932 F.2d 394, 398 (5th Cir.1991) ("[I]t makes little sense to forbid the judge from drawing inferences from the evidence submitted on summary judgment when that same judge will act as the trier of fact, unless those inferences involve issues of witness credibility or disputed material facts. If a trial on the merits will not enhance the court's ability to draw inferences and conclusions, then a district judge properly should draw his inferences without resort to the expense of trial." (quotations and citations omitted)).

Because the court decided the case on summary judgment motions, we review its legal determinations de novo, see Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 928 (4th Cir. 1995). But since it also engaged in fact-finding to dispose of the matter, we review its findings of fact for clear error. See, e.g., Petro Stopping Centers, L.P. v. James River Petroleum, Inc., 130 F.3d 88, 91-92 (4th Cir.1997) ("This circuit reviews district court determinations regarding likelihood of confusion under a clearly erroneous standard."); RFE Industries, Inc. v. SPM Corp., 105 F.3d 923, 925 (4th Cir. 1997) ("[The] district court's findings [as to secondary meaning] may be disturbed on appeal only if they are clearly erroneous.").4

The plaintiff companies first challenge the district court's determination that their use of 43 domain addresses violated 15 U.S.C. § 1125(a) of the Lanham Act, infringing on SBM's trademark. Central to their challenge is the claim that SBM did not have a protectable interest in the "Casino de Monte Carlo" mark, a prerequisite to SBM's ability to claim against the plaintiff companies under the Act. See 15 U.S.C. § 1125(a)(1) (allowing only a person "who believes that he or she is or is likely to be damaged" by the defendant's use of a confusing mark to bring a civil action); see also Lone Star Steakhouse & Saloon, Inc., 43 F.3d at 930 (proving trademark infringement under 15 U.S.C. § 1125(a) requires a plaintiff to prove it has a protectable mark).

This circuit requires that an unregistered trademark satisfy two requirements if its owner is to have a protectable interest in the trademark: The mark must be used in commerce, see 15 U.S.C. § 1051 (only trademarks "used in commerce," or which a person has a bona fide intention to use in commerce, can be registered, signaling Lanham Act protectability); see also Larsen v. Terk Technologies Corp., 151 F.3d 140, 146 (4th Cir.1998) ("to receive protection under [1125(a)] a trademark... must be `in use' in commerce"), and it must be distinctive, see Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 464 (4th Cir.1996) (noting that the degree of protection a mark may receive is directly related to its distinctiveness). The plaintiff companies argue that the district court erred in concluding that SBM met these two requirements. We address both arguments in turn.

Both parties have agreed, in their briefs and at oral argument, that the critical question in assessing whether SBM "used its mark in commerce" is whether the services SBM provided under the "Casino de Monte Carlo" mark were rendered in commerce. As shown below, the Lanham Act's plain language makes this conclusion unavoidable and the parties' agreement unsurprising.

We must first contend with a threshold matter, however. This circuit has never directly addressed the scope of the term "commerce" within the Lanham Act. Because of the clarity of the Act's own definition of the term, see 15 U.S.C. § 1127 (defining "commerce" as "all commerce which may lawfully be regulated by Congress"), we now hold that "commerce" under the Act is coterminous with that commerce that Congress may regulate under the Commerce Clause of the United States Constitution. The other circuits to address this question have concluded the same. See, e.g., United We Stand America, Inc. v. United We Stand, America, NY, Inc., 128 F.3d 86, 92-93 (2nd Cir. 1997); Planetary Motion v. Techsplosion, 261 F.3d 1188, 1194 (11th Cir.2001). Of course, Article I of the Constitution provides that,

[t]he Congress shall have Power ... to regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes[.]

U.S. Const. art. I, § 8, cl. 3. Consequently, "commerce" under the Lanham Act necessarily includes all the explicitly identified variants of interstate commerce, foreign trade, and Indian commerce.

Understanding commerce under the Act to be coterminous with that commerce Congress may regulate under the Commerce Clause, we turn next to the determination of what constitutes "use in commerce" under the Act. Again we rely on section 1127, which provides, of particular relevance here, a specific definition of that term as it relates to servicemarks, which the "Casino de Monte Carlo" mark unquestionably is:

The term "use in commerce" means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this chapter, a mark shall be deemed to be used in commerce —

....

(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services.

15 U.S.C. § 1127 (emphasis added).

Consistent with this definition of the statutory "use in commerce" requirement, the Supreme Court has said that "[t]here is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed.... [T]he right to a particular mark grows out of its use, not its mere adoption;" United Drug Co. v. Theodore Rectanus, Co., 248 U.S. 90, 97, 39 S.Ct. 48, 63 L.Ed. 141 (1918). Because a mark is used in commerce only if it accompanies services rendered in commerce, i.e., it is employed appurtenant to an established business or trade that is in commerce, "mere advertising" of that mark does not establish its protectability, though advertising is itself commerce that Congress may regulate.

With these principles in clear view, we proceed to address whether the "Casino de Monte Carlo" mark was used in commerce. In their briefs and before the court below, the parties debate principally whether the activities of SBM's New York office conducted under the "Casino de Monte Carlo" mark constitute services rendered in interstate commerce. SBM, for its part, contends that the office's booking of reservations is a rendered service, and that its maintenance of the office, its advertising in this country, and its promotional web page attach the "Casino de Monte Carlo" mark for sales and advertising purposes to this interstate service, thereby satisfying the "use in commerce" requirement. The plaintiff companies argue, to the contrary, that there is no evidence in the record that the New York office books reservations to the casino, and that, as a result, the office engages in no activity beyond "mere advertising." They argue further that the casino gambling services are the only established business to which the trademark applies, and that that service, being rendered in Monaco, is not rendered in commerce that Congress may regulate. The district court, accepting SBM's arguments, concluded as follows:

[I]t is clear from the undisputed record that SBM's New York office was one of SBM's many international sales offices from which customers could book reservations. Thus, the record shows that in this respect, SBM "services are rendered" in the United States.

Int'l Bancorp v. SBM, 192 F.Supp.2d 467, 479-80 (E.D.Va.2002) [Summary Judgment].

SBM's argument and the district court's reasoning are in error because the New York-office bookings on which they rely do not relate to the casino in question, but, rather, to SBM's resort facilities. As became evident at oral argument and upon our review of the record, SBM's assertion that the record contains evidence that its New York office booked reservations to the casino is unsubstantiated. The plaintiff companies correctly point out that since the "Casino de Monte Carlo" mark only pertains to the casino and its gambling services, any guest reservations SBM's New York office and web site book for SBM's various resorts, which reservation services the record does disclose, are irrelevant to the analysis. And the other operations of SBM's New York office, at least as they appear in the record, are merely promotional in nature. The Lanham Act and the Supreme Court, as shown above, make clear that a mark's protection may not be based on "mere advertising."

Because SBM presented no record evidence that the New York office did anything other than advertise the "Casino de Monte Carlo" mark, if its case rested on this alone, the plaintiff companies would have the better of the argument. When they appeared before the court, however, we asked the parties to address themselves to the question of whether the casino services at issue were rendered in foreign trade, and the plaintiff companies conceded that the record contained evidence that United States citizens went to and gambled at the casino. This concession, when taken together with the undisputed fact that the Casino de Monte Carlo is a subject of a foreign nation, makes unavoidable the legal conclusion that foreign trade was present here, and that as such, so also was "commerce" under the Lanham Act.

Since the nineteenth century, it has been well established that the Commerce Clause reaches to foreign trade. And, for the same length of time, the Supreme Court has defined foreign trade as trade between subjects of the United States and subjects of a foreign nation. See In re: Trade-Mark Cases, 100 U.S. 82, 96, 25 L.Ed. 550 (1879) ("commerce with foreign nations means commerce between citizens of the United States and citizens and subjects of foreign nations"); see also Henderson v. Mayor of City of New York, 92 U.S. 259, 270, 23 L.Ed. 543 (1875) (same); United States v. Holliday, 3 Wall. 407, 70 U.S. 407, 417, 18 L.Ed. 182 (1865) (same). And, of course, commerce does not solely apply "to traffic, to buying and selling, or the interchange of commodities ... Commerce, undoubtedly, is traffic, but it is something more: it is [commercial] intercourse." Gibbons v. Ogden, 9 Wheat. 1, 22 U.S. 1, 189, 6 L.Ed. 23 (1824) (C.J.Marshall). Service transactions are clearly commercial intercourse, and by extension can clearly constitute foreign trade. Cf. United States v. American Building Maintenance Indus., 422 U.S. 271, 283, 95 S.Ct. 2150, 45 L.Ed.2d 177 (1975) (noting that an entity engages in commerce when it is "directly engaged in the production, distribution, or acquisition of goods or services in interstate commerce") (emphasis added). Thus, while SBM's promotions within the United States do not on their own constitute a use in commerce of the "Casino de Monte Carlo" mark, the mark is nonetheless used in commerce because United States citizens purchase casino services sold by a subject of a foreign nation, which purchases constitute trade with a foreign nation that Congress may regulate under the Commerce Clause. And SBM's promotions "use[] or display[] [the mark] in the sale or advertising of [these] services... rendered in commerce."

At oral argument, the plaintiff companies objected to this straight-forward reasoning. They argued first that any trade that United States citizens engaged in at the casino was not subject to regulation by Congress since it did not occur in the United States.

COURT: Commerce [i.e., commerce within Congress' regulatory ambit, and thus equally commerce under the Lanham Act] includes services with a foreign country doesn't it?

Appellant: Not unless they're rendered in the United States.

COURT: Unless the Supreme Court has held otherwise?

Appellant: Unless the Supreme Court has held otherwise, of course.

Oral Argument, Dec. 3, 2002. In the alternative, they argued that even if Congress could regulate transactions between United States citizens and foreign subjects that occur abroad, the particular transactions at issue here should not be considered foreign trade because the Casino de Monte Carlo was a "playground for the very, very rich," id., and thus did not have a substantial effect on foreign trade. Both arguments are unavailing.

The plaintiff companies' first argument fails because the locality in which foreign commercial intercourse occurs is of no concern to Congress' power under the Constitution to regulate such commerce. In United States v. Holliday, when examining the extent of Congress' authority over Indian commerce, the Supreme Court noted that under Gibbons v. Ogden the foreign commerce power "must be exercised wherever the subject exists.... The locality of the traffic can have nothing to do with the power." Holliday, 70 U.S. at 417-18, 70 U.S. 407 (emphasis added). The subject of foreign trade, as the Supreme Court noted in In re: Trade-Mark Cases, Henderson, and Holliday, is defined not by where the trade occurs, but by the characteristics of the parties who engage in the trade, just as the Holliday Court concluded that the subject of Indian commerce is defined not by whether the commerce occurs on Indian territory, but rather by whether the trade brings United States citizens and tribal Indians together as transacting partners. See also United States v. Mazurie, 419 U.S. 544, 554, 95 S.Ct. 710, 42 L.Ed.2d 706 (1975) ("This Court has repeatedly held that [the Indian commerce clause] affords Congress the power to prohibit or regulate the sale of alcoholic beverages to tribal Indians, wherever situated ..." (emphasis added)).

Thus it is that Congress has validly enacted laws such as the Trading With the Enemy Act (TWEA), Act of Oct. 6, 1917, ch. 106, 40 Stat. 411, and the International Emergency Economic Powers Act (IEEPA), title II, Pub.L. 95-223, 91 Stat. 1626 et seq., codified at 50 U.S.C. § 1701 et seq., under its authority to regulate foreign commerce and has provided, via those enactments, for the regulation of commercial intercourse between United States citizens and subjects of foreign nations, see, e.g., United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 526 F.2d 560 (1975) (upholding broad import surcharge on products imported by United States citizens in transactions with Japanese sellers, which regulation was issued by the executive under TWEA's delegation of foreign commerce authority). And more importantly here, thus it is also that these laws extend their regulations to reach commercial intercourse that occurs solely on the foreign sovereign's soil. See, e.g., 31 C.F.R. § 515.560(a)(3) (1977) (prohibiting United States citizens from purchasing merchandise in Cuba with a foreign market value in excess of $100). Such embargo authority, encompassing embargoes of commercial intercourse abroad by United States citizens with subjects of foreign nations, has long been recognized to be a valid exercise of Congress' foreign commerce clause power:

It has, we believe, been universally admitted, that [the foreign commerce clause] comprehend[s] every species of commercial intercourse between the United States and foreign nations. No sort of trade can be carried on between this country and any other, to which this power does not extend.

Gibbons v. Ogden, 22 U.S. at 193-94.

Congress are, by the Constitution, vested with the power to regulate commerce with foreign nations; and however, at periods of high excitement, an application of the terms "to regulate commerce" such as would embrace absolute prohibition may have been questioned, yet, since the passage of the embargo and non-intercourse laws, and the repeated judicial sanctions those statutes have received, it can scarcely, at this day, be open to doubt, that every subject falling within the legitimate sphere of commercial regulation may be partially or wholly excluded ... Such exclusion cannot be limited to particular classes or descriptions of commercial subjects; it may embrace manufactures, bullion, coin, or any other thing. The power once conceded, it may operate on any and every subject of commerce to which the legislative direction may apply it.

United States v. Marigold, 50 U.S. 560, 566-67, 9 How. 560, 13 L.Ed. 257 (1850). The Supreme Court's acceptance of this expansive authority confirms that Congress may regulate foreign trade wherever it occurs.

Nor, in modern times, has the Supreme Court ever suggested that Congress' authority over foreign trade is limited in the manner that the plaintiff companies suggest. To the contrary, when it has considered the scope of Congress' authority over foreign trade, the Court has emphasized the expansive nature of that authority. See, e.g., Pfizer, Inc. v. India, 434 U.S. 308, 313 n. 11, 98 S.Ct. 584, 54 L.Ed.2d 563 (1978) ("The Chief Justice's dissent seems to contend that the Sherman Act's reference to commerce with foreign nations was intended only to reach conspiracies affecting goods imported into this county. But the scope of congressional power over foreign commerce has never been so limited..." (citations omitted)).

Congress' interest in foreign trade and the Executive's interest in foreign affairs unavoidably intersect, and this intersection can give the mistaken impression that Congress' authority over foreign trade must be limited so as to accommodate the President's authority over foreign affairs. The first interest, that of foreign trade, the Constitution assigns entirely to the legislative authority of Congress. See U.S. Const. art. I, § 8, cl. 3. The second, that of foreign affairs, it assigns jointly to the political branches (i.e., Congress and the Executive). See U.S. Const. art. I, § 8, cl. 1 and 11; id. art. II, § 2. The intersection of these two interests, and the dual allocation of authority over the latter, has long been noted:

If our government should make [restrictions on foreign commerce] the subject of a treaty, there could be no doubt that such a treaty would fall within the power conferred on the President and the Senate by the Constitution. [Foreign commerce] is in fact, in an eminent degree, a subject which concerns our international relations, in regard to which foreign nations ought to be considered and their rights respected, whether the rule be established by treaty or by legislation.

Henderson, 92 U.S. at 273. But no precedent suggests that the intersecting foreign affairs power the Constitution vests in the Executive in any way curtails the foreign trade power the Constitution vests in Congress, and there is thus no rationale for limiting the scope of congressional authority in the realm of foreign commerce to commercial intercourse that occurs solely within the United States.5

The plaintiff companies' second argument, that the purchase of gambling services by United States citizens at the Casino de Monte Carlo is not commerce because it does not have a substantial effect on the foreign commerce of the United States, also fails. The substantial effects test is not implicated here at all.

The Supreme Court has articulated the substantial effects test to ensure that Congress does not exceed its constitutional authority to regulate interstate commerce by enacting legislation that, rather than regulating interstate commerce, trammels on the rights of states to regulate purely intra-state activity for themselves pursuant to their police power. See United States v. Morrison, 529 U.S. 598, 608-09, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000). But while "Congress' power to regulate interstate commerce may be restricted by considerations of federalism and state sovereignty[,][i]t has never been suggested that Congress' power to regulate foreign commerce could be so limited." Japan Line Ltd. v. Los Angeles County, 441 U.S. 434, 448 n. 13, 99 S.Ct. 1813, 60 L.Ed.2d 336 (1979).

Although the Constitution, Art. I, § 8, cl. 3, grants Congress the power to regulate commerce "with foreign Nations" and "among the several States" in parallel phrases, there is evidence that the Founders intended the scope of the foreign commerce power to be the greater.

Id. at 448, 99 S.Ct. 1813. The rationale that underlies application of the substantial effects test in the analysis of congressional legislation purporting to regulate interstate commerce is therefore absent from analysis of congressional legislation purporting to regulate foreign commerce.

Furthermore, the substantial effects test only limits Congress' authoritative reach with respect to one of the three broad categories of activity that Congress may regulate under the Commerce Clause.

First, Congress may regulate the use of the channels of interstate commerce.... Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce.... Finally, Congress' commerce authority includes the power to regulate ... those activities that substantially affect interstate commerce.

Morrison, 529 U.S. at 609, 120 S.Ct. 1740 (emphasis added). Consequently, the substantial effects test does not limit Congress' regulation of activity that is itself commercial intercourse occurring interstate; it governs only Congress' regulation of non-commercial intercourse activity that effects interstate commerce.

Here, the regulated activity at issue is itself commercial intercourse (i.e., the trademarks are an instrumentality of commercial intercourse and the provision of the services necessarily involves both channels of and instrumentalities of that commercial intercourse). And the regulated commercial intercourse involves transactions between United States citizens and the subject of a foreign nation, qualifying the intercourse as a literal example of foreign trade. Even were the substantial effects test to govern some instances of congressional regulation of foreign trade, the present case, because it involves only the first two "broad categories of activity that Congress may regulate under its commerce power," id. at 608, 120 S.Ct. 1740, and not the third, does not implicate the substantial effects test.6

The plaintiff companies, seeking to avoid the full import of this foreign trade analysis, ask us to be wary in addressing whether United States trademark protection can extend to services rendered abroad and suggest that other courts have decided this question in the negative with reasoning that should persuade us not to extend trademark protection in this instance. In particular, the plaintiff companies point to the Second Circuit's opinion in Buti v. Perosa, S.R.L., 139 F.3d 98 (2nd Cir.1998). In Buti, the Second Circuit decided that the ad hoc distribution in the United States of an Italian restaurant's t-shirts, key chains, and cards, by the owner of the restaurant who was also the owner of a modeling agency, to his colleagues in the modeling industry, did not establish that the mark was used in commerce.

Buti is not persuasive authority to us for several reasons, however. First, the Buti court did not analyze the application of the Lanham Act to foreign trade because, as it noted, the plaintiff, in a "pivotal concession[],... conceded at oral argument that... the food and drink services [it sells] form no part of the trade between Italy and the United States." Id. at 103. And in fact, even though the Buti court did not analyze trademark rights created via foreign trade, it did acknowledge the basis for such. See id. (noting that a key inquiry is "whether [the plaintiff] has conducted the affairs of its Milan Fashion Cafe in such a way as to `substantially affect' United States interstate or foreign commerce, and thereby fall within Congress' authority under the Commerce Clause"). Secondly, even had the Buti plaintiff not explicitly conceded that his business was not foreign trade, it is not clear that the facts before the Buti court would have established that the plaintiff used the mark in that putative foreign trade. As the Second Circuit carefully noted, the restaurant undertook no "formal advertising or public relations campaign [aimed at United States citizens]." Id. at 100.

Here, SBM does not concede that its ser