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Charisma World Wide Corp., S.A. v. Avon Products Inc.

United States District Court, S.D. New York

March 19, 2017



          Paul G. Gardephe United States District Judge

         Plaintiff Charisma World Wide Corp, S.A. ("Charisma") brings this suit for trademark infringement under the Lanham Act, 15 U.S.C. § 1125(a), against Avon Products Inc.[1]Charisma alleges that Avon directed its Panamanian subsidiary to infringe Charisma's trademark in Panama and, in furtherance of the infringement scheme, brought a sham legal proceeding against Charisma in Panama attacking Charisma's Panamanian trademark. (Cmplt. (Dkt. No. 1) ¶¶ 23, 25) Avon has moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that Charisma has not alleged a substantial effect en domestic commerce sufficient to support the extraterritorial application of the Lanham Act. (Def. Br. (Dkt. No. 18) at 4)[2] For the reasons stated below, Avon's motion will be denied.


         Charisma is a Panamanian company that sells a wide variety of women's cosmetics and personal care products, including hand and body lotions, deodorants, and perfumed body talc and powders, in Panama. Charisma's products are made almost entirely from materials obtained from the United States. (Cmplt. (Dkt. No. 1) ¶¶ 9, 16, 38) Charisma markets its products with a trademark - "Charisma y Diseno" - that it created and registered in Panama in 1990. (Id. ¶ 15) Charisma distributes its trademarked products through wholesale supermarkets, pharmacies, and department stores in Panama. (Id. ¶ 17) Charisma alleges that its trademarked products are "frequently consumed by individuals of Panamanian extraction residing, either temporarily or permanently, within the United States, " and that its mark has "a reputation for quality amongst Panamanians throughout the world." (Id. ¶¶ 18-19) As a result of the commercial and financial success of its products, Charisma has entered into private label[3]contracts in other countries, including the United States. (Id. ¶ 20)

         Avon is a New York corporation that specializes in beauty, household, and personal care products. (Id. ¶ 11) Avon uses a direct sale business model in which Avon sales representatives market its products door to door. (Id. ¶ 12) Avon created a Panamanian subsidiary in 1991, and has since opened multiple retail locations in Panama. (Id. ¶¶ 22, 30-31)

         Charisma alleges that Avon directed its subsidiary to infringe Charisma's mark in Panama by selling competing products with the mark "Charisma" in Panama. (Id. ¶¶ 23, 34; Id. Exs. C, D) Beginning in 2006, Charisma and Avon litigated Charisma's ownership of its mark in the Panamanian courts. On April 16, 2013, the First Judicial Circuit of Panama ruled in favor of Charisma. (Id. ¶ 29) Charisma alleges that Avon nonetheless continues to infringe Charisma's mark in Panama. (Id. ¶¶ 30-31)

         Charisma alleges that Avon's ongoing infringement and legal challenge in Panama "negatively impact[ed] consumer confidence and goodwill, " resulting in lost revenue to Charisma and, correspondingly, reduced purchases of materials from, and private label contracts with, U.S. companies. (Id. ¶¶ 28, 38-39) Charisma also alleges that Avon's "infringing retail efforts have caused United States-based consumers to purchase the Panamanian Avon Products, " resulting in a financial benefit to Avon from its infringement. (Id. ¶¶ 30, 35-37)


         I. RULE 12(b)(6) STANDARD

          "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "In considering a motion to dismiss ... the court is to accept as true all facts alleged in the complaint, " Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007) (citing Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 87 (2d Cir. 2002)), and must "draw all reasonable inferences in favor of the plaintiff." Id. (citing Fernandez v. Chertoff. 471 F.3d 45, 51 (2d Cir. 2006)).

         A complaint is inadequately pled "if it tenders 'naked assertion[s]' devoid of 'further factual enhancement, "' Iflbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557), and does not provide factual allegations sufficient "to give the defendant fair notice of what the claim is and the grounds upon which it rests." Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007) (citing Twomblv, 550 U.S. at 555).

         In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint." DiFolco v. MSNBC Cable L.L.C.. 622 F.3d 104, 111 (2d Cir. 2010) (citing Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002); Hayden v. Cty. of Nassau, 180 F.3d 42, 54 (2d Cir. 1999)).


         Section 43(a) of the Lanham Act provides for a civil action for infringement of a trademark, including those not registered in the United States, against

[a]ny person who .. . uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin ... which ... is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person.

15U.S.C. § 1125(a)(1).

         "The 'usual rule' is that a sale of trademark-infringing merchandise that occurs in [a foreign country] will be governed by [that country's] law, not United States law." Aerogroup Int'l. Inc. v. Marlboro Footworks, Ltd., 955 F.Supp. 220, 225 (S.D.N.Y. 1997), affd, 152 F.3d 948 (Fed. Cir. 1998). However, "[t]he Lanham Act may reach allegedly infringing conduct that occurs outside the United States when necessary to prevent harm to commerce in the United States." Atl. Richfield Co. v. Arco Globus Im'l Co.. 150 F.3d 189, 192 (2d Cir. 1998) (citing Fun-Damental Too, Ltd. v. Gemmy Indus. Corp., 111 F.3d 993, 1006 (2d Cir. 1997)).

[T]hree factors - the so-called "Vanity Fair factors" - are relevant to whether the Lanham Act is to be applied extraterritorially: (i) whether the defendant is a United States citizen; (ii) whether there exists a conflict between the defendant's trademark rights under foreign law and the plaintiffs trademark rights under domestic law; and (iii) whether the defendant's conduct has a substantial effect on United States commerce.
Totalplan Corp. of Am. v. Colborne
14 F.3d 824 Vanity Fair Mills v. T. Eaton Co.. Steele v. Bulova Watch Co. 344 U.S. 280

         "[T]he absence of... factors [i] or [iii] .. . 'might well be determinative and ...the absence of both is certainly fatal' to applying the Lanham Act to a citizen's activities abroad." Aerogroup. 955 F.Supp. at 226 (quoting Vanity Fair. 234 F.2d at 643). Moreover, the Second Circuit "has 'never applied the Lanham Act to extraterritorial conduct absent a substantial effect on United States commerce.'" Hong Leong Fin. Ltd. (Singapore) v. PinnaclePerformance Ltd.. No. 12 CIV. 6010 JMF, 2013 WL 5746126, at *4 (S.D.N.Y. Oct. 23, 2013) ...

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