International Bancorp, L.L.C., et al. 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.

I.

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.

II.

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

III.

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 protectible
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 protectible
mark).

This circuit requires that an unregistered trademark satisfy two
requirements if its owner is to have a protectible 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 protectibility); 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.

A.

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 (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 protectibility,
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: Trademark Cases, 100 U.S. 82, 96 (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 (1875) (same); United
States v. Holliday, 70 U.S. 407, 417 (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, 22 U.S. 1, 189 (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 (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 straightforward
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 (emphasis
added). The subject of foreign trade, as the Supreme Court noted in
In re: Trademark 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 (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.,
526 F.2d 560 (C.C.P.A. 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 (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 (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
(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 (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. 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.

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