New Headache for Trademark Litigants? Fourth Circuit’s Bayer Decision Rejects Application of State Statute of Limitations to Laches Defense

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The Fourth Circuit recently held that the U.S. District Court for the Eastern District of Virginia erred in its analysis of a defendant’s laches defense against an unfair competition claim under Section 43(a) of the Lanham Act. The district court held that the plaintiff’s Lanham Act claim was time-barred under the “most analogous” state law, which the district court found to be a four-year or three-year statute of limitations under California’s fraud, unfair competition, and trademark infringement laws. The Fourth Circuit rejected that approach, holding that the “equitable character” of Section 43(a) actions means that using a state statute of limitations in evaluating a laches defense to such claims is improper as a matter of law. Belmora LLC v. Bayer Consumer Care AG, --- F.3d ---, 2021 WL 329878 (4th Cir. Feb. 2, 2021).

 

The Fourth Circuit’s decision creates a degree of uncertainty for trademark litigants because it rejects the traditional approach of using “analogous” state law statutes to establish a presumption of laches. The Court’s decision suggests that in some circumstances, even a lengthy delay in bringing suit (such as a delay that exceeds the equivalent state law limitations period) will not bar a trademark owner from validly asserting unfair competition or related claims under the Lanham Act.

Background

The Lanham Act contains no statute of limitations applicable to trademark infringement, unfair competition, or similar causes action that are brought pursuant to Section 43(a) of the Act. Instead, the time constraint on plaintiffs timely filing Lanham Act causes of actions is imposed through the equitable defense of laches. To prove a laches defenses, a defendant must prove that the plaintiff unreasonably delayed before filing its claim, and that the defendant has been prejudiced as a result of that delay. Traditionally, courts have looked to equivalent state law statutes (such as state trademark infringement or unfair competition statutes) to determine whether the length of the plaintiff’s delay was “unreasonable.” In several federal circuits, if the length of the plaintiff’s delay in filing suit exceeds the equivalent state law statute of limitations, this creates a presumption of laches that, unless successfully rebutted by the plaintiff, will bar some or all of the relief sought in the suit.

Recently, however, the Fourth Circuit rejected the use of state statutes of limitations to determine the applicability of laches in Section 43(a) claims, holding that this approach ignored the “equitable character” of Section 43(a) claims, and thus was improper as a matter of law. Belmora LLC v. Bayer Consumer Care AG, --- F.3d ---, 2021 WL 329878 (4th Cir. Feb. 2, 2021).

The Fourth Circuit issued its decision as the most recent chapter in a long-running trademark dispute between Bayer Consumer Care AG (“Bayer”) and Belmora LLC (“Belmora”). Since the 1970s, Bayer Consumer Care AG’s (“Bayer”) affiliate has sold naproxen sodium pain relievers in Mexico under the name FLANAX pursuant to a licensing agreement. Bayer does not sell pain relievers under the name FLANAX in the United States. However, Bayer’s FLANAX product is well-known among consumers in the United States who have spent time in Mexico and other parts of Latin America.

In 2004, Belmora began selling pain relievers under the FLANAX mark in the United States. Belmora’s early marketing materials targeted Hispanic American consumers familiar with FLANAX, and it used other advertising materials that allegedly associated its FLANAX pain relievers with Bayer’s FLANAX pain relievers sold in Mexico.

After approximately ten years, in June 2014, Bayer sued Belmora in the U.S. District Court for the Central District of California, asserting claims for false association and false advertising under Section 43(a) of the Lanham Act. The case was later transferred to the U.S. District Court for the Eastern District of Virginia. Ultimately, Belmora sought summary judgment on Bayer’s Section 43(a) and related state-law claims, arguing that those claims were barred by the statute of limitations and laches. The district court granted Belmora’s motion, holding that Bayer’s claims were time-barred because Bayer had “missed the statute of limitations by almost a decade” on its Section 43(a) claims, implicitly rejecting Bayer’s laches arguments. To reach this conclusion, the district court applied the statutes of limitations under the “most analogous” California state laws, namely, the California limitations periods for fraud, unfair competition, and trademark infringement claims. Those state laws prescribe three-year (fraud) and four-year (unfair competition and trademark infringement) statutes of limitations. Because Bayer did not file its Section 43(a) claim until well after the expiration of those statutes of limitations, the district court held that its claim was time-barred.

The Fourth Circuit’s Decision

On appeal, Bayer argued that the district court erred in concluding that Bayer’s Section 43(a) claims were time-barred. The Fourth Circuit agreed, and reversed the district court’s decision.

The Fourth Circuit began its analysis by acknowledging that in evaluating federal statutes that contain no express statute of limitations, courts typically “apply the most closely analogous statute of limitations under state laws.” However, that approach must be balanced against the policy that “state statutes of limitations can be unsatisfactory vehicles for the enforcement of federal law.” With that in mind, the Court concluded that “Section 43(a) is one such federal law for which a state statute of limitations would be an unsatisfactory vehicle for enforcement.” The Court reasoned that the text of Section 43(a) supports its conclusion because it states that claims for damages are “subject to principles of equity” and injunctive relief is awarded “according to the principles of equity.” Accordingly, the Court reasoned that laches is “an equitable defense” that “is distinct from the statute of limitations.” 

The Court therefore ruled that the district court erred by applying the most analogous state-law statutes of limitations to Bayer’s Section 43(a) claim, and thus vacated that portion of the district court’s summary judgment order. The Court remanded the case to the district court to determine whether Bayer’s Section 43(a) claim is barred by laches. 

It is unclear whether the Fourth’s Circuit approach to laches will be adopted by other circuits. However, the Court’s decision creates a degree of uncertainty for trademark litigants evaluating whether the length of a plaintiff’s delay in filing suit will give rise to a valid laches defense. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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