The US Court of Appeals for the Fourth Circuit reversed a district’s court denial of sovereign immunity under the Foreign Sovereign Immunity Act (FSIA) and remanded the case to be dismissed with prejudice, holding that France was immune from a trademark infringement claim in the United States brought by the former owner of the domain name France.com. France.com, Inc. v. The French Republic, Case No. 20-1016 (4th Cir. Mar. 25, 2021) (Motz, J.)
Jean-Noel Frydman and his company France.com, Inc. (collectively, Frydman) purchased and registered the domain name France.com and trademarked the name in the United States and in the European Union. In 2015, the Republic of France (RoF) intervened in an ongoing lawsuit between Frydman and a third party, asserting the exclusive right to the use of the term “France” commercially. The RoF also insisted that the use of “France” by a private enterprise infringed on its sovereignty. The Paris District Court agreed and ordered the transfer of the domain name to the RoF.
Frydman filed suit for trademark infringement, expropriation, cybersquatting and reverse domain name hijacking, and federal unfair competition in a Virginia district court against the RoF. The RoF moved to dismiss the claim based on the FSIA. The district court denied the motion, stating that the FSIA immunity defense would be best raised after discovery. The RoF appealed.
The Fourth Circuit first determined, based on Supreme Court precedent, that sovereign immunity was a threshold question to be addressed “as near to the outset of the case as is reasonably possible” and not to be postponed until after discovery.
The Court next considered whether the RoF was immune to suit. The FSIA provides a presumption of immunity for foreign states that can only be overcome if the complaint provides enough information to satisfy one of the specified exceptions. Frydman argued that the commercial activity and expropriation exceptions applied.
The commercial activity exception removes immunity where a foreign state has commercial activity in, or that has a direct effect in, the United States. Essentially, a court must determine whether the actions of the foreign state are those of a sovereign or those of a private party engaged in commerce. The Fourth Circuit first identified that the actual cause of the injury at issue to Frydman was the French court’s ruling that the domain name belonged to the RoF, and found that all claims of wrongdoing by the RoF flowed form the French court’s decision. Additionally, even if it was solely the transfer of the domain name that harmed Frydman, and not the French court’s judgment, the transfer was still based on the French court’s judgment that provided the basis for RoF to obtain the domain name. Because the cause of action was based on the powers of a sovereign nation (the foreign judgment) and not the actions of a private citizen in commerce, the Fourth Circuit found that the commercial activity exception did not apply.
The Fourth Circuit next rejected Frydman’s assertion of the expropriation exception. This exception applies when property is taken in violation of international law that is present in the United States for commercial activity by a foreign state or owned by a foreign agency. The Court first stated that it is unclear whether French judicial decree would be considered an expropriation under the FSIA. Even if it was, however, Frydman did not identify any international laws that were violated, the Court noted. The Court reasoned that because Frydman invoked the power of the French courts in litigation against a separate party, it gave the RoF the right to intervene in the action and take ownership of the domain.