The opinion of the court was delivered by: Bucklo, District Judge.
MEMORANDUM OPINION AND ORDER
Can a United States corporation maintain a Lanham Act action against a
foreign corporation for alleged trademark violations that occurred
entirely abroad on no more showing than that these hurt the plaintiffs
ability to conduct its business and license its products worldwide? I
conclude that, without an account of how to set limits on the exercise of
extraterritorial jurisdiction, this would extend my jurisdiction beyond
the limits that the law allows. Accordingly I grant the defendants'
motion to dismiss any claims alleging Lanham Act violations, and I grant
other motions in part and deny them in part.
The Alcar Group ("Alcar"), a Delaware corporation headquartered in
Illinois, designs and markets software worldwide. In 1994, it licensed a
British firm, Alcar U.K., which was renamed Corporate Performance Systems
("CPS") in 1997, and a British subject, Richard Bassett, to be exclusive
distributors of Alcar software in Britain and South Africa, under an
International Distributor Agreement (the "Agreement"). Things didn't pan
Alcar terminated the Agreement in June 1997, cutting all relationships
with the defendants in 1999. In the fall of 1997, in Frankfurt, Germany,
CPS and Bassett sold Deutsche Bank, an existing Alcar client, some Alcar
software under a contract with CPS, representing the arrangement to be
with Alcar. There were problems with the product, and Deutsche Bank
complained to Alcar in Illinois. Alcar felt obliged to fix the problem at
considerable cost, to save its goodwill. This lawsuit followed.
I begin with the motion to dismiss the claims in counts II, III, and IV
based on the Lanham Act, 15 U.S.C. § 1125(a)(1), 1114(1)(a), &
1125(c)(1) (the "Act"). On a motion to dismiss for lack of subject matter
jurisdiction, I read a complaint liberally and accept as true the
well-pleaded allegations of the complaint and the inferences that may be
reasonably drawn from those allegations. Sapperstein v. Hager,
188 F.3d 852, 855 (7th Cir.1999). The plaintiff has the obligation to
establish jurisdiction by competent proof. Commodity Trend Service, Inc.
v. Commodity Futures Trading Comm'n, 149 F.3d 679, 685 (7th Cir.1998).
Alcar invokes Steele v. Bulova Watch Co., 344 U.S. 280, 73 S.Ct. 252, 97
L.Ed. 319 (1952), arguing that the Supreme Court has read the Act to give
federal courts jurisdiction to regulate trademark rights that affect
American commerce. That case involved an American citizen who imported
watch parts from the United States into Mexico, where he made phony
"Bulova" watches, id. at 284-85, 85 S.Ct. 252. On those facts, the
Supreme Court found that exercise of jurisdiction was proper, reasoning
that "Congress in prescribing standards of conduct for American citizens
may project the impact of its laws beyond the territorial boundaries of
the United States." Id. at 282, 73 S.Ct. 252; The Court rejected the
argument that there was no jurisdiction because "petitioner had committed
no illegal acts within the United States." Id. at 281, 73 S.Ct. 252.
The present case, however, involves foreign citizens acting abroad, not
American citizens. It is a "longstanding principle of American law "that
legislation of Congress, unless a contrary intent appears, is meant to
apply only within the territorial jurisdiction of the United States.'"
United States v. Dawn, 129 F.3d 878, 882 (7th Cir.1997) (citing EEOC v.
Arabian American Oil Co., 499 U.S. 244, 248, 111 S.Ct. 1227, 113 L.Ed.2d
274 (1991)), superceded by statute on other grounds; see also Restatement
(Third) of Foreign Relations Law of the United States, §§ 402-04
(1987). Federal statutes "presumptively lack extraterritorial reach."
Glass v. Kemper Corp., 133 F.3d 999, 1000 (7th Cir.1998). Therefore, a
plaintiff wishing me to exercise extraterritonal jurisdiction over foreign
citizens for actions committed abroad must overcome that presumption.
According to Alcar, the holding of Steele is not limited to the
proposition that Congress can regulate the conduct of United States
citizens abroad under the Act, but is that Congress has power "`to
regulate commerce within the control of Congress'" Steele, 344 U.S. at
283, 73 S.Ct. 252 (quoting 15 U.S.C. § 1127). The Supreme Court noted
that the Act defines "commerce" as "all commerce which may lawfully be
regulated by Congress." Id. Even under the new and somewhat more
restrictive Commerce Clause jurisprudence in effect today, Congress'
powers in this regard are extensive. Congress may regulate ""those
activities having a substantial relation to interstate commerce, i.e.,
those. . . . substantially affect[ing] interstate commerce.'" United
States v. Morrison, ___ U.S. ___, ___, 120 S.Ct. 1740, 1749, 146 L.Ed.2d
658 (2000) (internal citation omitted). As the Seventh Circuit has said,
in this context, "[t]he Court upheld a broad concept of "commerce., John
Walker and Sons, Ltd. v. DeMert & Dougherty, 821 F.2d 399, 408 (7th Cir.
1987) ("`[T]he Lanham Act revealed a congressional intent to exercise its
power to the fullest.'"). The question is, how far is that? Does it extend
to the activity of foreign citizens in a foreign country?
Alcar urges me to adopt a "balancing test" for the exercise of
extraterritorial jurisdiction that was promulgated by the Fifth Circuit,
under which I consider several factors, including " the citizenship of
the defendant,  the effect on United States commerce, and  the
existence of a conflict with foreign law." American Rice, Inc. v.
Arkansas Rice Growers Coop. Ass'n., 701 F.2d 408, 414 (5th Cir. 1983).
Here the defendants are foreign citizens, and Alcar does not dispute the
potential for conflict with foreign law in view of the existence of three
valid British trademark registrations for the term "Alcar." It does note
that no "actual" conflict is shown here, but with a potential conflict,
this factor is no better than neutral. The question comes down to the
effect on United States commerce.
Magistrate Judge Denlow of this court analyzed the question of effect
on American commerce using the seven-factor balancing test from
Timberlene Lumber Co. v. Bank of America National Trust & Savings Ass'n,
549 F.2d 597 (9th Cir.1976) (Timberlane I) (antitrust case), superceded
by 15 U.S.C. § 6(a) (for antitrust purposes only). Under this test, I
 [T]he degree of conflict with foreign law or
policy,  the nationality or allegiance of the
parties and the locations or principal places of
business of corporations,  the extent to which
enforcement by either state can be expected to achieve
compliance,  the relative significance of effects
on the United States as compared with those
elsewhere,  the extent to which there is explicit
purpose to harm or affect American commerce,  the
foreseeability of such effect, and  the relative
importance to the violations charged of conduct within
the United States as compared with conduct abroad.
Thomas & Betts Corp. v. Panduit Corp., 71 F.Stipp.2d 838, 842
(N.D.Ill.1999) (citing Reebok Int'l, Ltd. v. Marnatech Enter., Inc.,
970 F.2d 552, 554 (9th Cir.1992)).
The first two elements of the Timberlane test are the same as the Fifth
Circuit test. For the rest, Alcar fails to address any of the factors in
the Timberlane test. It claims that the defendants' conduct affected
commerce here because: Alcar is an American corporation doing business in
this country; anything, including injury to its goodwill, that affects
its ability to do business anywhere affects its ability to business here
in the United States; and the defendants' activities have affected
Alcar's ability to do business in the United States with Deutsche Bank.
In short, no company is an island, entire unto itself.
This "for whom the bell tolls" argument*fn1 is closest to  in the
Timberlane test, but it leaves out the comparative dimension, i. e.,
whether the effect is greater here or abroad. For the rest, there is
silence. Alcar has waived the arguments for exercise of extraterritorial
jurisdiction because, having indicated what I agree is the correct test,
it did not even attempt to "establish jurisdiction by competent ...