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HESA Shahed [Jet Ranger 206]

The word Shahed [Shahid or Shaheed] originates from the Quranic Arabic word meaning "witness" and is used to denote a martyr.

In the 1970s, Bell operated a helicopter plant in Iran, which it abandoned after the Iranian revolution of 1979. In December 2002, Bell became aware that the Iran Aircraft Manufacturing Industrial Company (HESA), a company wholly owned and controlled by the Iranian government, was using the plant to manufacture helicopters that resembled the Jet Ranger 206. Bell designed this particular model to have distinctive but nonfunctional design features, including a protruding nose as opposed to a rounded front, based on an automotive concept, which would set it and the Bell brand apart from other helicopters and helicopter manufacturers.

The Iranian helicopters went under the name Shahed, and the Shahed 278 resembles the Jet Ranger 206; the Shahed 285 is a militarized version of the same helicopter. Iran has displayed prototypes of the Shahed at its annual air show held at Kish Island, Iran for international helicopter buyers for the purpose of selling them in what Bells witness described as Third World markets where safety certification restrictions imposed by European and North American governments do not apply. Iran would not, however, be able to sell the Shahed in US markets.

Bell sued Iran in 2006, alleging that Irans manufacture and marketing of the Shahed helicopters infringed and diluted Bells trade dress in violation of the Lanham Act, 15 U.S.C. 1051 et seq., and infringed its design patent under the Patent Act, 35 U.S.C 1 et seq. (The Patent Act claim was later dropped.) Bell served Iran with the complaint, but Iran did not appear. A default was entered against Iran on March 31, 2009, and the district court scheduled a hearing on damages for October 5, 2009. Iran contacted Bell to conduct settlement negotiations, but no agreement was reached prior to the hearing. At the hearing, Bells witnesses included one of its staff engineers, who testified regarding the distinctive trade dress of the Jet Ranger 206 and Bells primary customers, which include foreign militaries and numerous commercial customers.

Aviation safety consultant Vernon Albert testified for Bell about the confusingly similar appearances of the Jet Ranger and the Shahed, Bells second to none reputation for safety, and speculated regarding the possibility that Shahed helicopters could be passed off as Bell products in Third World markets with the resulting risk of accidents from the use of Shahed parts in Bell helicopters. Bell manager Terry Jeffcoat testified regarding the potential loss of Bell revenues as a result of the sale of Shahed helicopters.

The district court issued an order and default judgment against Iran on February 11, 2011, ruling that Iran had infringed and diluted Bells trade dress in violation of the Lanham Act, and that Iran was not immune from suit because its actions were commercial and had a direct effect in the United States. Bell Helicopter Textron Inc. v. Islamic Republic of Iran, 764 F. Supp. 2d 122, 126, 12728 (D.D.C. 2011) (Bell I). It awarded Bell $22,035,002.28 in damages (adjusted for pre-judgment interest) and $497,125 in attorneys fees. Id. at 12930. The State Department filed on October 19, 2011 an affidavit of service of the default judgment on Iran, and counsel for Iran entered an appearance on December 28, 2011.

On February 10, 2012, Iran moved, pursuant to Rule 60(b)(4), to vacate the default judgment as void due to lack of subject-matter jurisdiction. Upon reviewing de novo whether it had subject-matter jurisdiction, the district court granted the motion, ruling that Iran was immune from suit under the FSIA because Bell had not presented evidence that Irans actions had caused a direct effect in the United States. Bell Helicopter Textron Inc. v. Islamic Republic of Iran, 892 F. Supp. 2d 219, 225, 234 (D.D.C. 2012) (Bell II).

Under this traditional rule, [w]hen a federal court reaches beyond its statutory grant of subject-matter jurisdiction, its judgment is void. A judgment remains void even after final judgment if the issuing court lacked subject-matter jurisdiction, regardless of whether there existed an arguable basis for jurisdiction.

The court elaborated on appeal that [w]hen a person named as a defendant knows about the action but perceives that the court lacks territorial or subject matter jurisdiction, he is given a right to ignore the proceeding at his own risk but to suffer no detriment if his assessment proves correct. Practical Concepts, 811 F.2d at 1547. Because Iran never appeared in the district court proceeding resulting in the default judgment, the district court properly applied the traditional definition of voidness in granting Irans Rule 60(b)(4) motion.

The commercial activity exception to the FSIA provides that a foreign state does not enjoy jurisdictional immunity in any case in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.

Bell maintains the requisite direct effect in the United States from Irans infringement and dilution of Bells intellectual property were both financial and reputational. It points to the invasion of its exclusive right to reap the financial, reputation- related rewards associated with its desirable product, which is essentially a financial effect. On the other hand, the harm to Bells reputation as a producer of safe aircraft, the loss of the ability of Bells trade dress to serve as a unique identifier, and the diminishment of Bells incentive to product a quality product are basically reputational effects.

In the district court, Bell did not offer evidence that Iran had sold or advertised the Shahed in the United States. Instead, Bell focused on the physical similarity between the Shahed and the Jet Ranger 206 and potential financial and reputational loss, but the evidence regarding any effect on Bell was remote or speculative.

Bell presented no evidence that any of its current or potential customers were likely to encounter the Shahed in the regular course of doing business. Neither did Bell offer evidence that any consumer had contemplated buying a Shahed rather than a Jet Ranger, much less done so thinking the Shahed was associated with Bell. Nor did Bell offer evidence that any consumer had refrained from buying a Bell product because an association between the Shahed and the Jet Ranger had tainted Bells reputation. Yet under the Lanham Act, the inquiry is whether the buying public is likely to believe that defendants services come from the same source, or are affiliated with the trademark owner.

Bells response is that intellectual property torts are different from other property torts because of the importance of protecting intellectual property in a way that allows a producer to reap the financial and reputational rewards of its product and preserves incentives for trademark owners to produce quality products.

Shahed helicopters Shahed helicopters

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Page last modified: 08-07-2019 18:52:33 ZULU