Trademark Battle Over the Fame of “Atlantis” for Casino Services Headed to Trial In Nevada District Court

Two casino companies fighting over the right to use the service mark ATLANTIS in connection with casino services are heading for trial after two Nevada District Court orders ruled on multiple motions filed by the parties and set the stage for the parties to proceed to trial. See Kerzner Int'l, Inc. v. Monarch Casino & Resort, Inc., 2009 U.S. Dist. LEXIS 116622 (D. Nev. December 14, 2009); Kerzner Int'l, Inc. v. Monarch Casino & Resort, Inc., 2009 U.S. Dist. LEXIS 116624 (D. Nev. December 14, 2009).

Atlantis Resort & Casino - Paradise Island, Bahamas

On one side are Kerzner International Limited and Kerzner International Resorts, Inc. (together “Kerzner”), the owners of the Atlantis Resort and Casino on Paradise Island in The Bahamas. On the other side is Monarch Casino & Resort, Inc. and Golden Road Motor Inn, Inc. (together “Monarch”) which own and operate the Atlantis Casino Resort Spa in Reno, Nevada.

Atlantis Casino Resort in Reno, Nevada

The origins of the dispute date back to a trademark registration for the mark ATLANTIS for lodging services which was originally registered with the U.S. Patent and Trademark Office by Atlantis Lodge, Inc. (“Lodge”) on October 11, 1994. Lodge had been using the Atlantis mark in connection with lodging services in North Carolina since June 6, 1963. Lodge’s subsequent licensing of its Atlantis mark to both Kerzner and Monarch set the foundation for the eventual dispute between Kerzner and Monarch.

Monarch had been offering lodging services in Reno, Nevada since 1972 and casino services since 1986, but when Monarch first used the Atlantis mark in 1992, it was in connection with restaurant, bar, lounge, and nightclub services, not lodging or casino services. In February 1996, Monarch entered into a license agreement with Lodge for the exclusive right to use the Atlantis mark in connection with lodging services in all of Nevada. In April 1996, Monarch Reno casino resort (which at the time was operating under the “Clarion” mark) began operating under the name “Atlantis Casino Resort.” In July 1997, Monarch obtained a Nevada state trademark registration for the mark “Atlantis Casino Resort” for casino services, but never sought federal registration of the Atlantis mark for casino services.

In October 1994, Kerzner entered into a license agreement with Lodge for use of the Atlantis mark at its casino resort in The Bahamas (which at the time was under the name “Paradise Island Resort and Casino”). Kerzner began advertising the rebranding of its casino resort under the Atlantis name in October 1994 with the officially reopening occurring in December 1994.

In July 1996, Kerzner entered into an assignment and license agreement with Lodge whereby Kerzner acquired the ATLANTIS trademark registration for lodging services from Lodge and licensed the mark back to Lodge for use in North Carolina. The license agreement between Lodge and Monarch was attached as an exhibit to the Lodge/Kerzner assignment agreement, and Lodge’s representations of its right to assign the Atlantis mark were made subject to Monarch’s exclusive license to use the mark for lodging services in Nevada.

In February 1997, Kerzner filed an intent-to-use application to register the mark ATLANTIS in connection with, among other things, providing casino facilities, which issued on February 3, 2004, after Kerzner filed a Statement of Use in September 2003, claiming a first use date of October 1994.

The parties apparently coexisted in their respective markets without any problems until each side started taking steps towards expanding their respective Atlantis brand into the Las Vegas market.

Kerzner’s first amended complaint against Monarch was filed on February 14, 2006, and sought declaratory judgments that Monarch’s use of the Atlantis mark infringed Kerzner’s trademark right. Monarch fought back by filing counterclaims on December 28, 2006, seeking cancellation of Kerzner’s trademark registration and its own declaratory relief with respect to its own trademark rights to the Atlantis mark that Monarch had developed in connection with casino services. Monarch also filed a cancellation petition with the Trademark Trial and Appeal Board to cancel Kerzner’s trademark registration. See Monarch Casino & Resort, Inc. et al v. Kerzner International Resorts, Inc., Cancellation No. 92045869 (T.T.A.B. Filed May 31, 2006). The TTAB proceeding is stayed pending the outcome of the civil action.

In one of Monarch’s Motions for Partial Summary Judgment, Monarch claimed that it was entitled to a judgment as a matter of law that it had priority of use of the Atlantis mark for casino services. Monarch argued that its use of the Atlantis mark for casino services dated back to 1992 – the date when it first used the mark in connection with restaurant services (and which was before the date Kerzner began to use the Atlantis mark in The Bahamas).

The court, however, rejected Monarch’s argument that its use of the Atlantis mark for a restaurant gave it priority of use in connection with casino services under the “related goods” or “natural expansion” doctrine. The court concluded that restaurant services and casino services are not closely related and that Monarch only began to develop trademark rights in the Atlantis mark for casino services when it actually began using the mark in connection with casino services in April 1996.

Monarch also argued that its April 1996 had priority over Kerzner’s first use of December 1994 under the territoriality principle – Kerzner’s use was outside the United States and thus it use was not use of the Atlantis mark for casino services in the United States.

The court rejected Kernzer’s counterargument that activities conducted by it in the United States which are “integral” to its casino services in the Bahamas constitutes use of the Atlantis mark in the United States in connection with casino services. Since Kernzer’s “casino services” were clearly rendered outside the United States, Kerzner had to rely upon an exception to the territoriality principle to claim that its use of the Atlantis mark outside the United States gave it trademark rights in the United States..

With respect to one noted exception to the territoriality principle – described in International Bancorp, LLC v. Societe des Bains de Mer et du Cercle des Etrangers a Monaco, 329 F.3d 359 (4th Cir. 2003) where the court found that use of a mark in advertising or sale of services in the United States, coupled with the rendering of those services abroad to United States citizens, is sufficient to give rise to trademark rights in the United States – the court noted that the decision was not binding in the Ninth Circuit and, in light of the fact that the Ninth Circuit had even explicitly declined to adopt the reasoning and noted that the decision had been called into question, the Ninth Circuit would decline to adopt such reasoning if presented with the question. Thus, the district court declined to adopt it as well.

As for the other exception to the territoriality principle, that would be the “famous marks” exception to the territoriality principle which was recognized by the Ninth Circuti in Grupo Gigante SA de CV v. Dallo & Co., Inc., 391 F.3d 1088, 1093 (9th Cir. 2004), and thus binding precedent on this district court.

Grupo Gigante describes a two-step analytical process to determine whether a mark falls under the famous-mark exception. First, the district court must determine whether the mark has achieved the level of recognition that would be necessary in a domestic trademark infringement case. Id. at 1098; see also id. at 1106 (Graber, J., concurring). Second, “where the mark has not before been used in the American market, the court must be satisfied, by a preponderance of the evidence, that a substantial percentage of consumers in the relevant American market is familiar with the foreign mark. The relevant American market is the geographic area where the defendant uses the alleged infringing mark.” Id. at 1098. Thus, the standard for famous marks is an intermediate one: “[t]o enjoy extraterritorial trademark protection, the owner of a foreign trademark need not show the level of recognition necessary to receive nation-wide protection against trademark dilution. On the other hand, the foreign trademark owner who does not use a mark in the United States must show more than the level of recognition that is necessary in a domestic trademark infringement case.” Id. at 1106 (Graber, J., concurring).

The district court clarified that Kerzner must show that its mark was “famous” as of April 1996 – the date when Monarch began to use the Atlantis mark in connection with casino services.

And while Kerzner performed some surveys which tended to show that a “substantial percentage of consumers” surveyed were familiar with Kerzner’s use of the Atlantis mark (especially in the Las Vegas market, which was the more relevant market at issue in the case), the survey, conducted in 2007, did not ask questions about when the consumers became aware of the mark, and thus the survey lacked probative value about whether the mark qualifies for the famous-mark exception as of April 1996. The court did note that there was some evidence of the extensive promotional campaign that Kerzner engaged in to promoted its remodeled Atlantis casino resort, which could be reasonably inferred to have penetrated the Las Vegas market.

In the end, the court concluded that there was a genuine issue of material fact regarding when, if ever, Kerzner’s casino resort acquired the status of a famous mark in the meaning of Grupo Gigante. The court found that taking all reasonable inferences in Kerzner’s favor, a jury could conclude that by April 1996 a substantial percentage of consumers in the Las Vegas market were familiar with Kerzner’s mark based on the evidence of Kerzner’s substantial national advertising campaign and media coverage of the opening., and thus Kerzner might have priority of use in the Atlantis mark for casino services in the United States under the Grupo Gigante famous marks exception. Based on this finding, the court denied Monarch’s motion.

For similar reasons, the court also denied Monarch’s Motion that Kernzer does not have standing to bring its trademark infringement lawsuit.

Monarch filed another summary judgment motion arguing that Kerzner cannot show that it is entitled to injunctive relief as a matter of law.

Monarch first argued that Kerzner never had any plans to develop a casino resort in Las Vegas, much less one using the Atlantis mark, and thus Kerzner cannot demonstrate a likelihood of irreparable harm if the injunction did not issue. However, the court disagreed finding that, taking all reasonable inferences in Kerzner’s favor, the evidence submitted by Kerzner could demonstrate that Monarch had relatively immediate intentions either to open a casino resort under the Atlantis mark in Las Vegas or to sell rights in the mark to someone who would, and thus an injunction might well be an appropriate remedy after the conclusion of this lawsuit if Kerzner convinces the jury that it has senior rights in the mark.

Monarch next argued that since it is undisputed that Monarch has the exclusive right under its license agreement with Kerzner (as Lodge’s assignee in interest) to use the Atlantis mark for lodging services in Nevada (including Las Vegas), a Las Vegas resort hotel and casino under the Atlantis mark would create no greater likelihood of confusion than a facility which offers only lodging services, and thus Kerzner cannot demonstrate any additional likelihood of confusion that Kerzner might be entitled to enjoin.

In essence, Monarch argued that its license for lodging services gave Monarch leeway to create a certain likelihood of consumer confusion through providing lodging service, and only activities that would create an additional likelihood of consumer confusion could give rise to liability sufficient to merit an injunction. The court noted the obvious with respect to lodging services – to the extent that a consumer might believe that such a hotel is associated with Kerzner’s Atlantis mark, that consumer would not be confused at all given that Monarch is Kerzner’s licensee of the Atlantis mark for lodging services. The court then rejected Monarch’s argument by noting that Monarch’s license did not give it any rights to use the Atlantis mark in connection with both casino services and lodging services. Moreover, a consumer who believed casino services provided at a Monarch Atlantis casino resort in Las Vegas to be associated with Kerzner would be confused in a way that the consumer making the same association with regard to lodging services alone would not be, and if Kerzner prevails at trial, it may be entitled to an injunction to prevent such consumer confusion.

Monarch’s last argument in an attempt to persuade the court that injunctive relief should not be issued was the “Dawn Donut” rule and Kerzner’s lack of plans to offer casino services to consumers in Las Vegas. The Dawn Donut rule comes from the Second Circuit Court of Appeals decision in Dawn Donut Co., Inc. v. Hart’s Food Stores, Inc. 267 F.2d 358 (2d Cir. 1959):

Under the Dawn Donut rule, even if a federal registrant has rights in a mark, it is not necessarily entitled to an injunction against an unauthorized user: “if the use of the marks by the registrant and the unauthorized user are confined to two sufficiently distinct and geographically separate markets, with no likelihood that the registrant will expand his use into the defendant’s market, so that no public confusion is possible, then the registrant is not entitled to enjoin the junior user’s use of the mark.” Dawn Donut, 267 F.2d at 364 (footnote omitted); see also Fairway Foods, Inc. v. Fairway Markets, Inc., 227 F.2d 193, 198 (9th Cir. 1955) (vacating injunction issued to prevailing plaintiff on essentially the same basis as later became known as the Dawn Donut rule). Only once the federal registrant has expanded its use of the mark, so that the market areas of the two users are no longer separate and distinct, will the registrant be entitled to an injunction. Mister Donut of Am., Inc. v. Mr. Donut, Inc., 418 F.2d 838, 844 (9th Cir. 1969) (citing Dawn Donut).

However, in rejecting Monarch’s argument, the court noted that the Grupo Gigante famous marks exception to the territoriality principle necessarily implies an exception to the Dawn Donut rule – the court in Grupo Gigante recognized that consumer confusion can occur with respect to a famous mark abroad even if the user of the mark has no intention of ever using the mark in the United States. The court held that an injunction in the U.S. where a mark used exclusively abroad is determined to be famous under Grupo Gigante would be appropriate to prevent the consumer confusion.

Monarch also filed a motion seeking summary judgment on its counterclaim for a declaratory judgment that Monarch’s Nevada state trademark registration is valid and enforceable. While there was no dispute over the validity of Monarch’s state registration, there was a dispute over Monarch’s position that its state law rights trump Kerzner’s federal rights.

Monarch argued that its Nevada state trademark rights do not yield to Kerzner’s rights reflected in its federal registration because Kerzner could not use its Atlantis mark in Las Vegas under Nevada law. Monarch’s unique argument comes from the fact that under Nevada law, in order to obtain an unrestricted gaming license in a county of more than 100,000 population (i.e., Las Vegas), the casino must be associated with a hotel with at least 200 rooms. And since Monarch has the exclusive right to use the Atlantis mark for lodging services in Nevada (pursuant to its agreement with Kerzner), Kerzner could not build a casino resort which includes both a casino and a 200-room hotel in Las Vegas under the Atlantis mark, and could not use the Atlantis mark for casino services in Las Vegas or anywhere else in Nevada where the 200-room hotel requirement applies. Monarch’s position is that if Kerzner cannot use the Atlantis mark in Nevada, then Monarch is not blocked from doing so by any federal trademark rights Kerzner may have outside of Nevada.

For similar reasons described above, the court rejected Monarch’s argument based on the Grupo Gigante famous marks exception. Even if Kerzner is unable or unwilling to operate a casino in Nevada, it may still have federal trademark rights enforceable in Nevada under the famous marks exception. And those federal trademark rights would preempt Monarch’s state trademark rights.

The court also rejected Monarch’s invocation of the “natural zone of expansion” doctrine to argue that Monarch is entitled to statewide rights in the Atlantis mark because Las Vegas is within its “natural zone of expansion,” and therefore Monarch should be treated as if Las Vegas is within the territory where it has already used the mark in connection with casino services, even though Monarch does not actually operate a casino in Las Vegas.

In rejecting Monarch’s argument, the court noted the following about the “natural zone of expansion” doctrine:

The doctrine is normally invoked by senior users seeking to expand their federal statutory trademark rights into areas where a junior user is already using the mark under the protection of the common law. See 5 McCarthy, supra, § 26:20. Here, Monarch turns the doctrine on its head, seeking to leverage its state trademark rights to expand the geographic area in which it is entitled to trademark protections in derogation of Kerzner’s federal rights. Monarch has not cited, nor have we discovered, any authority for so applying the natural zone of expansion doctrine.

So while the court granted Monarch’s motion to the extent that the state registration was found to be valid and enforceable under Nevada law, it denied the motion to the extent that there are genuine issues of material fact about whether Kerzner’s mark falls within the Grupo Gigante famous marks exception (and when it became famous) in which case Kerzner would have federal trademark rights which preempt Monarch’s state trademark rights.

The court’s decision in a parallel order dealt with additional motions to exclude certain evidence and motions for summary judgment by Monarch and Kerzner. While I won’t go into detail regarding that order in this blog post (isn’t this one already long enough?), the court did decide as a matter of law that Monarch has continuously used the Atlantis mark for casino services from April 1996 to the present and that Kerzner’s trademark application date (and thus its constructive use date of the mark in the United States) was February 1997.

The court’s decisions now push the case towards trial on the issue of whether Kerzner acquired priority of use in the Atlantis mark under the Grupo Gigante famous marks exception.

Las Vegas Businessman ordered to stop using the name COHIBA on cigars and rum

The Associated Press reported today (link here) that Las Vegas businessman Philip Restifo, President of the Nevada corporation Cohiba Caribbean’s Finest Inc. and the Bahamas corporation Data Commodities Ltd., was ordered on June 30, 2008 by U.S. District Court Judge Brian Sandoval to stop using the mark COHIBA on cigars and rum and to pay General Cigar Co. ("General Cigar"), the owner of the COHIBA mark for cigars, $770,000 in damages plus legal costs.

The Cohiba Caribbean's Finest Cigar

The order banned Restifo and his affiliated companies from the importing, marketing, distributing and selling of "Cohiba Caribbean's Finest" cigars and rum. Apparently, Restifo’s use of the COHIBA on his cigars was prominent and the "Caribbean's Finest" were in small italicized font. General Cigar’s vice president and general counsel called Restifo's businesses the most aggressive among several Cohiba counterfeiters in the nation. [Query: Is Restifo a big Cohiba rum counterfeiter as well?]

A real Cohiba® cigar

The Cohiba, which apparently gets its name from the Taino word for "tobacco," was originally the private brand of cigar for Fidel Castro, but is now produced and sold worldwide (except in the U.S.) by the state owned company Cubana del Tabaco (d/b/a Cubatabaco) both directly and through Cubatabaco's licensee, Habanos SA. The Cohiba cigar sold in the U.S. by General Cigar is actually made in the Dominican Republic in order to get around the U.S. ban on trade with Cuba. Of course, because General Cigar's COHIBA is not the cuban-made COHIBA, this has led to some contentious trademark litigation between the parties (more on this later).

Restifo was quoted as saying that as of the 30th, his company stopped sales of the rum and pulled down his website. And while it’s true that if you go to http://www.cohibarum.com/, the home page that appears states the following:

Will no longer be servicing for sale or Wholesale,the products of Cohiba Carribbeans Finest.

Due to Big Bully Business and a pure lack of Money...We could no longer afford to defend our Position.

Please remember General Cigar has never been in theLiqour Business!!!!!!

Court orders have reduced an Honost Brand name to the level of Mogel Money Monsters.

General Cigar without Merit and deep pockets transformed a Mom & Pop Liqour [sic] operation into being the Al Capones of the Cigar & liquor Industry.

However, Restifo’s original home page is still accessible through http://www.cohibarum.com/home.html (Check out the COHIBA girls!). You can view the “infringing” cigar products at http://www.cohibarum.com/cigars.html.

And while I have not reviewed the actual court documents in the litigation, Mr. Restifo’s statements about General Cigar not being in the rum business may have merit.

While General Cigar has two registrations for the mark COHIBA for cigars (one registered in 1981 and a second in 1992), its two applications to register the mark for rum (among many other classes of goods) were not filed until 1996 – and even then, the basis was intent-to-use and General Cigar has never updated the basis to reflect use-in-commerce.

Of course, the failure to update may not be from lack of use, but instead because the application has been continuously suspended pending the outcome of another intent-to-use application to register COHIBA for alcoholic beverages, namely, tequila filed in 1995 by Tequila Cuervo La Rojena, S.A. de C.V., which itself has been the subject of an opposition filed in March 10, 2000 by, guess who, General Cigar. See General Cigar Co. v. Tequila Cuervo La Rojena, S.A. de C.V., Opposition No. 91117311 (Filed Feb. 14, 2000).

And this opposition has been suspended pending the outcome of a cancellation proceeding filed against General Cigar by Cubatabaco. See Empresa Cubana del Tabaco v. General Cigar Co., Cancellation No. 92025859 (Filed Jan. 15, 1997). This cancellation proceeding was the beginning of what became a contentious dispute between the two cigar companaies over the COHIBA name. The cancellation moved over to the federal courts in 1997 (see Empresa Cubana del Tabaco v. General Cigar Co., Case No. 97-cv-8399 (S.D.N.Y.)). Although the district court in 2004 held that Cubatabaco owned the trademark COHIBA for use on cigars under the famous marks doctrine and ordered General Cigar Co's registration cancelled (opinion here), the U.S. Court of Appeals for the Second Circuit reversed the district court on the basis that the U.S. trade embargo against Cuba prevented Cubatabaco from acquiring property rights in United State trademarks under the famous marks doctrine. See Empresa Cubana Del Tabaco v. Culbro Corporation, 399 F.3d 462 (2nd Cir. 2005), cert. denied, 126 S.Ct. 2887, 165 L. Ed. 2d 916 (2006).

Upon remand to the district court, General Cigar subseuqently filed a motion with the district court to amend its prior order to add an order to the USPTO dismissing the pending cancellation proceeding. However, the court denied the motion as untimely because General Cigar had not sought such claim for relief earlier in the case and because the TTAB can properly decide the impact of the Court of Appeal's decision. See Empresa Cubana Del Tabaco v. Culbro Corp., 478 F. Supp. 2d 513 (S.D.N.Y. 2007). General Cigar has appealed this decision to the Second Circuit Court of Appeals (Appeal No. 07-1248), but no oral arguments have been heard nor decision made. In addition, Cubatabaco in early 2008 filed its own motion with the district court seeking relief from the district court's previous dismissal of Cubatabaco's claim of relief based on New York common law unfair competition by misappropriation. (Can you say "BUKHARA"?). Oral arguments have been heard, but no decision has been issued.

Unrelated to the litigation over COHIBA for cigars, there is another application filed in 2000 by New Yorker Kereskedelmi Kft., a Hungarian corporation, for the mark COHIBA for various goods including alcoholic beverages (including rum). The application, originally filed as an intent-to-use (both under Section 1(b) and Section 44(d)), now has an established priority date of September 15, 2000 – the company having obtained a registration for the mark in Hungary and changing the basis for its application to Section 44(e).

All of this fighting over a word that in Spanish actually means “stifle” or “restrain” (a conjugated form of the Spanish verb “cohibir”).

Second Circuit renders final decision in BUKHARA “famous marks doctrine” appeal – Is the U.S. Supreme Court next?

In a decision that will undoubtedly come as no surprise to followers of this case, the United States Court of Appeals for the Second Circuit affirmed a New York district court’s decision to grant summary judgment in favor of the defendants on the issue of unfair competition under New York state law. See ITC Limited v. Punchgini, Inc., Case No. 05-0933 (2nd Cir. February 26, 2008).

As a brief summary, the plaintiffs (“ITC”) sued the defendants on federal and state claims of trademark infringement, unfair competition, and false advertising in connection with the mark BUKHARA and related trade dress for use in restaurant services even though ITC had not used the mark in the United States for more than three years. ITC has operated a restaurant under the name Bukhara in New Delhi, India since 1977. ITC opened and franchised other locations worldwide, including New York and Chicago, but all but 3 closed. The New York restaurant opened in 1986, but closed in 1991; the Chicago franchise opened in 1987, but closed in 1997. In 1999, the defendants, who had worked at ITC’s New Delhi Bukhara location and one of whom had worked at the New York Bukhara restaurant, opened an Indian restaurant named Bukhara Grill since there was no other restaurant in the New York City area named Bukhara. While ITC first objected to defendants’ use of the name Bukhara in 2000, ITC did not bring suit until 2003. ITC argued that its Bukhara mark qualified for protection in the U.S. under the “famous mark” doctrine (described herein) based on the fame of the Bukhara name for restaurants services in the U.S. even though ITC’s current use was outside the U.S. The district court granted summary judgment in favor of the defendants on all claims. See ITC Ltd. v. Punchgini, Inc., 373 F. Supp. 2d 275 (S.D.N.Y. 2005).

In the Second Circuit’s 2007 decision, ITC Limited v. Punchgini, Inc., 482 F.3d 135 (2nd Cir. March 28, 2007), the court affirmed the grant of summary judgment on ITC’s federal and state trademark infringement claims on the basis that ITC had abandoned its Bukhara mark for restaurant services in the United States. More detailed summaries of the Second Circuit’s initial decision can be found at The TTABlog, 43(b)log, Intellectual Property Law Blog, and Filewrapper Blog.

More controversial, however, was the court’s decision to affirm summary judgment on ITC’s federal unfair competition claim because it depended on the “famous marks” doctrine, which the court found was not recognized under current federal trademark law. The “famous marks” doctrine is actually an exception to the “territoriality principle” whereby priority of U.S. trademark rights depends on priority of use in the U.S., not use anywhere else. Under the “famous marks” doctrine, a trademark owner not currently using a mark in the U.S. can nonetheless stop any infringing use in the U.S. if the mark at issue is famous or has acquired secondary meaning within the U.S. The court even acknowledged that its decision to reject the “famous marks” doctrine conflicts with the Ninth Circuit’s decision in Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, (9th Cir. 2004) which recognized the “famous marks” doctrine with respect to federal trademark rights, and goes against famed trademark treatise author J. Thomas McCarthy, who has apparently called the decision “embarrassing” (see write-up by Seattle Trademark Lawyer and contrasting write-up by Likelihood of Confusion). This circuit conflict alone leads some (myself included) to believe that a grant of certiorari from the U.S. Supreme Court is in the future.

While the court’s decision to reject the “famous marks” doctrine for purposes of federal trademark law was significant, it was not the end of the case. The court recognized that the famous marks doctrine might support ITC’s state unfair competition claim under New York common law, and certified two question to the New York Court of Appeals (the highest court of the State of New York): (1) “Does New York common law permit the owner of a federal mark or trade dress to assert property rights therein by virtue of the owner’s prior use of the mark or dress in a foreign country?”; and (2) “If so, how famous must a foreign mark be to permit a foreign mark owner to bring a claim for unfair competition?”

The New York Court of Appeals (“NYCA”) rendered its decision on December 13, 2007. See ITC Ltd. v. Punchgini, Inc., 2007 N.Y. Slip Op. 09813 (N.Y. December 13, 2007). Detailed summaries of this decision can be found at The TTABlog, Intellectual Property Law Blog, and 43(b)log.

The NYCA answered the first question in the affirmative – then qualified its answer to make clear that it was not recognizing the “famous marks” doctrine, but instead reaffirming established state law prohibiting unfair competition (“when a business, through renown in New York, possesses goodwill constituting property or commercial advantage in this state, that goodwill is protected from misappropriation under New York unfair competition law. This is so whether the business is domestic or foreign.” 2007 N.Y. Slip Op. 09813 at *13-14).

As for the court’s second question, the NYCA stated that protection for unfair competition by misappropriation of a famous foreign mark presupposes the existence of actual goodwill in New York and that if a foreign plaintiff has no goodwill in New York to appropriate, there can be no viable claim for unfair competition under a theory of misappropriation. The NYCA further stated that a plaintiff’s mark, when used in New York, must call to mind the plaintiff’s goodwill – consumers of goods or services provided under a certain mark used by a defendant in New York “must primarily associate the mark with the foreign plaintiff.”

The NYCA identified several relevant factors to determine whether consumers of a defendant's goods or services would primarily associate such goods or services with those provided by a foreign plaintiff, including “evidence that the defendant intentionally associated its goods with those of the foreign plaintiff in the minds of the public, such as public statements or advertising stating or implying a connection with the foreign plaintiff; direct evidence, such as consumer surveys, indicating that consumers of defendant's goods or services believe them to be associated with the plaintiff; and evidence of actual overlap between customers of the New York defendant and the foreign plaintiff.” 2007 N.Y. Slip Op. 09813 at *15

The NYCA concluded by stating that for ITC to prevail on its unfair competition claim under New York common law, ITC would have to 1) prove that defendants deliberately copied ITC’s Bukhara mark or trade dress for their New York restaurants and 2) establish that the relevant consumer market for New York’s Bukhara restaurant primarily associates the Bukhara mark or trade dress with those Bukhara restaurants owned and operated by ITC outside of the United States. 2007 N.Y. Slip Op. 09813 at *15-16. Stated another way by the court, for ITC to pursue an unfair competition claim under New York law, it must provide evidence of deliberate copying and secondary meaning.

In light of the NYCA’s response, the court affirmed the district court’s award of summary judgment in its entirety (including the New York state unfair competition claim). The court agreed with the district court’s decision that ITC had provided sufficient evidence of deliberate copying, so the primary issue was ITC’s evidence of secondary meaning. The district court had also concluded that ITC failed to establish a triable issue as to the existence of “secondary meaning” in the New York market in which the defendants operated.

ITC had originally tried to argue that no proof of secondary meaning was required when a New York unfair competition claim is based on intentional copying. Because the NYCA determined otherwise, ITC attempted to argue that the district court had erroneously applied a stricter standard to its secondary meaning analysis than what the NYCA identified as the relevant test and erred in concluding that ITC could not establish secondary meaning. ITC tried to argue that had it had the benefit of the NYCA decision, it would have submitted sufficient evidence to withstand summary judgment.

In rejecting ITC’s pleas that it could have provided additional evidence that would have allowed it to withstand summary judgment, the court noted that ITC had the same incentive to provide evidence of secondary meaning in order to support its argument that the “famous marks” doctrine applied at the federal and state level. In addition, the court found that the district court did not hold ITC to an unduly strict standard of secondary meaning, but instead considered the evidence in light of the six factors typically analyzed to decide whether a mark has acquired secondary meaning: “(1) advertising expenditures, (2) consumer studies linking the mark to a source, (3) unsolicited media coverage of the product, (4) sales success, (5) attempts to plagiarize the mark, and (6) length and exclusivity of the mark’s use.” Slip op. at *8 (citing ITC Ltd. v. Punchgini, Inc., 373 F. Supp. 2d at 288 (quoting Genesee Brewing Co. v. Stroh Brewing Co., 124 F.3d 137, 143 (2d Cir. 1997))). The court found this standard to be no different than the factors stated by the NYCA

The court also made clear that for purposes of determining secondary meaning “in the New York market” both the district court and the NYCA were referring to potential customers for defendants’ New York restaurant (i.e., the NYCA’s opinion was not limiting the relevant market to persons who had already eaten in defendants’ restaurants nor was the district court’s decision improperly including every New York resident in the relevant market).

And even if the district court did err in defining the relevant market, the court held that ITC failed to provide evidence that was sufficient to create a genuine issue of material fact on the question of whether the Bukhara mark and trade dress used by the defendants in New York brings to mind ITC’s goodwill for defendants’ potential customers or that defendants’ customers primarily associate the Bukhara mark and trade dress with ITC.

The court noted that ITC’s evidence of goodwill came entirely from foreign media reports and sources – ITC did not include any evidence that would permit an inference that such reports or sources have reached the relevant consumer market in New York. ITC also provided no evidence that it had advertised its foreign “Bukhara” restaurants in the U.S. nor did ITC make any attempt to show either New York based goodwill or any kind of name recognition through consumer surveys. The court also noted the lack of any evidence of actual overlap between customers of defendants’ restaurant and ITC’s Bukhara “aside from ITC’s own inadmissible speculation

The court stated: “Absent admissible evidence, however, a reasonable factfinder could not conclude that potential customers of defendants’ restaurant would primarily associate the Bukhara mark with ITC, particularly in light of evidence that numerous Indian restaurants in Massachusetts, Washington, Virginia, and around the world have used the name ‘Bukhara,’ all without any affiliation or association with ITC.” Slip op. at 10.

The court rejected as belated ITC’s attempts to identify admissible evidence of secondary meaning. The court found that ITC provided no evidence other than “conjecture” (insufficient to withstand summary judgment) that the alleged well-traveled customers patronizing defendants’ restaurant would primarily associate the mark Bukhara and the accompanying trade dress with ITC.

In response to ITC’s argument that the district court failed to consider the public statement and advertisements which stated or implied a connection with ITC, the court noted that the district court did consider such evidence in concluding that defendants had intentionally copied ITC’s mark and trade dress, but found that intentional copying alone would not be enough to demonstrate the necessary “secondary meaning” to set forth a claim for unfair competition where the “copying” at issue is prohibited based on the application of the “famous marks” doctrine for marks that have acquired a “secondary meaning.” The court found this reasoning to be consistent with the NYCA’s opinion that a famous foreign mark holder must show more than copying in order to pursue a claim for unfair competition under New York state law. In other words, ITC cannot prove “secondary meaning” solely with evidence of similarities between the defendants’ Bukhara restaurant and ITC’s Bukhara restaurant because such evidence does not show that defendants’ potential customers were even aware of ITC’s mark.

In addition, ITC failed to show any evidence that the goodwill that had been generated when ITC’s Bukhara restaurants were operating in New York and Chicago had lingered long enough such that defendants’ potential customers “primarily associated” defendants’ Bukhara restaurant with ITC’s former restaurants.

Finding that the evidence failed as a matter of law to raise a triable question of fact on the issue of secondary meaning necessary to establish a New York common law unfair competition claim, the court affirmed the district court’s grant of summary judgment on this claim, which affirmed the district court’s decision in all respects.

Next stop: Petition for writ of certiorari to the U.S. Supreme Court.