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. 
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