• STOLI Is Back

    by  • January 11, 2016 • trademark • 0 Comments

    This is my sixth post (recursive link) about the STOLI case. The defendant, Spirits International B.V., claims to own the STOLI and STOLICHNAYA trademarks as a result of privatization during the collapse of the Soviet Union and is listed as the owner of the trademark registrations. The Russian government, acting through state entity Federal Treasury Enterprise Sojuzplodoimport (FTE), claims to be the true owner of the trademarks and has sued to regain record ownership of the US trademark registrations and for infringement. Two lawsuits and 11 years later, FTE has made it through the initial motion to dismiss stage and, just maybe, will reach the substantive basis for its claim.

    Thus far the case has only been about standing. The first suit was dismissed because FTE itself admitted that the Russian government, not it, was the owner of the trademarks. Since the only claims were under Section 32 of the Lanham Act, which may only be asserted by the owner of the trademarks, the case was dismissed.

    FTE and the Russian government thereafter executed a formal assignment of the US trademarks and sued again. The district court nevertheless held that under Russian civil law, FTE was not an entity that was allowed to own trademarks. The court, though, admitted “In the short run, the parties to this action could benefit from a de novo appellate review of this decision—I have little doubt that FTE will seek such review.”

    Which they did, and they won. Russia had decreed* that FTE was to have all rights to the trademarks in the US:

    Decree P version

    If you can’t read it, it says, quoting the opinion, “[State Property Management] is to conclude with [FTE] an agreement on transferring to the said enterprise the rights of the Russian Federation to trademarks containing verbal designations “Stolichnaya” and/or “Stoli” used on the territory of the United States (on all territories subject to the jurisdiction of the United States of America).” And that direction was carried out with a formal assignment.

    It was a simple matter of comity:

    Under the principles of international comity, United States courts ordinarily refuse to review acts of foreign governments and defer to proceedings taking place in foreign countries, allowing those acts and proceedings to have extraterritorial effect in the United States.

    The Decree and Assignment were indisputably acts of a foreign government. The declaration of a United States court that the executive branch of the Russian government violated its own law by transferring its own rights to its own quasi-governmental entity (FTE) would be an affront to the government of a foreign sovereign. Even an inquiry into whether Russian law permitted the Assignment is a breach of comity. “So long as the act is the act of the foreign sovereign, it matters not how grossly the sovereign has transgressed its own laws.” Banco de Espana v. Fed. Reserve Bank of N.Y., 114 F.2d 438, 444 (2d Cir. 1940).

    The court distinguished this outcome from the first lawsuit, which likewise interpreted the relationship of the parties under Russian law:

    We concluded in FTE IV that the United States has an interest in enforcing “its own trademark laws within its borders” and “the Lanham Act’s express [standing] requirements.” FTE IV, 726 F.3d at 82. But in this case, the question of standing depends on whether an agency of a foreign sovereign has been endowed by that government with all the rights and powers it claims over the Marks. Whether those rights, if validly assigned, prevail against alleged infringers is very much an issue confided to the United States courts; the distinct question whether the government of a foreign sovereign has effectively and legally allocated its rights and powers among its agencies and instrumentalities under that foreign sovereign’s law, is not. Considerations of international comity precluded the district court from adjudicating the validity of the Assignment.

    FTE also won under the acts of state doctrine, which “‘precludes any review whatever of the acts of the government of one sovereign State done within its own territory by the courts of another sovereign State.’ First Nat. City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 763, 92 S. Ct. 1808, 32 L. Ed. 2d 466 (1972).”

    So it goes back to district court, where there is still plenty of heavy lifting to go on the substantive case. From what I can tell, the basis for FTE’s Section 32 theory is a claim of ownership of three trademark registrations that the defendant fraudulently had transferred to it. While FTE has proved, as been it and Russia, it is the trademark owner, it still has to prove that it is the owner as between it and Spirits Int’l B.V. So in step one of its Section 32 infringement claim it will have to prove ownership of the registrations, then in step two prove infringement. However, FTE stated in its complaint that PepsiCo was an authorized distributor and the errant chain of title started when PepsiCo assigned the trademarks to Allied Domecq. Parts of the chain of title are so old that the underlying documents aren’t available, but the online record shows that PepsiCo was the owner of all, right title and interest before the allegedly wrongful assignment. There also is a matter of the renewals, which were filed by the defendant, so query whether these registrations are valid. And if not valid, then is there a claim for infringement under Section 32? And what about abandonment, or confusion, has any vodka been distributed by FTE since the wrongful transfer?

    Federal Treasury Enter. Sojuzplodoimport v. Spirtis Int’l B.V., No. 14-4721-cv(L), 15-152-cv (XAP) (2d. Cir. Jan. 5, 2016).

    *The translation in the linked copy is the defendant’s translation; the court quoted the plaintiff’s translation.

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