Property, intangible

a blog about ownership of intellectual property rights and its licensing

STOLICHNAYA Case Still Alive, Just Barely

Oh, Federal Treasury Enterprise Sojuzplodoimport, without you I wouldn’t be so good at spelling “Stolichnaya.”* I’ve lost count of the opinions talking about who owns the STOLICHNAYA trademark and we’re now on the second lawsuit over it.

It all stems from a disputed claim of ownership of the STOLICHNAYA mark in the United States. To tell the story briefly, the mark was originally owned by the Soviet Union and registered by an enterprise named V/O SPI, later renamed VVO-SPI, which exported the vodka to the United States. Beginning in 1990 and provoked by the collapse of the Soviet Union, the record trademark ownership ended up in the hands of defendant Spirits International B.V. According to FTE, one of the links in Spirits International’s chain of title has been voided by the Russian courts.

FTE is owned by the Russian Federation, organized and operating under the laws of the Russian Federation. The Russian Federation formed FTE to assume the functions and operations of VVO-SPI, that is, to export STOLICHNAYA vodka. So what we end up with is two purported owners of the STOLICHNAYA trademark in the United States, plaintiff FTE and defendant Spirits International.

And what a battle. In the first lawsuit, the first opinion of note was one confirming that even though Spirits International’s registration was incontestable, the validity of the assignment to Spirits International could be challenged. But after examining the grant given to FTE by the Russian government, the district court held, and the appeals court affirmed, that the Russian government had not transferred full ownership of the marks to FTE, so FTE wasn’t the registrant of the mark. Since FTE had dismissed all claims except for infringement of a registered mark, it didn’t have standing and the case was dismissed.

Now FTE and the Russian government have a new document, one that assigns the trademarks in every way possible, and FTE has filed a new lawsuit against Spirits International.

FTE’s new suit has now survived a motion to dismiss, but just barely. FTE brought eleven counts against the various defendants, for federal trademark infringement, federal unfair competition, federal trademark dilution, state law trademark infringement, state law unfair competition, state law trademark dilution, contributory trademark infringement, contributory unfair competition, contributory federal trademark dilution, federal rectification of the register, and federal cancellation of registration.** The only one that survived was the claim for which there was absence of standing the first time around, federal trademark infringement under § 32 of the Lanham Act. All of the other claims either had been pled in the original suit but dismissed so were barred by res judicata, or could have been pled in the original suit but weren’t so couldn’t be brought now.

But even on the § 32 claim I think there’s an elephant in the room. The registrations FTE relies on for standing are the ones owned by Spirits International, but who owns them is really the gravamen of the case. Or, in other words, FTE will own a registered mark that is allegedly infringed once the court resolves the ownership issue in FTE’s favor. That’s an unusual posture for a § 32 claim and also internally inconsistent with the count for cancellation—if the Spirits International registrations are cancelled, what happens to FTE’s § 32 claim that relies on them?

On the surviving § 32 claim, Spirits International argued that, despite the assignment, FTE’s charter and the Russian Civil Code did not give FTE the right of ownership. But the the court didn’t have enough information to rule that the assignment was invalid under the charter or Russian law, so “at this stage, FTE has alleged facts that plausibly show that the Russian Federation has assigned the Marks to FTE, giving FTE standing to sue under Section 32(1).”

I mentioned the first time around that I didn’t understand why FTE asserted only a claim for infringement of a registered mark and not a claim under § 43(a). Standing under § 43(a) is much easier; a plaintiff needs to show only that it is likely to be damaged. I don’t understand why this claim was so easily conceded, although the current complaint says obliquely “FTE has granted [co-plaintiff] Cristall an exclusive license to produce vodka and other products bearing the STOLICHNAYA mark for sale in the United States,” but doesn’t say Cristall is actually making them yet. So if Cristall isn’t making vodka, FTE can’t allege it is damaged by a likelihood of confusion.†

What a case.

Federal Treasury Enter. Sojuzplodoimport v. Spirits Int’l B.V., No. 14-cv-0712 (SAS) (S.D.N.Y. Aug. 25, 2014).

* I rank it up there with being able to pronounce “acetyl salicylic acid.”

** Cancellation and rectification of the register probably aren’t causes of action but a form of relief. Nike, Inc. v. Already, LLC, 09 CIV. 6366 RJS, 2011 WL 310321 (S.D.N.Y. Jan. 20, 2011) aff’d, 663 F.3d 89 (2d Cir. 2011) aff’d, 133 S. Ct. 721, 184 L. Ed. 2d 553 (U.S. 2013). But given the weird procedural posture of the case, I’d have pleaded them too and let the court sort it out later.

† The reason the § 32 claim works is, under Dawn Donut, there is infringement, you just don’t get an injunction.

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