Trademark rights assigned by the Russian government to Stolichnaya vodka must be respected by courts in the United States, a federal appeals court ruled Tuesday.

The U.S. Court of Appeals for the Second Circuit revived a claim in a suit over the trademarks “Stolichnaya” and “Stoli,” finding a Russian agency, Federal Treasury Enterprise (FTE), has standing to sue in the United States.

Southern District Judge Shira Scheindlin had determined the assignment of trademark rights by the Russian Federation to the agency was invalid under Russian law, and so FTE lacked standing.

But Judges Jon Newman, John Walker and Dennis Jacobs called that ruling “an affront” to Russian sovereignty and reinstated the case of Federal Treasury Enterprise v. Spirits International B.V., 14-4721-cv, a long-running feud over the “Stolichnaya” and “Stoli” marks.

Federal Treasury Enterprise and its co-plaintiff, OAO “Moscow Distillery Cristall,” claimed that Spirits International and other companies, as well as its distributors, misappropriated its marks and violated §32(1) of the Lanham Act.

Spirits International is a successor to a Soviet state enterprise that obtained the federal trademark for Stolichnaya in 1969. The company was supposedly privatized in the 1990s, but a Russian court held in 2000 that it was not validly privatized, and that ownership of the marks belonged to the Russian Federation.

In 2002, the federation formed FTE as the successor to Spirits International, and FTE licensed with Cristall to distribute the vodka in the United States. FTE and Cristall filed suit in 2004, setting off litigation now entering its 12th year.

In 2013, following an opinion of the Second Circuit, the Russian federation issued a decree giving FTE the “entire right, title and interest in and to” the trademarks for “Stolichnaya” and “Stoli.”

But Scheindlin held that FTE lacked statutory standing to bring the §32(1) claims because the assignment of the marks was invalid under Russian law. She also ruled that non-§32(1) claims were barred by res judicata and doctrine of laches—an unreasonable delay in bringing the claim.

The Second Circuit, with Jacobs writing for the court, said it was up to Russia to make the call on the assignment of rights. It reversed on the assignment issue, and thus on standing, but affirmed Scheindlin on res judicata and laches grounds, leaving only a single count before the lower court on remand.

“The district court conceded that it was ‘somewhat uncomfortable telling a foreign government that a validly enacted decree cannot achieve the result that was clearly intended by its passage,’” Jacobs said. “We conclude that the district court had good reason for discomfort.”

Jacobs said U.S. courts ordinarily refuse to review acts of foreign governments taken abroad unless they conflict with the policies or interests of the United States, and that was not the case here.

Judge JacobsNYLJ/Rick Kopstein

“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,” Jacobs said. “Even an inquiry into whether Russian law permitted the assignment is a breach of comity.”

The judge said the question of standing depends on whether FTE has been given by the Russian Federation all of 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,” he said. “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.”

Jacobs said the lower court’s decision also was barred by the act of state doctrine, saying the “validity of the assignment determines only FTE’s statutory standing to assert such claims as the Russian Federation may have.”

“That is a question of Russian law decided within Russia’s borders, rather than a matter of U.S. law with a situs in the United States,” he said.

Daniel Bromberg, a partner at Quinn Emanuel Urquhart & Sullivan in Redwood Shores, California, argued for FTE.

“We are gratified with the Second Circuit’s decision today,” Bromberg said. “We look forward to proving on behalf of the Russian people that our client FTE is the true owner of the Stolichnaya trademarks, as courts in other countries have recognized.”

Eugene Gulland, senior counsel at Covington & Burling in Washington, D.C., argued for Spirits International.

Edward Colbert, partner at Kenyon & Kenyon in Washington, D.C., argued for distributors William Grant & Sons.