Perhaps you haven’t heard about New Delhi’s Bukhara Restaurant. It’s considered by many food critics to be one of the 50 best restaurants in the world, as well as the best restaurant in Asia. Since it opened its doors in 1977, it has garnered enthusiastic fans worldwide, including luminaries such as former President Bill Clinton and Russian President Vladimir Putin.

Then the Bukhara Grill opened in Manhattan in 1999. Customers who walked in the door saw the New Delhi restaurant’s familiar logos, decor, staff uniforms, wood-slab menus and red-checkered customer bibs.

This Manhattan restaurant, however, had no affiliation with the prestigious Bukhara Restaurant. As one of the Grill’s owners put it, there was “no restaurant Bukhara in New York, and we just thought we will take the name.”

The owner of the New Delhi restaurant, ITC Ltd., wasn’t happy. It sued the owners of the Bukhara Grill in 2003, alleging trademark infringement and unfair competition. The trial court threw out the suit because ITC didn’t have a U.S. trademark on “Bukhara.”

ITC appealed, arguing it didn’t need U.S. trademark rights because it was protected by the “famous marks doctrine.” Enshrined in two international treaties, this doctrine protects foreign marks in countries where they are well known–even if the marks are neither used nor registered in those countries.

Then, in March 2007, the 2nd Circuit issued a ruling that stunned many trademark experts. The court held in ITC Ltd. v. Punchgini Inc. that U.S. law doesn’t recognize the foreign marks doctrine, even though two treaties require the U.S. to uphold it.

Many experts fear this ruling, which conflicts with prior court rulings, will create a dangerous international backlash.

“If we don’t live up to our [treaty] obligations ?? 1/2 other countries won’t live up to their obligations to protect not just trademarks, but also copyrights, patents and other types of IP,” says Ethan Horwitz, an IP litigator in the New York office of Goodwin Procter, who represents ITC in this case.

Such a weakening of international IP rights would be bad news for U.S. companies, which own the lion’s share of the world’s valuable IP.

“If this ruling is upheld, the people who stand to lose the most are U.S. IP owners,” Horwitz says.

Global Protection

The famous marks doctrine was created in 1925 by an addition to the Paris Convention and originally protected only trademarks. The doctrine was expanded to cover service marks by the World Trade Organization’s 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).

The doctrine recognizes it is often economically unfeasible for the owner of a famous mark to register it in every country where it is well known. By offering legal protection in all countries where a mark is famous, the doctrine protects a trademark owner’s ability to expand internationally and prevents counterfeiters from unscrupulously selling goods and services labeled with famous foreign marks. This protection has become increasingly important in recent years, as globalization has fueled a surge in the cross-border flow of goods and services.

Starting in 1936, New York State courts and the PTO have repeatedly applied the doctrine to protect well-known foreign marks. For instance, a New York trial court ruled in 1959 that the doctrine protected the famous Paris restaurant Maxim’s against a Manhattan restaurant that was copying Maxim’s name, decor and distinctive script style. The court issued an injunction against the New York City restaurant.

In 2004 the U.S. 9th Circuit Court of Appeals held that the doctrine was part of federal trademark law.

Federal district courts in New York, however, issued three conflicting rulings on whether the doctrine provided a foreign trademark owner with any rights under federal law.

“In New York the famous marks doctrine was going down a very dangerous and inconsistent road,” says Michelle Mancino Marsh, an IP attorney in the Manhattan office of Kenyon & Kenyon who represents the owners of the Manhattan Bukhara Grill.

Court’s Theory

Then the 2nd Circuit handed down its controversial decision in ITC. The two-judge panel held that the famous marks doctrine is part of the Paris Convention and TRIPs, so the U.S., as a signatory, is required to uphold the doctrine. But because these treaties are not self-executing and Congress failed to enact legislation that explicitly incorporated the famous marks doctrine, the doctrine is not part of federal trademark law.

The judges’ ruling has drawn fire from many trademark experts.

“They were wrong,” says J. Thomas McCarthy, a prominent trademark expert who teaches at the University of San Francisco School of Law. “There is a way to [implicitly] incorporate the doctrine into the federal trademark statute. But the 2nd Circuit wanted to see explicit words saying the doctrine is enforceable. They gave a narrow reading to the statute.”

The 2nd Circuit demanded an explicit statutory command because the doctrine runs counter to a bedrock principle of U.S. trademark law–that trademark rights end at a nation’s borders. By contrast, the famous marks doctrine allows a trademark owner to assert extra-territorial rights.

“Before we construe the Lanham Act to include such a significant departure from the principle of territoriality,” the court stated, “we will wait for Congress to express its intent more clearly. “

The 2nd Circuit’s ruling has sown confusion about what protection the U.S. provides to famous foreign marks.

“The 2nd Circuit is in direct contradiction with the 9th Circuit,” says G. Roxanne Elings, a trademark attorney in the New York office of Greenberg Traurig.

The ruling also puts the U.S. in a rather awkward position. The country is pressuring other nations to adopt the foreign marks doctrine in order to protect U.S. marks abroad, while a U.S. appellate court has held that the U.S. does not recognize the doctrine. The latter has left non-U.S. marks unprotected.

“It’s a great embarrassment for the U.S.,” McCarthy says.

International Retaliation

Many experts expect foreign countries to retaliate. “If we don’t recognize the doctrine, other countries won’t recognize it either,” Horwitz says.

If this happens, the major losers would be U.S. companies, which own a huge percentage of the world’s famous marks and which have often used the doctrine to protect their interests in foreign lands.

“For a very long time ?? 1/2 the famous marks doctrine has allowed U.S. companies to get rights that have been usurped by others,” Elings says.

Moreover, any international backlash will likely extend beyond trademarks. Because if the U.S. doesn’t meet its obligations under the Paris Convention and TRIPs, this will give other countries an excuse to do likewise–for any type of IP.

“This decision can be used as a club to beat our trade negotiators, with foreign governments saying, ‘Who are you to criticize us? You are not living up to your treaty obligations, ‘” McCarthy says.