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A recent 2d U.S. Circuit Court of Appeals decision has introduced considerable uncertainty concerning whether U.S. courts will recognize trademark rights based on a significant degree of mark recognition, but no actual usage, in this country. In ITC Ltd. v. Punchgini Inc., 482 F.3d 135 (2d Cir. 2007), a 2d Circuit panel rejected outright the “famous marks” doctrine, reasoning that there was nothing in the language of the Lanham Act to justify a departure from the territoriality principle. In so doing, the panel expressly rejected the rationale in a 2004 9th Circuit decision, Grupo Gigante S.A. de C.V. v. Dallo & Co. Inc., 391 F.3d 1088 (9th Cir. 2004), thereby setting up a clear circuit split on this issue. Because the U.S. Supreme Court recently denied certiorari in Punchgini, the circuit split will not be resolved soon. The famous marks doctrine was first recognized in the United States in 1936 in Maison Prunier v. Prunier’s Rest. & Caf�, 288 N.Y.S. 529 (New York Co., N.Y., Sup. Ct. 1936). The plaintiff operated French restaurants in Paris and London using the mark “Prunier.” The defendants opened a New York restaurant using the same mark and slogan, advertising it as the “Famous French sea food restaurant.” The court held that the plaintiff had a right to pursue a common law unfair competition claim to protect its reputation and prevent misappropriation, even though the two parties’ restaurants were not in direct competition. More than 20 years later, another New York trial-level court applied this reasoning in Vaudable v. Montmartre Inc., 193 N.Y.S.2d 332 (New York Co., N.Y., Sup. Ct.. 1959), when the defendants opened a New York restaurant using the name “Maxim’s.” The plaintiffs owned the famous French restaurant Maxim’s in Paris. The court enjoined the defendants’ use of the mark, noting that the defendants’ purpose in choosing Maxim’s was to appropriate the French restaurant’s good will and to exploit it in the United States. The famous marks doctrine was next cited in Mother’s Rests. Inc. v. Mother’s Other Kitchen Inc., 218 U.S.P.Q. 1046 (T.T.A.B. 1983), when a Canadian opposer to a trademark application argued that it had priority rights in the United States in the mark “Mother’s” or “Mother’s Pizza Parlour & Spaghetti House” for restaurant services based on significant promotional activities in Canada that ultimately reached consumers in the United States. The Trademark Trial and Appeal Board rejected this argument, holding that advertising a mark inside or outside of the United States for goods or services marketed exclusively outside the country was insufficient to create priority rights. However, in dicta, the board noted that prior use outside the United States could, under the famous marks doctrine, protect a foreign business if there were clear evidence that the foreign party’s mark was a “famous” one at the time the other party first used it in the United States. A few months later, the board applied the doctrine in All England Lawn Tennis Club (Wimbledon) Ltd. v. Creations Aromatiques Inc., 220 U.S.P.Q. 1069 (T.T.A.B. 1983), in ruling against a U.S. company that had applied to register the mark “Wimbledon Cologne” (featuring the design of a tennis player). The board concluded that the mark was so famous that the English opposer had acquired priority rights in the United States, even though it never marketed a product here. Prior to the 2d Circuit’s decision in Punchgini, the famous marks doctrine had been gaining some traction in the federal courts. In Empresa Cubana Del Tabaco v. Culbro Co., 70 U.S.P.Q. 1650, 1682 (S.D.N.Y. 2004), rev’d, 399 F.3d 462 (2d Cir. 2005), for example, the court applied it to non-U.S. trademark use of a Cuban cigar maker. The Cuban company, Cubatabaco, argued that the defendant violated the Lanham Act when it began selling cigars using the name “Cohiba.” The plaintiff did not use the mark in the United States due to a sales embargo, but the “Cohiba” mark was nevertheless well known in the United States at the time the defendant began using the name. In applying the famous marks doctrine, the district court adopted a secondary-meaning standard to determine the level of fame required to trigger the doctrine, relying on the earlier district court decision in Grupo Gigante S.A. de C.V. v. Dallo & Co., 119 F. Supp. 2d 1083 (C.D. Calif. 2000), vacated, 391 F.3d 1088 (9th Cir. 2004). On appeal, however, the 2d Circuit dismissed the case on other grounds and did not reach the famous marks doctrine. The 9th Circuit’s ‘Grupo’ ruling In 2004, in the Grupo Gigante appeal, the 9th Circuit became the first federal appeals court to recognize the famous marks doctrine. The plaintiffs owned a large, well-known chain of grocery stores in Mexico called “Gigante.” The defendants opened grocery stores in neighboring San Diego using the “Gigante Market” name. The court expressed concern about the likelihood of confusion, noting that the defendants were trying to “fool immigrants” into thinking that they were shopping in a store associated with their nearby home country. Yet, under a strict application of the territoriality principle, the plaintiffs would have no cause of action, since the earlier use was exclusively in Mexico. The court opted to adopt the famous marks doctrine, stating that “[w]hile the territoriality principle is a long-standing and important doctrine within trademark law, it cannot be absolute.” 391 F.3d at 1094. However, the court rejected the secondary meaning standard for determining whether a mark had achieved a sufficient level of recognition necessary to trigger the exception. Instead, the court held that for a foreign mark to be protected under federal trademark law, it must have more than secondary meaning � it must have established familiarity among a “substantial percentage” of consumers in the relevant American market, i.e. a level of recognition more stringent than secondary meaning but less exacting than the “fame” required for a federal dilution claim. Id. at 1098. In De Beers L.V. Trademark Ltd. v. Rosenblatt, No. 04 CIV. 4099, 2005 U.S. Dist. Lexis. 9307 (S.D.N.Y. 2005), U.K. plaintiffs brought suit against a U.S. company alleging violation of the Lanham Act. The “De Beers” name had been associated with diamond mining since 1888, although products and services had not been sold in the United States under that name. The defendant operated a diamond business using the mark “DeBeers Diamond Syndicate” for use in purchasing, ordering and distributing diamonds. The court noted that “[r]ecognition of the famous marks doctrine is particularly desirable in a world where international travel is commonplace and where the Internet and other media facilitate the rapid creation of business goodwill that transcends borders.” Id. at *25. Ultimately, the court held that the doctrine was not appropriate in that case, as the plaintiffs had failed to provide enough evidence that the name was used as a mark. See 440 F. Supp. 2d 249 (S.D.N.Y. 2006). In Almacenes Exito S.A. v. El Gallo Meat Market Inc., 381 F. Supp. 2d 324 (S.D.N.Y. 2005), however, the same court rejected the logic of the 9th Circuit panel in Grupo Gigante. The plaintiff there owned a retail superstore chain under the mark “Exito” in Colombia and Venezuela, but never operated within the United States. The defendants opened up several grocery stores in Hispanic neighborhoods in New York using the same Exito name. The “Exito” foreign mark was well known in Latin America as well as in the New York Hispanic community. Notwithstanding the defendants’ intent both to confuse customers and appropriate the good will in the foreign mark, the court concluded that the doctrine had “no place in federal law where Congress ha[d] enacted a statute, the Lanham Act, that carefully prescribe[d] the bases for federal trademark claims[, but that] nowhere specifie[d] the well-known or famous marks doctrine.” Id. at 327. In Punchgini, the plaintiffs had previously obtained a trademark registration for “Bukhara” after opening a restaurant in New York. The restaurant eventually closed, and the plaintiffs had not owned or licensed any restaurant in the United States with that mark since terminating the franchise in 1997. The court found that the plaintiffs had abandoned the registered mark. The plaintiffs also continued to operate numerous restaurants using the Bukhara mark in India. The defendants, having previously worked at either the New Delhi or the New York Bukhara, opened a New York restaurant using the name in 1999. The defendants conceded that they took the name and design from the previous restaurant, rationalizing that there was no longer a restaurant in New York using that name. The plaintiffs argued that the famous marks doctrine applied since they had used the Bukhara mark outside the United States since 1977 and it was famous well before the opening of the New York restaurant. The court rejected this argument, citing the rationale in Almacenes Exito that when a statute such as the Lanham Act is comprehensive, a court should not imply additional substantive protections, but should defer to Congress. It acknowledged the policy rationales for a departure from the territoriality principle, but concluded that it could not overcome the clear meaning of the statute. In an interesting twist, the panel in Punchgini certified to the New York Court of Appeals, New York’s highest court, the question of whether the famous marks exception to the territoriality principle exists under New York’s common law of unfair competition, given the age of the Maison Prunier and Vaudable opinions and the fact that no state appellate courts in New York had ever addressed the doctrine. That court decided to accept the certified questions. ITC Ltd. v. Punchgini, Inc., 8 N.Y.3d 994 (2007). The famous marks doctrine was also mentioned in dicta in First Niagara Ins. Brokers Inc. v. First Niagara Fin. Group Inc., 77 U.S.P.Q.2d (BNA) 1334 (2005), in which the Trademark Trial and Appeal Board dismissed a Canadian opposer’s claim based on prior use because it had not proved use of its trademarks “in commerce” in the United States. The Canadian opposer sold insurance policies and operated exclusively in Canada. Nevertheless, the company had some connection with the United States, selling policies issued through U.S. underwriting companies to U.S. citizens who owned Canadian property. It also provided insurance to Canadian drivers to operate motor vehicles legally in the United States. On appeal, the Federal Circuit reversed the board’s decision, and held that the plain language of � 2 of the Lanham Act merely requires the prior mark to have been “used in the United States,” which applies to intrastate use by domestic as well as foreign opposers. 476 F.3d 867 (Fed. Cir. 2007). Curiously, therefore, under First Niagara, a party may have standing to oppose a registration, based on “use” in the United States, even though it may not be in a position to claim trademark rights in the United States absent “use in commerce.” The Supreme Court denied certiorari in Punchgini on Oct. 1, leaving in place the circuit conflict on the famous marks doctrine and the attending ambiguity regarding trademark territoriality under the Lanham Act. 76 U.S.L.W. 3009, 76 U.S.L.W. 3023 (U.S. Oct. 1, 2007) (No. 06-1722). As for Congress’ interest in addressing Punchgini with a statutory change, that likely depends on the level of interest at the International Trademark Association. If Punchgini is upheld, the United States will be out of step with many other jurisdictions, such as France, Spain and Italy, that, based on Article 6bis of the Paris Convention, incorporate the famous marks doctrine explicitly into their trademark statutes. Finally, it will be interesting to see how the federalism issue plays out in the New York Court of Appeals. It would seem curious for state courts under common law unfair competition doctrines to determine whether the famous marks doctrine will be enforced in the United States, state by state. Bruce J. Goldner and Kenneth A. Plevan are partners in the intellectual property practice of New York-based Skadden, Arps, Slate, Meagher & Flom. Allison Levine, an associate at the firm, and Rebecca Silberberg, a student at Harvard Law School, provided assistance in the preparation of this article.

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