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Miami-based generic cigarette maker Trademark Holdings Corp. faced a tough choice recently: Cease production of its new and profitable Cowboys brand cigarettes — which are packaged with the image of a cowboy astride a horse — or shoot it out with Philip Morris U.S.A. in an intellectual property lawsuit. In a July 17 letter, Philip Morris warned Trademark that the marketing or sale of the Cowboys brand, which Trademark launched in March, violates its trademark and trade dress rights — the company’s proprietary interest in the product’s overall image. The cigarette maker claimed that the cowboy logo infringes on the tobacco giant’s famous Marlboro man trademark. The letter demanded that Miami-based Sun Tobacco, which imports the cigarettes from South America for Trademark, immediately stop sales and distribution of Cowboys and destroy all cigarettes in its inventory. But, true to its macho icon, Trademark chose to fight. It continued supplying distributors nationally with Cowboys cigarettes. And on Aug. 16, it filed a lawsuit in U.S. District Court in Miami seeking a declaratory judgment that its use of the Cowboys name and caballero image does not infringe on Philip Morris’ intellectual property. “It appears to be that you cannot put any image of the American West on a pack of cigarettes without infringing on their trade dress rights,” scoffed Mark Stein, a partner at Lott & Friedland in Coral Gables, Fla., who represents Trademark and Vibo Corp., the company’s marketing and distribution arm. “Our clients’ position is that trade dress does not extend nearly that far.” Also representing Trademark and Vibo is J. Ronald Denman, a partner at Marlow, Connell, Valerius, Abrams, Adler & Newman in Miami. In response, Richmond, Va.-based Philip Morris U.S.A. filed counterclaims and a third-party complaint in the same court, alleging that Trademark’s Cowboys brand, along with its Bronco and Silver lines, infringed on the company’s intellectual property rights. The packaging for the Bronco and Silver brands features images of horses but no cowboys. Philip Morris contends that the packaging on Cowboys brand cigarettes appropriates the Marlboro cowboy, that the brand name Bronco is reminiscent of Marlboro Country, and that the packaging of Silver cigarettes employs a similar image of a horse. The company also alleges that the design and color schemes of the Trademark brands are similar to Marlboro and violate its trademarks and trade dress rights. “We believe certain trademarks are infringing upon ours,” said Philip Morris spokesman Tom Ryan in New York. “And we are requesting that those two parties — Vibo and Trademark Corp. — cease and desist the use of these trademarks and trade dress.” Philip Morris is seeking unspecified compensatory damages as well. The legal battle in Miami represents the latest showdown between generic and brand-name cigarette makers. Philip Morris’ flagship Marlboro brand and other brand-name smokes have been losing market share to Cowboys and other less expensive rivals, which typically retail for $1.50 to $2 less per pack, or $12 to $15 less per carton, than brand-name smokes. Attorneys for Philip Morris declined to comment. They are Samuel Danon, a partner at Hunton & Williams in Miami, and Anthony Fletcher, a partner, and Stacy Grossman, an associate, at Fish & Richardson in New York. The attorneys for Philip Morris Management Corp. of New York, the company’s in-house legal and administrative arm, are Barry Krivisky, assistant general counsel, and Cecelia Dempsey, senior counsel-trademarks, in Rye Brook, N.Y. Earlier this month, Trademark and Vibo filed a response to Philip Morris’ counterclaims, denying all of the charges and asserting affirmative defenses. By mid-November, the lawyers for both sides will meet to give the court a proposal of when deadlines for the case should fall. Trademark disputes such as this one are common, said Scott Austin, a partner at Adorno & Yoss in Boca Raton, Fla., who directs the firm’s intellectual property and technology department but who is not involved in this case. “You’re talking about the Marlboro Man and whether there’s a likelihood of confusion among consumers of cigarettes,” he said. “Trademark is all about goodwill. The law of trademark is all about identifying the source of a product or service, and ensuring that someone else doesn’t pass off their goods for those of another.” LOW-PRICED BRANDS THRIVING Brand name cigarette makers like Philip Morris are struggling with the competition from the generic distributors, which enjoy cost advantages that allow them to price their products lower. Compared with the big tobacco companies, generic cigarette makers pour much less into production and promotion. They manufacture their cigarettes in Latin America rather than in the United States and focus their marketing efforts on widespread distribution rather than on advertising. That’s been the business strategy behind the Cowboys, Bronco and Silver brands, and it has reaped profits for Trademark Holdings, which primarily sells cigarettes made in Colombia. The company, which distributes about 120 million cigarettes in the United States annually, has captured 1.3 percent of the overall market share for generic and brand-name smokes, Denman said. It is owned by Vidal Suriel and Miguel Sanchez, two Miami businessmen. While other generic cigarette makers have come and gone, Trademark and Vibo have been successful in distributing four brands of cigarettes: GT One, believed to be the best-selling generic, and the Cowboys, Bronco and Silver brands. It has continued expanding its line of products: Bronco hit the market in 2000, Cowboys debuted in March and the Silver brand came out this summer. “As I understand it, my client is No. 1 in the generic market at this time,” said Denman, who declined to divulge any specific revenue or income figures for the privately held company. According to Philip Morris’ third-quarter earnings announcement Thursday, the company’s net revenues increased 1.2 percent, to $20 billion; net earnings rose 4.1 percent to $2.7 billion. Diluted earnings per share rose 8.6 percent, to $1.26. “Philip Morris Cos. Inc. achieved good results during the third quarter, especially in light of the weakness in the world economy,” Louis C. Camilleri, chairman and chief executive officer, said in a written statement. “Encouragingly, our domestic tobacco business witnessed sequential share improvement from July through September, driven by Marlboro.” CLAIMING THE AMERICAN WEST? In the court filings, Trademark and Vibo contend that neither company is using trade dress or trademarks that infringe on any trade dress or trademark rights owned by Philip Morris. And Trademark stands by its ownership of the trademark registration “vaquero” — the Spanish word for cowboy — as well as the trademark application for “a logo design of a horse with rider.” Trademark said it has authorized Vibo, which markets and distributes its products, to use vaquero, the logo design of a horse with a rider and cowboys, to identify the cigarettes. Stein criticized Philip Morris’ trademark claim as impermissibly broad. The tobacco giant’s trademark claim includes “essentially the entire American West,” he said. But in its counterclaims, Philip Morris chronicled the long history of its cigarettes and its use of western images in the company’s packaging and marketing to establish its exclusive right to the material. The company seized on the macho cowboy image only in the 1950s, when it sought to reposition Marlboros as a smoke for men rather than women. The company has manufactured and sold Marlboro cigarettes, among other brands, since 1883. For many years, Marlboro was a filter-tipped cigarette intended mainly for women. But in 1955, it was repackaged and marketed as a full-flavor, king-size filter cigarette in a newly designed flip-top box. The initial advertisement for the relaunch portrayed a cowboy. “For several years, the cowboy remained one of several images of Marlboro cigarettes,” according to court papers. “In 1962, the cowboy appeared in scenes depicting recognizable American landmarks, with the (then) newly minted slogan ‘Marlboro Country.’” These ads are attached as exhibits to Philip Morris’ court filings. “In 1963, the Marlboro cowboy moved to the American West, and by 1964, he was appearing frequently on horseback,” Philip Morris’ lawyers wrote. “Since the early 1960s, Philip Morris, in advertising its Marlboro cigarettes, has almost exclusively used varying but generally similar images of the American West, the vast majority of which comprised at least two of the following elements: a cowboy; a cowboy on horseback; a horse or horses; cattle; and American Western scenery (e.g.,: landscapes, corrals, and barns).” BRAND CONFUSION? While Philip Morris claims that the packaging of the Cowboys and Bronco brands is similar to Marlboro’s, an examination of the packages shows some obvious differences that would make it difficult for a careful observer to confuse the products. Unlike Marlboro ads, the Marlboro cigarette package does not feature any image of cowboys; the package does feature a small “cartouche,” or heraldic emblem, of two standing horses near the top. The Cowboys package displays a prominent image of a cowboy, while the Bronco package has a central image of a horse. Like the Marlboro package, the Bronco box also bears a small cartouche near the top of two standing horses. Scott Austin said federal case law sets out a 13-part test for determining whether the use of a particular logo or image that’s similar to another company’s trademark would cause brand confusion among purchasers. Among the factors, he said, is whether the product is an impulse buy rather than a unique product that consumers research carefully. Cigarettes likely would qualify as an impulse buy, which could increase the likelihood of brand confusion, Austin said. Since Trademark Holdings isn’t using the exact Marlboro Man image, the issue then becomes, “How similar are these designs?” he said. “Would the average consumer mistake one design for the other?”

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