US Ruling Creates Uncertainty For Famous Foreign Trademarks

By Steve Seidenberg for Intellectual Property Watch
In a ruling that surprised many trademark experts in the United States, one of the country’s most respected appellate courts recently cut back on the protection given to famous foreign trademarks. If such marks are well known in the US but are not registered or used in the country, they are unprotected by federal law, according to the Second Circuit Court of Appeals.

Such famous foreign marks are protected by two international treaties: the Paris Convention for the Protection of Industrial Property (Paris Convention) and the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Both treaties have been signed by the United States, but the Second Circuit held in ITC Limited v. Punchgini, Inc. that the treaties’ protections for famous foreign marks have not been incorporated into US federal law.

The ruling contradicts prior court and administrative rulings in the US, creating uncertainty about what protections the country provides to famous foreign marks. The ruling also puts the US government in an awkward position; while the US is pressuring other nations to fully implement TRIPS (in order to protect US companies’ IP), a US court has determined that the United States is not protecting the rights of foreign trademark owners, in apparent violation of TRIPS.

“The court says the US isn’t living up to its obligations under international treaties,” said Ethan Horwitz, an attorney in the New York office of Goodwin Procter who represents the foreign trademark owner in the ITC case. “If we don’t live up to our obligations under TRIPS, other countries won’t live up to their obligations.”

At the heart of the Second Circuit case is the Bukhara Restaurant in New Delhi. Owned and operated by ITC Limited, the 30-year old establishment has been repeatedly rated by Restaurant Magazine (UK) as one of the 50 best restaurants in the world and the best restaurant in Asia. It has many fans throughout the globe. When Russian President Vladimir Putin visited India’s capital, he reportedly dined at Bukhara three times a day.

But in 1999, ITC received word that five people in the United States, including three ex-employees, had opened up a Bukhara Grill in New York City.

Their decision to use the “Bukhara” name was no accident. As one of the Grill’s owners said in a deposition, there was “no restaurant Bukhara in New York, and we just thought we will take the name.”

That was not all that the Grill’s owners took. Their restaurant also copied the New Delhi’s restaurant’s logos, decor, staff uniforms, wood-slab menus, red-checkered customer bibs, and much of the menu.

ITC eventually sued the Grill’s owners. The suit alleged, among other things, that the Grill’s owners had engaged in unfair competition in violation of federal trademark law.

The trial court threw out the suit, ruling that ITC had no legal rights under US law. On appeal, ITC argued that its right to the “Bukhara” name was protected by the famous marks doctrine. This doctrine was first promulgated in 1925, when Article 6bis was added to the Paris Convention. It requires each member state to “prohibit the use” of a trademark within its borders if: (a) such use is “liable to create confusion” with a trademark from another member state, and (b) the foreign trademark is “well known” in the member state where protection is sought.

In 1994, TRIPS Article 16(2) extended the doctrine to also cover service marks, such as the name of ITC’s prestigious restaurant.

Does Famous Marks Doctrine Apply in US?

The Second Circuit ruled that the treaties’ famous marks doctrine can become a part of US federal law only if the US Congress enacts a law adopting the doctrine. And no US statute explicitly adopted this doctrine.

ITC argued that the federal unfair competition statute implicitly recognised the doctrine. But the Second Circuit was not convinced. The court was unwilling to accept a mere implicit recognition, because the doctrine flew in the face of a bedrock principle of US trademark law: territoriality.

The court noted that “a trademark has a separate legal existence under each country’s laws” and that this “principle of territoriality is basic to American trademark law.” The famous marks doctrine, by contrast, provides extraterritorial rights to certain marks. “Before we construe [federal law] to include such a significant departure from the principle of territoriality,” the court stated, it must see “a clear congressional intent to incorporate a famous marks exception into federal unfair competition law.”

The court found no such clear intent, so it affirmed the district court’s decision to dismiss ITC’s federal law claims.

The ruling puts the Second Circuit at odds with the Ninth Circuit Court of Appeals, several federal district courts, and the US Patent and Trademark Office’s administrative Trademark Trial and Appeal Board, all of which have found that the famous marks doctrine is part of US federal law. Because of this conflict, it is now uncertain what protections the US provides to well-known foreign marks.

The ITC ruling may thus foster problems in the US for owners of well-known foreign marks. “It creates confusion in the marketplace and an incentive to extort money from foreign trademark owners,” says John Dabney, an IP litigator in the Washington, DC office of McDermott Will & Emery. “It creates an incentive for unscrupulous companies to find well-known foreign trademarks, use them in the US [thus obtaining US trademark rights], and try to shake down the marks’ owners when they try to expand into the US market.”

Perceived US Double Standard on TRIPS

The ruling also undermines the US government’s efforts to convince other governments to comply with TRIPS. “The US has been pushing other countries to adopt legislation that effectuates TRIPS,” says Horwitz. “Now the US will lose the moral high ground on this.”

“It is a great embarrassment for the US,” said J. Thomas McCarthy, a prominent trademark expert who teaches at the University of San Francisco School of Law. He adds, “It is a problem that needs to be solved very quickly, or countries like China will say when pressed [about their failure to comply with TRIPS], ‘You don’t even recognise the famous marks doctrine, what about that?'”

Steve Seidenberg may be reached at info@ip-watch.ch.