Famous Marks Doctrine: A Defeat in New York State

Last year, we reported on the Second Circuit's limitation of famous foreign trademark protection without domestic use. In March 2007, in ITC Limited v. Punchgini, et al., the Second Circuit held there was no federal 'famous marks' exception and upheld the district court's findings that despite foreign use of plaintiff's mark, ITC had abandoned its trademark domestically, and therefore could not seek protection under federal law for trademark infringement, unfair competition, and false advertising. The circuit court then certified questions to the New York Court of Appeals as to whether New York common law protects a trademark that despite being used only overseas might nonetheless be sufficiently famous in New York State to warrant barring others from using the name. In December 2007, the New York Court of Appeals declined to recognize the 'famous marks' doctrine, but it did confirm the possibility of protection under existing common law theories of misappropriation in certain limited circumstances.

The ITC Case

ITC owns an Indian restaurant in New Delhi, India called 'Bukhara' and 'Bukhara' restaurants elsewhere in Asia. ITC had operated restaurants in Manhattan and Chicago from 1986 through 1997, and held a registered trademark for restaurant services. Two years after ITC ceased its domestic restaurant operations, in 1999, the defendants, who included former employees of ITC's New York restaurant, opened Indian restaurants in New York City under the name 'Bukhara Grill.' They adopted the Bukhara name and allegedly incorporated logos and decor that were similar to ITC's original restaurant. ITC filed its lawsuit in February 2003, after defendants' attorneys rejected ITC's cease and desist letters, asserting abandonment.

As an alternative theory of recovery, ITC sought to invoke a famous marks doctrine to bolster its unfair competition claim under '43(a)(1)(A) of the Lanham Act. The Second Circuit soundly rejected this argument. The court explained: 'absent some use of its mark in the United States, a foreign mark holder generally may not assert priority rights under federal law, even if a United States competitor has knowingly appropriated that mark for his own use. ' ITC urges us to recognize an exception to the territoriality principle for those foreign marks that, even if not used in the United States by their owners, have achieved a certain measure of fame within this country.'

The Second Circuit gave a historical overview of the famous marks doctrine. It noted its origins in the 1925 addition of Article 6bis to the Paris Convention for the Protection of Industrial Property. In addition, the Second Circuit cited two cases in New York that discuss the famous marks doctrine at common law. In Maison Prunier v. Prunier's Rest. & Caf', 159 Misc. 551, 557-58, 288 N.Y.S. 529, 535-36 (N.Y. Sup. Ct. 1936), a French corporation sought relief for the unauthorized use of its name and mark as unfair competition under New York common law. The court upheld the foreign corporation's claim, first citing the right to sue under the Paris Convention and then noting that the French plaintiff's mark was famous and the defendants' actions demonstrated bad faith. In Vaudable v. Montmartre, Inc., 20 Misc. 2d 757, 193 N.Y.S.2d 332 (N.Y. Sup. Ct. 1959), the trial court granted injunctive relief to French restaurant 'Maxim's' against a New York City restaurant, noting the French restaurant's priority based on uninterrupted use of the mark abroad and the fame of the mark in New York City.

Rejecting the famous marks doctrine under federal law, the Second Circuit examined ITC's claims for unfair competition under New York state common law. It stated that ITC's 'common law assertion of a property right or a commercial advantage in these designations based on their foreign use depends on whether New York recognizes the famous marks doctrine in the circumstances here at issue.' It then certified two questions to the New York Court of Appeals to clarify New York common law: Does New York common law protect a famous foreign trademark if the only use has been in a foreign country? If so, how famous must the foreign mark be to sustain a claim for unfair competition under New York common law?

The New York Court of Appeals Decision

In response to the first certified question, the New York Court of Appeals concluded: 'New York recognizes common law unfair competition claims, but not the 'famous' or 'well-known' marks doctrine.' Acknowledging a long-standing recognition of palming off and misappropriation as common law theories of unfair competition, the court noted that the Prunier and Vaudable cases were 'decided wholly on misappropriation theories. ' [These cases] fit logically and squarely within our time-honored misappropriation theory, which prohibits a defendant from using a plaintiff's property right or commercial advantage ' ' the goodwill attached to a famous name ' to compete unfairly against the plaintiff in New York.' The court then explained that the Prunier and Vaudable holdings afford protection for famous or well-known marks (those associated with 'cachet goods/services with highly mobile clienteles') under existing unfair competition law and expressly stated that it was 'not thereby recognizing the famous or well-known marks doctrine, or any other new theory of liability under the New York law of unfair competition.'

The second certified question was 'how famous must a foreign mark or trade dress be to permit its owner to sue for unfair competition?' The court answered 'at a minimum, consumers of the good or service provided under a certain mark by a defendant in New York must primarily associate the mark with the foreign plaintiff.' That inquiry requires a case-by-case analysis based on the facts. The court refused to provide a litmus test for that factual analysis, but it did include some factors to consider: 1) defendant's intent to associate its goods/services with those of the foreign plaintiff, as proved by advertising or public statements; 2) direct evidence, such as consumer surveys, indicating that consumers believe defendants' goods/services to be those of plaintiffs; 3) evidence of actual overlapping customers between a New York defendant and a foreign plaintiff.

Applying the answers to the certified questions to the case at hand, the New York Court of Appeals stated that ITC would have to show: 1) that the defendants appropriated or 'deliberately copied' ITC's trademark for their New York restaurants, and 2) that consumers in New York associated defendants' 'Bukhara' trademark or dress with the restaurants owned and operated by ITC abroad.

Conclusion

This case represents a defeat for the 'famous marks' doctrine. The Second Circuit had refused to recognize the doctrine without Congressional mandate. The New York Court of Appeals similarly refused, instead resting on principles of misappropriation law. On the other hand, the Court of Appeals' answers to the certified questions establish that a famous foreign mark can potentially be protected under the common law theory of misappropriation, without a showing of use within New York if there is a high level of public recognition.

Kyle-Beth Hilfer specializes in advertising, marketing, intellectual property, and licensing law. She advises clients regarding advertising, promotions, trademarks, copyrights, licensing, new media, and interactive and multimedia technology issues. Hilfer also is an arbitrator for the Commercial and Intellectual Property panels of the American Arbitration Association. ' Kyle-Beth Hilfer, P.C. 2008

Last year, we reported on the Second Circuit's limitation of famous foreign trademark protection without domestic use. In March 2007, in ITC Limited v. Punchgini, et al., the Second Circuit held there was no federal 'famous marks' exception and upheld the district court's findings that despite foreign use of plaintiff's mark, ITC had abandoned its trademark domestically, and therefore could not seek protection under federal law for trademark infringement, unfair competition, and false advertising. The circuit court then certified questions to the New York Court of Appeals as to whether New York common law protects a trademark that despite being used only overseas might nonetheless be sufficiently famous in New York State to warrant barring others from using the name. In December 2007, the New York Court of Appeals declined to recognize the 'famous marks' doctrine, but it did confirm the possibility of protection under existing common law theories of misappropriation in certain limited circumstances.

The ITC Case

ITC owns an Indian restaurant in New Delhi, India called 'Bukhara' and 'Bukhara' restaurants elsewhere in Asia. ITC had operated restaurants in Manhattan and Chicago from 1986 through 1997, and held a registered trademark for restaurant services. Two years after ITC ceased its domestic restaurant operations, in 1999, the defendants, who included former employees of ITC's New York restaurant, opened Indian restaurants in New York City under the name 'Bukhara Grill.' They adopted the Bukhara name and allegedly incorporated logos and decor that were similar to ITC's original restaurant. ITC filed its lawsuit in February 2003, after defendants' attorneys rejected ITC's cease and desist letters, asserting abandonment.

As an alternative theory of recovery, ITC sought to invoke a famous marks doctrine to bolster its unfair competition claim under '43(a)(1)(A) of the Lanham Act. The Second Circuit soundly rejected this argument. The court explained: 'absent some use of its mark in the United States, a foreign mark holder generally may not assert priority rights under federal law, even if a United States competitor has knowingly appropriated that mark for his own use. ' ITC urges us to recognize an exception to the territoriality principle for those foreign marks that, even if not used in the United States by their owners, have achieved a certain measure of fame within this country.'

The Second Circuit gave a historical overview of the famous marks doctrine. It noted its origins in the 1925 addition of Article 6bis to the Paris Convention for the Protection of Industrial Property. In addition, the Second Circuit cited two cases in New York that discuss the famous marks doctrine at common law. In Maison Prunier v. Prunier's Rest. & Caf', 159 Misc. 551, 557-58, 288 N.Y.S. 529, 535-36 (N.Y. Sup. Ct. 1936), a French corporation sought relief for the unauthorized use of its name and mark as unfair competition under New York common law. The court upheld the foreign corporation's claim, first citing the right to sue under the Paris Convention and then noting that the French plaintiff's mark was famous and the defendants' actions demonstrated bad faith. In Vaudable v. Montmartre, Inc., 20 Misc. 2d 757, 193 N.Y.S.2d 332 (N.Y. Sup. Ct. 1959), the trial court granted injunctive relief to French restaurant 'Maxim's' against a New York City restaurant, noting the French restaurant's priority based on uninterrupted use of the mark abroad and the fame of the mark in New York City.

Rejecting the famous marks doctrine under federal law, the Second Circuit examined ITC's claims for unfair competition under New York state common law. It stated that ITC's 'common law assertion of a property right or a commercial advantage in these designations based on their foreign use depends on whether New York recognizes the famous marks doctrine in the circumstances here at issue.' It then certified two questions to the New York Court of Appeals to clarify New York common law: Does New York common law protect a famous foreign trademark if the only use has been in a foreign country? If so, how famous must the foreign mark be to sustain a claim for unfair competition under New York common law?

The New York Court of Appeals Decision

In response to the first certified question, the New York Court of Appeals concluded: 'New York recognizes common law unfair competition claims, but not the 'famous' or 'well-known' marks doctrine.' Acknowledging a long-standing recognition of palming off and misappropriation as common law theories of unfair competition, the court noted that the Prunier and Vaudable cases were 'decided wholly on misappropriation theories. ' [These cases] fit logically and squarely within our time-honored misappropriation theory, which prohibits a defendant from using a plaintiff's property right or commercial advantage ' ' the goodwill attached to a famous name ' to compete unfairly against the plaintiff in New York.' The court then explained that the Prunier and Vaudable holdings afford protection for famous or well-known marks (those associated with 'cachet goods/services with highly mobile clienteles') under existing unfair competition law and expressly stated that it was 'not thereby recognizing the famous or well-known marks doctrine, or any other new theory of liability under the New York law of unfair competition.'

The second certified question was 'how famous must a foreign mark or trade dress be to permit its owner to sue for unfair competition?' The court answered 'at a minimum, consumers of the good or service provided under a certain mark by a defendant in New York must primarily associate the mark with the foreign plaintiff.' That inquiry requires a case-by-case analysis based on the facts. The court refused to provide a litmus test for that factual analysis, but it did include some factors to consider: 1) defendant's intent to associate its goods/services with those of the foreign plaintiff, as proved by advertising or public statements; 2) direct evidence, such as consumer surveys, indicating that consumers believe defendants' goods/services to be those of plaintiffs; 3) evidence of actual overlapping customers between a New York defendant and a foreign plaintiff.

Applying the answers to the certified questions to the case at hand, the New York Court of Appeals stated that ITC would have to show: 1) that the defendants appropriated or 'deliberately copied' ITC's trademark for their New York restaurants, and 2) that consumers in New York associated defendants' 'Bukhara' trademark or dress with the restaurants owned and operated by ITC abroad.

Conclusion

This case represents a defeat for the 'famous marks' doctrine. The Second Circuit had refused to recognize the doctrine without Congressional mandate. The New York Court of Appeals similarly refused, instead resting on principles of misappropriation law. On the other hand, the Court of Appeals' answers to the certified questions establish that a famous foreign mark can potentially be protected under the common law theory of misappropriation, without a showing of use within New York if there is a high level of public recognition.

Kyle-Beth Hilfer specializes in advertising, marketing, intellectual property, and licensing law. She advises clients regarding advertising, promotions, trademarks, copyrights, licensing, new media, and interactive and multimedia technology issues. Hilfer also is an arbitrator for the Commercial and Intellectual Property panels of the American Arbitration Association. ' Kyle-Beth Hilfer, P.C. 2008