Fed. Treasury Enter. v. SPI Spirits Ltd., No. 11-4109-cv (2d Cir. Aug. 5, 2013) [click for opinion]

A state-chartered entity of Russia, the Federal Treasury Enterprise Sojuzplodoimport, and its exclusive licensee, OAO “Moscow Distillery Cristall," sued SPI Spirits Limited and related entities for infringing United States-registered trademarks related to Stolichnaya vodka (the "Marks") in violation of the Lanham Act, 15 U.S.C. § 1114(b).

The Soviet Union had registered the Marks in the United States in the late 1960s.  When the Soviet Union collapsed in 1990, a privatization of the Soviet enterprise holding the Marks was attempted.  But in 2000 a Russian court found the privatization to be ineffective.  Russia later regained rights in the Marks.  In two 2002 decrees, Russia vested Sojuzplodoimport with rights to the Marks.  A 2005 decree gave Sojuzplodoimport the right to sue in foreign courts.

The question before the Second Circuit was whether Plaintiffs had standing to sue under § 1114(b) of the Lanham Act.  To have standing, a plaintiff must qualify as a "registrant."  A "registrant" includes "legal representatives, predecessors, successors and assigns."  Plaintiffs argued that they qualify as both assigns and legal representatives of Russia.

The court began its analysis by rejecting Plaintiffs' choice-of-law argument.  Plaintiffs argued that Russian trademark law should apply.  The court explained that while Russian law is relevant in determining the relationship between Sojuzplodoimport and Russia with respect to the Marks, United States law governs the determination of whether that relationship vested sufficient rights in Sojuzplodoimport to confer standing as a registrant under the Lanham Act.

The court then considered whether Sojuzplodoimport was Russia's "assign." Sojuzplodoimport argued that its exclusive rights to the Marks were tantamount to those conveyed in a standard assignment.  The court disagreed and explained that inherent in the concept of assignment under the Lanham Act are the requirements of a duly executed instrument in writing and the transfer of an ownership interest.  The court found the decrees granting Sojuzplodoimport rights in the Marks too indefinite; the decrees granted Sojuzplodoimport the right to "use and dispose" the Marks but did not mention any assignment or a transfer of ownership.  This, the court held, was insufficient to satisfy the requirement.  The court explained that policy concerns necessitated strict adherence to formalistic writing requirements.

The court further explained that for the purposes of the Lanham Act assignment means a transfer of ownership.  The Russian Federation retained not only legal ownership but a significant operational interest in the Marks.  Particularly detrimental to Sojuzplodoimport's argument were: it had no right to assign the Marks; it had no general right to exclude others from using the Marks, there was no constraint on Russia's use of the Marks; and Russia was free to withdraw Sojuzplodoimport's rights in the Marks at any time.

The court then considered Sojuzplodoimport's alternative position that it was Russia's "legal representative."  Sojuzplodoimport argued that the district court had adopted too narrow a reading of the term by requiring the owner of the trademark to be legally incapable of representing itself.  The Second Circuit sided with the district court and reiterated that to qualify as a "legal representative" under the Act a plaintiff must show both legal authority to represent the owner of the trademarks at issue and that the owner is legally incapable of representing itself.  The court reasoned that the restrictive interpretation was in line with the legislative intent to limit standing under § 1114(b) of the Lanham Act to a single registrant so as to avoid duplicative litigation.  Sojuzplodoimport did not allege that Russia was legally incapable of representing itself.

Sojuzplodoimport argued that the court's narrow interpretation offended international comity by disregarding the decision of a foreign nation to place trademarks and associated commercial operations under the control of a state enterprise.  While recognizing the importance of avoiding conflict with foreign law, the court noted that considerations of comity are not absolute obligations.  The court explained that in this case concern for comity could not overcome the United States' interest in domestic enforcement of trademark laws.

Finally, Sojuzplodoimport argued that regardless of the court's determinations on the "registrant" issues the suit should be allowed to go forward because Russia had ratified the litigation under Federal Rule of Civil Procedure 17(a).  Sojuzplodoimport pointed to a May 2011 letter to the district court from the Deputy Head of the Federal Service for the Regulation of the Alcohol Market of Russia which gave Sojuzplodoimport authority to bring the lawsuit and expressed Russia's intention to be bound by it. Sojuzplodoimport further argued that this letter should dispose of any policy concerns regarding duplicative litigation.  The court explained that Rule 17 could not be used as an end run around the standing requirements of the Act because the Rules Enabling Act, 28 U.S.C § 2072(b), makes clear that none of the Federal Rules of Civil Procedure can be used to modify any substantive right.  To extend to Sojuzplodoimport a right otherwise unavailable to non-registrants by way of Rule 17 ratification would expand substantive rights granted only to the narrow class of registrants as defined by the Lanham Act. 

Cristall, the exclusive licensee, was also found to lack standing since its rights were merely derivative of Sojuzplodoimport's.