In a recent decision, the United States Court of Appeals for the Second Circuit – the federal appeals court that sits in New York – held that the fame of a restaurant operated in New Delhi and several Asian cities was not a basis on which the name of the restaurant could be protected from misappropriation in the United States under federal trademark and unfair competition law, notwithstanding that the name might be known to significant numbers of restaurant-goers in the United States. ITC Limited v. Punchgini, Inc., No. 05-0933-cv (2d Cir. Mar. 28, 2007). The ITC decision underscores the hurdles that multinational companies face in protecting foreign trademarks in this country if the marks are not otherwise used here, and calls for reevaluation of strategies for preserving opportunities to enter the United States market under a trademark first adopted and used outside the United States.

ITC represents a classic corporate nightmare. The ITC plaintiff owned and operated a five-star hotel in New Delhi, India for 30 years, and its “Bukhara” restaurant has acquired an international reputation. The hotel owner had also opened or franchised Bukhara restaurants in a number of major international business cities, some of which still exist; but the last of its U.S. restaurants closed a decade ago. Years later, several of its former employees opened a “Bukhara” restaurant in New York, adopting the restaurant’s trade tress as well as its name – similarities that the court of appeals acknowledged to be “suggestive of deliberate copying.”

Notwithstanding that the plaintiff’s mark was registered in and had been used continuously in other countries, and may even “have achieved a certain measure of fame within this county,” the Second Circuit held that the mark was not eligible for protection under United States federal trademark law and could be freely appropriated by anyone else in the U.S. market. Trademark rights are territorial, meaning no protection ordinarily attaches in the United States based on registration or use abroad. Furthermore, advertising alone does not constitute “use,” so marketing in the U.S. for products or services sold only overseas is generally insufficient to accord a business any trademark protection in the United States. Because, in the court’s view, actual “use” of the mark in United States commerce – and not just fame in the United States – is prerequisite to trademark protection, the hotel owner in ITC was held to be entitled to no protection under U.S. federal law.

In reaching its conclusion, the court specifically rejected, as statutorily unsupported, several decisions of the Trademark Trial and Appeal Board and one decision from the United States Court of Appeals for the Ninth Circuit that had previously extended federal protection, under unfair competition law (section 43(a) of the Lanham Act), to “famous” non-United States marks that were known in the United States. The court also reiterated its holding from 2005 that the Paris Convention for the Protection of Industrial Property does not provide any substantive U.S. protection not otherwise afforded by the Lanham Act, and thus affords no added protection against the misappropriation of a famous foreign mark.

Although the ITC decision is an extension of previous rulings rather than a watershed event, it leaves multinational companies meaningfully at risk if they do not use the same brand names in the United States as they do overseas. It also suggests that the goodwill built up in a foreign brand name at great effort and cost may be at risk of being lawfully cannibalized by unscrupulous parties here unless the trademark owner takes steps to register or use its mark in the United States. Possible avenues of protection under federal law include the following: 

  • In California and the Pacific Northwest, the Ninth Circuit’s contrary holding in Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088 (9th Cir.2004) – which upheld unfair competition claims by the owner of a famous foreign mark, but which the Second Circuit concluded was wrongly decided – is still the law. So if a company has the option of bringing an enforcement proceeding in that part of the country, it may get a more receptive hearing than it currently will in New York. 
  • There is some authority – acknowledged but sidestepped in the Second Circuit’s decision – that the combination of advertising in the U.S. plus actually doing business overseas with U.S. customers may be enough to trigger federal protection, even though either element alone would not be sufficient. See International Bancorp, LLC v. Societe des Bains de Mer et du Cercle des Etrangers a Monaco, 329 F.3d 359, 370, 373 (4th Cir. 2003). 
  • Under section 44(e) of the Lanham Act, a business with a registered foreign mark can obtain issuance of a corresponding United States registration based on the filing of a statement of its bona fide intention to use the mark in the U.S. Seeking protection under Section 44(e) would seem a cost effective way of preserving a line of commerce in the United States under an internationally famous trademark that is not yet in use in the United States.

In addition, there may be additional protection against unfair competition available under state law. New York state case law has recognized a right of action for deceptive use of internationally famous trademarks. In ITC case itself, the Second Circuit did not dismiss the plaintiff’s state law claims but asked New York’s highest court to clarify whether such common law protection is available. Clients whose businesses may be impacted by the ITC ruling may have an interest in communicating their views to the New York Court of Appeals in an amicus curiae brief. Should the New York Court of Appeals reaffirm that deceptive use of internationally famous marks may constitute unfair competition under New York state law, the practical impact of the ITC case may be limited.