In addressing the issue of whether the famous marks exception to the territoriality principle of trademark protection exists under federal law, Judge Raggi  – writing for the U.S. Court of Appeals for the Second Circuit – affirmed the grant of summary judgment in favor of defendants, holding that the plaintiff, the owner of an arguably famous mark overseas, could not pursue a trademark infringement claim after it abandoned its trademark in the United States.  ITC Ltd. v. Punchgini, Inc., Case No. 05-0933 (2nd Cir., Mar. 28, 2007).

ITC is an Indian corporation that owns and operates, via its subsidiaries, Indian restaurants named Bukhara.  At one time, ITC opened two U.S. Bukhara restaurants:  one in New York and one in Chicago. Soon after opening the New York location, ITC filed a federal trademark application for Bukhara.  Several years later, ITC closed the New York restaurant and some time later it closed its Chicago restaurant.  Obviously, upon the closing of the Chicago restaurant, ITC ceased using the Bukhara trademark.

Two years later, Punchgini opened a restaurant in New York named “Bukhara Grill“.  After that, ITC filed a lawsuit in federal court alleging trademark infringement, federal unfair competition, state unfair competition and false advertising.  Punchgini countered that ITC abandoned its rights in the Bukhara trademark by failure to use the mark in the United States.

The district court agreed with the defendant that once a trademark owner ceases use of the mark without the foreseeable intent to resume use, the mark is deemed abandoned and the mark returns to the public domain. ITC appealed that ruling.

ITC also asserted a claim of unfair competition under § 43 (a) (1) (A) of the Lanham Act. To succeed on a claim of unfair competition, a plaintiff must show three things: that plaintiff had priority rights in the mark at the time of the defendant’s challenged actions, that the mark is distinctive as to the source of goods and/or services and that there is a likelihood of confusion between plaintiff’s goods and/or services and that of the defendant. As ITC abandoned the “Bukhara” mark in the United States, in order to prove that it had superior rights in the mark at the time of defendants’ allegedly infringing use, ITC asserted that its “Bukhara” mark had acquired famous status outside of the United States and, as a result, the mark was renowned in the United States prior to defendants’ use.

The Territoriality Principle recognizes that “ownership of a mark in one country does not automatically confer upon the owner the exclusive right to use that mark in another country.”  However, there is a well-established U.S. common law exception for famous marks, wherein a mark is deemed famous abroad and is therefore afforded the protections of U.S. laws. However, as acknowledged by the Second Circuit, district courts have varied interpretations of the applicability of the famous mark exception in federal law.  Some district court decisions have held that rights obtained by the operation of the famous mark exception at common law could be asserted in a federal unfair competition action, while other decisions have held the famous marks doctrine has no place in federal law where Congress has enacted a statute, i.e., the Lanham Act.

Judge Raggi held that ITC could not bring a federal claim for unfair competition as Congress had not incorporated the substantive protections of the famous marks doctrine into the Lanham Act. However, the Court left open the applicability of the famous mark doctrine to a state claim of unfair competition.

Related links:

> Mondaq 
> PDF of opinion 
> Fried Frank Memo