Federal Treasury Enterprise Sojuzplodoimport et al v. Spirits International B.V. et al

Filing 42

OPINION AND ORDER re: 22 JOINT MOTION to Dismiss Claims Against Defendants. filed by Stoli Group (USA) LLP, Allied Domecq Spirits & Wines USA, Inc., SPI Group SA, William Grant & Sons, Inc., Allied Domecq International Holdin gs B.V., SPI Spirits Limited, Spirits International B.V., William Grant & Sons USA. For the reasons set forth above, Defendants' motion is GRANTED as to Claims 2, 3, 4, 5, 6, 8, and 9, which are dismissed with prejudice. Defendants' motion is DENIED as FTE's Section 32(1) claims - Claims 1, 7, 10, and 11. The Clerk of the Court is ordered to close this motion [Docket No. 22]. A conference is scheduled for September 3, 2014 at 4:30 p.m., ( Status Conference set for 9/3/2014 at 04:30 PM before Judge Shira A. Scheindlin.) (Signed by Judge Shira A. Scheindlin on 8/25/2014) (lmb)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

·---------------------------------------------------

)(

FEDERAL TREASURY ENTERPRISE
SOJUZPLODOIMPORT and OAO
"MOSCOW DISTILLERY CRISTALL,"
Plain tiffs,

OPINION AND ORDER

v.

14-cv-0712 (SAS)

SPIRITS INTERNATIONAL B.V., SPI
SPIRITS LIMITED, SPI GROUP SA,
YURI SHEFLER, ALEXEY OLIYNIK,
ALLIED DOMECQ INTERNATIONAL
HOLDING B.V., ALLIED DOMECQ
SPIRITS & WINE USA, INC.,
WILLIAM GRANT & SONS USA,
WILLIAM GRANT & SONS, INC., and
STOLi GROUP (USA) LLC,
Defendants.

·---------------------------------------------------

)(

SHIRA A. SCHEINDLIN, U.S.D.J.:
I.

INTRODUCTION
Federal Treasury Enterprise Sojuzplodoimport ("FTE") and OAO

"Moscow Distillery Cristall" ("Cristall") bring this action against Defendants
based on their alleged unlawful misappropriation and commercial exploitation of
the Stolichnaya trademarks (the "Marks") related to the sale of vodka and other

1

spirits in the United States.1 Defendants include Yuri Shefler and Alexey Oliynik,
their companies — Spirits International B.V., SPI Group SA, and SPI Spirits
Limited (collectively “SPI”); Allied Domecq International Holding B.V., and
Allied Domecq Spirits and Wine USA, Inc. (collectively “Allied Domecq”);
William Grant & Sons USA and William Grant & Sons, Inc. (collectively
“WGS”); and Stoli Group (USA) LLC (“Stoli Group”).2 FTE brings claims for
federal trademark infringement (Claim 1), federal unfair competition (Claim 2),
federal trademark dilution (Claim 3), state law trademark infringement (Claim 4),
state law unfair competition (Claim 5), state law trademark dilution (Claim 6),
contributory trademark infringement (Claim 7), contributory unfair competition
(Claim 8), contributory federal trademark dilution (Claim 9), federal rectification
of register (Claim 10), and federal cancellation of registration (Claim 11).3
In prior litigation among these parties, the Second Circuit ruled that
FTE lacked standing to assert similar claims under Section 32(1) of the Lanham
Act.4 FTE now argues that it has cured its standing defect and should be allowed

1

See Complaint (“Compl.”) ¶ 1.

2

See id. ¶¶ 13-17.

3

See id. ¶¶ 67-125.

4

See Federal Treasury Enter. Sojuzplodoimport v. SPI Spirits Ltd.
(“FTE IV”), 726 F.3d 62, 85 (2d Cir. 2013).
2

to re-assert its claims.5 Defendants move to dismiss under Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6). They argue that (1) FTE lacks standing under
Section 32(1) of the Lanham Act; (2) all of FTE’s claims are barred by res
judicata; and (3) FTE has failed to state a claim because all of its claims are
premised on a time-barred misappropriation claim.6 For the following reasons,
Defendants’ motion is GRANTED in part and DENIED in part.
II.

BACKGROUND
A.

Factual Background
FTE is owned by the Russian Federation and is organized and

operates under the laws of Russia.7 The Russian Federation formed FTE in
December 2001 to assume the functions and operations of VVO-SPI, the original
owner of the Marks.8 Cristall is a corporation organized under the laws of Russia.9
Cristall has the exclusive license to produce vodka and other products in the United

5

See Compl. ¶¶ 7, 66.

6

See Defendants’ Memorandum of Law in Support of Joint Motion to
Dismiss (“Def. Mem.”) at 11, 19, 21-23.
7

See Compl. ¶ 7.

8

See id.

9

See id.¶ 8.
3

States bearing the Marks.10 SPI purports to own United States Trademark
Registration Nos. 865, 462, 1,244,735, and 1,291,454 for the Marks. 11 Allied
Domecq, WGS, and Stoli Group are corporations licensed to do business in New
York by the Alcoholic Beverage Control State Liquor Authority. 12
1.

The Marks

In the late 1940’s, the Soviet Union began producing vodka under the
Stolichnaya trademark.13 In 1967, the Soviet Union created an enterprise named
V/O SPI to export Stolichnaya vodka.14 That same year, V/O SPI applied to
register the Stolichnaya trademark with the United States Patent and Trademark
Office (“USPTO”).15 In 1969, V/O SPI was granted Trademark Registration No.
865,462 for the Stolichnaya trademark.16 In 964 and then again in 1983, V/O SPI
applied for and was granted Trademark Registration No. 1,244,735 for the STOLI

10

See id.

11

See id. ¶ 12.

12

See id. ¶ 15.

13

See id. ¶ 23.

14

See id. ¶ 24.

15

See id. ¶ 25.

16

See id. ¶ 26.
4

Mark and Registration No. 1,291,454 for the Stolichnaya Mark. 17 In 1990, V/O
SPI was reorganized and renamed VVO-SPI.18
From 1969 until 2000, immense quantities of Stolichnaya vodka were
sold in the United States by authorized licensees and distributors of V/O SPI:
Monsieur Henri Wines, Ltd. and PepsiCo, Inc. (“PepsiCo”).19 V/O SPI, and
subsequently VVO-SPI, spent millions of dollars annually to promote and
advertise the Stolichnaya brand in the United States.20
2.

Events Leading to this Suit

In 1990, the Soviet Union began to collapse and “billion dollar
enterprises were hijacked by their managers and/or directors.”21 FTE alleges that
VVO-SPI’s General Director, Evgeniy Filippovich Sorochkin, hijacked VVO-SPI
to make it appear that VVO-SPI had been lawfully transformed into a private joint
stock company, VAO-SPI.22 VAO-SPI asserted in its Charter that it was the

17

See id.¶ 27.

18

See id. ¶ 28.

19

See id. ¶¶ 29-30.

20

See id. ¶ 31.

21

Id. ¶ 34.

22

See id. ¶ 35.
5

successor to VVO-SPI.23 However, FTE alleges that VAO-SPI was not the
successor to VVO-SPI, and that VVO-SPI was never privatized.24
Defendants, however, claim to have rights in the Stolichnaya Marks
based on a chain of purported transfers, starting with the purported assignment by
VAO-SPI to an entity that SPI controls.25 This purported assignment has been
declared null and void by the Russian courts.26
In general, FTE alleges that Defendants have unlawfully imported and
sold vodka bearing the Marks in the United States.27 The vodka sold by
Defendants is allegedly different in quality and character than the vodka sold by
VVO-SPI.28 However, FTE alleges that U.S. consumers may mistakenly believe
that the vodka sold by Defendants is the same quality as that sold by VVO-SPI
between 1969 and 2000.29
a.

Allied Domecq’s Alleged Infringement

23

See id.

24

See id. ¶¶ 35-36.

25

See id. ¶ 37.

26

See id.

27

See id. ¶ 60.

28

See id. ¶ 61.

29

See id.
6

In November 2000, VAO-SPI and Allied Domecq entered into an
agreement that allowed Allied Domecq to distribute and sell vodka bearing the
Marks.30 Furthermore, in January 2001, SPI induced PepsiCo to assign whatever
rights it purported to have in the Stolichnaya Marks to Allied Domecq.31 FTE
argues that because VAO-SPI was not a valid successor to VVO-SPI and because
PepsiCo was a licensee who did not own the Marks, neither PepsiCo nor VAO-SPI
had the right to transfer the Marks to Allied Domecq.32 From 2001 to 2008, Allied
Domecq advertised, imported, sold, and distributed substantial quantities of vodka
bearing the Marks throughout the United States.33
b.

WGS’s Alleged Infringement

In December 2008, SPI entered into an agreement with WGS to
distribute and sell vodka bearing the Marks in the United States.34 From December
2008 to the present, WGS imported, distributed, advertised, and sold substantial
quantities of vodka bearing the Marks throughout the United States. 35 This use of
30

See id. ¶ 38.

31

See id. ¶ 39.

32

See id. ¶ 40.

33

See id. ¶ 41.

34

See id. ¶ 48.

35

See id. ¶ 49.
7

the Marks was not authorized by VVO-SPI , FTE, or the Russian Federation.36
c.

Stoli Group’s Alleged Infringement

In January 2014, Stoli Group entered into an agreement with SPI to
distribute and sell vodka bearing the Marks in the United States.37 Stoli Group has
not been authorized by FTE, VVO-SPI, or the Russian Federation to use the
Marks.38
d.

SPI’s Alleged Infringement

SPI entered into agreements with Allied Domecq, WGS, and Stoli
Group to distribute and sell vodka bearing the Marks. 39 Furthermore, SPI supplied
the vodka sold by Allied Domecq, WGS, and Stoli Group.40 SPI has imported,
advertised, sold, and distributed vodka bearing the Marks throughout the United
States.41 FTE alleges that SPI’s use of the Marks was not authorized by FTE,
VVO-SPI, or the Russian Federation.42

36

See id. ¶ 50.

37

See id. ¶ 52.

38

See id ¶ 54.

39

See id. ¶ 56.

40

See id.

41

See id. ¶ 57.

42

See id. ¶ 59.
8

B.

Procedural Background
1.

FTE I

In 2004, FTE brought suit against SPI and Allied Domecq for
declaratory judgment; cancellation of marks; rectification of register; federal
claims of unfair competition, trademark infringement, trademark dilution, false
designation of origin, and copyright infringement; and common law claims of
fraud, unjust enrichment, and misappropriation.43 FTE then amended its complaint
twice and asserted fifteen claims against SPI and Allied Domecq.44 These new
claims included trademark infringement, trademark dilution, unfair competition,
false designation of origin, misappropriation, fraud, unjust enrichment, and
copyright infringement.45
The defendants moved to dismiss this Second Amended Complaint
(“SAC”) on the ground that the Marks were incontestable.46 In a March 31, 2006
Order, Judge George Daniels dismissed all but two of the claims, holding that FTE
had no valid grounds for challenging Allied Domecq’s incontestable rights in the

43

See Federal Treasury Enter. Sojuzplodoimport v. Spirits Int’l N.V.
(“FTE I”), 425 F. Supp. 2d 458, 464 (S.D.N.Y. 2006).
44

See id.

45

See Def. Mem. at 3.

46

See id. See also FTE I, 425 F. Supp. 2d at 461.
9

Marks.47 FTE then dismissed the remaining claims with prejudice against Allied
Domecq and declined to challenge the “district court’s dismissal of a similar claim
against SPI.”48
2.

FTE II

FTE appealed the decision, and the Second Circuit affirmed in part
and remanded in part.49 The court held that “FTE can challenge the validity of the
assignment of the incontestable [Marks] to Allied Domecq, and that there is federal
jurisdiction over those claims under the Lanham Act.”50 The court then vacated the
district court’s dismissal of FTE’s trademark, misappropriation, and unfair
competition claims.51
3.

FTE III

47

See FTE I, 425 F. Supp. 2d at 471. The only claims that were not
dismissed in FTE I were for federal unfair competition and false designation of
origin against Allied Domecq. See id.
48

Def. Mem. at 3.

49

See Federal Treasury Enter. Sojuzplodoimport v. Spirits Int’l N.V.
(“FTE II Summary Order”), 400 Fed. App’x 611 (2d Cir. 2010) (affirming
dismissal of fraud and unjust enrichment claims). See also Federal Treasury
Enter. Sojuzplodoimport v. Spirits Int’l N.V. (“FTE II”), 623 F.3d 61 (2d Cir. 2010)
(remanding remaining trademark, unfair competition, and misappropriation
claims).
50

FTE II, 623 F.3d at 71.

51

See id.
10

On remand, the court allowed FTE to amend its complaint for a third
time.52 In its Third Amended Complaint (“TAC”), FTE did not plead federal
trademark dilution and contributory unfair competition.53 The only claims that
remained in the TAC were federal trademark infringement under Section 32(1) of
the Lanham Act, declaratory and remedial relief based on FTE’s alleged ownership
of the Marks, and common-law misappropriation.54
Defendants then moved to dismiss the TAC on multiple grounds. The
court dismissed the Lanham Act and declaratory judgment claims for lack of
standing and declined to exercise supplemental jurisdiction over the remaining
common-law misappropriation claims.55
4.

FTE IV

FTE again appealed the decision, and in August 2013, the Second
Circuit affirmed the district court’s dismissal of all claims.56 The Second Circuit
held that FTE lacked standing to sue for trademark infringement because even
52

See Def. Mem. at 4.

53

See FTE II, 623 F.3d at 71 n.11.

54

See Def. Mem. at 4.

55

See id. See also Federal Treasury Enter. Sojuzplodoimport v. Spirits
Int’l B.V. (“FTE III”), No. 04 Civ. 08510, 2011 WL 4005321, at *3 (S.D.N.Y.
Sept. 1, 2011).
56

See FTE IV, 726 F.3d at 70.
11

though the Russian Federation “entrusted [FTE] with responsibility for using and
enforcing the [] Marks, it had not assigned the trademarks to FTE.”57 The Second
Circuit stated that the Russian Federation had “simply too great an operational
interest in the Marks for us to consider the Federation as having assigned the
Marks to FTE for purposes of the Act.”58 The Second Circuit also refused to
remand the case so that FTE could join the Russian Federation as a plaintiff
because “it [was] simply too late.”59
FTE alleges that it has rectified its lack of standing because the
Russian Federation assigned the Marks to it through an Assignment in February
2014.60 The Assignment states that the Russian Federation “assign[s] the
Stolichnaya Marks to FTE” and agrees to “sell[], convey[], transfer[], assign[] and
set[] over its entire right, title, and interest in and to the Trademarks.”61 The
Assignment also assures that the Russian Federation “relinquishes any and all
right, title, and interest” in the Marks.62 Therefore, FTE asserts that it now

57

Compl. ¶ 65.

58

FTE IV, 726 F.3d at 75.

59

Id. at 84 n.18.

60

See Compl. ¶ 66.

61

Assignment of United States Trademarks, Ex. A to Compl. at 3.

62

Id.
12

qualifies as an “assign” under Section 32(1) of the Lanham Act.63
III.

LEGAL STANDARD
A.

Rule 12(b)(1) Motion to Dismiss
Rule 12(b)(1) allows a party to assert by motion the defense that the

Court lacks subject matter jurisdiction to hear a claim. “Federal courts are courts
of limited jurisdiction, and ‘[t]he validity of an order of a federal court depends
upon that court’s having jurisdiction over both the subject matter and the
parties.’”64 “The plaintiff bears the burden of proving subject matter jurisdiction
by a preponderance of the evidence.”65 Courts also have “an independent
obligation to determine whether subject-matter jurisdiction exists, even in the
absence of a challenge from any party.”66
“For the purpose of determining whether a district court has federal
question jurisdiction pursuant to Article III and 28 U.S.C. § 1331, the jurisdictional
inquiry ‘depends entirely upon the allegations in the complaint’ and asks whether
63

See Plaintiffs’ Memorandum of Law in Opposition to Defendants’
Motion to Dismiss (“Opp. Mem.”) at 16.
64

South New England Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 132
(2d Cir. 2010) (quoting Insurance Corp. of Ireland, Ltd. v. Compagnie des
Bauxites de Guinee, 456 U.S. 694, 701 (1982)).
65

Al-Khazraji v. United States, 519 Fed. App’x 711, 713 (2d Cir. 2013)
(citing Liranzo v. United States, 690 F.3d 78, 84 (2d Cir. 2012)).
66

Arbaugh v. Y&H Corp., 546 U.S. 500, 501 (2006).
13

the claim as stated in the complaint ‘arises under the Constitution or laws of the
United States.’”67 “When . . . the defendant challenges the factual basis for the
plaintiff’s assertion of jurisdiction, ‘[j]urisdiction must be shown affirmatively, and
that showing is not made by drawing from the pleadings inferences favorable to the
party asserting it.’”68 In fact, “in dismissing a complaint for lack of subject-matter
jurisdiction under Rule 12(b)(1), a court may ‘refer to evidence outside the
pleadings.’”69
B.

Rule 12(b)(6) Motion to Dismiss
In deciding a motion to dismiss under Rule 12(b)(6), the court must

“accept[] all factual allegations in the complaint as true, and draw[] all reasonable
inferences in the plaintiff’s favor.”70 The court evaluates the complaint under the
“two-pronged approach” set forth in Ashcroft v. Iqbal.71 First, a court may
“identify[] pleadings that, because they are no more than conclusions, are not

67

South New England, 624 F.3d at 132 (quoting Carlson v. Principal
Fin. Group, 320 F.3d 301, 306 (2d Cir. 2003)).
68

Jordan v. Verizon Corp., 391 Fed. App’x 10, 12 (2d Cir. 2010) (citing
APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003) (quotation marks omitted)).
69

Burfeindt v. Postupack, 509 Fed. App’x 65, 67 (2d Cir. 2013) (quoting
Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)).
70

Freidus v. Barclays Bank PLC, 734 F.3d 132, 137 (2d Cir. 2013).

71

556 U.S. 662, 679 (2009).
14

entitled to the assumption of truth.”72 “‘Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not suffice”’ to
withstand a motion to dismiss.73 Second, “‘[w]hen there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief.”’74
To survive a Rule 12(b)(6) motion to dismiss, the allegations in a
complaint must meet a standard of “plausibility.”75 A claim is facially plausible
“when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”76
Plausibility “is not akin to a probability requirement,” rather, plausibility requires
“more than a sheer possibility that a defendant has acted unlawfully.”77
In considering a motion to dismiss for failure to state a claim pursuant
to Rule 12(b)(6), a district court may consider “only the complaint, . . . any

72

Bigio v. Coca-Cola Co., 675 F.3d 163, 173 (2d Cir. 2012) (citing
Iqbal, 556 U.S. at 678).
73

Id. (quoting Iqbal, 556 U.S. at 678).

74

Taveras v. UBS AG, 513 Fed. App’x 19, 22 (2d Cir. 2013) (quoting
Iqbal, 556 U.S. at 679).
75

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 564 (2007).

76

Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556).

77

Id. (quotation marks and citation omitted).
15

documents attached thereto or incorporated by reference and documents upon
which the complaint relies heavily.”78 Allegations in the complaint that are
“contradicted by more specific allegations or documentary evidence” are not
entitled to a presumption of truthfulness.79
IV.

APPLICABLE LAW
A.

Res Judicata
“Under the doctrine of res judicata, or claim preclusion, ‘[a] final

judgment on the merits of an action precludes the parties or their privies from
relitigating issues that were or could have been raised in that action.”’80 Res
judicata bars “‘later litigation if [an] earlier decision was (1) a final judgment on
the merits, (2) by a court of competent jurisdiction, (3) in a case involving the same
parties or their privies, and (4) involving the same cause of action.”’81 The burden
to prove res judicata is on the party seeking to “to prove that the doctrine bars the

78

Building Indus. Elec. Contractors Ass’n v. City of New York, 678 F.3d
184, 187 (2d Cir. 2012) (citing In re Citigroup ERISA Litig., 662 F.3d 128, 135 (2d
Cir. 2011) (quotation marks omitted)).
79

Kirkendall v. Halliburton, Inc., 707 F.3d 173, 175 n.1 (2d Cir. 2013)
(citing L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir. 2011)).
80

St. Pierre v. Dyer, 208 F.3d 394, 399 (2d Cir. 2000) (quoting
Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981)).
81

EDP Med. Computer Sys., Inc. v. United States, 480 F.3d 621, 624 (2d
Cir. 2007) (quoting In re Teltronics Servs., Inc., 762 F.2d 185, 190 (2d Cir. 1985)).
16

second action.”82 “Even where a second action arises from some of the same
factual circumstances that gave rise to a prior action, res judicata is inapplicable if
formal jurisdictional or statutory barriers precluded the plaintiff from asserting its
claims in the first action.”83
In the Second Circuit, “a dismissal for lack of subject matter
jurisdiction is not an adjudication of the merits.”84 Because “a dismissal for lack of
Article III standing is a dismissal for lack of subject-matter jurisdiction, … the …
judgment has almost no res judicata effect[.]”85 While the prior dismissal
“preclude[s] relitigation of the very issue of [standing] actually determined, [it]
does not preclude a second action on the same claim if the [standing] problem can
be overcome.”86
B.

Lanham Act Standing

Section 32(1) of the Lanham Act “protects only registered

82

Computer Assocs. Int’l, Inc. v. Altai, Inc., 126 F.3d 365, 369 (2d Cir.

1997).
83

Id. at 370.

84

St. Pierre, 208 F.3d at 400.

85

18A Fed. Prac. & Proc. Juris. § 4436 (2d ed.) (citing St. Pierre, 208

F.3d at 400).
86

Id.
17

trademarks.”87 Under that section, a party has a cause of action “against any
person who ‘uses in commerce any . . . imitation of a registered mark . . . likely to
cause confusion, or to cause mistake, or to deceive.’”88 However, “[t]his cause of
action is available . . . only to ‘registrant[s]’ of the trademarks at issue, a term the
Act defines as embracing the actual registrant’s ‘legal representatives,
predecessors, successors and assigns.”’89
Courts in the Second Circuit have long held that “a party is not an
assign for standing purposes under the Lanham Act unless that party owns the
mark at issue.”90 Moreover, the Second Circuit has “accepted that a transfer of an
ownership interest in a mark is a predicate to standing for any putative assign.”91
C.

Laches
“It is well established that the equitable defense of laches may be

applied to cases brought under the Lanham Act.”92 In order to succeed on a laches

87

FTE IV, 726 F.3d at 72 (citing 15 U.S.C.§ 1114(1)).

88

Id. (quoting 15 U.S.C.§ 1114(1)).

89

Id. (quoting 15 U.S.C. § 1127).

90

Id. at 75.

91

Id. at 76 (citing DEP Corp. v. Interstate Cigar Co., 622 F.2d 621 (2d

Cir. 1980)).
92

United States v. Milstein, 401 F.3d 53, 63 (2d Cir. 2005) (citing
Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 193 (2d Cir. 1996)).
18

defense, a defendant “must show [1] that plaintiff had knowledge of defendant’s
use of its marks, [2] that plaintiff inexcusably delayed in taking action with respect
thereto, and [3] that defendant will be prejudiced by permitting plaintiff
inequitably to assert its rights at this time.”93
“Although laches is an equitable defense, employed instead of a
statutory time-bar, analogous statutes of limitation remain an important
determinant in the application of a laches defense.”94 Because the Lanham Act
establishes no limitations period, courts “look to the most appropriate or the most
analogous state statute of limitations for laches purposes.”95 Prior to the running of
that statute, “there is no presumption of laches and the burden remains on the
defendant to prove the defense.”96 Courts in the Second Circuit use “New York’s
six-year fraud statute of limitations to determine if a Lanham Act claim is barred

93

Saratoga Vichy Spring Co., Inc. v. Lehman, 625 F.2d 1037, 1040 (2d
Cir. 1980). Accord Eppendorf-Netheler-Hinz GMBH v. National Scientific Supply
Co., Inc., 14 Fed. App’x 102, 105 (2d Cir. 2001).
94

Conopco, 95 F.3d at 191. Accord Petrella v. Metro-Goldwyn-Mayer,
Inc., 134 S. Ct. 1962, 1974 n.15 (2014) (“In contrast to the Copyright Act, the
Lanham Act, which governs trademarks, contains no statute of limitations, and
expressly provides for defensive use of ‘equitable principles, including laches.’”)
(quoting 15 U.S.C. § 1115(b)(9)).
95

Conopco, 95 F.3d at 191 (internal quotation marks omitted).

96

Id.
19

by the doctrine of laches.”97
V.

DISCUSSION
A.

Res Judicata Bars FTE’s Non-Section 32(1) Claims
Defendants assert that “[f]undamental res judicata principles” bar all

of FTE’s claims in this suit.98 First, Defendants argue that FTE’s Section 32(1)
claims are barred by the Second Circuit’s holding in FTE IV.99 Specifically, the
Second Circuit held that because FTE was neither an “assign” nor a “legal
representative” under the Lanham Act, it lacked standing to sue under Section
32(1).100 Defendants argue that even though these claims were dismissed on
“jurisdictional grounds. . . , th[e] judgment still has preclusive effect against

97

Parks v. ABC, Inc., 341 Fed. App’x 737, 739 (2d Cir. 2009) (citing
Conopco, 95 F.3d at 191).
98

Def. Mem. at 17.

99

See id. at 11-17. For the purposes of this Order, I will refer to Claims
1, 7, 10, and 11 as “Section 32(1) claims.” Technically, only FTE’s federal
trademark infringement claim (“Claim 1”) arises under Section 32(1). See 15
U.S.C. § 1114(1). However, FTE’s rectification of register (Claim 10) and
cancellation of registration (Claim 11) claims depend on FTE’s “standing to sue for
infringement” under Section 32(1). FTE IV, 726 F.3d at 84 (“[A]bsent Lanham
Act standing to sue for infringement, plaintiffs also lack standing to seek these
remedies[.]”). Moreover, without standing to sue for direct infringement, FTE
lacks standing to sue for contributory infringement (Claim 7). See id.
100

See FTE IV, 726 F.3d at 85.
20

attempts to relitigate the same jurisdictional question.”101 Thus, Defendants urge
the Court to dismiss FTE’s Section 32(1) claims for trademark infringement
(Claim 1), contributory infringement (Claim 7), rectification of register (Claim 10),
and cancellation of registration (Claim 11).102
FTE insists that jurisdictional questions can never be relitigated. But
“a dismissal for lack of subject matter jurisdiction is not an adjudication on the
merits.”103 While a prior dismissal “preclude[s] relitigation of the very issue of
[standing] actually determined, [it] does not preclude a second action on the same
claim if the [standing] problem can be overcome.”104 Because lack of standing is
“curable,” FTE may re-assert its Section 32(1) claims because it has alleged new
facts to cure its standing defect.105
101

Def. Mem. at 12 (citing Insurance Corp. of Ireland, Ltd., 456 U.S.
694 at n.9 (“A party that has had an opportunity to litigate the question of
subject-matter jurisdiction may not, however, reopen that question in a collateral
attack upon an adverse judgment. It has long been the rule that principles of res
judicata apply to jurisdictional determinations—both subject matter and
personal.”)).
102

See id. at 17.

103

St. Pierre, 208 F.3d at 400.

104

18A Fed. Prac. & Proc. Juris. § 4436 (2d ed.) (citing St. Pierre, 208

F.3d at 400).
105

Criales v. American Airlines, Inc., 105 F.3d 93, 98 (2d Cir. 1997)
(holding that res judicata did not bar employee from bringing a second Title VII
action after his first action was dismissed for failing to obtain right-to-sue notice
21

By contrast, FTE’s remaining claims — arising under either Section
43 or state law — must be dismissed. Res judicata “bars the relitigation . . . of
claims that were, or could have been, brought in an earlier litigation between the
same parties or their privies.”106 First, res judicata precludes FTE from bringing its
federal unfair competition claim (Claim 2), state law unfair competition claim
(Claim 5), and contributory unfair competition claim (Claim 8), as well as direct
and contributory federal trademark dilution claims (Claims 3 and 9). FTE pled
these claims in the SAC, but abandoned them in the TAC. In addition, FTE
introduced its state law trademark infringement and dilution claims (Claims 4 and
6) for the first time in the present Complaint. Because all of these claims “could
have been brought” in the TAC, FTE cannot assert them now.107
Moreover, FTE’s unfair competition claims (Claims 2, 5, and 8) are
precluded by FTE’s strategic decisions. In order to appeal the district court’s
decision in FTE I, FTE voluntarily dismissed with prejudice virtually identical

from administrative agency); Robinson v. Overseas Military Sales Corp., 21 F.3d
502, 507 n.4 (2d Cir. 1994) (“[A] dismissal for want of subject matter []
jurisdiction is not a decision on the merits[,] [and] the plaintiff is free to institute
the suit anew . . . under circumstances supporting jurisdiction.”).
106

Burberry Ltd. v. Horowitz, 534 Fed. App’x 41, 43 (2d Cir. 2013)
(citing Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905, 919 (2d Cir. 2010)
(emphasis in original)).
107

Id.
22

versions of its unfair competition claims against Allied Domecq.108 FTE may not
now reassert those claims against Allied Domecq.109 Nor may FTE bring its
contributory unfair competition against SPI (Claim 8) because SPI’s liability for
this claim hinges on Allied Domecq’s conduct.110 Finally, FTE is precluded from
bringing its current federal unfair competition claim (Claim 8) against Allied
Domecq’s successors-in-interest,WGS and Stoli Group, because these parties
received their rights to distribute the Marks after the identical claims were
voluntarily dismissed with prejudice against Allied Domecq.111

108

See Notice of Dismissal, Ex. 3 to Declaration of Eugene Gulland
(“Gulland Decl.”) at 1 (demonstrating that plaintiffs “hereby dismiss with
prejudice their Fifth [unfair competition] and Thirteenth [false designation of
origin] claims for relief as to Allied Domecq”).
109

See Chase Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 345
(2d Cir. 1995) (holding that “[a] voluntary dismissal with prejudice is an
adjudication on the merits for purposes of res judicata”). See also Samuels v.
Northern Telecom, Inc., 942 F.2d 834, 836 (2d Cir. 1991) (quoting Nemaizer v.
Baker, 793 F.2d 58, 60 (2d Cir. 1986) (holding that “‘[a] dismissal with prejudice
has the effect of a final adjudication on the merits favorable to defendant and bars
future suits brought by plaintiff upon the same cause of action”’)).
110

See Falbaum v. Pomerantz, 19 Fed. App’x 10, 14 (2d Cir. 2001)
(quoting Restatement (Second) of Judgments § 51 (1982)) (stating that “if two
persons have a relationship such that one is vicariously responsible for the conduct
of the other, a judgment against an injured person in favor of one person bars the
injured person from reasserting his claim against the other”).
111

See Esquire Trade & Fin., Inc. v. CBQ, Inc., 562 F.3d 516, 520 (2d
Cir. 2009) (stating that if a party is a successor-in-interest, res judicata “would
have merit”).
23

B.

FTE Has Alleged an Assignment Sufficient to Confer Standing
Under Section 32(1) of the Lanham Act
Next, Defendants argue that even if FTE’s Section 32(1) claims are

not barred by res judicata, they should be dismissed because the Assignment fails
to confer standing.112 Under Section 32(1), standing is available only to
“registrants” of a mark, including a registrant’s “assigns.”113 In FTE IV, the
Second Circuit held that FTE was not an “assign” under Section 32(1) of the
Lanham Act because (1) the purported assignment was not in a “duly executed
writing” and (2) the Russian Federation maintained “simply too great an
operational interest in the Marks.”114 But the court assumed that the defect was
curable, stating:
Had the Russian Federation effected a valid assignment here, FTE
could sue under Section 32(1) as an “assign.” As the relationship
between the Russian Federation and FTE is now structured, . . . it
cannot [sue under Section 32(1)], consistent with the Act.115
The court explained that the Russian Federation retained not only “formal title to

112

See Def. Mem. at 19-20.

113

See 15 U.S.C. § 1114(1); 15 U.S.C. §1127 (“The terms ‘applicant’ and
‘registrant’ embrace the legal representatives, predecessors, successors and assigns
of such applicant or registrant.”). FTE does not claim to be a “legal
representative,” “predecessor,” or “successor” of the Russian Federation.
114

FTE IV, 726 F.3d at 74-75.

115

Id. at 79.
24

the Marks,” but also “the right to rescind the [Marks], to grant a license for [their]
use to others, [and] exclude others from using the [Marks].”116 The Assignment,
however, expressly conveys to FTE the Russian Federation’s “entire right, title and
interest” in the Marks.117 It also states that the Russian Federation “relinquishes
any and all right, title, and interest” in the Marks.118 Thus, FTE has plausibly
alleged an assignment sufficient to confer standing.
Although Defendants concede that the Assignment “might cure” the
“duly executed writing” defect, they insist that the Russian Federation still retains
“simply too great an operational interest in the Marks.”119 First, Defendants
contend that the Second Circuit “based its holding principally on FTE’s
Charter.”120 In FTE IV, the Second Circuit recognized that the Charter limits
FTE’s ownership in the marks by prohibiting it from “alienating or otherwise
disposing of any property transferred to it, and “allows the Russian Federation’s
authority to use the Marks itself,” to “withdraw FTE’s rights to use the Marks,” or

116

Id. at 77.

117

Assignment at 3.

118

Id.

119

Def. Mem. at 19-20. Accord Defendants’ Reply Memorandum in
Further Support of Defendants’ Joint Motion to Dismiss (“Reply Mem.”) at 6.
120

Def. Mem. at 20.
25

to “grant others similar rights.”121 Defendants argue that the Assignment cannot
“expand[] FTE’s authority beyond that granted in [the Charter].”122 But
Defendants fail to explain how the Charter supercedes the Assignment, issued
twelve years later under a Russian Federation decree.123 Defendants’ insistence
that the Russian Federation retains the right “to use the Marks for itself” is belied
by the Assignment, which expressly states that the Russian Federation
“relinquishes any and all right, title, and interest” in the Marks.124 And as a
practical matter, Defendants cannot explain why the Russian Federation would
create a Charter that can never be superceded by an Assignment, as FTE
suggests.125 Based on Defendants’ theory, the Charter ties the Russian Federation’s
121

FTE IV, 726 F.3d at 77.

122

Reply Mem. at 6.

123

See Assignment at 1 (stating that the Assignment is issued “in
accordance with decree of the Russian government dated February 1, 2014, no.
69”). Because the Assignment is attached to the Complaint, statements in the
Assignment are deemed true for the purposes of this motion. See Grant v. County
of Erie, 542 Fed. App’x 21, 23 (2d Cir. 2013) (citing Rothman v. Gregor, 220 F.3d
81, 88 (2d Cir. 2000) (“[F]or purposes of a motion to dismiss, we have deemed a
complaint to include any written instrument attached to it as an exhibit or any
statements or documents incorporated in it by reference . . . ”).
124

Assignment at 3 (emphasis added).

125

See 7/31/14 Teleconference Tr. at 6:14-23 (Marc Greenwald, counsel
for FTE: “[T]he charter was issued pursuant to a . . . decree, and the Assignment
was also issued . . . pursuant to a subsequent decree. Our position is that the
subsequent decree supercedes the first decree.”).
26

hands with respect to the Marks.
Second, Defendants argue that “the limits on FTE’s authority [also]
derive from . . . the Russian Civil Code, under which ‘state unitary enterprises’ like
FTE are ‘not endowed with the right of ownership.’”126 Under Russian law, state
unitary enterprises hold property only “by right of economic jurisdiction or
operative management.”127 According to Defendants, FTE IV held that state
unitary enterprises — like FTE — do not and cannot “possess an ownership
interest sufficient to give rise to Lanham Act standing.”128
In fact, the Second Circuit’s ruling was not so conclusive. The court
refused to “tender a definitive reading of Russian law,” and noted only that Russian
law is “equivocal” regarding the rights of state unitary enterprises. 129 Like the
Second Circuit, I decline to interpret Russian law without further input from the
parties.130 Because I have only been provided with counsel’s reading of Russian
126

Reply Mem. at 6 (quoting Russian Civil Code art. 113).

127

Russian Civil Code art. 113(2), Ex. 1 to Gulland Decl.

128

8/1/14 Letter from Eugene Gulland, counsel for SPI, to the Court at 1.

129

FTE IV, 726 F.3d at 76-77.

130

Addressing the validity of the Russian Federation’s Assignment could
potentially raise issues under the Act of State doctrine. See Konowaloff v.
Metropolitan Museum of Art, 702 F.3d 140, 143 (2d Cir. 2012), cert. denied, 133
S. Ct. 2837 (2013) (“[T]he act of state doctrine ‘precludes the courts of this
country from inquiring into the validity of the public acts of a recognized foreign
27

law — as opposed to full discovery, including expert testimony — I cannot rule
that the the Assignment is invalid under either Russian law or superceded by the
Charter.131 At this stage, FTE has alleged facts that plausibly show that the Russian
Federation has assigned the Marks to FTE, giving FTE standing to sue under
Section 32(1).132
C.

FTE’s Section 32(1) Claims Are Not Time-Barred
Finally, Defendants argue that FTE’s Complaint fails to state a claim,

and in any event, its claims are time-barred. First, Defendants contend that FTE’s
claims should be dismissed because “public [USPTO] records reflect that SPI

sovereign power committed within its own territory.”’) (quoting Banco Nacional
de Cuba v. Sabbatino, 376 U.S. 398, 401, 84 (1964)).
131

While not required, courts may consider expert testimony when
deciding issues of foreign law. See Fed. R. Civ. P. 44.1 (“In determining foreign
law, the court may consider any relevant material or source, including
testimony[.]”); Bigio v. Coca–Cola Co., No. 97 Civ. 2858, 2010 WL 3377503, at
*4 (S.D.N.Y. Aug. 23, 2010), aff’d, 675 F.3d 163 (2d Cir. 2012) (“Written or oral
expert testimony accompanied by extracts from various kinds of foreign legal
materials remains the basic mode of proving foreign law.”).
132

Nor does FTE lack standing due to its status as a government agency
under the Russian Federation’s control. A subsidiary assigned a trademark by its
parent may sue under Section 32(1) even though the parent maintains the power to
dissolve that subsidiary. See Novartis Animal Health US, Inc. v. LM Connelly &
Sons, Pty Ltd., No. 04 Civ. 10213, 2005 WL 1902085, at *3 (S.D.N.Y. June 14,
2005) (citing G.H. Mumm Champagne v. Eastern Wine Corp., 142 F.2d 499 (2d
Cir. 1944)).
28

[rather than FTE] owns the marks.”133 The records establish that in 1991, VVOSPI assigned the marks to PepsiCo under a contract, stating that the marks would
revert to VVO–SPI in 2001.134 In 1992, VVO-SPI was lawfully privatized and
transformed into VAO-SPI.135 In 2001, VAO-SPI’s successor — SPI — caused
PepsiCo to assign the Marks to Allied Domecq, who assigned the marks to SPI.136
Defendants argue that because there is no break in the chain of title, SPI owns the
Marks.137 As such, FTE must first prove that the marks were misappropriated
before it can bring any claim against Defendants for infringement, dilution, or
unfair competition.138
Second, Defendants argue that “any misappropriation claim FTE may
now possess” is “nineteen years too late.”139 Defendants contend that any
misappropriation claim would have accrued in 1992 or 1993, when VAO-SPI
allegedly “filed a corporate charter claiming to be the legal successor to VVO-SPI,
133

Def. Mem. at 21.

134

See id. at 8-9 (citing USPTO Reel/Frame No. 0793/0750).

135

See id. at 9.

136

See id. at 9-10 (citing USPTO Reel/Frame No. 0793/0750; USPTO
Reel/Frame No. 2170/0498; USPTO Reel/Frame No. 3828/0485).
137

See id. at 21.

138

See id. at 21-22.

139

Id. at 22-23.
29

and ‘expelled’ VVO-SPI as the shareholder in the new entity.”140 Because New
York has a three year statute of limitations for misappropriation claims, FTE’s
claim expired in 1996 at the latest — eighteen years before FTE filed the present
Complaint.141 Third, Defendants argue that FTE’s claims are barred by laches
because “the Russian Federation slept on these claims until 2014.”142
As an initial matter, FTE need not litigate its state law
misappropriation claim before bringing its federal infringement, trademark
dilution, and unfair competition claims. In FTE II, the Second Circuit explained
that “ownership of the relevant trademark is one of the ‘necessary elements . . . of
trademark infringement under the Lanham Act.’”143 “Accordingly, federal courts
may, applying the relevant law, adjudicate the ownership of a trademark as part of
an infringement claim.”144
140

Id. (citing TAC ¶¶ 45, 48, 50).

141

See Sporn v. MCA Records, Inc., 58 N.Y.2d 482, 288 (1983).

142

Def. Mem. at 24.

143

FTE II, 623 F.3d at 69 (quoting Island Software & Computer Serv.,
Inc. v. Microsoft Corp., 413 F.3d 257, 259–60 (2d Cir. 2005)).
144

Id. Defendants argue that in FTE II the Second Circuit considered
only whether “federal courts have jurisdiction to consider the validity of this chain
of assignments,” and that this Court must “ask whether FTE can undermine
Defendants’ chain of title by stating a misappropriation claim.” Reply Mem. at 7.
But there is no requirement that the plaintiff must succeed on their
misappropriation claim before they can assert their claim of ownership. FTE II,
30

On a motion to dismiss, it is enough for FTE to allege plausible facts
to show that its marks were misappropriated.145 Here, the Complaint alleges that
after the collapse of the Soviet Union in 1990, the managers and directors of state
enterprises “hijacked” those enterprises.146 Specifically, VVO-SPI’s directors
“hijacked” it “to make it appear that VVO-SPI [] had been lawfully transformed
into a private joint stock company by creating a private company . . . , VAO-SPI,
nearly identical to VVO-SPI, and [] asserting in VAO-SPI’s corporate charter that
it was VVO-SPI’s successor.”147 But in fact, “VVO-SPI was not transformed into
VAO-SPI or otherwise privatized.”148 The Complaint also states that in 2000 a
Russian court, affirmed by Russia’s highest court, and the European Court of
Human Rights, “h[eld] that VAO-SPI was not VVO-SPI’s successor.”149 As such,
FTE has alleged a plausible defect in Defendants’ chain of title because neither

623 F.3d at 69 (“[I]n order to determine the federal claim for infringement, the
district court, as a preliminary matter, permits the plaintiff to establish the facts
which underlie [its] claim of ownership.”).
145

See Twombly, 550 U.S. at 570 (holding that a complaint must plead
“enough facts to state a claim to relief that is plausible on its face”).
146

Compl. ¶ 34.

147

Id. ¶ 35.

148

Id. ¶ 36.

149

Id. ¶ 44.
31

VAO-SPI — nor its successor, SPI — ever legitimately owned the marks. Thus, it
is at least plausible that FTE holds “right, title, and interest” to the Marks, by
reason of the Assignment from the Russian Federation.150
Next, FTE’s Section 32(1) claims are not time-barred. FTE’s
infringement, dilution, and unfair competition claims did not accrue until 2001
when Defendants began using the marks. FTE alleges that in January 2001 “SPI
induced PepsiCo to purport to assign its rights to the [] marks to Allied Domecq”
by “falsely represent[ing] themselves to be VVO-SPI’s legitimate successor.”151 In
the Second Circuit, courts apply “New York’s six-year fraud statute of limitations
to . . . Lanham Act claim[s].”152 Under New York’s tolling statute, FTE’s Section
32(1) claims were tolled in October 2004 when FTE filed its original complaint.153
Because the FTE IV court did not terminate FTE’s Section 32(1) claims “on the
merits,” and FTE filed the new complaint less than six months later, FTE’s Section
32(1) claims are timely.154
150

Assignment at 3.

151

Compl. ¶ 39.

152

Parks, 341 Fed. App’x at 739 (citing Conopco, Inc., 95 F.3d at 191).

153

See N.Y. C.P.L.R. § 205(a).

154

See id. (“If an action is timely commenced and is terminated in any
other manner than . . . a final judgment upon the merits, the plaintiff . . . may
commence a new action upon the same transaction or occurrence . . . within six
32

Finally, FTE’s Section 32(1) claims are not barred by laches because
Defendants cannot show delay. Because FTE’s filed suit within the applicable sixyear limitations period, “there is no presumption of laches and the burden remains
on the defendant to prove the defense.”155 Defendants adduce no evidence that
Plaintiffs unreasonably delayed in bringing suit or that Defendants were
prejudiced. The Complaint alleges that in December 2000, when the Russian
Federation learned that VVO-SPI had not been privatized, it sued in a Russian
court.156 In December 2001, the Russian Federation formed FTE to sue in the
United States to recover the marks.157 FTE filed its original complaint in 2004, less
than six years after Defendants began using the marks, and filed the present
Complaint in February 2014, less than six months after the prior action was
terminated. Because FTE filed within the statutory period, I cannot find that it
months after the termination provided that the new action would have been timely
commenced at the time of commencement of the prior action . . . .”).
155

Conopco, 95 F.3d at 191.

156

See Compl. ¶¶ 44. Defendants argue that the Russian Federation was
put on notice that VVO-SPI was not legitimately privatized based on a 1993
decision in the Southern District of New York. See Pl. Mem. at 23-24 (citing
Financial Matters, Inc. v. PepsiCo., Inc., No. 92 Civ. 7497, 1993 WL 378844
(S.D.N.Y. Sept. 24, 1993)). But in that case, importer plaintiffs challenged
PepsiCo’s ownership of the marks, but never alleged that “VAO SPI is [not] the
lawful successor to VVO SPI.” Id. at *3. In addition, the court declined to
consider whether VVO-SPI had been privatized. See id. at n.4.
157

See Compl. ¶¶ 7, 65.
33

delayed. Even if it had, Defendants are not prejudiced simply because the
proceeding is "extensive (and expensive)." 158

VI.

CONCLUSION
For the reasons set forth above, Defendants' motion is GRANTED as

to Claims 2, 3, 4, 5, 6, 8, and 9, which are dismissed with prejudice. Defendants'
motion is DENIED as FTE's Section 32(1) claims -

Claims 1, 7, 10, and 11. The

Clerk of the Court is ordered to close this motion [Docket No. 22]. A conference is
scheduled for September 3, 2014 at 4:30 p.m.

SO.ORDE

·'.~~-~~-~
.·

.

. I

"',

1/.

,

.

,

Shira A.
U.S.D.J.
Dated:

New York, New York
August 25, 2014

158

Def. Mem. at 25. See Fourth Toro Family Ltd. P 'ship v. PV Bakery,
Inc., 88 F. Supp. 2d 188, 198 (S.D.N.Y. 2000) ("Prejudice cannot normally be
claimed for expenses incurred after the parties were contesting their respective
trademark rights.").
34

-AppearancesFor Plaintiffs:
Daniel H. Bromberg, Esq.
Jones Day
51 Louisiana Ave. N.W.
Washington, DC 20001
[phone]
Jessica Anne Rose, Esq.,
Marc Laurence Greenwald, Esq.,
Robert Lloyd Raskopf, Esq.
Quinn Emanuel Urquhart & Sullivan LLP
51 Madison Avenue, 22nd Floor
New York, NY 10010
[phone]

For Defendants:
David M. Zionts, Esq.
Covington & Burling, LLP
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004
[phone]
Emily Johnson Henn, Esq.
Covington & Burling, LLP
333 Twin Dolphin Drive, Suite 700
Redwood Shores, CA 94065
[phone]
Bingham B. Leverich, Esq.,
Eugene Gulland, Esq.
Covington & Burling, LLP
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004
35

[phone]
Hope Ivy Hamilton, Esq.
Holland & Hart LLP
1800 Broadway, Suite 300
Boulder, CO 80302
[phone]
David H. Bernstein, Esq.,
Carl Micarelli, Esq.,
Michael Shaper, Esq.
Debevoise & Plimpton, LLP
919 Third Avenue, 31st Floor
New York, NY 10022
[phone]
Edward T. Colbert, Esq.
Kenyon & Kenyon LLP
1500 K Street, N.W. Suite 700
Washington, DC 20005
[phone]

36