Wednesday, September 19, 2007

Philip Morris USA Files More Trademark Infringement Lawsuits Against Two More Internet-Based Cigarette Vendors

Altria Group, Inc put out a press release today announcing that its operating company, Philip Morris USA Inc., had filed lawsuits on September 17, 2007, in the U.S. District Court for the Southern District of New York against two Internet site operators, and (along with other related websites), engaged in the sale of imported cigarettes bearing Philip Morris USA’s trademarks. See Philip Morris USA, Inc. v. Cigmall et al., No. 1:2007cv08135 (PACER link for complaint) and Philip Morris USA, Inc. v. Howard et al., No. 1:2007cv08134 (PACER link for complaint).

According to the press release, the complaints allege that the defendants are selling cigarettes that have been imported in violation of the Imported Cigarette Compliance Act of 2000, have made false statements about the legality of these sales on their websites, and fail to comply with applicable tax laws and the federal Jenkins Act.

The lawsuits represent a continued effort on the part of Philip Morris to use its trademarks as a weapon to stop online cigarette retailers. See 2002 story here. More recently, in April 28, 2006, Philip Morris filed a similar lawsuit against several companies that operated online cigarette stores through websites such as,, and See Philip Morris USA v. Veles Ltd. et al., Civil Action No. 06-CV-2988 (S.D.N.Y). The complaint alleged that the defendants used Philip Morris’ trademarks without authorization in advertising and selling “grey market” cigarettes in the U.S. bearing Philip Morris’ trademarks. “Grey market” cigarettes are those manufactured by Philip Morris affiliates overseas which are intended for sale outside the United States.

The trademark aspect of the lawsuit garnered attention earlier this year when Judge George B. Daniels, on March 12, 2007, issued a decision and order denying the defendants’ motion to dismiss for failure to state a claim for relief under the Lanham Act (a copy of the order can be downloaded here courtesy of

The defendants argued that Philip Morris could not state a claim for relief under the Lanham Act because the websites are selling Phillip Morris-brand cigarettes and because the defendants posted a disclaimer on their websites to the effect: “The Phillip Morris products being sold were not originally intended for sale in the United States and have been distributed by a company unaffiliated with Philip Morris. . . . Further, we do not make any claim to ownership of the Philip Morris Trademarks or trade names.”

Philip Morris argued that the cigarettes manufactured by its overseas affiliates are materially different than those made and sold in the U.S., and, as such, the defendants’ use of Philip Morris’ trademarks could mislead consumers into believing that the websites are affiliated with Philip Morris.

The court noted that while the Lanham Act does not prevent the reimportation and sale of genuine articles under their real trademarks, such is not the case if the domestic and foreign products are materially different – in which case the sale of the foreign product in the United States has a potential to mislead or confuse consumers who will otherwise assume the foreign product to be the same as the normal product sold domestically. See R.J. Reynolds Tobacco Co. v. Cigarettes Cheaper!, 462 F.3d 690, 700 (7th Cir. 2006).

Philip Morris asserted that its domestic cigarettes are subject to quality control measures regarding the shipping and storage of its cigarettes and the replacement of damaged and stale products in order to ensure that U.S. consumers receive the high-quality cigarette they have come to associate with Philip Morris’ trademarks. These same quality control measures are not applied to Philip Morris’ foreign made cigarettes intended to be sold abroad, and thus, U.S. consumers purchasing such cigarettes may receive an inferior product.

The defendants argued that the website disclaimer prevents any consumer confusion that may arise with respect to the “grey market” cigarettes they are selling. However, the court found such disclaimer inadequate because it did not provide notice to consumers that the foreign cigarettes they are buying may be made under different quality control standards from domestic cigarettes sold under the same brand name in the United States.

The court found Philip Morris’ claim of a material difference in quality control standards between its domestic and foreign cigarettes bearing Philip Morris’ trademarks to be a “legally feasible contention.” As such, Philip Morris’ allegations were sufficient to raise an inference that defendant’s sale of foreign cigarettes in the U.S. could be misleading to consumers, and therefore state a claim for relief under the Lanham Act. The defendants’ motion to dismiss for failure to state a claim for relief under the Lanham Act was denied.

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