Monday, September 8, 2008

Second Circuit Affirms District Court’s Denial of Relief to General Cigar in COHIBA trademark dispute

As I previously blogged about here, General Cigar and Cubatabaco have been involved in a contentious trademark battle since 1997 over ownership rights to the mark COHIBA for cigars. Cubatabaco filed a cancellation proceeding against General Cigar over the registered mark COHIBA. See Empresa Cubana del Tabaco v. General Cigar Co., Cancellation No. 92025859 (Filed Jan. 15, 1997). The cancellation moved over to the federal courts in 1997 (see Empresa Cubana del Tabaco v. General Cigar Co., Case No. 97-cv-8399 (S.D.N.Y.)). While the district court in 2004 held that Cubatabaco owned the trademark COHIBA for use on cigars under the famous marks doctrine and ordered General Cigar Co's registration cancelled (opinion here), the U.S. Court of Appeals for the Second Circuit reversed the district court on the basis that the U.S. trade embargo against Cuba prevented Cubatabaco from acquiring property rights in United State trademarks under the famous marks doctrine. See Empresa Cubana Del Tabaco v. Culbro Corporation, 399 F.3d 462 (2nd Cir. 2005), cert. denied, 126 S.Ct. 2887, 165 L. Ed. 2d 916 (2006).

Upon remand to the district court, General Cigar subsequently filed a motion with the district court to amend its prior order to add an order to the USPTO dismissing the pending cancellation proceeding. The district court, however, denied the motion as untimely because General Cigar had not sought such claim for relief earlier in the case and because the TTAB can properly decide the impact of the Court of Appeal's decision. See Empresa Cubana Del Tabaco v. Culbro Corp., 478 F. Supp. 2d 513 (S.D.N.Y. 2007). General Cigar appealed the decision to the Second Circuit Court of Appeals.

On September 4, 2008, the Second Circuit Court of Appeals affirmed the district court’s decision finding no abuse of discretion by the district court in deciding not to order the USPTO to dismiss the pending cancellation proceeding. See Empresa Cubana Del Tabaco v. Culbro Corp. et al, Appeal No. 07-1248, 2008 U.S. App. LEXIS 18819 (2nd Cir. September 4, 2008) (per curiam).

The Court of Appeals reiterated the fact that General Cigar did not request the relief it sought (authorized by 15 U.S.C. §1119) as a counterclaim in its original pleadings, but only after the district court had adjudicated and dismissed the underlying trademark action between the parties. As such, the district court treated its motion for relief as a motion to amend the judgment under Federal Rule of Civil Procedure 59(e).

The Court did not address whether General Cigar’s motion was timely under FRCP 59(e); instead, the Court concluded that when such a request for relief was made for the first time after the underlying trademark dispute had already been adjudicated, such request was essentially based on an estoppel theory:

That is, a request for section 1119 relief made for the first time after judgment essentially amounts to a claim that because the district court adjudicated a trademark case in a certain way, there is nothing left for the PTO to decide, and so it ought to be instructed to follow the court's lead for the sake of efficiency and consistency. See Eagles, 356 F.3d at 731. Like the Sixth Circuit in Eagles, we see no reason why it was an abuse of discretion for the district court simply to tell General Cigar to raise its estoppel claim before the PTO and let the agency decide, subject to review by the Federal Circuit, what preclusive effect should be given to our decision in Empresa V, if any. See id. (noting PTO's expertise in addressing the estoppel issue).

Id. at *6-7.

General Cigar also attempted to argue that its motion was not one to amend the judgment, but rather one to enforce the judgment pursuant to the district court's ancillary jurisdiction. However, the Court cited the U.S. Supreme Court’s caution against exercising ancillary jurisdiction “over proceedings that are entirely new and original or where the relief [sought is] of a different kind or on a different principle than that of the prior decree” (quoting Peacock v. Thomas, 516 U.S. 349, 358 (1996) (citation and internal quotation marks omitted; alteration in original)). Because General Cigar did not raise its section 1119 claim in the pleadings, the issue of whether relief under section 1119 should be granted was never before either the Second Circuit or even the district court in these proceedings until after the district court had dismissed the claims in the case. As such, the relief sought by General Cigar was “of a different kind” than what had been considered by the district court and by the Second Circuit. Furthermore, because the motion is based on an estoppel theory, it is premised on a “different principle than that of the prior decree.” Therefore, the motion was not a proper invocation of the district court's ancillary enforcement jurisdiction.

No word yet on Cubatabaco’s motion filed earlier this year with the district court seeking relief from the district court's previous dismissal of Cubatabaco's claim of relief based on New York common law unfair competition by misappropriation. PACER records do not reveal any outcome from the oral hearing that was scheduled to have occurred April 2, 2008.

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