ITC Ltd. v. Punchgini, Inc., --- N.E.2d ----, 2007 WL 4334177 (N.Y.)
The Second Circuit certified two questions to the New York Court of Appeals. That court concluded that New York does have a common-law unfair competition claim, but that doesn’t include the famous/well-known marks doctrine. Except insofar as it actually does: read on!
ITC has operated the Bukhara restaurant in New Delhi since 1977; in 2002 and 2003, it made Restaurant magazine’s list of the 50 best restaurants in the world. ITC opened or franchised Bukhara restaurants in several locations around the world, but only a few of them survived – in Singapore, Kathmandu, and Ajman. ITC opened a Bukhara in NYC in 1986 and then registered Bukhara for restaurant services. The restaurant closed in 1991, and a Chicago cousin’s franchise (b. 1987) was cancelled in 1997.
In 1999, defendants, who had worked at ITC’s New Delhi Bukhara (one had also worked in NYC Bukhara), opened Bukhara Grill. The Bukhara Grill “features many of the New Delhi Bukhara’s signature dishes-- which showcase the cuisine of the Northwest frontier region of India--and replicates many of its particular design elements.” One defendant described the Bukhara Grill in the press as “quite like Delhi’s Bukhara,” commenting that “[t]he food is similar ... and the waiters too are dressed in similar Pathani suits.”
Five other restaurants in the US use Bukhara in their names, as well as more than 20 unaffiliated Bukhara restaurants worldwide, including one in South Africa that sells prepackaged foods and owns bukhara.com.
ITC objected to Bukhara Grill in 2000 (at which time defendants’ counsel asked for proof of use of the mark in the US), and again in 2002, but only filed suit in 2003. The district court found that ITC had abandoned its mark in the US, and held that ITC was not protected under state law by the well-known marks doctrine based on its use of the mark outside the US. Even if the well-known marks doctrine was valid in New York, ITC hadn’t met its minimum requirements.
The Second Circuit affirmed the holdings on the federal issues, but certified the state-law questions to the New York Court of Appeals.
Certified Question No. 1: “Does New York common law permit the owner of a famous mark or trade dress to assert property rights therein by virtue of the owner’s prior use of the mark or dress in a foreign country?”
The court reframed the question as whether a famous foreign mark constitutes property or a commercial advantage protected from unfair competition under New York law. New York recognizes two theories of common-law unfair competition: palming off and misappropriation. Prior New York cases often cited as “famous marks doctrine” cases were based on misappropriation – it’s unfair to appropriate the results of the skill, expenditures and labor of a competitor. In fact, the court held, those cases did not adopt a well-known marks doctrine, but simply applied the general unfair competition law, where the defendants had misappropriated plaintiffs’ goodwill in famous names to themselves. Those cases stand for the proposition that, “for certain kinds of businesses (particularly cachet goods/services with highly mobile clienteles), goodwill can, and does, cross state and national boundary lines.”
Thus, the answer to the first question is “Yes,” but “we are not thereby recognizing the famous or well-known marks doctrine, or any other new theory of liability under the New York law of unfair competition.” But when a business has goodwill in New York, that’s a form of property or commercial advantage the law will protect, whether the business is domestic or foreign.
Certified Question No. 2: “How famous must a foreign mark or trade dress be to permit its owner to sue for unfair competition?”
Actual goodwill in New York is a requirement. Otherwise another’s use in New York takes nothing away from the plaintiff. At a minimum, New York consumers must “primarily associate the mark with the foreign plaintiff” (citing, interestingly enough, the foundational dilution case Allied Maintenance Corp. v. Allied Mechanical Trades, Inc., 42 N.Y.2d 538, 545 (1977)). Relevant factors include: defendant’s intentional association of its goods/services with those of the plaintiff, “such as public statements or advertising stating or implying a connection with the foreign plaintiff”; direct evidence, such as consumer surveys; and evidence of actual customer overlap. Deliberate copying is an independent prerequisite. Only if that is established can plaintiffs proceed to show that the relevant consumer market “primarily” associates the mark at issue with plaintiff’s restaurants.
This doesn’t address head-on the difficulties of recognizing a well-known marks exception to the US’s use-based system, but it does seem to impose a higher standard than secondary meaning for protection, and by directing attention to defendants’ market it means that foreign fame alone will not justify protection. ITC sounds like it’s out of luck, given the district court’s factual findings about the lack of fame of the Bukhara mark in New York.