Thursday, December 17, 2015

Puerto Rico registration can't constitutionally extend elsewhere

Puerto Rico Coffee Roasters LLC v. Pan American Grain Manufacturing Co., Inc., 2015 WL 8551102, No. 3:15–CV–02099 (D.P.R. Dec. 11, 2015)
P.R. Coffee Roasters, which sells “Café Rico” coffee in P.R., sued Pan American for trademark infringement, false advertising, and related claims under federal and Puerto Rico law based on Pan American’s conduct in the coffee industry, specifically its Florida sales of “Rico Coffee”  using the same name, packaging format, and color scheme as P.R. Coffee Roasters’ Café Rico,” along with alleged disparagement of P.R. Coffee Roasters. P.R. Coffee Roasters further alleged that the statement on packages of Rico Coffee, that “it is no accident Puertorrican coffee is the preferred coffee of Popes and Kings” infringed P.R. Coffee Roasters’ trademark in the slogan “The Coffee of Popes & Kings,” on packages of “Alto Grande” coffee, another P.R. Coffee Roasters brand.  (I imagine the nominative use argument might be an uphill battle here, but it’s an interesting thought.)
Plaintiff's Café Rico
Plaintiff's Alto Grande, The Coffee of Popes & Kings

Defendant's Rico Coffee
Defendant's coffee: It is no accident that Puertorrican Coffee is the preferred coffee of popes & kings

Also, P.R. Coffee Roasters alleged that Pan American was waging a “defamation campaign” that accusds P.R. Coffee Roasters of “using child labor,” “selling imported coffee as local coffee,” and “participating in efforts to undermine the Puerto Rico coffee industry,” etc.  The court pointed out that, to some extent, the allegations were that Pan American’s wrongs were at cross-purposes: seeking to benefit from, but ultimately destroy, the reputation of P.R. Coffee Roasters’ coffee brands.
P.R. Coffee Roasters alleged that Pan American knew of its Café Rico trademark due to a series of deals and litigation by Pan American involving the mark. Pan American’s Rico Coffee was allegedly marketed to the same type of consumers as P.R. Coffee Roasters’ brands, such as “the Puerto Rican community in Florida, who know and have been consuming Café Rico for more than 70 years.”  
Pan American argued that it had senior rights, but that certainly couldn’t be resolved on the pleadings. Plus, Pan American seemed to base its claim on its incontestable right to use the trade dress for “Arroz Rico,” a brand of packaged rice.  But P.R. Coffee Roasters alleged the use of its Café Rico mark for coffee since “approximately 1936” and that it was the senior user of the mark for coffee.
P.R. Coffee Roasters thus sufficiently pled infringement of its registered and unregistered marks/designs, though it didn’t allege a separate trade dress claim and would be held to that concession.  “Café Rico” was unregistered under federal law, so P.R. Coffee Roasters would ultimately have to prove secondary meaning under a rigorous standard, but it adequately pled secondary meaning by alleging that the word mark had been in continuous use since the 1930s, such that “the Puerto Rican community in Florida ... know[s] and ha[s] been consuming Café Rico for more than 70 years,” and by appending to the complaint historic examples of the advertising and promotion of the mark.  Thus, P.R. Coffee Roasters sufficiently alleged that its mark could identify the source of coffee in Florida.
The false advertising claim was also sufficiently pled.  P.R. Coffee Roasters alleged that the falsities were “disseminated under the Facebook accounts for Pan American’s brand Café Mami and the campaign ‘Salvemos el café 100% puertorriqueño,’ controlled by Pan American’s public relations team.”  “Whether a P.R. Coffee Roasters coffee is cheap or good, imported or local, adulterated or pure, destructive of Puerto Rico or supportive of it, and complicit in child labor or standing against it are all material representations about the coffee because they all ‘relate[ ] to a characteristic that defines the product at issue, as well as the market in which it is sold.’” The alleged accusations struck at the heart of P.R. Coffee Roasters’ brand.  And the allegations were of explicit falsity, requiring no extrinsic evidence of consumer deception.  Likewise, P.R. Coffee Roasters properly alleged that Pan American made false statements about itself: that it was protecting locally produced coffee, using the “slogan ‘Salvemos el Café 100% puertorriqueño’ (Save the 100% Puertorrican Coffee),” while at least two of the three brands affiliated with Pan American, Del Patio and De Mi Tierra, used imported coffee. P.R. Coffee further alleged that Pan American was abusing its control of 90% of the fertilizer market to harm P.R. coffee growers, contrary to its representations.
Pan American argued that the court lacked jurisdiction because all the allegedly disparaging statements occurred in Puerto Rico and were directed at the consuming public there.  But Congress legislated to the full extent of its Commerce Clause power in the Lanham Act.  Pan American allegedly waged part of its defamation campaign through online “ads and sponsored social media sites.” And anything that has “traveled via the Internet” has “traveled in interstate commerce.” Separately, “an adverse effect on the sales or goodwill of one whose trademark is used in interstate commerce is a sufficiently substantial effect on interstate commerce to entitle [P.R. Coffee Roasters] to invoke the protection of the Lanham Act, even if the [acts] of [Pan American’s] are wholly intrastate.”
The court also rejected Pan American’s First Amendment defense at this stage, since the First Amendment didn’t give Pan American a right to engage in misleading commercial speech.
However, P.R. Coffee Roasters couldn’t bring a Puerto Rico trademark claim, because Puerto Rico trademark law didn’t apply extraterritorially, both on statutory interpretation and Dormant Commerce Clause/First Amendment grounds. (Note interesting invocation of the First Amendment here—as we’ll see, the court suggests that there is a First Amendment right of others to use descriptive terms without secondary meaning.  That would suggest some trouble for incontestability.)  Extraterritorial application of trademark rights in “Café Rico” would conflict with the PTO’s holding that P.R. Coffee Roasters was required to disclaim rights in the word mark, other than as shown in the design mark, because “Café Rico” is a descriptive phrase in Spanish, meaning “delicious, rich coffee.” “The extraterritorial application of Puerto Rico law in this case would not only unravel the delicate balance between free speech and property rights struck in the Lanham Act, but it would also unconstitutionally impede interstate trade and speech.”

The court dismissed P.R. Coffee Roasters’ trademark misuse claim, because there was no cause of action for that.  However, P.R. Coffee Roasters could bring Puerto Rico tort claims to the extent that they adopted the Lanham Act—so P.R. Coffee Roasters could sue another Puerto Rico citizen, as Pan American was, for conduct in the state of Florida that violated the Lanham Act.  The court reserved the question of whether, if Puerto Rico law provided extra remedies (as it might), such remedies would be preempted.
By contrast, P.R. Coffee Roasters’ defamation claim under Puerto Rico law failed.  Although Pan American didn’t show it was a public figure, P.R. Coffee Roasters still needed to plausibly allege negligence.  Negligence is assessed based on the “nature of the published information,” the “[o]rigin of the information and reliability of its source,” and the “[r]easonableness of the process for checking the truthfulness of the information.”Although discovery would be required to prove negligence, P.R. Coffee Roasters still had the burden at this stage to plead negligence in a non-conclusory manner supported by pertinent facts. This it did not do.

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