United States: Limits To Enjoining Trademark Infringement Do Not Necessarily Preclude Standing To Cancel The Trademark Registration Before The TTAB

In Empresa Cubana Del Tabaco v. General Cigar Co., No. 13-1465 (Fed. Cir. June 4, 2014), the Federal Circuit vacated the TTAB's SJ decision that Empresa Cubana Del Tabaco (d/b/a Cubatabaco) ("Cubatabaco") lacked standing to seek cancellation of trademark registrations owned by General Cigar Co., Inc. ("General Cigar"). Though not decided by the TTAB, the Court also held that neither issue nor claim preclusion barred Cubatabaco's Amended Petition to seek cancellation. Accordingly, the Court remanded for proceedings consistent with its opinion.

General Cigar is a Delaware corporation that owns two trademark registrations for the COHIBA mark for use in connection with cigars ("the Registrations"). Cubatabaco is a Cuban entity that owns the COHIBA mark in Cuba and supplies cigars bearing that mark throughout the world, except the United States, where the Cuban Assets Control Regulations ("CACR") prohibits such sales. CACR also prohibits a "transfer of property rights . . . to a Cuban entity by a person subject to the jurisdiction of the United States." Slip op. at 3 (quoting 31 C.F.R. § 515.201(b)). The CACR is, however, subject to exceptions: it authorizes Cuban entities to obtain a general or specific license to engage in certain otherwise prohibited transactions, such as "transactions 'related to the registration and renewal' of trademarks" before the PTO. Id. (quoting 31 C.F.R. 515.527(a)(1)).

Under a CACR general license, Cubatabaco attempted to register the COHIBA mark in the United States based on its registration of the same mark in Cuba. The PTO cited General Cigar's Registrations as grounds for refusing Cubatabaco's registration due to a likelihood of confusion, and Cubatabaco filed a petition to cancel the Registrations. Cubatabaco also commenced litigation against General Cigar in the Southern District of New York, alleging trademark infringement and seeking, inter alia, to enjoin General Cigar's use of the COHIBA mark in the United States and to cancel General Cigar's competing Registrations. The TTAB suspended the cancellation proceedings pending the outcome of the district court action. The district court canceled the Registrations and permanently enjoined General Cigar's use of the COHIBA mark. On appeal, the Second Circuit vacated the cancellation and the injunction, holding that Cubatabaco could not obtain the injunctive relief it sought because the remedy would entail a prohibited transfer of property under the CACR since Cubatabaco would acquire ownership of the underlying mark.

The TTAB proceedings then resumed. Cubatabaco filed an Amended Petition, and General Cigar moved for SJ on the grounds that Cubatabaco lacked standing and that the principles of issue and claim preclusion barred Cubatabaco's Amended Petition. The TTAB granted the motion, finding that Cubatabaco lacked standing in light of the Second Circuit's decision, but expressly noting that it did not need to reach the merits of the preclusion claims.

"Cubatabaco therefore has a legitimate interest in the cancellation of the Registrations that are causing Cubatabaco damage by blocking its application. Indeed, if Cubatabaco proves successful in the cancellation proceedings, Cubatabaco could obtain registration of the COHIBA mark."
Slip op. at 9.

On appeal, the Federal Circuit reversed. The Court noted that though the TTAB declined to address the preclusive effect of the Second Circuit's decision, the TTAB relied exclusively on that decision to find that Cubatabaco lacked standing. The Court then explained that the Second Circuit decided only that the CACR limited the federal courts' authority to grant Cubatabaco injunctive relief, a finding that not only did not bar Cubatabaco from ever acquiring any property interest in the COHIBA mark, but also was irrelevant to the proceedings before the TTAB, where Cubatabaco had affirmative authorization to seek cancellation of the Registrations under a CACR general license. Furthermore, according to the Court, Cubatabaco had a legitimate commercial interest in the COHIBA mark. Because the TTAB had refused registration of Cubatabaco's own pending trademark application based on a likelihood of confusion with General Cigar's Registrations, the Court held that Cubatabaco had a statutory cause of action under the Lanham Act to seek cancellation of the Registrations.

The Court separately addressed General Cigar's issue and claim preclusion arguments. As a preliminary matter, the Court held that it had authority to resolve these questions of law for the first time on appeal since they were fully briefed by the parties based on an extensive record. The Court then held that neither issue nor claim preclusion barred any of the grounds for which Cubatabaco sought cancellation of the Registrations. Regarding issue preclusion, the Court concluded that, at a minimum, the issues that Cubatabaco raised were not addressed by, or necessary to, the Second Circuit's final judgment. Regarding claim preclusion, the Court explained that the Second Circuit never issued a final decision on cancellation and that the transactional facts differed in Cubatabaco's cancellation proceedings before the TTAB.

The Federal Circuit thus vacated the TTAB's SJ decision, holding that Cubatabaco had a cause of action to seek cancellation of the Registrations that was not barred by issue or claim preclusion, and remanding for further proceedings consistent with its opinion.

Judges: Rader (author), Taranto, Hughes

[Appealed from TTAB]

This article previously appeared in Last Month at the Federal Circuit, July 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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