MHW is no longer selling genuine Stolichnaya vodka, and for alleging that the Terek vodka is in fact genuine Stolichnaya vodka for U.S. importation.
PepsiCo and MHW, on the other hand, cross-move for a preliminary injunction against FMI. MHW has a multi-million dollar business, built up over more than 20 years. PepsiCo and MHW claim that plaintiffs will suffer no irreparable injury, their request for relief has been inordinately delayed, defendants will suffer catastrophic results if the order is entered, and the result sought will destroy, rather than maintain, the status quo. Also, they maintain that plaintiffs' claims must fail on the merit. Terek has never used the mark here, and has no registration here or anywhere else, and thus no basis to claim trademark rights under U.S. law. Plaintiffs cannot have greater rights in the U.S. than their assignor has.
Plaintiffs' North Ossetian proclamation stating that Terek has the rights in the mark does not have legal force in the U.S., even assuming arguendo its validity in Russia.
A declaration by a purported government official in North Ossetia does not reflect any official position of the Russian government: North Ossetia is only of the twenty autonomous republics of the Russian federation, is not recognized as sovereign by the U.S., and has no authority to speak on behalf of the Russian federation.
The Act of State doctrine does not apply here; no sovereign state recognized by the U.S. has made any proclamation, and furthermore, such a decree purporting to expropriate property located within the United States is without effect. Bandes v. Harlow & Jones, Inc., 852 F.2d 661, 666-67 (2d Cir. 1988). Indeed, I note in this connection that James Burke, president of FMI, stated at his recent deposition that this North Ossetian declaration was actually prepared by FMI's counsel in New York, taken to Moscow, and faxed to the North Ossetian Deputy Prime Minister to sign. Furthermore, that proclamation, even if valid, purports to grant the right to use the Stolichnaya mark to Terek and "all other liquor making factories" -- at least six of those factories are stockholders in SPI and are distillers who have been supplying MHW all along. Plaintiffs state that Terek has been appointed as the designated spokesman for all other factories, but they submit no evidence or agreements indicating that such is indeed the case.
Under the concept of territoriality, which is basic to trademark law, "trademark rights exist in each country solely according to that country's statutory scheme." Fuji Photo Film Co., Inc. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 599 (5th Cir. 1985), citing Ingenohl v. Walter E. Olsen & Co., 273 U.S. 541, 544, 71 L. Ed. 762, 47 S. Ct. 451 (1927). The function of a trademark is not necessarily to specify the origin of a product, but rather "to symbolize the domestic goodwill of the domestic markholder so that the consuming public may rely with an expectation of consistency on the mark by its owner. . ." Bambu Sales, Inc. v. Sultana Crackers, Inc., 683 F. Supp. 899, 910 (E.D.N.Y. 1988). The domestic trademark owner need not produce or manufacture the products sold under the mark.
FMI's claim of ownership of the marks in the U.S. is based not on use or registration in the U.S. by Terek, but solely on the aforementioned proclamation of the North Ossetian deputy prime minister. Plaintiffs' activities seem to be a clear violation of Section 32(1)(a) of the Lanham Act, 15 U.S.C. § 1114(1)(a), prohibiting the sale of "imitation" goods of questioned quality that are likely to deceive or to cause confusion among buyers. Regardless of any rights that Terek may or may not have in Russia, they do not have rights in the U.S. in the face of the valid, incontestable U.S. trademark. Stolichnaya vodka in the U.S. is the vodka imported by MHW, PepsiCo's authorized importer and distributor, under that brand name for the last twenty years. Vodka imported into the U.S. through a source other than PepsiCo may not be called "Stolichnaya." Foreign use is ineffectual to create trademark rights in the U.S. La Societe Anonyme des Parfums Le Galion v. Jean Patou, Inc.. 495 F.2d 1265, 1270 n. 4 (2d Cir. 1974); Persons Co., Ltd. v. Christman, 900 F.2d 1565, 1568 (Fed. Cir. 1990).
Plaintiffs in the final analysis have failed to establish on this record that they will suffer any irreparable injury if an injunction in their favor is denied. Plaintiffs have no certificate of label approval from the Federal Bureau of Alcohol, Tobacco and Firearms, without which they may not lawfully import or sell vodka. They have no import license, no inventory of any kind in the U.S., and no firm delivery dates for the approximately ten orders they have received from U.S. distributors, who have agreed to wait until this case is resolved. There is no evidence that Terek vodka, which is bottled and perhaps blended in Budapest, meets Russian export standards or PepsiCo's standards. Indeed, this whole situation appears basically to have been seen by president Herbik of plaintiff Import, and presumably others, as a unique opportunity to succeed to an enormously popular franchise developed by MHW; clearly, plaintiffs are presenting their product as the same vodka that has been imported and sold by defendants for 20 years. The use of the Stolichnaya trademark for vodka that seems likely to be inferior to, and is admittedly different from, the vodka that MHW has been selling for twenty years, could destroy the Stolichnaya mark and goodwill that PepsiCo and MHW have built up. It is certainly clear from this vantage point that were things to proceed without judicial intervention, a likelihood of confusion as to the source of the product would exist, and that showing alone in the setting before me is sufficient to establish that there is a risk of irreparable harm to the reputation of the trademark. See General Motors Corp. v. Gibson Chemical & Oil Corp, 786 F.2d 105, 109 (2d Cir. 1986); LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 79 (2d Cir. 1985).
PepsiCo and MHW having on this record overwhelmingly shown irreparable injury and a likelihood of success on the merits, their cross-motions for preliminary injunctive relief against plaintiffs are granted, and plaintiffs are accordingly enjoined from proceeding further as purported importers of Stolichnaya vodka, and from soliciting purchase orders for their infringing Stolichnaya vodka, and from representing to the U.S. trade or customers that they own the marks, or that they have the right to import or sell vodka under those marks, or that MHW does not have this right. Plaintiffs' original motion is accordingly necessarily denied.
The foregoing is so ordered. Defendants may, if desired, submit a formal order on notice carrying the foregoing into effect.
Dated: November 17, 1992
New York, New York
United States District Judge