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GENERAL CIGAR CO. v. G.D.M. INC.

December 18, 1997

GENERAL CIGAR CO., INC., Plaintiff, against G.D.M. INC. d/b/a GLOBAL DIRECT MARKETING and RAYMOND PARKER, Defendants.


The opinion of the court was delivered by: SWEET

 Sweet, D.J.

 Plaintiff General Cigar Co. Inc., ("General Cigar") has filed the instant motion for inter alia, a preliminary injunction to enjoin defendant G.D.M. Inc. ("GDM") from using the trademark COHIBA for premium cigars. An expensive cigar is a symbol of influence, sophistication and power, *fn1" the gift of heads of state, *fn2" which has found an increasing popularity with new, young and affluent smokers. COHIBA is variously a term for tobacco in an ancient and forgotten tongue, a sometime geographic destination, and a trademark owned by General Cigar Co. Inc. ("General Cigar"). It is in this latter capacity that COHIBA arises as the subject of this litigation. In brief, GDM, an upstart company, began illegal use of General Cigar's established COHIBA trademark, and has attempted to defend its actions, in part, by asserting the trademark rights of the Cuban dictator, Fidel Castro. As GDM will learn from the outcome set forth below, those who rely on the reputation of Castro's cigar to protect themselves from infringement actions will find their arguments going up in smoke.

 Parties

 Plaintiff General Cigar is a Delaware corporation with its principal place of business at 320 West Newberry Road, Bloomfield, Connecticut. General Cigar has been engaged in the manufacture, sale and distribution of cigars and related products in the United States, in the Dominican Republic and in other countries for many years.

 Defendant GDM is a New York corporation with offices at 599 Lexington Avenue, New York, New York. GDM has been engaged in, the importation, advertising and distribution of cigars in New York and elsewhere since July, 1997.

 Defendant Raymond Parker ("Parker") is the vice-president and a principal owner of GDM and has offices at 27 West 20th Street, New York, New York.

 Defendant Glen Miller ("Miller") is president and principal shareholder of the corporate defendant.

 Prior Proceedings

 General Cigar filed this action on October 21, 1997, bringing claims against GDM for trademark infringement in violation of § 32 of the United States Trademark Act, (the "Trademark Act") 15 U.S.C. § 1114, unlawful importation and sales of unlawfully imported goods in violation of the United States Tariff Act of 1930, 19 U.S.C. § 1526, and in violation of §§ 42 and 43(b) of the Trademark Act, 15 U.S.C. §§ 1124, 1125(b), false representations, false advertising and unfair competition in violation of § 43(a) of the Trademark Act, 15 U.S.C. § 1125(a), deceptive trade practices in violation of N.Y. Gen. Bus. Law § 349, false advertising in violation of N.Y. Gen. Bus. Law § 350, injury to reputation in violation of N.Y. Gen. Bus. Law § 360(1), common law trademark infringement and unfair competition and tortious interference with prospective business advantage.

 On October 29, 1997, General Cigar brought the instant preliminary injunction action by order to show cause. General Cigar seeks to enjoin GDM from, inter alia : (a) using the mark COHIBA or any other mark confusingly similar to General Cigar's COHIBA mark to identify services constituting or relating to cigars; (b) making any false or misleading statement about General Cigar's COHIBA cigars, which misrepresents the nature, characteristics or qualities of General Cigar's goods or trademark; (c) importing COHIBA cigars without the consent or authorization of General Cigar; and (d) selling, distributing, marketing, or advertising COHIBA cigars which have been imported into this country without the consent or authorization of General Cigar.

 General Cigar also seeks an injunction requiring GDM to deliver all cigars or other merchandise which refer to the COHIBA mark in connection with cigars or related goods, to inform their customers that they cannot sell COHIBA cigars in the United States, and that all their COHIBA cigar sales have been unauthorized, and to recall all cigars which GDM has distributed or sold which bear the infringing COHIBA mark.

 A factual hearing was held on Friday, November 14 and Monday, November 17, with final arguments heard on Monday, December 1, 1997.

 Findings of Fact

 Use of COHIBA Mark by General Cigar

 In late 1977, Culbro, the former parent company of General Cigar, decided to adopt COHIBA as a new trademark for one of its premium brand cigars. Notes from internal Culbro meetings dated December 15 and January 2, 1977 state that the word "cohiba" was derived from the Spanish verb "cohibir", which means to prohibit or restrain. Another set of notes dated December 12, 1977 made by Charles H. Sparks, the trademark custodian for Culbro, state that COHIBA was the name of a personal brand of cigar smoked by Castro. These notes indicate that the CEO of Culbro rejected the idea of a trademark search for COHIBA, and was satisfied with beginning use of the mark on cigars. The notes conclude by stating that "a grain label [will be] made up for the first three marks and [Culbro will] at least have a first use made of the marks in commerce."

 Culbro registered the COHIBA mark in 1978. In its application for registration, Culbro stated that the mark was first used on cigars in interstate commerce on February 13, 1978, and "is now in such use in commerce." The mark at that time consisted merely of the word COHIBA, without any specific design or presentation of the letters. In February and June of 1978, Culbro sold cigars labeled with the COHIBA mark to Rubovits Cigars, Inc., Chicago, Illinois. In March and April of 1978, Culbro sold COHIBA cigars to Cigars Santa Clara Ltd., New York, New York. These retailers sold the COHIBA cigars to the public. During this period, COHIBA Cigars were marketed in boxes of 50 cigars each, no example of which has survived.

 On July 25, 1978, the Patent and Trademark Office ("PTO") sent an inquiry to Culbro regarding whether the term Cohiba had any meaning or significance in the relevant trade or industry, or in the English language. The PTO also inquired regarding compliance with labels using the trademark. On January 3, 1979, Culbro sent a response to the PTO stating "To the best of applicant's knowledge, the word 'cohiba' has no English translation or any meaning or significance in the relevant trade or industry." The response also stated that "applicant is and has been in compliance with the Federal Regulations regarding labeling of products bearing the mark COHIBA", and enclosed a label specimen.

 On March 30, 1979, the PTO again contacted Culbro, raising the issue that Cohiba is a geographical tobacco growing region of Cuba, and therefore the name should be denied registration as merely descriptive or as deceptively misdescriptive, pursuant to § 2 of the Trademark Act. Culbro responded by contending that registration should not be denied because the cigars did not originate in Cuba, and cigar consumers in the United States were sufficiently ignorant of the Cohiba region in Cuba that use of the term was arbitrary or fictitious.

 On February 17, 1981, the PTO issued registration of the COHIBA mark, No. 1,147,309. This registration was assigned by Culbro to its subsidiary, General Cigar on January 13, 1987.

 An internal memorandum dated March 2, 1981, informed Edgar M. Cullman, Jr. ("Cullman"), the CEO of Culbro, that the trademark registration had matured. The memorandum also stated:

 
This trademark is being used in conjunction with periodic shipments, but to gain full protection of this trademark against use by others, shipments of cigars in interstate commerce should be made with the permanent-type of packaging as early as practical.

 General Cigar was unable to produce documents demonstrating any sales of COHIBA cigars in 1980 or 1981. Another internal memorandum dated February 18, 1982 stated:

 
We have a registration for that mark issued February 17, 1981, but as yet no commercial use of product . . . Normally the Patent & Trademark Office would reject the new application on the basis of our registration. . . . This is a little tricky because of our non-use of the registration on a commercial scale.

 General Cigar was unable to produce documents demonstrating commercial use of the mark for the first three quarters of 1982.

 At some point in 1982, General Cigar altered the packaging of COHIBA cigars from the original box of 50 to a clear plastic cylindrical package which held an upright bundle of 20 cigars. A label was pasted around the middle of the package with a picture of a monk and an Indian facing one another, separated by an enlarged tobacco leaf and the setting sun. The front of the label bore the legend: "COHIBA . . . FLOR FINA DIAZ Y CIA . . . 20 CIGARS . . . HANDMADE . . . IMPORTED." Beneath the wrap-around label was another rectangular label stating: "COHIBA No. 2." The back of the label related a short history of COHIBA cigars which began:

 
In the year 1496, the first account of tobacco was published by the Spanish monk, Romanus Pane, who sailed with Columbus on his second voyage to America. During his stay in St. Domingo (Hispaniola), he wrote the fascinating story of smoking by the Indian natives who used cured leaves from a strange plant which he named . . . COHIBA [. . . ] We have selected St. Domingo (now the Dominican Republic) with its rich tradition to make our COHIBA(R) . . . A HANDMADE CIGAR OF IMPECCABLE QUALITY.

 This story of COHIBA cigars is related in a history book possessed by Culbro which was published in 1875. The book also states that the original name for the tobacco plant given by the Indians of Hispaniola was "cohiba."

 State of the Cigar Market from 1978-1992

 According to John R. Geoghegan, vice president of strategic planning and brand development for General Cigar, the market for cigars, including premium cigars, was in a state of steady decline from 1972 until 1992, shrinking by three to six percent per year. In the late seventies to mid eighties, the total number of units imported into the United States was only 70 or 80 million units of premium cigars. In the early 1990's, only an estimated 500,000 men smoked premium cigars in the United States, approximately one half of one percent of the adult male population.

 During this period, sales of the COHIBA cigar declined, in part as a reflection of the overall market decline, and in part, according to Geoghegan, due to the failure of the plastic canister package to attract customers. Total volume of sales of COHIBA cigars from 1978 to 1992 amounted to a million and a half cigars, at approximately $ 2.5 million factory selling price. Invoices indicate shipments of COHIBA cigars for September through December of 1982, and December of 1983, 1984, 1985, 1986 and 1987, but invoices are lacking to demonstrate any shipment or sales in 1988, 1989, 1990 or 1991. General Cigar maintains that this period from 1988 to 1991 represents a temporary hiatus during which General Cigar Staged the relaunching of COHIBA cigars. Geoghegan testified that the relaunching was comprised of three major efforts: the institution of a tobacconist partnership program, an application for a second trademark registration with improved graphics, and a complete change in packaging.

 The tobacconist partnership program formed a marketing partnership between General Cigar and premium cigar retailers, initially exclusively with two retailers, Alfred Dunhill, North America Ltd., ("Dunhill"), and Mike's Cigars. Dunhill maintained eleven cigar shops around the country; Mike's Cigars maintained cigar shops in Miami. Both companies conduct an extensive direct mail business for national distribution of the cigars. General Cigar intended to limit the customer base for COHIBA cigars in order to uphold its reputation as a premium cigar. These efforts at relaunching COHIBA appear to have been successful. Mark Perez, ("Perez"), a buyer for the smoker's products division at Dunhill, testified that boxes of repackaged COHIBA cigars would rarely be shelved because they were sold out immediately upon delivery to Dunhill.

 The second trademark application was filed on December 30, 1992. This second registration included not only the word COHIBA, but specific type-face, in bold, capital letters. On January 5, 1995, General Cigar filed a statement of use with the PTO, indicating that the second COHIBA mark was first used on goods in interstate commerce in December 1992, and was in use at the time of the statement. The registration was issued June 6, 1995, No. 1,898,273.

 The new package was a shallow rectangular box which held 25 cigars. A lid was attached to the box by a metal clasp and two metal hinges. On the lower right hand corner of the lid appeared the trademark, COHIBA, in bold, capital letters. The inside of the lid bore the same mark, and the words:

 
25 Robusto . . . Hecho a Mano . . . Made in Santiago, Republica Dominicana.

 The front of the box bore the words "25 Robusto . . . Hecho a Mano." The back of the box bore the following warning:

 
Warning: This Product Produces Chemicals Known To The State of California To Cause Cancer And Birth Defects or Other Reproductive Harm.

 The sides of the box bear the legend "25 Robusto . . . Hecho a Mano." The bottom of the box bore the inscription:

 
25 Cigars Distributed By Alfred Dunhill of London, Inc. . . . Handmade in Santiago, Republica Dominicana . . . F4S New York, N.Y.

 In 1992 General Cigar again altered the packaging of COHIBA cigars, applying a finish to the wooden box used earlier. General Cigar also added a sheer flyleaf on top of the cigars inside the box. The flyleaf bears the mark COHIBA in the same bold capital letters followed by the trademark symbol. The mark is superimposed over smaller type again telling the legend of COHIBA cigars:

 
As early as 1496, the word COHIBA(R) was used by the natives of Hispaniola (now Santo Domingo) to describe the cured leaves of tobacco they smoked for pleasure and relaxation. While sailing with Christopher Columbus on his second voyage, Romanus Pane, a Spanish monk, wrote of this and gave us the name COHIBA(R). The fertile soil and ideal climate of the Dominican Republic, where COHIBA(R) was first smoked 500 years ago, makes it an ideal source for time tobaccos today.

 The rest of the type reiterates the virtues of COHIBA cigars. At the bottom of the flyleaf in small print are the words: "COHIBA(R) is a registered trademark of General Cigar Co., Inc." COHIBA cigars themselves bear a banded label which is white bordered in black. Across the center of the label are the bold, capital letters: "COHIBA". The center of the "O" in COHIBA is colored red.

 General Cigar's Advertising Campaign for COHIBA

 During the decline of the cigar market, General Cigar did not make a practice of widely advertising COHIBA cigars, or any of its other branded cigars. Instead, General Cigar would provide incentive dollars to its retailer customers to use to develop creative material, fliers and local advertisements. The amount of dollars provided was tied to the percentage of COHIBA cigars purchased, which averaged about $ 10,000 per year during this slow period. Advertisements in 1985 and 1986 were placed in direct mail catalogs produced by tobacconist Iwan Reis & Co. in Chicago Illinois.

 In 1991 and 1992, however, General Cigar began to spend significantly more money as it relaunched COHIBA cigars in its new wooden box, amounting to $ 50,000 per year. In 1993, shortly after General Cigar's first relaunching of COHIBA cigars, the cigar market began to surge upwards. From 1993 to 1997, total imports of premium cigars are estimated to have been 550 million units, an eight fold increase. As a result of this upward swing, General Cigar again relaunched COHIBA in 1997 in the finished wooden box with fly-leaf, and also increased spending to $ 3 million for 1997 alone for advertising in such magazines as Vanity Fair, the New York Times Magazine, Cigar Aficionado, the New Yorker, GQ and U.S. News and World Report, as well as for promotional parties in New York, and Miami. From July 1997 to the present, General Cigar sold 750,000 COHIBA cigars.

 Use of COHIBA Mark by GDM

 According to the testimony of Raymond Parker, ("Parker"), Vice President of GDM, GDM began importing its COHIBA cigars in May 1997 from the Monte Cristi de Tobacos c.x.a. factory in Santiago, Dominican Republic.

 General Cigar first learned of Monte Cristi's imports in 1995. Since that time, it has cooperated with its main competitor, Consolidated Cigar, ("Consolidated"), in a lawsuit brought by Consolidated against Monte Cristi in the Dominican Republic. General Cigar has also instructed its employees to immediately notify its in-house legal counsel if any cigars marked with the Monte Cristi name are spotted in the market. Seizures of Monte Cristi COHIBA cigars have been made by customs agents over the last few years.

 Parker traveled to the Dominican Republic in May 1997 for the specific purpose of importing popular cigars such as Cohiba, Montecristo, Partaga, H. Uppman, Macanudo, and several others that he felt would sell in the United States. Parker, who was not previously in the cigar business, brought back a small quantity of Monte Cristi's cigars. The cigars were well-received, and GDM determined that it would be able to supply the cigars to companies to whom General Cigar would not sell its COHIBA cigars.

 GDM was aware of General Cigar's registration of the COHIBA mark. In September of 1997, Parker conducted a trademark search of COHIBA, which showed that General Cigar's trademark had been challenged by Empresa Cubana del Tabaco, d.b.a. Cubatabaco, ("Cubatabaco"), a Cuban company, on January 15, 1997, on the grounds that Cubatabaco had registered the COHIBA mark in Cuba in 1972, and used the mark continuously since that time in Cuba and internationally. GDM was also aware of the seizure of Monte Cristi's COHIBA cigars by customs officials; Parker testified ...


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