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Coca-Cola Loss Raises—But Ducks—Territoriality Trademark Tension

July 7, 2022, 9:15 AM

Coca-Cola Co.’s failure to provide critical evidence regarding its Indian trademarks prevented its case against a US copycat from reaching the uncertain intersection of two core trademark principles: confusion and territoriality.

Meenaxi Enterprise Inc. convinced the US Court of Appeals for the Federal Circuit to revive its US registrations of Thums Up and Limca soda trademarks—marks that Coca-Cola made famous in India. But evidence that Indian-Americans knew the brands well could’ve helped Coca-Cola avoid the appeals court’s finding that its claims of damages were merely speculative.

That would have cast the case into an actively disputed area that’s the subject of a pending petition to the US Supreme Court. Territoriality is a fundamental component of trademark law, with rights generally existing only in the countries where a mark is used. But avoiding consumer deception sits at the core of trademark law.

Those principles can collide when a company like Meenaxi intentionally copies foreign trademarks that aren’t in use in the US—a conflict attorneys say courts aren’t entirely sure how to balance.

“There is no definitive answer when it comes to territoriality and its intersection with consumer confusion,” said trademark attorney Michael Kondoudis of the Law Office of Michael Kondoudis. “There’s definitely a tension there.”

‘For Goodness Sake’

The Trademark Trial and Appeal Board held Meenaxi’s use of logos that are “essentially identical” to both older and updated versions of Coca-Cola’s Indian marks “reflects an effort to dupe consumers” into thinking the products were the same. The board also noted that the distributor admitted familiarity with the marks’ use in India, and that it targeted Indian grocers and restaurants. It said success in India and other countries made it likely Indian-Americans knew of Thums Up and Limca.

But the Federal Circuit said the record contained “no basis to assume that an American of Indian descent is aware of brands in India.” It faulted the TTAB for relying on affidavits of two Coca-Cola executives and “stereotyped speculation” for its assumption.

Without establishing that US consumers were aware of their brands, Coca-Cola couldn’t demonstrate reputational harm—and therefore a right to challenge the mark—the court said. Coca-Cola’s use and reputation in India by itself have no bearing on its US rights.

Trademark attorney Marsha Gentner of Dykema Gossett PLLC called territoriality “a very strong controlling principle.” Coca-Cola’s failure to provide any evidence of broad US awareness of the marks, such as a consumer survey, doomed its case before any challenging territoriality-versus-confusion questions could even be reached, she said.

“The court was saying ‘for goodness sake, if you want us to go against this cardinal rule of trademark law for centuries, you have got to have evidence,’” Gentner said.

But if Coca-Cola had provided evidence, Gentner said there’s “a good chance” the court nevertheless would have ruled it couldn’t ax the US trademark because Coca-Cola didn’t have any US rights in them.

“I think they were close to saying ‘even if you had a reputation, we don’t know that we’d buy it,’” Gentner said.

Between the Lines

The court alluded to multiple overarching questions—ones it said it didn’t have to address because of the nature of Coca-Cola’s case.

The opinion said “courts disagree” whether famous marks used outside the US are entitled to protection from reputational injury in the US. But it noted Coca-Cola’s claims didn’t rely on a famous marks exception to territoriality limitations. Circuit Judge Jimmie V. Reyna’s concurring opinion said Coca-Cola needed that waived exception to overcome the territoriality doctrine. Reyna said the majority “could be reasonably read to imply” that proof of US awareness of the brands could have given Coca-Cola standing, but he still would have reversed the TTAB.

Trademark professor Margaret Chon of Seattle University School of Law noted Reyna’s statement that he believes “the well-known mark exception is essentially the same inquiry” as whether US consumers knew of the marks. She said that sentence “is key.”

“Is this a new exception or is it just a version of the famous mark exception?” Chon said in an email. “That’s the 6 million dollar question. I think that the CAFC announced a new general rule.”

The majority also said “it remains unclear the extent to which territoriality principle applies” to false designation of origin or misrepresentation of source claims, which don’t require US trademark rights to bring. But Coca-Cola’s claims were based entirely on alleged activity in the US, so “the extent to which the Lahnam Act applies to activities outside the US is not a question implicated here.”

Extra-Territoriality

The Fourth Circuit has also addressed a brand known in the US accusing a copycat of using its foreign mark to deceive immigrants. It found in 2016 that Bayer AG could bring false designation and misrepresentation claims against Belmora LLC. Belmora’s US use of a “Flanax” mark that Bayer used to sell Aleve in Mexico fell within Bayer’s zone-of-interests.

But the Federal Circuit’s Coca-Cola ruling cited several academic criticisms of the Fourth Circuit’s suggestion that lost foreign sales can qualify as a Lanham Act injury.

“There’s a good chance that the Federal Circuit, had Coca-Cola presented evidence, might have said ‘we’re on the territorial bandwagon,’” Gentner said. “Cases are all over the map.”

Kondoudis noted the Federal Circuit’s citation of its 1990 decision Person’s Co. v. Christman, a case with the same “fatal defect” as Coca-Cola’s. The court ruled Person’s—a retailer well-known in Japan that expanded into the US—couldn’t stop Christman from using its mark because it didn’t show the mark had “acquired any notoriety” in the US when Christman adopted it.

The Supreme Court has asked the US government to weigh in on a different breed of trademark territoriality case that it’s considering taking up. There, the question is whether a company that sold knock-off Hetronic radio remote controls can retain a Tenth Circuit-affirmed $90 million trademark award almost entirely derived from foreign sales.

Academics said Arbitron Austria GmbH v. Hetronic Int’l Inc. wouldn’t inform the handling of the Thums Up case—even if Coca-Cola established reputational damage and hadn’t waited more than a decade to act. One involves damages for infringing a US trademark through foreign sales, and the other deals with canceling US trademark registrations based on reputational damage to foreign marks.

“I don’t think the Hetronic case would help clarify this case, although it does underscore the basic principle of territoriality, which the Hetronic court seems to have minimized,” Chon said.

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editors responsible for this story: Adam M. Taylor at ataylor@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com