Joint Stock Society v. UDV North America, Inc.

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
9-14-2001
Joint Stock Society v. UDV N Amer Inc
Precedential or Non-Precedential:
Docket 99-5422
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Filed September 14, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-5422
THE JOINT STOCK SOCIETY, "Trade House of
Descendants of Peter Smirnoff, Official
Purveyor to the Imperial Court" and THE
RUSSIAN AMERICAN SPIRITS COMPANY,
Appellants
v.
UDV NORTH AMERICA, INC. and
PIERRE SMIRNOFF COMPANY
ON APPEAL FROM THE
UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF DELAWARE
(Dist. Court No. 95-749-GMS)
District Court Judge: Gregory M. Sleet
Argued September 27, 2000
Before: BECKER, Chief Judge, and ALITO and
FUENTES, Circuit Judges.
(Opinion Filed: September 14, 2001)
James W. Hawkins (Argued)
Hilary Harp
Todd E. Jones
Powell, Goldstein, Frazer, &
Murphy LLP
191 Peachtree Street, 16th Floor
Atlanta, Georgia 30303
Duncan M. Grant
Pepper Hamilton LLP
1201 Market Street, Suite 600
P.O. Box. 1709
Wilmington, Delaware 19899-1709
Attorneys for Appellants
Arlin M. Adams
Schnader, Harrison, Segal &
Lewis LLP
Suite 3600
1600 Market Street
Philadelphia, Pennsylvania 19103
Attorney for Amicus Curiae
in Support of Appellants
Allen M. Terrell, Jr.
Richards, Layton & Finger
One Rodney Square
Wilmington, Delaware 19899
William L. Webber (Argued)
Kenneth W. Brothers
Kelly A. Clement
Charles A. Loughlin
Erik Bertin
Howrey Simon Arnold & White, LLP
1299 Pennsylvania Avenue, N.W.
Washington, District of
Columbia 20004
Attorneys for Appellees
OPINION OF THE COURT
ALITO, Circuit Judge:
The Joint Stock Society ("Joint Stock") and the Russian
American Spirits Company ("RASCO"), filed this action
against UDV North America, Inc. ("UDV") and the Pierre
Smirnoff Company, asserting claims under the Lanham Act,
15 U.S.C. S 1051 et seq., for false designation of origin,
2
false advertising, and trademark cancellation. The plaintiffs
also raised claims under the Delaware Uniform Deceptive
Trade Practices Act, 6 Del. Code SS 2531-36 et seq. The
plaintiffs alleged that the defendants have fostered the
mistaken impression that Smirnoff vodka is made in Russia
and is the same product that was produced in Russia and
sold to the czar before the Russian Revolution. The District
Court dismissed the complaint for lack of subject matter
jurisdiction, holding that the plaintiffs had failed to present
a case or controversy that was ripe for decision within the
meaning of Article III of the United States Constitution and
that, even if the plaintiffs' claims were ripe, the plaintiffs
did not meet constitutional or prudential standing
requirements. In the alternative, the Court granted
summary judgment in favor of the defendants under the
doctrine of laches. See Joint Stock Soc'y v. UDV N. Am., Inc.,
53 F. Supp. 2d 692 (D. Del. 1999). We hold that the
plaintiffs did not satisfy Article III or prudential standing
requirements, and we affirm the judgment of the District
Court.
I.
In the 1860s, Piotr Arsenvitch Smirnov ("P.A. Smirnov")
began a vodka trade house in Russia named "P.A. Smirnov
in Moscow." During his lifetime, P.A. Smirnov built his
trade house into a nationally and internationally renowned
vodka distillery, winning numerous awards. Perhaps the
greatest recognition he received was being named the
"Official Purveyor to the Russian Imperial Court" in 1886.
P.A. Smirnov died in 1898, leaving the trade house to his
widow and five sons. After his widow died in 1899, the
business was owned by his sons, who were, from eldest to
youngest, Piotr, Nikolai, Vladimir, Sergei, and Alexey. The
plaintiffs allege that the three oldest brothers bought
Sergei's and Alexey's interests in the business in 1902.
Plaintiffs also allege that Nikolai and Vladimir sold their
interests to Piotr in 1904 or 1905, leaving Piotr as the sole
owner of the trade house. In addition, the plaintiffs claim
that Vladimir agreed to relinquish his "right to the company
name, privileges, and honors" in exchange for monetary
compensation. When Piotr died in 1910, his wife, Eugenia,
3
became the sole owner of the trade house. She operated the
trade house successfully until 1917.
In 1917, as the Bolshevik revolution spread through
Russia, Eugenia married an Italian diplomat and fled to
Italy. She eventually settled in Nice, France. In 1918, the
newly formed Communist government in Russia
nationalized the Smirnov trade house. Under state control,
the trade house no longer used the "Smirnov" name,
although vodka production continued.
Also in flight from the Russian Revolution, Vladimir
relocated to Constantinople. In 1920, he established a
distillery under the name "Supplier to the Imperial Russian
Court, Pierre Smirnoff Sons." By 1924, Vladimir had moved
to Lvov, Poland, and had opened a vodka distillery. In 1925,
he opened another distillery in Paris under the name of
"Ste. Pierre Smirnoff Fils" or "The Company of the Sons of
Peter Smirnoff."
In 1933, Ste. Pierre Smirnoff Fls. entered into an
agreement with Rudolph Kunett, an American
businessman. Under this agreement, Vladimir granted
Kunett the exclusive right to manufacture and market
Smirnoff vodka in the United States in exchange for
monetary compensation. Kunett soon thereafter assigned
his rights to himself, Benjamin B. McAlpin, Jr., Donald M.
McAlpin, and Townsend M. McAlpin. Those four
individuals, in turn, assigned their rights to a newly created
New York corporation, Ste. Pierre Smirnoff Fls., Inc. (NY). In
1934, Ste. Pierre Smirnoff Fls., Inc. (NY) began the
production and sales of vodka in the United States, using
the name of "Smirnoff "1 and the historical Smirnoff marks.2
_________________________________________________________________
1. As the parties concede, there is no material difference between the
"Smirnoff " and "Smirnov" names. However, in order to differentiate
between the parties and their respective products, we use the name
"Smirnov" when referring to the plaintiffs' products and Smirnoff when
referring to those made by the defendants.
2. The historical marks of which Joint Stock complains include, but are
not limited to, the use of Cyrillic characters, a crown, a shield and red
shroud from the Russian Imperial Court, and several medals bearing the
state coat of arms for Russia.
4
Five years later, G.F. Heublein & Bro. purchased Ste.
Pierre Smirnoff, Fls., Inc. (NY). G.F. Heublein & Bro.
established a Connecticut subsidiary to manufacture and
market the sale of Smirnoff vodka in the United States, Ste.
Pierre Smirnoff, Fls. (CT). In 1955, G.F. Heublein & Bro.
changed its name to Heublein, Inc. Since then, Heublein
and its successor, UDV, have marketed Smirnoff vodka
successfully, currently manufacturing approximately six
million cases per year. Smirnoff is now the largest-selling
vodka brand in the United States and the second largest-
selling distilled spirit. Smirnoff still uses labeling and
advertising that is heavily dependent on its association with
P.A. Smirnov and the Russian trade house. For example,
the label of a Smirnoff vodka bottle refers to Ste. Pierre
Smirnoff Fls. as "Purveyors to the Imperial Russian Court
1886-1917" and "successors to the world-famous Pierre
Smirnoff." The label also includes a crown, shield, and red
shrouds from the Russian Imperial Court, as well as several
medals bearing the state coats of arms for Russia.
Eugenia first learned of Vladimir's use of the Smirnoff
name and marks around 1925. Upset that Vladimir was
marketing Smirnoff vodka without permission, she wrote a
letter to her husband asking for advice. Her husband
responded that any legal action would require documentary
proof of her claim to be the sole owner of the Smirnov trade
house. However, all papers proving the ownership of the
trade house were still in Russia, where the Communist
regime was repressing all facets of private enterprise.
Fearing that she would be prosecuted by the Soviet
authorities if she tried to obtain the needed documents in
Russia, Eugenia elected not to make an attempt. She did,
however, write letters to friends and family in Russia asking
for their help. Eugenia also had her daughter, Tatyana,
write letters to friends, relatives, and organizations to enlist
their aid in obtaining documentary proof, but there is no
evidence that either Eugenia or Tatyana contacted Vladimir
to bring this issue to his attention.
During the 1930s, Eugenia and her family became aware
that Vladimir had sold his "rights" to the Smirnoff name to
Kunett and that Kunett was manufacturing Smirnoff vodka
in the United States and was using the Smirnoff name and
5
marks. Nevertheless, no one contacted either Kunett or the
later producers of Smirnoff vodka in America, Ste. Pierre
Smirnoff Fls. Inc. (NY), to inform them of Eugenia's claim to
the Smirnoff name.
In 1958, Eugenia died. Prior to her death, however,
Eugenia executed a document giving Tatyana "power of
attorney" over the "defense of [her] interest in asserting
[her] rights to the ownership and title of``SMIRNOFF
VODKA' . . . which [she believed had] been unjustly used by
third parties in violation of her rights." In 1977, Tatyana
died intestate in France, with her "rights" in Smirnoff
passing to her sons, Boris Alexandrovich Smirnoff and
George Smirnoff. George Smirnoff died the next year, never
having informed Heublein of his claim to the rights
surrounding the name "Smirnoff." Nor did Boris
Alexandrovich Smirnoff ever inform Heublein of his claim
until 1994, when he learned of Joint Stock's dispute with
Heublein.
II.
As noted, the plaintiffs-appellants in this case are Joint
Stock and RASCO. Neither of the plaintiffs has a direct
connection to Eugenia, Tatyana, Boris Alexandrovich, or
George (collectively, the "French Smirnovs"). Instead, both
are recently formed companies that wish to import and sell
vodka in the United States under the Smirnov name.
Joint Stock was chartered in Russia in 1993 as "Trade
House of Descendants of Peter Smirnov, Official Purveyor to
the Imperial Court." The principal owners of Joint Stock are
Andrei and Boris Alexeseevich Smirnoff (as distinguished
from Boris Alexandrovitch Smirnoff, Eugenia's son), who are
the descendants of P.A. Smirnov's two youngest sons,
Sergei and Alexey. Joint Stock, in conjunction with Russian
vodka manufacturers, currently produces and markets
vodka under the Smirnov name in Russia.
RASCO is a Delaware corporation headquartered in
Connecticut. RASCO has an agreement with Joint Stock
under which RASCO would be the exclusive licensee for any
rights Joint Stock might obtain in the Smirnoff or Smirnov
trademark and trade name. RASCO was incorporated by an
6
agent of Joint Stock with this purpose in mind. Neither
Joint Stock nor RASCO has ever sold vodka in the United
States.
The defendants-appellees in this case are UDV and the
Pierre Smirnoff Company. As detailed above, UDV, a
Connecticut corporation, and its predecessors have
manufactured, sold, distributed, and marketed the Smirnoff
brand of vodka products in the United States since 1934.
Between 1934 and 1997, UDV and its predecessors
obtained 17 trademark registrations in the United States
for various Smirnoff marks. The Pierre Smirnoff Company,
a Delaware Corporation, is the wholly owned subsidiary of
UDV responsible for the marketing of Smirnoff vodka. The
defendants and their predecessors heavily promoted the
Smirnoff brand, spending more than $700 million for
advertising and marketing over the past 60 years.
The plaintiffs in this case contend that the defendants
have misappropriated the Smirnov name and that they
have misled consumers into believing that Smirnoff vodka
is made in Russia and is the same as the product that was
produced in Russia and purveyed to the czar before the
revolution. In fact, they allege that Smirnoff vodka is made
in the United States using ingredients and a process that
sharply differ from that used in Russia before 1917. Instead
of pure Russian water, they say, Smirnoff uses filtered city
tap water, and instead of neutral spirits derived from
Russian wheat, Smirnoff is made using American corn.
Moreover, the date 1818 on the Smirnoff label, according to
the plaintiffs, is deceptive, since the Russian trade house
was not founded until 1860, and manufacture of the
distinctive American vodka sold under the Smirnoff mark
did not commence until the 1930s.
The complaint in this action contained seven counts.
Counts one and two asserted claims for, respectively, false
designation of origin and false advertising, in violation of
Section 43(a)(1)(A) and (B) of the Lanham Act, 15 U.S.C.
SS 1125(a)(1)(A) and (B).3 In support of these claims, the
_________________________________________________________________
3. Section 43(a)(1)(A) and (B) provide as follows:
(1) Any person who, on or in connection with any goods or services,
or any container for goods, uses in commerce any word, term,
7
complaint referred to the defendants' use of "the trademark
and trade name SMIRNOFF " and "the Smirnoff family
crest, insignia, emblems, and medals." Counts one and two
alleged that the defendants' false designation of the origin
of their products and false advertising had caused damage
to the plaintiffs and was likely to continue to do so. It is
important to note that, although the plaintiffs' presentation
of their position often tends to foster a contrary impression,
these claims under Section 43(a) are not dependent on any
right that the plaintiffs may assert to the use of the
Smirnov or Smirnoff name. As plaintiffs' counsel
acknowledged at oral argument, the plaintiffs could have
asserted these claims even if they marketed their product
under a wholly unrelated name. The essence of these
claims is not that the defendants have no legitimate right to
the use of the Smirnoff marks but that the defendants have
propagated the false impression that Smirnoff vodka is
Russian and is essentially the same product that was
produced by P.A. Smirnov in czarist days. As the Second
Circuit stated, "Section 43(a) is intended to reach false
advertising violations, not false registration claims." La
Societe Anonyme des Parfums Le Galion v. Jean Patou, Inc.,
495 F.2d 1265, 1271 n.6 (2nd Cir. 1974); see also Charles
E. McKenney & George F. Long III, Federal Unfair
Competition: Lanham Act S 43(a) S 2.02[6] (2000)
("Defendant's attempts to establish trademark rights . . .
does not state a Section 43(a) violation, nor are efforts by
defendant to obtain fraudulent registrations redressable
under Section 43(a).")
_________________________________________________________________
name, symbol, or device, or any combination thereof, or any false
designation of origin, false or misleading description of fact, or
false
or misleading representation of fact, which--
(A) is likely to cause confusion, or to cause mistake, or to
deceive as
to the affiliation, connection, or association of such person with
another person, or as to the origin, sponsorship, or approval of
his
or her goods, services, or commercial activities by another person,
or
(B) in commercial advertising or promotion, misrepresents the
nature, characteristics, qualities, or geographic origin of his or
her
or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that
he
or she is or is likely to be damaged by such act.
8
Count three asserted a claim under Section 38 of the
Lanham Act, 15 U.S.C. S 1120,4 which imposes civil liability
for damages sustained by a person injured as a result of
the procurement of the registration of a mark by a false or
fraudulent declaration. Count three alleged that the
defendants had obtained registration of their trademarks by
filing papers that they knew were false or fraudulent.
Count four, which was based on Sections 14 and 37 of
the Lanham Act, 15 U.S.C. SS 1064 and 1119, 5 sought
cancellation of the defendants' marks, as well as other
relief, and count five, which was grounded on Section 34 of
the Lanham Act, 15 U.S.C. S 1116,6 sought an injunction
against further violations of Section 43.
_________________________________________________________________
4. Section 38 of the Lanham Act, 15 U.S.C. S 1120, provides as follows:
Any person who shall procure registration in the Patent and
Trademark Office of a mark by a false or fraudulent declaration or
representation, oral or in writing, or by any false means, shall be
liable in a civil action by any person injured thereby for any
damages sustained in consequence thereof.
5. Section 14 of the Lanham Act, 15 U.S.C. S 1064, provides in pertinent
part as follows:
A petition to cancel a registration of a mark, stating the grounds
relied upon, may, upon payment of the prescribed fee, be filed as
follows by any person who believes that he is or will be damaged,
including as a result of dilution under section 1125(c) of this
title,
by the registration of a mark on the principal register established
by
this chapter, or under the Act of March 3, 1881, or the Act of
February 20, 1905. . . .
The statute then goes on to specify, among other things, when such a
petition must be filed.
Section 37 of the Lanham Act, 15 U.S.C. S 1119, provides as follows:
In any action involving a registered mark the court may determine
the right to registration, order the cancelation of registrations,
in
whole or in part, restore canceled registrations, and otherwise
rectify
the register with respect to the registrations of any party to the
action. Decrees and orders shall be certified by the court to the
Director, who shall make appropriate entry upon the records of the
Patent and Trademark Office, and shall be controlled thereby.
6. Section 34(a) of the Lanham Act, 15 U.S.C.S 1116(a), provides in
pertinent part as follows:
9
Finally, counts six and seven asserted claims under the
Delaware Uniform Deceptive Trade Practices Act, 6 Del.
Code SS 2531-36 et seq.7 These counts alleged that the
_________________________________________________________________
The several courts vested with jurisdiction of civil actions
arising
under this chapter shall have power to grant injunctions, according
to the principles of equity and upon such terms as the court may
deem reasonable, to prevent the violation of any right of the
registrant of a mark registered in the Patent and Trademark Office
or to prevent a violation under subsection (a), (c), or (d) of
section
1125 of this title. . .
7. The provision of the Delaware Act that defines"deceptive trade
practices," 15 Del. Code S 2532, provides in pertinent part as follows:
(a) A person engages in a deceptive trade practice when, in the
course of a business, vocation, or occupation, that person:
(1) Passes off goods or services as those of another;
(2) Causes likelihood of confusion or of misunderstanding as to
the source, sponsorship, approval, or certification of goods or
services;
(3) Causes likelihood of confusion or of misunderstanding as to
affiliation, connection, or association with, or certification by,
another;
(4) Uses deceptive representations or designations of geographic
origin in connection with goods or services;
(5) Represents that goods or services have sponsorship,
approval, characteristics, ingredients, uses, benefits, or
quantities
that they do not have, or that a person has a sponsorship,
approval,
status, affiliation, or connection that the person does not have;
(6) Represents that goods are original or new if they are
deteriorated, altered, reconditioned, reclaimed, used, or
secondhand;
(7) Represents that goods or services are of a particular
standard, quality, or grade, or that goods are of a particular
style or
model, if they are of another;
(8) Disparages the goods, services, or business of another by
false or misleading representation of fact;
(9) Advertises goods or services with intent not to sell them as
advertised;
10
defendants' use of the Smirnoff mark and the Smirnoff
family crest, insignia, emblem, and medals constituted
deceptive trade practices.
In its prayer for relief, the complaint sought, among other
things, damages under the Lanham Act and treble damages
under the Delaware Uniform Deceptive Trade Practices Act,
a judgment declaring the defendants' marks null and void
and an order directing that the marks be canceled, and an
injunction prohibiting further violations of the Lanham Act
or the Delaware Act.
The defendants moved for summary judgment on all
claims on several grounds, and the District Court
subsequently entered an order that dismissed the
complaint for lack of subject matter jurisdiction and, in the
alternative, granted the defendant's summary judgment
motion in part. The Court first held that the plaintiffs had
failed to establish the existence of an Article III case or
controversy that was ripe for adjudication. Joint Stock, 53
F. Supp. 2d at 703. The Court observed that "the plaintiffs
ha[d] not meaningfully or adequately prepared to begin
selling their SMIRNOV vodka products in the United
States." Id. at 702. The Court also held that the plaintiffs
lacked both constitutional and prudential standing and
that their claims were barred by laches. Id. at 701.
Constitutional standing was lacking, the Court concluded,
because the plaintiffs admitted that they would not attempt
to enter the United States market unless they prevailed in
this litigation and, therefore, "they ha[d] not demonstrated
that they ha[d] suffered an actual or imminent injury or
[were] likely to suffer an injury in the future." Id. at 707. As
for prudential standing under the Lanham Act, the Court
_________________________________________________________________
(10) Advertises goods or services with intent not to supply
reasonably expectable public demand, unless the advertisement
discloses a limitation of quantity;
(11) Makes false or misleading statements of fact concerning the
reasons for, existence of, or amounts of, price reductions; or
(12) Engages in any other conduct which similarly creates a
likelihood of confusion or of misunderstanding.
11
held that the plaintiffs' injuries were not the type that were
intended to be redressed by Section 43(a) of the Lanham
Act, that their injuries were indirect and speculative, and
that the risk of duplicative damages was too great. Id. at
708-11. In addition, the Court concluded that the plaintiffs
did not have standing under Sections 37 and 38 of the
Lanham Act or the Delaware Act, and that Section 14 of the
Lanham Act does not authorize cancellation of a mark by a
court but instead applies only to the Patent and Trademark
Office. Id. at 711-12 & n.16. Finally, the Court held that,
even if the plaintiffs' claims were ripe and they had
standing, the Court would nevertheless grant the
defendant's summary judgment motion on the basis of
laches. Id. at 712. The Court cited the failure of the French
Smirnovs to take any action to alert Kunett or Heublein of
their claims, and the Court concluded that the defendants
would suffer great "economic prejudice" and"evidentiary
prejudice" if the case were now allowed to proceed. Id. at
717-21.
On appeal, the plaintiffs contest the dismissal of all their
claims except those under Section 38 of the Lanham Act.
See Reply Brief at 30 n.13. They argue that, contrary to the
decision of the District Court, they satisfied the
requirements of Article III, their case is ripe, they have
standing, and summary judgment based on laches was
improper.
III.
We turn first to the requirements of Article III of the
Constitution. Article III, section 1 confers upon the federal
courts "[t]he judicial Power of the United States," and
Article III, Section 2 provides that this power extends to
specified categories of "Cases" and "Controversies." As a
result, " ``[t]he existence of a case and [or] controversy is a
prerequisite to all federal actions.' " Philadelphia Fed'n of
Teachers v. Ridge, 150 F.3d 319, 322-23 (3d Cir. 1998)
(quoting Presbytery of N.J. of Orthodox Presbyterian Church
v. Florio, 40 F.3d 1454, 1462 (3d Cir. 1994)).
The Article III case-or-controversy requirement includes
ripeness and standing requirements. See Clinton v. City of
12
New York, 524 U.S. 417, 429 & n. 15 (1998) (standing);
Philadelphia Fed'n of Teachers, 150 F.3d at 322-323 & n.3
(ripeness). These two doctrines are related and to some
degree overlap. Pic-A-State PA Inc. v. Reno, 76 F.3d 1294,
1298 n.1 (3d Cir. 1996); Armstrong World Indus., Inc. v.
Adams, 961 F.2d 405, 411 n.13 (3d Cir. 1992). We have
said that "[w]hereas ripeness is concerned with when an
action may be brought, standing focuses on who may bring
an action." Pic-A-State, 76 F.3d at 1298 n.1 (emphasis in
original); see also Presbytery of N.J., 40 F.3d at 1462;
Armstrong World Indus., 961 F.2d at 411 n.13. But as
noted in Lee v. Oregon, 207 F.3d 1382, 1387-88 (9th Cir.
1997):
The overlap between these concepts has led some legal
commentators to suggest that the doctrines are often
indistinguishable. See, e.g., Erwin Chemerinsky, A
Unified Approach to Justiciability, 22 Conn. L. Rev.
1139, 677, 681 (1990). And, in "measuring whether the
litigant has asserted an injury that is real and concrete
rather than speculative and hypothetical, the ripeness
inquiry merges almost completely with standing." Gene
R. Nichol, Jr., Ripeness and the Constitution , 54 U. Chi.
L. Rev. 153, 172 (1987).
Although the Article III issues in this case could be
addressed under either doctrine, we find it preferable to do
so under the doctrine of standing.
In considering whether the plaintiffs meet the standing
requirements of Article III, we will focus on the plaintiffs'
Section 43(a) and Delaware-law claims. Although the
plaintiffs, as noted, also asserted claims under Sections 14,
34, 37, and 38 of the Lanham Act, the plaintiffs do not
contest the grant of summary judgment against them on
their Section 38 claim, see Reply Brief at 30 n.13, and they
take the position that their standing with respect to their
Section 14, 34, and 37 claims is dependent on their
standing with respect to the Section 43(a) claims. See Brief
for Appellants at 49; Reply Brief at 29-30. Thus, our
current discussion is confined to the plaintiffs' standing to
litigate their claims under Section 43(a) and the Delaware
Act.
13
The doctrine of standing incorporates both a
constitutional element and a non-constitutional,
"prudential" element. See The Pitt News v. Fisher, 215 F.3d
354, 359 (3d Cir. 2000); Trump Hotels & Casino Resorts,
Inc. v. Mirage Resorts, Inc., 140 F.3d 478, 484 (3d Cir.
1998). Constitutional standing is a threshold issue that we
should address before examining issues of prudential
standing and statutory interpretation. See Steel Co. v.
Citizens for a Better Environment, 523 U.S. 83, 94 (1998);
Conte Bros. Auto., Inc. v. Quaker State-Slick 50, Inc., 165
F.3d 221, 224 (3d Cir. 1998). The question of the plaintiffs'
prudential standing under the Lanham Act and the
Delaware Uniform Trade Practices Act will be taken up in
Parts IV and V.
Constitutional standing "is the ``irreducible constitutional
minimum' of standing." Trump Hotels, 140 F.3d at 484
(quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
(1992)). Constitutional standing has three elements, all of
which must be met: (1) the plaintiff must have suffered an
injury in fact; (2) there must be a causal nexus between
that injury and the conduct complained of; and (3) it must
be likely that the injury will be redressed by a favorable
judicial decision. See Lujan, 504 U.S. at 560-61; Pitt News,
215 F.3d at 359-361; Trump Hotels, 140 F.3d at 484-85;
Conte Bros., 165 F.3d at 225. "These requirements ensure
that plaintiffs have a ``personal stake' or ``interest' in the
outcome of the proceedings, ``sufficient to warrant . . . [their]
invocation of federal-court jurisdiction and to justify
exercise of the court's remedial powers on . . .[their]
behalf.' " Wheeler v. Travelers Ins. Co. , 22 F.3d 534, 537-38
(3d Cir. 1994) (citations omitted) (quoting Warth v. Seldin,
422 U.S. 490, 498-99 (1975)). "The party invoking federal
jurisdiction bears the burden of establishing [these]
elements." Lujan, 504 U.S. at 561. Furthermore, when
standing is called into question at the summary judgment
stage, as it was in this case, the plaintiff cannot rely on
mere allegations "but must ``set forth' by affidavit or other
evidence ``specific facts,' Fed. Rule Civ. Proc. 56(e), which for
purposes of the summary judgment motion will be taken to
be true." Id.
The plaintiffs in the case before us claim that they have
14
suffered or are suffering seven injuries due to the
defendants' illegal conduct. These are: (1) the barrier to
entry into the United States vodka market "erected by
Defendants' false advertising, false designation of origin,
and illegally obtained trademarks"; (2) the plaintiffs'
"inability to enter into distribution contracts in the United
States"; (3) their "inability to control the use of the name
and designations of their predecessor"; (4) the loss of the
royalties from the defendants' "unauthorized and false
association with P.A. Smirnov"; (5) "the inevitable and
imminent" denial by the Bureau of Alcohol, Tobacco, and
Firearms ("BATF ") of plaintiffs' application for a permit to
import vodka with the Smirnov label";8 (6) the harm to their
ability to compete "arising from public misperceptions
about Defendants' vodka caused by their false advertising
and designation of origin"; and (7) the plaintiffs' inability to
issue press releases in the United States without being
sued by the defendants. See Brief for Appellants at 26-27.
In analyzing whether any of the plaintiffs' seven putative
injuries suffice for constitutional standing, we start by
noting that these harms are susceptible to one of two
characterizations, both of which the plaintiffs have
employed at various times during this appeal: Under the
first characterization, these asserted injuries are not
dependent on the plaintiffs' inability to use the Smirnov
name in this country; under the second, these injuries are
dependent on the plaintiffs' ability to use that name. It is
worth noting, however, that the exact characterization of
the plaintiffs' injuries is not dispositive of the constitutional
standing issue because, under either characterization, we
believe that the plaintiffs have failed to establish Article III
standing.
Under the first characterization, the plaintiffs' injury is
unrelated to their asserted rights to the Smirnoff or
_________________________________________________________________
8. It is unlawful to import distilled spirits without a "basic permit"
issued
by the Secretary of the Treasury. 27 U.S.C. S 203(a)(1). As the plaintiffs
note (Brief for Appellants at 37), if they applied for a "basic permit" to
import vodka with the Smirnov name, it is likely that the application
would be rejected due to the defendants' registered trademarks. See 27
U.S.C. SS 204(a)(2)(C), 205(e).
15
Smirnov name. Put another way, the defendants' allegedly
false advertising and false designation of origin harms the
plaintiffs in the same way in which it harms other vodka
manufacturers. For instance, the defendants' putatively
false or misleading depiction of their vodka as a Russian
product with a considerable historical pedigree may
influence consumers to purchase Smirnoff vodka when, all
other things being equal, those consumers would ordinarily
have selected another brand. Under this set of facts, the
defendants' allegedly false advertising harms the plaintiffs
by channeling consumers toward the Smirnoff brand, but
every other vodka manufacturer experiences the same type
of injury. Moreover, one of the core injuries asserted by the
plaintiffs is their inability to enter the United States vodka
market due to the defendants' false advertising; this is the
gravamen of harms (1), (2), and (6) listed above. Again,
however, under the first characterization of the plaintiffs'
injuries, this type of injury is not unique to the plaintiffs.
Just as the allegedly false advertising may have impeded
the plaintiffs' ability to enter the United States market--
e.g., by diverting vodka consumers with a preference for
Russian brands to Smirnoff vodka, and away from other
genuine Russian-made vodka--it would have had a
similarly negative impact on the ability of all other Russian
vodka manufacturers seeking to export their product to the
United States.
We believe that the plaintiffs' putative injuries, when
characterized in this manner, do not suffice for Article III
standing. At this summary judgment stage, plaintiffs have
failed to create a genuine issue that they have suffered an
injury in fact for the simple reason that the plaintiffs have
never marketed any vodka in the United States and have
not adduced any evidence establishing that they are
prepared at this time to sell any vodka in this country
without using the Smirnov name. The defendants' allegedly
false advertising cannot have harmed the plaintiffs by
channeling their customers toward Smirnoff when the
plaintiffs have not even begun offering their product for sale
in the United States.
Importantly, as the plaintiffs' counsel acknowledged at
oral argument, the plaintiffs could have asserted their false
16
advertising and false designation of origin claims even if
they had marketed their vodka in the United States not
under the Smirnov brand, but under a totally unrelated
name. For instance, the plaintiffs could have renamed their
product "Muscovy vodka," and exported it for sale in the
United States under that name. The defendants' use of the
Smirnoff marks would not have posed any formal obstacle
to entry--e.g., the denial of a basic permit from the BATF,
see supra note 8, or the possibility of a trademark
infringement suit initiated by the defendants--because the
plaintiffs' vodka would have been offered for sale under a
mark that would not be likely to create confusion with the
defendants' existing Smirnoff marks.
In this case, however, the plaintiffs have insisted on
entering the United States vodka market only under the
Smirnov mark. If the plaintiffs had shipped even a small
amount of Russian vodka to this country for sale under a
different name, they likely would have established a
sufficient injury in fact. All that the Article III's injury-in-
fact element requires is "an identifiable trifle" of harm,
United States v. Students Challenging Regulatory Action
Procedures, 412 U.S. 669, 689 n.14 (1973), which
presumably could have been met by showing that some
consumers who bought the defendants' product under the
mistaken belief that is was of Russian origin and carried a
notable pedigree would have otherwise bought the plaintiffs'
product. Similarly, if the plaintiffs were poised to ship
vodka to this country under a name other than Smirnov,
they might have been able to show that they faced a
sufficiently "imminent" threat of injury to satisfy the injury-
in-fact requirement. See Lujan, 504 U.S. at 560. But as
things now stand, any future diminution of sales in this
country, or any potential barrier to entering the United
States vodka market, is "conjectural" or "hypothetical,"
Lujan, 504 U.S. at 560 (quoting Whitmore v. Arkansas, 495
U.S. 149, 155 (1990), since the plaintiffs have not
expressed an intention to ship vodka here unless they are
able to use the Smirnov name. Thus, the first
characterization of the plaintiffs' putative injury does not
yield constitutional standing, as Article III's injury-in-fact
requirement is not satisfied.
17
We turn, therefore, to the second characterization of the
plaintiffs' asserted injuries--i.e., one that is dependent on
the plaintiffs' inability to use the Smirnov name in the
United States in connection with their vodka. Under this
second, alternative characterization of the plaintiffs'
asserted injury, the plaintiffs have suffered a harm due to
their unique claim to the Smirnoff or Smirnov name and
marks. Put another way, the core of the plaintiffs' claim
here is that they possess superior rights to Smirnoff marks,
and that the defendants have interfered with and
appropriated the benefits of those superior rights by
employing those marks in the United States vodka market.
This appears to be the logic behind harms (3), (4), (5), and
(7). Moreover, one can characterize harms (1) and (2) in this
fashion: The defendants' use of the Smirnoff marks in the
United States market has created a specific barrier to entry
to the plaintiffs' brand, since the threat of a trademark
infringement suit (and the denial of a basic permit) prevents
the plaintiffs from entering into distribution contracts and
selling their vodka in the United States under the
confusingly-similar Smirnov name.
Although the plaintiffs' asserted harms, when
characterized in this second fashion, would likely satisfy
the injury-in-fact requirement, we believe that the plaintiffs
lack Article III standing because there is no "causal
connection between the injury and the conduct complained
of," Trump Hotels, 140 F.3d at 485 (citing Lujan, 504 U.S.
at 560-61). Under this second characterization,"the
conduct complained of "--i.e., the defendants' allegedly false
and misleading misrepresentation of their vodka as a
Russian product once manufactured by P.A. Smirnov and
sold to the Russian imperial family--is not the cause of the
core injury claimed by the plaintiffs--i.e., their inability to
use the Smirnov names in the United States vodka market.
Rather, it is the defendants' prior use of the marks in the
United States market. This use spanned several decades,
involved hundreds of millions of dollars in expenditures,
and resulted in the creation of considerable goodwill
associated with the Smirnoff brand.
To be sure, the plaintiffs could (and do) claim that they
had rights to the Smirnov and Smirnoff marks superior to
18
that of the defendants (presumably, through the plaintiffs'
association with the French Smirnovs, who claim a right to
the Smirnoff marks through Eugenia). The typical vehicle
for asserting such a claim is a trademark infringement
action. If this were a trademark infringement suit, then the
Article III causal connection would most likely be present,
as the "the conduct complained of "--i.e., the defendants'
infringing use of the plaintiffs' marks--would have directly
caused the plaintiffs' putative injury. In this case, however,
the plaintiffs have stressed that they are not bringing a
trademark infringement suit, but rather an action for false
advertising and false designation of origin. See Appellant's
Brief at 4. Viewed as part of a false advertising suit, the
plaintiffs' putative injuries simply lack the requisite causal
connection to the defendants' allegedly false advertising.
Suppose, for example, that the labels of the defendants'
products and promotions made it perfectly clear that their
Smirnoff vodka was made in the United States using
American ingredients and an entirely new American recipe
and method not endorsed by the original P.A. Smirnov or
the French Smirnovs. It is doubtful that the plaintiffs would
have a basis for their Section 43(a) or Delaware deceptive
trade practices claims; the defendants' marketing would be,
after all, neither false nor misleading. Nonetheless, the
plaintiffs ability to enter the United States market under
the Smirnov name would be no greater than it is now, due
to the fact that the defendants have employed and continue
to employ an established set of marks associated with the
Smirnoff name in that market. Consequently, it is apparent
that, under this second characterization, the plaintiffs'
putative injuries are not "fairly traceable to the challenged
action of the defendant[s]," but are rather the result of an
independent cause. Lujan, 504 U.S. at 560; see also Simon
v. Easter Ky. Welfare Rights Org., 426 U.S. 26, 41-42
(1976).
Thus, we conclude that, under either of the two
alternative characterizations of the plaintiffs' injuries, the
plaintiffs lack Article III standing to litigate their Section
43(a) and their Delaware deceptive trade practices claims.9
_________________________________________________________________
9. In their reply brief, the plaintiffs offer another theory for their
Article
III standing to bring the false advertising and false designation of
origin
19
IV.
Moreover, even if the plaintiffs' Section 43(a) claims meet
the standing requirements of Article III, they cannot satisfy
the demands of prudential standing. "Prudential standing
``consists of a set of judge-made rules forming an integral
part of "judicial self-government.' " Gen. Instrument Corp. of
_________________________________________________________________
claims. The plaintiffs argue that they possess a"right of association"
with the original P.A. Smirnov (a right originally held by Eugenia, then
passed through descent to Boris Alexandrovitch Smirnov, and finally
transferred by Boris to the plaintiffs), independent of any common law
trademark rights in the Smirnoff or Smirnov name or marks, and that
the defendants' false advertising has caused the plaintiffs injury by
interfering with this right of association.
For support, the plaintiffs analogize this case to Cairns v. Franklin Mint
Co., 24 F. Supp. 2d 1013 (C.D. Cal. 1998), aff 'd, 1999 WL 12780044
(9th Cir. 2000), in which a District Court held that the executors of the
estate of the late Princess Diana stated a claim under Section 43(a) for
false celebrity endorsement against the Franklin Mint and others who
sold merchandise (such as porcelain dolls, rings, and plates) that bore
Princess Diana's likeness or name. The district court understood the
plaintiffs' chief argument to be that the defendants' use of the likeness
and name was likely to lead consumers to believe that the executors
were endorsing the defendants' products, and held that the executors
had standing in their own right to bring their Section 43(a) claim against
the defendants. See id. at 1032-33.
Because the plaintiffs in the present case did not develop this
argument until their reply brief, we do not regard it as properly before
us. See Laborers' Int'l Union of N. Am. v. Foster Wheeler Corp., 26 F.3d
375, 398 (3d Cir. 1994)("An issue is waived unless a party raises it in
its
opening brief. . . ."). But even if it were before us, it would not
persuade
us that the plaintiffs have standing. Even were we to assume arguendo
that the plaintiffs possessed such "right of association" with P.A.
Smirnov, and that the defendants' allegedly false advertising interfered
with that right by preventing the plaintiffs from using the Smirnov or
Smirnoff name and marks in the United States market, we would still
conclude that the plaintiffs failed to establish the requisite causal
connection between the plaintiffs' asserted injury and the defendants'
challenged conduct. The plaintiffs have not pointed to evidence that is
sufficient to show that they would be able to market their vodka in the
United States under the Smirnov name were it not for the consuming
public's mistaken belief, fostered by the defendants' false advertising,
that either the plaintiffs (or P.A. Smirnov, or the French Smirnovs)
endorsed the defendants' product.
20
Del. v. Nu-Tek Elecs. & Mfg., Inc., 197 F.3d 83, 87 (3d Cir.
1999) (quoting Conte Bros., 165 F.3d at 225). The
requirements of prudential standing serve "to avoid
deciding questions of broad social import where no
individual rights would be vindicated and to limit access to
the federal courts to those litigants best suited to assert a
particular claim." Conte Bros., 165 F.3d at 225 (quoting
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 804 (1985)).
"Where Congress has expressly conferred standing by
statute, prudential standing concerns are superseded."
Gen. Instrument, 197 F.3d at 87 (citing Warth, 422 U.S. at
501). However, "Congress is presumed to incorporate
background prudential standing principles, unless the
statute expressly negates them." Conte Bros. , 165 F.3d at
227 (citing Bennett v. Spear, 520 U.S. 154, 164 (1997)).
Here, these "background prudential standing principles"
apply, since "Congress did not expressly negate[the]
prudential standing doctrine in passing the Lanham Act."
Conte Bros., 165 F.3d at 227.
In Thorn v. Reliance Van Co., 736 F.2d 929 (3d Cir.
1984), we addressed Section 43(a)'s prudential standing
requirements for the first time. We held that a party has
prudential standing to bring a claim under Section 43(a) if
the "party has a reasonable interest to be protected against
false advertising." Thorn, 736 F.2d at 933. In later cases, we
"grappled with defining the term [reasonable interest] with
greater precision." Conte Bros., 165 F.3d at 231; see, e.g.,
PDK Labs., Inc. v. Friedlander, 103 F.3d 1105, 1111 (3d Cir.
1991) (applying a two-pronged reasonableness test for
S 43(a) prudential standing).
In Conte Bros., 165 F.3d at 233, we adopted the test for
antitrust standing articulated by the Supreme Court in
Associated General Contractors of California, Inc. v.
California State Council of Carpenters, 459 U.S. 519 (1983)
[hereinafter, AGC]. Under this test, a court called upon to
decide whether a party has prudential standing under
Section 43(a) should consider the following factors:
(1) The nature of the plaintiff 's alleged injury, i.e., is
the injury of a type that Congress sought to redress in
providing a private remedy for violations of the Lanham
Act?
21
(2) The directness or indirectness of the asserted
injury.
(3) The proximity or remoteness of the party to the
alleged injurious conduct.
(4) The speculativeness of the damages claim.
(5) The risk of duplicative damages or complexity in
apportioning damages.
Id. at 233 (citations omitted); see, e.g., Unisource
Worldwide, Inc. v. Heller, No. Civ. A. 99-266, 1999 WL
374180, at *6 (E.D. Pa. June 9, 1999) (applying the Conte
Bros. test); Proctor & Gamble Co. v. Amway Corp., 80 F.
Supp. 2d 639, 678-81 (S.D. Tex. 1999) (same). Courts have
applied the AGC test on a case-by-case basis, weighing the
enumerated factors without giving any one factor
determinative weight. See Sullivan v. Tagliabue , 25 F.3d 43,
46 (1st Cir. 1994); Los Angeles Mem'l Coliseum v. NFL, 791
F.2d 1356, 1363 (9th Cir. 1986). After examining and
weighing these five factors, we hold that the plaintiffs lack
prudential standing under Section 43(a). We discuss each
factor below.
A.
Section 43(a) is intended to provide a private remedy "to
a commercial plaintiff who meets the burden of proving that
its commercial interests have been harmed by a
competitor's false advertising." Serbin v. Ziebart Int'l Corp.,
11 F.3d 1163, 1175 (3d Cir. 1993). This is not to say that
a non-competitor never has standing to sue under this
provision; rather, the focus is on protecting "commercial
interests that have been harmed by a competitor's false
advertising," Granite State Ins. Co. v. Aamco Transmissions,
Inc., 57 F.3d 316, 321 (3d Cir. 1995), and "secur[ing] to the
business community the advantages of reputation and good
will by preventing their diversion from those who have
created them to those who have not." Conte Bros., 165 F.3d
at 234 (quoting S. Rep. No. 1333, 79th Cong., 2d Sess.
(1946), reprinted in 1946 U.S.C.C.A.N. 1274, 1275).
In our treatment of constitutional standing, we listed and
discussed the numerous forms of injury that the plaintiffs
22
claim to have suffered, and as we noted, those various
injuries may be characterized in two ways -- those injuries
that are and those that are not dependent on the plaintiffs'
inability to use the Smirnov name. We previously pointed
out that the injuries in the former characterization are not
"fairly traceable" to the conduct on the part of the
defendants that forms the basis for the plaintiffs' Section
43(a) claims -- the allegedly false designation of origin and
false advertising.
The plaintiffs, however, rely heavily on injuries of this
type to support their argument that the first factor of the
Conte Bros. test weighs in their favor. The plaintiffs
complain that they cannot obtain BATF approval for a
vodka label using the Smirnov name and symbols. Brief for
Appellants at 32. However, the plaintiffs predict that the
BATF will reject this label "because it would infringe
Defendants' registered trademarks." Brief for Appellants at
37. Under the first factor of the Conte Bros. test, we must
look for an injury that "flows from that which makes
defendants' acts unlawful." See Brunswick Corp. v. Pueblo
Bowl-O-Mat, 429 U.S. 477, 489 (1977) (An "antitrust injury"
must "flow[ ] from that which makes defendants' acts
unlawful."). Section 43(a) of the Lanham Act seeks to
protect parties against false designation of origin and false
advertising. Accordingly, we must look for an injury that
was caused by a false designation of origin or false
advertising. For this reason, the plaintiffs' purported injury
involving the BATF is insufficient to satisfy the first factor
of the Conte Bros. test.
The plaintiffs also claim that they are unable to enter into
distribution contracts or to advertise their products, but it
is apparent that these injuries too result largely, if not
entirely, from the defendants' marks and not from their
alleged false designation of origin or false advertising. The
plaintiffs have not identified evidence showing that their
supposed complete inability to enter into distribution
contracts or advertise results from the defendants' false
association with the original Smirnov trade house or false
advertising. On the contrary, the plaintiffs themselves state
that distributors have refused to enter into contracts with
Joint Stock "for fear of being sued by the Defendants" for
trademark infringement. Brief for Appellants at 36.
23
The plaintiffs do allege at least one injury of the type that
Section 43(a) is intended to protect. The plaintiffs state:
Companies such as Plaintiffs that manufacture and
distribute Russian vodka are uniquely injured by
Defendants' false advertising and designations of
origin. The evidence shows that Defendants'
wrongdoing has caused consumers to perceive
SMIRNOFF vodka to be a Russian product. Any
deceived customers who seek to buy Russian vodka are
likely to mistakenly purchase Defendants' product only
to the detriment of companies like Plaintiffs, which
produce true Russian vodka.
Brief for Appellants at 33-34. The plaintiffs correctly note
that this injury is "irrespective of their rights to the
SMIRNOV name and heritage." See Brief for Appellants at
33. But as we have already discussed, we do not believe
that the plaintiffs have shown that they have actually
suffered injury of this type or that they face an imminent
threat of such injury because the plaintiffs have never
manifested an intent to offer their products for sale in the
United States market other than under the Smirnov name.
Nevertheless, even if our prior conclusion were incorrect
and the plaintiffs had shown at least an "identifiable trifle"
of this sort of injury or a sufficient threat of such an injury
to satisfy the constitutional requirement of injury in fact, it
would not necessarily follow that they have prudential
standing as well. Just as "[a]ntitrust injury is a necessary
but insufficient condition of antitrust standing," Barton &
Pittinos, Inc. v. Smithkline Beecham Corp., 118 F.3d 178,
182 (3d Cir. 1997), the existence of a minimal Lanham Act
injury does not alone support a finding of standing. Rather,
we must weigh this injury with the other four factors of the
Conte Bros. test.
B.
Under the second factor of the Conte Bros. test, we
examine the directness or indirectness of the asserted
injury. See Conte Bros., 165 F.3d at 234. The issue under
this factor is whether the defendants' conduct has had a
direct effect on either the plaintiffs or the market in which
24
they participate. See AGC, 459 U.S. at 540-41; Sullivan, 25
F.3d at 51 (examining the directness factor under AGC).
The plaintiffs provided some evidence that the
defendants' designation of origin and advertising may have
had an adverse impact on Russian vodka producers. There
is no doubt that the labels that the defendants affix to their
products evoke Russia and could convey the impression
that the defendants' vodka is the same as or similar to the
vodka that was purveyed to the Russian court and won
international competitions prior to the revolution. J.A. at
659 & 708 & 711 (Smirnoff labels). In addition, the
plaintiffs submitted a study showing that only 37% of
American vodka drinkers identify Smirnoff as an American
brand, while 23% of vodka drinkers believe that Smirnoff is
made in Russia. Moreover, the study found that 27% of
Smirnoff drinkers believe that it is a Russian brand, while
only 33% of sub-premium vodka drinkers can correctly
identify Smirnoff as an American label. J.A. at 3116. This
evidence could support a finding that the defendants have
misled consumers regarding the origin and nature of their
products and have detracted from the "reputation or good
will" of importers of Russian vodka. See Conte Bros., 165
F.3d at 234.
As noted, however, the plaintiffs have not and do not
import Russian vodka and apparently do not intend to do
so unless they are able to use the Smirnov mark. While an
importer of Russian vodka could claim that the defendants'
activities directly lowered its sales and profits, the plaintiffs'
position is more attenuated. They complain that the
defendants' false designation of origin and false advertising
have made the American market less profitable for
importers of Russian vodka; that this has made distributors
less willing to import Joint Stock's product; and that this
has contributed to Joint Stock's failure to send any vodka
to the United States. Seen in this light, Joint Stock's injury
is not direct enough to weigh in favor of prudential
standing under the Lanham Act.
C.
The third factor is the proximity of the plaintiff to the
allegedly harmful conduct. See Conte Bros., 165 F.3d at
25
233. Our task here is to determine whether there is"an
identifiable class of persons whose self-interest would
normally motivate [them] to vindicate the public interest" by
bringing an enforcement action. AGC, 459 U.S. at 542;
accord Conte Bros., 165 F.3d at 234. The existence of such
a class "diminishes the justification for allowing a more
remote party . . . to perform the office of a private attorney
general." AGC, 459 U.S. at 542.
Russian vodka manufacturers who are currently
exporting their products to the United States form such an
identifiable class, and all manufacturers currently selling
vodka products in the United States constitute another
such class. Both of these groups of manufacturers are more
proximate to the claimed injury here, which has occurred in
the American vodka market.
The Second Circuit faced a similar situation in Havana
Club Holding, S.A. v. Galleon, S.A., 203 F.3d 116 (2d Cir.
2000). There, a Cuban manufacturer of rum, Havana Club
Holding, S.A. ("HCH"), filed suit against Bacardi & Co.
("Bacardi"), the American manufacturer of"Havana Club"
rum. HCH claimed that Bacardi falsely designated its rum's
origin as Cuban. However, HCH did not compete with
Bacardi in the United States because of the Cuban trade
embargo. In holding that HCH did not have standing to
pursue its Lanham Act claims, the Second Circuit relied in
part on the ability of "[a]ny rum producer selling its product
in the United States" to "obtain standing to complain about
Bacardi's allegedly false designation of origin." Havana
Club, 203 F.3d at 134. Similarly, in this case, any vodka
producer selling its products in the United States could
challenge the defendants' activities and would have a
stronger commercial interest to protect than do the
defendants, making it more appropriate for them to act as
"private attorney generals."10
_________________________________________________________________
10. In weighing this factor, we do not impose a requirement that
plaintiffs "be United States competitors to have standing," as the
plaintiffs misconstrue the District Court's opinion as holding. Compare
Brief for Appellants at 42 with Joint Stock Soc'y, 53 F. Supp. 2d at 710.
Rather, we take into account the premise implicit in the AGC and Conte
Bros. test that a direct competitor will usually have a stronger
commercial interest than a non-competitor.
26
We realize that the plaintiffs have taken some steps in
preparation for possibly marketing Joint Stock's products
in this country. Joint Stock has organized RASCO as the
exclusive licensee and distributor of its vodka in the United
States and has hired a market consultant. Joint Stock has
also issued a press release, created a label, and solicited
contracts. The plaintiffs argue that they cannot take further
steps to enter the market because of the very activity that
they seek to enjoin. However, the plaintiffs again confuse
injuries traceable to the defendants' marks with injuries
traceable to the defendants' alleged false designation of
origin and false advertising. As we have observed, according
to the plaintiffs, distributors refuse to enter into contracts
with Joint Stock because they fear being sued by the
defendants for trademark infringement. See Brief for
Appellants at 36. Joint Stock could presumably circumvent
this problem by simply importing vodka into the United
States under a different name. Thus, faulting Joint Stock
because it is not more closely associated with the American
market is not, as the plaintiffs claim, "ask[ing] Plaintiffs to
do the impossible." Brief for Appellants at 37.
D.
The fourth factor, the speculative nature of the plaintiffs'
damages, also weighs against prudential standing. Because
the plaintiffs have never sold or attempted to sell their
vodka in the United States, any attempt to calculate lost
sales or profits would be highly speculative.
Attempting to circumvent this problem, the plaintiffs
assert that they advanced the following three theories of
damages that would not have required speculation: (1) a
reasonable royalty for the defendants' use of the Smirnov
name since 1939; (2) the costs of a corrective advertising
campaign; and (3) disgorgement of the defendants' profits
since 1982. See Brief for Appellants at 42. We do not agree
that the plaintiffs' request for these forms of relief causes
the fourth factor to weigh in their favor.
First, it is not clear that an award of royalties for the use
of the Smirnov name since 1939 would be a proper remedy
for the false designation of origin and false advertising
27
claims that the plaintiffs asserted under Section 43(a). In
every case cited by the plaintiffs in which royalties were
awarded, the owner of a patent or trademark sued for
infringement. See Sands, Taylor & Wood Co. v. Quaker Oats
Co., 34 F.3d 1340, 1351 (7th Cir. 1994) (trademark
infringement); Sands, Taylor & Wood Co. v. Quaker Oats
Co., 978 F.2d 947, 964 (7th Cir. 1992) (same); Proctor &
Gamble Co. v. Paragon Trade Brands, Inc., 989 F. Supp.
547, 607-14 (D. Del. 1997) (patent infringement). Moreover,
in their briefs on appeal, the plaintiffs have made little
attempt to show that they have a right to the use of the
Smirnov or Smirnoff marks in this country. The plaintiffs
have not attempted to answer the defendants' argument
that trademark rights are territorial; that, whatever rights
the plaintiffs and the French Smirnovs may have to use the
family name elsewhere, they have never had any trademark
rights in this country; and that even if they had trademark
rights in this country prior to the Russian Revolution,11
those rights were long ago abandoned.
As for the remaining theories of damages -- disgorgement
of profits and the cost of a corrective advertising campaign
-- it appears that any party with standing could request
these forms of relief. Disgorgement of profits "initially
developed as a remedy to provide a plaintiff with relief in
equity, to serve as a proxy for damages, or to deter the
wrongdoer from continuing his violations" and"is most
appropriate if damages are otherwise nominal." BASF Corp.
v. Old World Trading Co., 41 F.3d 1081, 1095-96 (7th Cir.
1994); see also Playboy Enters., Inc. v. Baccarat Clothing
Co., 692 F.2d 1272, 1274 (9th Cir. 1982). Similarly, a
corrective advertising campaign could presumably be
sought by any party no matter how situated.
If a request for relief that may be sought by any party
sufficed under the fourth factor of the Conte Bros. test, that
factor would be essentially meaningless, and we refuse to
undermine the fourth factor in this way. "The aim of
[prudential standing] is to determine whether the plaintiff is
``a proper party to invoke judicial resolution of the dispute
_________________________________________________________________
11. There is some evidence that P.A. Smirnov's trade house shipped a
small quantity of vodka to New York before 1917.
28
and the exercise of the court's remedial powers." Conte
Bros., 165 F.3d at 225 (quoting Bender v. Williamsport Area
Sch. Dist., 475 U.S. 546 n.8 (1986)) (emphasis added); see
Roger D. Blair & William H. Page, "Speculative" Antitrust
Damages, 70 Wash. L. Rev. 423, 425 (1995) (noting that
the doctrine of antitrust standing requires an effective
mechanism for the proof of individual harm). Therefore, we
agree with the District Court that the plaintiffs may not
bolster their case for prudential standing by relying on
forms of monetary relief that they would receive"as a
``vicarious avenger' of the general public's right to be
protected against potentially false advertisements." Joint
Stock, 53 F. Supp. at 710 (citing Serbin, 11 F.3d at 1175).
The damages that we examine under this factor are those
that are particular to the plaintiffs. For example, a plaintiff
often will point to its own reduction in sales or loss of
profits. See Conte Bros., 165 F.3d at 234; Johnson &
Johnson v. Carter-Wallace, Inc., 631 F.2d 186, 190 (2d Cir.
1980) (holding that a Lanham Act plaintiff must show a
likelihood of damages from loss of sales). The only damages
of that nature that the plaintiffs in this case could claim
would be extremely speculative -- namely, the profits that
Joint Stock would have made if it had sold its vodka in the
United States without using the Smirnov name and had not
faced the defendants' allegedly false designation of origin
and false advertising. For this reason, the fourth factor
weighs against prudential standing.
E.
The final factor under Conte Bros. is the risk of
duplicative damages or the complexity of apportioning
damages. Damage claims such as those advanced by the
plaintiffs may be asserted by at least three groups. Ranked
in descending order of proximity to the allegedly unlawful
conduct, these groups are: (1) all importers of Russian
vodka currently doing business in the United States; (2) all
other vodka manufacturers in the American market; and (3)
all manufacturers of vodka (including makers of Russian
vodka) who, like the plaintiffs, have not entered the United
States market but have taken at least minimal preparatory
steps for entry. Due to the speculative nature of the
29
damages of parties in the third group, allowing them to sue
would create a danger of duplicative damages and thus
potentially "would subject defendant firms to multiple
liability for the same conduct and would result in
administratively complex damages proceedings." Conte
Bros., 165 F.3d at 235. Although the plaintiffs correctly
note that in Conte Bros. we were disinclined to grant
standing to remote parties along the vertical distribution
chain, see Brief for Appellants at 46-47, we see no reason
why similar concerns should not apply in the admittedly
different context here.
F.
To summarize, the plaintiffs may have a minimal
commercial interest, but they have at best only a very
indirect injury. In addition, they are remote from the
asserted injury, their damages claims are highly
speculative, and there is a substantial risk of duplicative
damages. The Conte Bros. factors counsel strongly against
prudential standing. The plaintiffs argue that some of the
Conte Bros. factors are suited for use only in considering
claims for damages and therefore should not be taken into
account or should be discounted in determining whether
the plaintiffs have prudential standing with respect to their
requests for non-monetary relief. Even if we do this,
however, the remaining factors -- most notably, the indirect
nature of the plaintiffs' injury and their remoteness from
the alleged violations of Section 43(a)-- lead to the same
result. We thus hold that the plaintiffs lack prudential
standing to assert any of their Section 43(a) claims.12
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12. As an alternative basis for the summary judgment grant in the
defendants' favor, the District Court held that the plaintiffs' action was
barred under the equitable doctrine of laches. Laches bars an action
from proceeding if there was (1) an inexcusable delay in bringing suit,
and (2) material prejudice to the defendant as a result of the delay. See
Pappan Enterp. v. Hardee's Food Sys., 143 F.3d 800, 804 (3d Cir. 1998);
accord United States Cellular Inv. Co. v. Bell Atl. Mobile Sys., Inc., 677
A.2d 497, 502 (Del. 1996) (setting forth the same two-prong test under
Delaware law).
With respect to the inexcusable delay prong, the District Court noted
that the French Smirnovs were aware for over sixty years that the
30
V.
We likewise hold that the plaintiffs lack standing under
the Delaware Uniform Deceptive Trade Practices Act. A
proper plaintiff under this Act is "[a] person likely to be
damaged by a deceptive trade practice of another." 6 Del.
Code S 2533. The relevant Delaware case law persuades us
that standing under this Act with respect to claims of the
sort advanced by the plaintiffs in this case is no broader
than prudential standing under Section 43(a). See S & R
_________________________________________________________________
defendants and their predecessors in interest were producing and selling
vodka in the United States under the Smirnoff label, yet neither
instituted legal action nor provided the defendants or their predecessors
with notice that the French Smirnovs had a potential claim to the marks.
See id. at 713-14. Furthermore, the Court rejected the excuses offered by
the plaintiffs, namely that the French Smirnovs were too destitute, and
too hampered by lack of available documentary evidence establishing
their connection to the original P.A. Smirnov vodka manufacturer, to
pursue their claims against the defendants or their predecessors. See id.
at 715-16. Finally, with respect to the second prong of the laches test,
the Court observed that the defendants' had suffered severe economic
and evidentiary prejudice by the French Smirnovs' sixty-year delay. See
id. at 717-21.
On appeal, the plaintiffs seek to overcome the District Court's powerful
analysis of the laches issue on several grounds. First, the plaintiffs
argue
that it was improper for the Court to impute the French Smirnovs' delay
to the plaintiffs, because the plaintiffs are corporate entities that did
not
come into existence until the early to mid 1990s. Second, even assuming
that the Court's imputation was proper, the plaintiffs argue that the
French Smirnovs' poverty and lack of documentary evidence excuses are
legitimate ones. Third, the plaintiffs claim that the record evidence
raises
a genuine issue as to whether the defendants were prejudiced by the
sixty-year delay. Finally, the plaintiffs point to the equitable nature of
the laches doctrine, assert that the defendants did not act in good faith
in employing the Smirnoff marks (in fact, that they willfully set out to
defraud and deceive the public), and argue that such alleged bad faith
should prevent the laches bar from applying to the plaintiffs' claims.
Because, for the reasons set forth in this opinion, we conclude that the
plaintiffs lack the constitutional and prudential standing necessary to
bring this action against the defendants, we need not reach this
alternative bar to the plaintiffs' claims. Accordingly, we will not
address
the merits of the plaintiffs' challenges to the District Court's laches
analysis.
31
Assocs., L.P., III v. Shell Oil Co., 725 A.2d 431, 440 (Del.
Super. Ct. 1998); Pack & Process, Inc. v. Celotex Corp., 503
A.2d 646, 649 n.1 (Del. Super. Ct. 1985). Consequently, for
the reasons already discussed, we hold that the plaintiffs
lack standing under the Delaware Act.
VI.
We affirm the order of the District Court dismissing this
case.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
32