Classic Liquor Importers, Ltd. v. Spirits Int'l B.V.

• Decision Date: 29 December 2015
• Docket Number: 15 Civ. 6503 (JSR)
• Citation: 151 F.Supp.3d 451,117 U.S.P.Q.2d 1310
• Parties: Classic Liquor Importers, Ltd., Plaintiff, v. Spirits International B.V., Defendant.
• Court: U.S. District Court — Southern District of New York

151 F.Supp.3d 451

117 U.S.P.Q.2d 1310

Classic Liquor Importers, Ltd., Plaintiff,

v.Spirits International B.V., Defendant.

15 Civ. 6503 (JSR)

United States District Court, S.D. New York.

Signed December 29, 2015

Max Moskowitz, Ariel Samuel Peikes, Ostrolenk, Faber, LLP, New York, NY, Attorneys for Classic Liquor Importers, Ltd.

David William Haller, Covington & Burling LLP (NYC), New York, NY, Attorney for Spirits International B.V.

OPINION

JED S. RAKOFF

, UNITED STATES DISTRICT JUDGE.

By “bottom-line” order dated December 23, 2015, this Court granted in part and denied in part defendant's motion to dismiss. This Opinion explains the reasons for that ruling.

The declaratory judgment procedure is of critical importance to new businesses that seek to clarify their rights before expending significant resources on activities that potentially infringe a more established business's trademarks. This case illustrates why.

Plaintiff Classic Liquor Importers, Ltd. (“Classic Liquor”) is a newcomer to the liquor distribution business, established about two years ago “with the aim of becoming a leading developer, manufacturer, importer and seller of high quality spirits and wines.” See Amended Complaint (“Am.Compl.”) ¶ 5, ECF No. 11. Defendant Spirits International B.V. (“SPI”), by contrast, is a leader in the industry; its vodka brands include STOLICHNAYA, ELIT BY STOLICHNAYA, and ELIT.

Classic Liquor asserts that it has committed millions of dollars to developing its first product, a vodka that it plans to market under the mark ROYAL ELITE. Id. ¶¶ 6–7, 13. On October 30, 2014, Classic Liquor filed a trademark application in the United States Patent and Trademark Office (“USPTO”) for the name ROYAL ELITE. See Am. Compl., Ex. A. In February 2015, the USPTO approved the ROYAL ELITE mark for publication, subject to third-party opposition.

In a cease-and-desist letter mailed to Classic Liquor on or about May 5, 2015, SPI alleged that Classic Liquor's proposed use of the ROYAL ELITE mark in connection with liquor and beverage products would infringe SPI's United States trademarks of variations of the term ELIT.¹ See Am. Compl., Ex. G. The letter requested that SPI withdraw its application for the ROYAL ELITE mark and limit its application for a related mark to exclude wines, spirits, and other beverages. Id. By letter dated May 21, 2015, Classic Liquor responded to SPI's letter, arguing that its proposed use of its ROYAL ELITE mark would not infringe SPI's ELIT marks. By letter dated July 10, 2015, SPI sought clarifications from Classic Liquor as to which products it planned to bring to market under the ROYAL ELITE mark. Without apparently responding to this last letter, Classic Liquor, on August 18, 2015, commenced this action.

In its Amended Complaint, filed on October 28, 2015, Classic Liquor seeks (1) a declaratory judgment that its vodka bottles and the trademarks and trade dress used thereon do not infringe SPI's trademarks, and (2) the cancellation of two of SPI's registered trademarks “on the grounds that ‘elit’, according to SPI, has the exact same meaning as ‘elite’, a descriptive term that cannot be registered with the PTO pursuant to 15 U.S.C. § 1052(e)

.” Am. Compl. ¶ 39.

Classic Liquor also alleged in its original complaint filed August 18, 2015 that it was preparing to market and distribute its vodka products in the United States “within a month or so” from the date of the filing of the complaint. Complaint ¶ 14, ECF No. 1. Although this language was carried over verbatim to the Amended Complaint, see Am. Compl. ¶ 14, this may have been unintentional, since in a declaration filed in support of plaintiff's opposition papers to the instant motion, Classic Liquor's president, Simon Alishaev, avers that “[s]ales and shipment of the ROYAL ELITE vodka to retailers commenced as early as September 2015, and the public has been purchasing [plaintiff's] ROYAL ELITE vodka[ ] product since then.” Declaration of Simon Alishaev dated Nov. 23, 2015 (“Alishaev Decl.”), ¶ 9, ECF No. 19. Mr. Alishaev further avers that “Royal Elite is currently in approximately 100 retailers in the New York metro area and is expanding to over 10 states in January 2016—with further expansion to over 20 states through 2016.” Id.

Mr. Alishaev also avers that, over the course of 2015, SPI filed oppositions in many countries against plaintiff's applications to register the ROYAL ELITE mark, including in Panama, South Korea, Hong Kong, and Australia. See id. ¶ 15. And the Amended Complaint asserts that on September 28, 2015, SPI filed an opposition to Classic Liquor's application for the ROYAL ELITE mark with the USPTO's Trademark Trial and Appeal Board (“TTAB”). See Am. Compl. ¶ 30. However, in a letter to Classic Liquor dated October 28, 2015 (i.e., well after this litigation commenced), SPI represented that it had no present intention to sue Classic Liquor for trademark infringement and purportedly did not have such an intention when it sent its cease-and-desist letter on May 5, 2015. Nonetheless, SPI reserved its right to pursue litigation “if and when Classic Liquor launches and has any actual sales, and depending on the iteration of the mark used, and if we observe or learn of any actual consumer confusion.” Declaration of Max Moskowitz dated Nov. 23, 2015 (“Moskowitz Decl.”), ECF No. 18, Ex. 1 at 2.² On November 9, 2015, the TTAB granted Classic Liquor's motion to stay the TTAB proceedings, pending disposition of the instant action, as per its standard policy. Id ., Ex. 4.

On November 16, 2015, SPI moved to dismiss Counts One and Two of the Amended Complaint. With respect to Count One, SPI argued that the Court lacked subject-matter jurisdiction over Classic Liquor's declaratory judgment claim for non-infringement.

The Declaratory Judgment Act is properly invoked where “there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941)

. The dispute must “admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (internal quotation marks omitted). While the “Act confers on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants,” Peconic Baykeeper, Inc. v. Suffolk Cty., 600 F.3d 180, 187 (2d Cir.2010) (internal quotation marks omitted), a “declaratory judgment action should be entertained when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and ... when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.” Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 790 (2d Cir.1986)

(internal quotation marks omitted).

The Second Circuit has explained that “[d]eclaratory judgment actions are particularly useful in resolving trademark disputes, in order to promptly resolve controversies where the alleged owner of a trademark right threatens to sue for infringement,” and, as such “the finding of an actual controversy should be determined with some liberality” in such a case. Starter Corp. v. Converse, Inc., 84 F.3d 592, 596 (2d Cir.1996)

. “A more restrictive view,” the Court of Appeals has explained, could require a party “to go to substantial expense in the manufacture, marketing, and sale of its [product], and subject itself to considerable liability for a violation of the Lanham Act before its right to even engage in this line of commerce could be adjudicated.” Id.

A motion to dismiss for lack of subject-matter jurisdiction is brought under Rule 12(b)(1) of the Federal Rules of Civil Procedure

. “Courts weighing a Rule 12(b)(1) motion ‘borrow from the familiar Rule 12(b)(6) standard, construing the complaint in plaintiff's favor and accepting as true all material factual allegations contained therein.’ ” Gelmart Indus., Inc. v. Eveready Battery Co., 120 F.Supp.3d 327, 330, 2014 WL 1512036, at *2 (S.D.N.Y. Apr. 15, 2014) (quoting Donoghue v. Bulldog Investors Gen. P'ship, 696 F.3d 170, 173 (2d Cir.2012) ). However, in considering a Rule 12(b)(1) motion, “a district court may resolve disputed factual issues by reference to evidence outside the pleadings, including affidavits.” State Emps. Bargaining Agent Coal. v. Rowland, 494 F.3d 71, 77 n.4 (2d Cir.2007).

With these principles in mind, the Court turns to the substance of defendant's motion. SPI argues that the Court lacks subject-matter jurisdiction over Classic Liquor's declaratory judgment claim because the claim is impermissibly hypothetical in nature. In particular, SPI asserts (1) that Classic Liquor fails to adequately allege that it is imminently ready to market its product under the ROYAL ELITE mark; (2) that Classic Liquor has not sufficiently fixed its mark such that it can be compared to SPI's marks; (3) that evidence of actual consumer confusion is unavailable because Classic Liquor's products are supposedly not yet on the market; and (4) that SPI has no present intention, and has never threatened, to sue Classic Liquor for infringement.

The first three arguments are largely premised on the notion that Classic Liquor has not yet brought its product to market (or at least has not yet formally so alleged in its complaints). See, e.g., Def.'s Opening Br. at 14, ECF No. 14 (“[Classic Liquor] has not launched its products into the consumer marketplace.”); id. at 11 (“[Classic Liquor] does not adequately allege that it is imminently ready to produce and sell to consumers vodka products bearing the ‘ROYAL ELITE’ mark”); id. at 12 (“Put simply, the Amended Complaint does not allege facts that would evidence a concrete intention to use the ‘ROYAL...