Cuban Cigar Brands NV v. Upmann Intern., Inc.

• Decision Date: 20 July 1978
• Docket Number: No. 77 Civ. 345.,77 Civ. 345.
• Citation: 457 F. Supp. 1090
• Parties: CUBAN CIGAR BRANDS N. V., Plaintiff, v. UPMANN INTERNATIONAL, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

457 F. Supp. 1090

CUBAN CIGAR BRANDS N. V., Plaintiff, v. UPMANN INTERNATIONAL, INC., Defendant.

No. 77 Civ. 345.

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

July 20, 1978.

Watson, Leavenworth, Kelton & Taggart, New York City, for plaintiff; Frank J. Colucci, Leslie D. Taggart, Howard B. Barnaby, Jr., William R. Liberman, New York City, of counsel.

Bader & Bader, New York City, for defendant; I. Walton Bader, New York City, of counsel.

OPINION FINDINGS OF FACT AND CONCLUSIONS OF LAW

WEINFELD, District Judge.

This trademark infringement action involves variations on the name "Upmann" as a mark used in the sale of cigars.¹ Plaintiff, owner of the mark "H. Upmann," seeks declaratory and injunctive relief under the Lanham Act² and the common law: (a) cancelling defendant's federal registration of the marks "Carl Upmann" and "Upmann's Repeater" and (b) enjoining defendant's further use of these marks, the name "Upmann" alone as a mark, and its recently adopted corporate name, "Upmann, International, Inc." Interposing various defenses such as laches, abandonment and the incontestability of its marks, defendant seeks to dismiss the complaint and requests a declaratory judgment permitting it to use its marks without interference. Defendant also counterclaims, alleging that plaintiff had committed various antitrust and United States tax law violations which require cancellation of plaintiff's mark and an award of treble damages in its favor. The antitrust and tax law claims, for which defendant demanded a trial by jury, were severed from the trademark issues which were tried to the Court.

At the close of a two-day trial, the Court indicated that there was no question but that there was "likelihood of confusion" under the Lanham Act³ and cases construing it.⁴ Plaintiff was thus entitled to the injunctive relief sought, unless one of the defendant's defenses could be sustained— specifically, whether plaintiff was guilty of laches⁵ and whether the defendant's use of Upmann in its marks was in bad faith so as to preclude its asserting that defense. Answering the first question negatively and the second affirmatively, the Court grants plaintiff its requested relief.

I

A. The Parties, Individually

Simply stated, H. Upmanns manufactured in pre-Castro Cuba were among the world's finest cigars. First registered in this country on December 17, 1912 to H. Upmann & Co. of Havana, Cuba (Registration No. 89,518),⁶ the mark and business were acquired by Menendez, Garcia y Compania ("Menendez Garcia"), a Cuban limited liability partnership,⁷ on or about August 2, 1939. Although its reputation even then was that of a fine, expensive, hand-made cigar, its sales volume was not commensurate with its reputation, and Menendez Garcia sought to change that situation.

Their efforts met with great success. By 1959, H. Upmann had garnered nearly 80% of the premium cigar market in Cuba and by volume was the largest brand exported. Packaged in attractive cedar boxes, especially for luxury store distribution, H. Upmanns were sold throughout the United States by leading cigar importers and distributors as a premium product. Menendez Garcia spent about $50,000-$70,000 per year on direct advertising which appeared in magazines such as the New Yorker and Fortune and in the financial press; the American importers also advertised in their catalogues and with the news media. In its last full year of business in Cuba, Menendez Garcia exported to this country more than five million cigars at a wholesale price in excess of one and one-half million dollars; the cigars were then sold for between 50¢ and $1.25 per cigar, according to grade.

In 1960, the Menendez Garcia organization was intervened (in effect, confiscated) by the Castro government.⁸ The principals, joined by a number of their skilled employees, fled Cuba for Spain and, in Las Palmas, Canary Islands, formed Compania Insular Tabacalera ("CIT"), along with investors including some of those previously interested in Menendez Garcia and a number of new, additional interests. For a while, they continued to manufacture cigars with Cuban-grown tobacco, but after the United States embargo on Cuban goods took effect,⁹ CIT began to experiment with blends of Santo Domingo, Brazil, Cameroon, Sumatra and Connecticut tobacco. These cigars were sold under trademarks other than H. Upmann, in part because of ongoing litigation concerning ownership of the mark with various importers and the Cuban government,¹⁰ which, following its intervention, continued to export cigars under the H. Upmann name. CIT, however, continued to test various blends, in an effort to market a non-Cuban tobacco cigar of equally high quality as the Cuban version under the name H. Upmann once the ownership issue was resolved. Although there were various shipments of non-Cuban H. Upmanns made prior to 1975, these were de minimis and were made for the sole purpose of testing various blends. In November 1975, however, having emerged victorious on the ownership issue, thus entitled to the exclusive right to use H. Upmann,¹¹ and having developed a satisfactory blend of non-Cuban H. Upmann cigars, CIT began shipments in earnest. The return of H. Upmann to the American market was greeted with great acclaim in the press and renewed consumer acceptance.

Plaintiff acquired the business, the H. Upmann mark, as well as another former Menendez Garcia brand in 1976, for which it paid $1,000,000, although CIT continues manufacturing. Since plaintiff's acquisition, sales have been at the rate of approximately 300,000 per month; the retail prices are twice what they were in 1959. Plaintiff continues to advertise through television, magazines and newspapers, and distributors likewise continue to promote the product. Having successfully passed through rebirth, H. Upmann now enjoys the revival of its reputation as one of the premium cigars sold in this country.

Defendant's tale is rather less illustrious. The earliest use for which any evidence was offered at trial was the early 1930's, although the applications filed in 1954 for what eventually became registrations numbered 648,113 and 648,144 for the marks Carl Upmann and Upmann's Repeater respectively, claim use in interstate commerce dating back to 1871. As told by Antonio Suarez, registrant of the marks and defendant's assignor and principal witness at trial, the history of the marks is as follows. In the early 1930's, a Tampa, Florida firm employing Suarez received a contract to manufacture the Carl Upmann line from what was then Carl Upmann, Inc., headed by one Carl Julius Upmann who was said to be a descendant of the cigar's namesake. Carl Upmann, Inc., a New York entity, was succeeded by another corporation, Upmann & Suarez, in 1941 which continued the sale (such as there was) of Carl Upmann cigars, using the same labels, bands, displays, etc. left over from Carl Upmann, Inc. Upmann & Suarez was dissolved in 1946 or 1947, however, and Suarez moved to Tampa where, according to his testimony, he continued the manufacturing and sale of Carl Upmann cigars and Upmann's Repeaters under the name of Antonio Suarez y Compania. Suarez applied to register the marks in 1954. After various difficulties were overcome,¹² the Patent Office accepted the registrations and published the marks in June of 1955. In 1962, Suarez filed a combined affidavit under Sections 8 and 15 of the Lanham Act, 15 U.S.C. §§ 1058, 1065.

Suarez has no records of his business either with Upmann or alone, and consequently, there is lack of or insufficient evidence upon which accurately to determine the extent of business done by him under the marks. Indeed, the only documentary proof of any sales whatsoever during the entire time Suarez owned or worked with the marks consists of a handful of orders covering a limited period in 1947. The evidence does support a finding that Carl Upmann or Upmann's Repeater never achieved acceptance by the smoking public that even came close to approaching the fame and financial success of H. Upmann. Whatever distribution of these cigars that may have been made was indeed sparse.

In 1963, Suarez sold his rights in the marks Carl Upmann and Upmann's Repeater to Zelick Gimelstein, owner of Zelick's Tobacco Corporation of Miami Beach, Florida. Gimelstein arranged shortly thereafter for the manufacture and sale of the cigars. When Zelick died in 1971, he was succeeded by his son Alex, chief executive of the defendant, who also testified at trial.

Defendant's cigars are presently manufactured in and imported from Honduras; at the time defendant acquired the marks, however, it arranged for their manufacture by a Tampa, Florida firm. Intermittent advertising in trade journals began in 1972, and was expanded somewhat in 1974. No advertising was done in the general media. The only evidence of sales offered goes back to 1966.¹³ From that point until 1974, sales of both brands combined never went above 222,000 annually and, in fact, averaged approximately 115,120. In 1974, however, they rose to 465,000; in 1975, approximately 587,000 and in 1976, approximately 1,007,700 were sold. The 1977 sales are placed at over 1,474,200.

But 1974 was significant to defendant for another reason. In that year, Alex Gimelstein caused the incorporation of defendant under its present name, Upmann International, Inc. In July 1975, it applied to the Patent Office to register the mark of Upmann alone. Later, in September 1975, defendant commenced proceedings to cancel a number of former Cuban cigar marks, including H. Upmann, which had not yet resumed bulk sales in this country, claiming that the marks were abandoned, and with respect to H. Upmann, that it was confusingly similar to defendant's own marks.¹⁴ The proceeding against H. Upmann was dismissed when defendant failed to clarify internal inconsistencies in its application.¹⁵ Proceedings on defendant's application to register Upmann alone, to which H. Upmann...