Iberia Foods Corp. v. Romeo

• Decision Date: 30 July 1998
• Docket Number: No. 97-5424,97-5424
• Parties: IBERIA FOODS CORP. v. Rolando ROMEO, Jr. d/b/a Rol-Rom Foods Rolando Romeo, Jr., t/a Rol-Rom Foods, Appellant
• Court: U.S. Court of Appeals — Third Circuit

Page 298

150 F.3d 298

47 U.S.P.Q.2d 1604

IBERIA FOODS CORP. v. Rolando ROMEO, Jr. d/b/a Rol-Rom Foods Rolando Romeo, Jr t/a Rol-Rom Foods, Appellant

No. 97-5424.

United States Court of Appeals Third Circuit.

Argued April 27, 1998.

Decided July 30, 1998.

Stephen L. Baker (Argued), Stephen L. Baker, P.A., Somerville, New Jersey, for Appellant.

John G. Gilfillan, III (Argued), Kenneth L. Winters, Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, Roseland, NJ, for Appellee.

Before: ALITO, RENDELL and GARTH, Circuit Judges

OPINION OF THE COURT

GARTH, Circuit Judge:

This is a trademark action brought by Iberia Foods against Rolando Romeo, Jr. and his company, Rol-Rom Foods (collectively, "Rol-Rom"), to enjoin Rol-Rom's sale of household cleaning products under the Mistolin trademark owned by Iberia. The district court granted summary judgment in favor of Iberia, and Rol-Rom has appealed. Because the Mistolin products sold by Rol-Rom are "genuine" under Section 32 of the Lanham Act, 15 U.S.C. § 1114, we will reverse.

I.

Iberia Foods is a Brooklyn-based wholesale distributor of grocery store products that owns the United States trademark to Mistolin household cleaners. The line of Mistolin products includes soaps, tile cleaners, and laundry detergents, and is offered for sale at grocery stores and supermarkets both in Puerto Rico and in certain metropolitan areas in the United States for a few dollars a bottle.

Mistolin products are manufactured exclusively in Puerto Rico by Mistolin Caribe, Inc. ("Caribe"). In addition to selling Mistolin to Iberia for resale in the United States, Caribe markets Mistolin directly to distributors in Puerto Rico for resale in the Puerto Rican market. Although both Iberia and Caribe sell Mistolin products, the two companies service entirely separate markets: Caribe sells Mistolin only in Puerto Rico to Puerto Rican distributors, and Iberia sells Mistolin only in the continental United States.

The business arrangement between Iberia and Caribe dates back to 1988, when Iberia acquired the United States trademark to Mistolin from Caribe's parent company, Mistolin Dominicana, C.A. ("Dominicana"). ¹ Although the legal effect of the 1988 agreement is disputed, its terms granted Iberia "all the rights, title and interest in and to [the Mistolin ] trademark insofar as they relate to the United States." In exchange for ownership of the Mistolin trademark, Iberia agreed to purchase Mistolin exclusively from Caribe.

The defendant in this case, Rol-Rom Foods, is a New Jersey-based distributor of household cleaning products that purchases Mistolin products on the open market in Puerto Rico and sells them in New York and New Jersey. Although Rol-Rom has never purchased Mistolin products directly from Caribe, it is undisputed that the Mistolin sold by Rol-Rom was originally sold by Caribe for resale in the Puerto Rico market. By obtaining Mistolin in Puerto Rico and selling it in New York without Iberia's involvement, RolRom has been able to offer Mistolin for sale in direct competition with Iberia at a substantial discount from Iberia's price.

II.

In April 1993, Iberia filed a four count complaint against Rol-Rom seeking injunctive relief and damages. The principal count in the complaint alleged that Rol-Rom's sale of Mistolin products constituted infringement of Iberia's trademark in violation of § 32 of the Lanham Act, codified at 15 U.S.C. § 1114. ² Rol-Rom's answer denied that it had infringed Iberia's mark, alleged several affirmative defenses, and added a number of counterclaims. Following discovery, both parties moved for summary judgment on the federal trademark infringement count.

Before the district court on summary judgment, Iberia argued that Rol-Rom had clearly infringed Iberia's trademark. According to Iberia, the 1988 agreement between Iberia and Caribe had transferred the rights to the Mistolin trademark in the continental United States to Iberia, but had allowed Caribe to retain the trademark rights to Mistolin in Puerto Rico. By buying Mistolin in Puerto Rico and selling it in the continental United States, Iberia contended, Rol-Rom had circumvented the quality control measures enforced by Iberia on all the Mistolin products it sold. Accordingly, Iberia claimed, Rol-Rom's Mistolin was not "genuine," and Rol-Rom's sales constituted infringement of Iberia's trademark because it injured the goodwill Iberia had invested in the mark.

Rol-Rom's view of the case contrasted sharply with Iberia's. According to Rol-Rom, the 1988 agreement had transferred all of Caribe's United States trademark rights to Iberia. Because Puerto Rico is considered part of the "United States" for the purpose of federal trademark law, see 15 U.S.C. § 1127, Rol-Rom claimed that the 1988 agreement had granted Iberia the Mistolin trademark rights in Puerto Rico as well as in the continental United States. According to Rol-Rom, Iberia's longstanding failure to challenge Caribe's sales of Mistolin to Puerto Rican distributors provided Rol-Rom with two affirmative defenses to Iberia's action. First, Rol-Rom argued that Iberia's failure to exercise control over its mark constituted a "naked license" that had led to de facto abandonment of the Mistolin trademark. ³ Second, Rol-Rom claimed that Iberia had impliedly consented to Caribe's sales of Mistolin in Puerto Rico, such that Iberia had relinquished its trademark rights to the Mistolin sold by Rol-Rom pursuant to the "first sale" or "exhaustion" doctrine. ⁴

On March 26, 1996, the district court entered an order denying Rol-Rom's motion for summary judgment and granting Iberia's summary judgment motion. Addressing Rol-Rom's defenses first, the district court held that Rol-Rom's first sale and abandonment defenses were meritless because the uncontroverted evidence in the record made clear that neither Caribe nor Iberia had intended that Iberia would possess the right to prevent Caribe from marketing Mistolin in Puerto Rico. When Caribe and Iberia had agreed to transfer the Mistolin trademark rights to Iberia "insofar as they relate to the United States," the district court held, they had intended to transfer only the rights covering the continental United States, where Iberia was already distributing Mistolin products. Because Iberia had no right to control Caribe's sales of Mistolin in Puerto Rico, it had no ability either to authorize Caribe's "first sale" of Mistolin or to grant Caribe a "naked license" to sell it in Puerto Rico. Accordingly, the district court held that the first sale (exhaustion) and abandonment doctrines were inapplicable. In any event, the district court noted, the Mistolin trademark had clearly not been abandoned because the mark continued to have significance among purchasers in the continental United States.

Having dispensed with Rol-Rom's affirmative defenses, the district court turned to Iberia's motion for summary judgment. Here, the district court referenced its prior discussion of Iberia's view that the Mistolin sold by Rol-Rom was not "genuine" because it never passed through Iberia's post-manufacture quality controls. In that discussion, the district court had also noted the presence of "record evidence showing that [Iberia] has in fact instituted some quality control procedures over products it received from Caribe." In its motion for summary judgment, Iberia argued that this evidence entitled Iberia to summary judgment on its federal trademark infringement count. The district court agreed, although it did not specify the basis for its implicit conclusion that Rol-Rom's Mistolin was not "genuine."

The litigation regarding Iberia's remaining claims and Rol-Rom's counterclaims continued until June 4, 1997, when the district court acceded to the parties' request to enter a final order and injunction that would allow Rol-Rom to pursue an appeal without further delay. The final order enjoined Rol-Rom from selling Mistolin products that had not first been distributed by Iberia, and ordered that if Rol-Rom violated the injunction it would be held in contempt, fined, and forced to pay Iberia's attorney's fees. Further, the final order stated that Rol-Rom's counterclaims and Iberia's claim for damages were withdrawn with prejudice, subject to the right of the parties to reinstate their claims if the district court's March 26, 1996 order were to be reversed on appeal. ⁵

Rol-Rom filed a timely appeal. We will reverse.

III.

On summary judgment, we exercise plenary review, construing all evidence and resolving all doubts raised by affidavits, depositions, answers to interrogatories, and admissions on file in favor of the non-moving party. See SEC v. Hughes Capital Corp., 124 F.3d 449, 452 (3d Cir.1997). Our task is to identify and explain the substantive law governing the action, and then in light of that law determine whether there is a genuine dispute over dispositive facts. See Ciarlante v. Brown & Williamson Tobacco Corp., 143 F.3d 139, 145 (3rd Cir.1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)). If upon review of cross motions for summary judgment we find no genuine dispute over material facts, then we will order judgment to be entered in favor of the party deserving judgment in light of the law and undisputed facts. See Ciarlante, 143 F.3d at 145-46.

IV.

Although the parties have devoted their attention to the merits of Rol-Rom's affirmative defenses, we consider the primary question raised by this appeal to be one addressed only in passing by the parties. The question is: has Iberia established that the Mistolin sold by Rol-Rom is not "genuine" according § 32 of the Lanham Act? Because we conclude that Iberia has failed to establish that the Mistolin sold by Rol-Rom is not "genuine," we hold that Rol-Rom is entitled to summary judgment, and that the order of the district court must be reversed.

A.

Iberia's federal trademark claim...