IP Law Daily Whether Classic Liquor’s 'ROYAL ELITE' infringed Spirits’ vodka 'ELIT' mark remained in dispute
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Monday, August 22, 2016

Whether Classic Liquor’s 'ROYAL ELITE' infringed Spirits’ vodka 'ELIT' mark remained in dispute

By Pamela C. Maloney, J.D.

The question of whether Classic Liquor Importers’ use of the ROYAL ELITE trademark on its vodka bottles infringed Spirits International’s (SPI) trademarks of variations of the term "ELIT" for its vodka brand raised a question of fact, a federal district court in New York City ruled, denying Classic Liquor’s motion for summary judgment on its declaratory judgment claim. Although the term "ELIT" was not entitled to trademark protection because it was self-laudatory and descriptive, it may have acquired a secondary meaning, such that consumers in the spirits marketplace primarily associated "ELIT" with SPI vodka (Classic Liquors Importers, Ltd. v. Spirits International B.V., August 19, 2016, Rakoff, J.).

On October 30, 2014, Classic Liquor filed a trademark application in the USPTO for the name ROYAL ELITE. In a cease-and-desist letter mailed to Classic Liquor on 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. SPI held registered trademarks in a stylized version of the term ELIT, a figurative representation of the term ELIT, the term STOLICHNAYA ELIT, and a figurative representation of the term STOLICHNAYA ELIT. Classic Liquor filed suit seeking (1) a declaratory judgment that its vodka bottles and the trademarks and trade dress used thereon did not infringe SPI’s trademarks; and (2) the cancellation of two of SPI’s registered trademarks on the ground that "elit" was unregistrable because it had the exact same meaning as the descriptive term "elite."

Viability of declaratory judgment action. As an initial matter, the court addressed SPI’s renewed motion to dismiss the declaratory judgment action, citing its earlier opinion in this matter holding that the trademark infringement action between these two companies was a justiciable controversy under the Declaratory Judgment Act. The court also denied Classic Liquor’s motion for a default judgment of non-infringement, rejecting the argument that SPI’s failure to bring a compulsory counterclaim for trademark infringement meant that the declaratory judgment claim was "per se unopposed."

Strength of trademark. The court went on to find that SPI’s ELIT marks were not fanciful and, thus, were not entitled to maximum protection under the Lanham Act. The term "ELIT" fell into a category of marks described as "self-laudatory" terms that were not entitled to trademark protection absent secondary meaning. There was a factual dispute as to the strength of the ELIT component of these marks for purposes of a Polaroid analysis. Specifically, a report commissioned by SPI indicated that awareness of the "elit by Stolichnaya" mark had increased significantly; that the brand enjoyed strong retention rates; and that the brand’s recognition on social media had improved substantially.

Remaining Polaroid factors. An analysis of the remaining Polaroid factors revealed that it could not be ascertained as a matter of law that there was no likelihood of confusion by Classic Liquor’s use of ROYAL ELITE. Although the manifestations of the marks were not visually similar and the parties’ trade dress was dissimilar, the ELITE and ELIT components were functionally equivalent. Furthermore, the products at issue were in close proximity in the marker and were in direct competition. There also was some evidence of actual confusion. Finally, there was sufficient evidence that Classic Liquor might have masked a bad-faith motive for adopting the ROYAL ELITE mark so as to foreclose summary judgment on the question of whether the mark was adopted in order to exploit the good will and reputation of the ELIT mark.

False advertising and unfair competition. SPI counterclaims that Classic Liquor’s use of the ® symbol next to the word "ROYAL" on its Royal elite vodka bottle and its inclusion of the designation "Since 1867" on all of its vodka bottles amounted to false advertising and unfair competition under the Lanham Act and under New York state law met with mixed results. The court dismissed the Lanham Act claims, explaining that the use of the ® symbol as evidence of false advertising was foreclosed by case law, which required a showing that Classic Liquors had misrepresented an inherent quality of characteristic of its product. The purpose of the federal registration was to put the public on notice of the registrant’s ownership of the mark; the goods or services to which it pertained was irrelevant.

The court also dismissed the Lanham Act claims based on Classic Liquor’s use of "Since 1867" because there was no extrinsic evidence that consumer’s perceived this statement as misleading. However, the inquiry as to whether consumers perceived this statement as misleading under New York law required the courts to apply an objective reasonable consumer standard in determining whether the challenged practice or advertisement was likely to mislead consumers. In this case, the evidence presented raised an issue of fact as to whether an average consumer would be misled by that designation. Thus, SPI state law claim for false adverting was allowed to continue.

The case is No. 15 Civ. 6503.

Attorneys: Ariel Samuel Peikes (Ostrolenk Faber LLP) for Classic Liquor Importers, Ltd. Keith R. Hummel (Cravath, Swaine & Moore LLP) and David William Haller (Covington & Burling LLP) for Spirits International B.V.

Companies: Classic Liquor Importers, Ltd.; Spirits International B.V.

MainStory: TopStory Trademark NewYorkNews

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