“While the CAFC disagreed with Meenaxi’s argument that Coca-Cola lacked a cause of action under the Lanham Act because of the territoriality principle, the court said that the resales of Coca-Cola products in the United States by authorized distributors ‘do nothing to establish lost sales by Coca-Cola in the United States.'”
The U.S. Court of Appeals for the Federal Circuit (CAFC) today reversed a decision of the U.S. Patent and Trademark Office’s (USPTO’s) Trademark Trial and Appeal Board (TTAB) that had canceled two marks for Thums Up cola and Limca lemon-lime soda owned by Meenaxi Enterprise, Inc. The CAFC held that Coca-Cola had not established a statutory cause of action based on lost sales or reputational injury under Section 14(3) of the Lanham Act and thus reversed the decision. Judge Reyna wrote separately in concurrence but said he would have focused the inquiry on the territoriality principle and the well-known mark exception, rather than lost sales and reputational injury among U.S. consumers, as the majority did.
The Soda Marks
The trademarks in question are Meenaxi’s registered THUMS UP and LIMCA character marks for “Colas; Concentrates, syrups or powders used in the preparation of soft drinks; Soft drinks, namely, sodas.” Meenaxi had been selling products to Indian grocers in the United States since 2008 using the marks, and obtained the registrations in 2012. Thums Up cola has been sold in India since 1977 and Limca lemon-lime soft drink since 1971—Coca-Cola purchased the company that introduced the drinks there in 1993 and acquired the Indian marks for THUMS UP and LIMCA. The products are also sold in a number of other countries, and the Delhi High Court has found the THUMS UP and LIMCA marks to be “famous” and/or “well known” in India. Coca-Cola claimed that its beverages have been imported and sold in the United States since at least 2005 by resellers.
Coca-Cola sued Meenaxi in 2016 for misrepresentation of source under Section 14(3), seeking to cancel Meenaxi’s registrations. Section 14(3) states:
A petition to cancel a registration of a mark, stating the grounds relied upon, may . . . be filed as follows by any person who believes that he is or will be damaged . . . by the registration of a mark on the principal register[:] . . .
(3) At any time . . . if the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used.
The TTAB ultimately found that Coca-Cola had a statutory entitlement to bring a cancellation claim because “Coca-Cola’s THUMS UP and LIMCA marks ‘likely would be familiar to much of the substantial Indian-American population in the United States,’” and that “Coca-Cola ‘reasonably believe[d] in damage proximately caused by the continued registration by [Meenaxi] of THUMS UP and LIMCA,’ as Meenaxi’s use of the THUMS UP and LIMCA marks could cause a harm ‘stemming from the upset expectations of consumers.’” The Board further held that Meenaxi’s logos and slogans were intentionally “exact or nearly exact replicas of those used by Coca-Cola” until Coca-Cola objected, and that the company was “attempting ‘to dupe consumers in the United States who were familiar with [Coca-Cola’s] THUMS UP cola from India into believing that [Meenaxi’s] THUMS UP cola was the same drink.’” The TTAB thus cancelled the registrations.
CAFC: No Lost Sales or Injury
While the CAFC disagreed with Meenaxi’s argument that Coca-Cola lacked a cause of action under the Lanham Act because of the territoriality principle, the court said that the resales of Coca-Cola products in the United States by authorized distributors “do nothing to establish lost sales by Coca-Cola in the United States,” and that Coca-Cola presented no evidence it sells Limca soda anywhere in the United States, and has only limited sales of Thums Up in two U.S. cities. While it presented evidence for future plans to market the products more broadly in the United States, “nebulous future plans for U.S. sales cannot be the basis for a Lanham Act claim,” said the court.
As to reputational injury, the CAFC noted that Coca-Cola did not rely on a famous-marks exception, and instead argued only that it experienced reputational injury in the United States because: “(1) members of the Indian- American community in the United States were aware of the THUMS UP and LIMCA marks and (2) Meenaxi traded on Coca-Cola’s goodwill with Indian-American consumers in those marks by misleading them into thinking that Meenaxi’s beverages were the same as those sold by Coca-Cola in India.” But under Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118, 129, 132 (2014), which governs the statutory cause of action, a “cognizable ‘economic and reputational injury’ generally ‘occurs when deception of consumers causes them to withhold trade from the plaintiff,’” and Coca-Cola had alleged no lost U.S. sales as a result of the claimed reputational injury.
The court explained that the TTAB’s finding that the reputation of the THUMS UP and LIMCA marks “would extend to the United States, at least among the significant population of Indian-American consumers” was at least partly based on assumption and stereotyping, as “[t]here is no basis to assume that an American of Indian descent is aware of brands in India.” The court continued:
“The Board did not consider what portion of Indian Americans had spent time in India, i.e., how many had visited India or lived in India. The Board’s conclusion relies at least in part on stereotyped speculation.”
Coca-Cola also presented no survey evidence demonstrating consumer awareness of either mark in the United States, relying instead on unsupported statements by Coca-Cola executives. Meenaxi’s admission at oral argument of a single instance in which a U.S. customer had commented that they recognized the THUMS UP mark as one they had seen in India is “plainly insufficient” to establish consumer awareness, said the court.
Reyna Says Territoriality Should Govern
Judge Reyna concurred, but said the factual inquiries on which the majority relied—lost sales and reputational injury among U.S. consumers—” are directly reflective of the territoriality principle and the well-known mark exception.” Reyna expressed concern that the majority’s holding “could be reasonably read to imply that Coca-Cola could have established statutory standing if it proved that U.S. consumers were aware of its Indian brands,” whereas Reyna still would have reversed in that case “because the territoriality doctrine governs, and Coca-Cola waived reliance on the well-known mark exception thereto.”
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