Famous Indian Restaurant, Bukhara, Denied Protection By Second Circuit

Thursday, November 1, 2007 - 01:00

With walls made of boulders, sturdy copper and brass bowls and spoons, menus printed on laminated tree sections and heavy wooden tables surrounding an open kitchen where guests can watch tandoori grill chefs preparing their meals, Bukhara restaurants represent a singular dining experience and has been described as "the most famous Indian restaurant in the world." But, the BUKHARA mark is not registered in the United States, nor is it being used in the United States. Thus, the BUKHARA mark has no rights through use or registration in the United States. As a result, the U.S. Court of Appeals for the Second Circuit would not enjoin former employees who copied the restaurant and the name Bukhara in the United States because the court held that U.S. law does not recognize the 'well-known marks' doctrine (also referred to as the 'famous marks' doctrine) ( ITC Limited v Punchgini Inc. , 482 F2d 135 (2d Cir 2007)).

History Of ITC's Bukhara

ITC Limited's first Bukhara restaurant, which opened in 1977 in New Delhi, India, in the luxury Maurya Sheraton Hotel, has become internationally known. It has won numerous awards and is consistently rated as one of the top 50 restaurants in the world and as the top Asian restaurant in the world. Bukhara is a regular stop for international travellers and has been praised by visitors, including a variety of international celebrities, diplomats and dignitaries such as former U.S. President Clinton.

Given the success of the first Bukhara restaurant in New Delhi, ITC opened more Bukhara restaurants in far-reaching areas of the world - Hong Kong, Bangkok, Ajman, Kathmandu, Singapore and Montreal.

ITC opened Bukhara restaurants in New York and in Chicago, both recreated the ambiance of the first Bukhara in New Delhi. However, Indian regulations on overseas investment are particularly strict, and neither restaurant was able to provide adequate returns to satisfy Indian regulatory requirements. Thus, both closed, and since 1997 ITC has not operated a Bukhara restaurant in the United States.

Defendants' Bukhara Grill

Meanwhile, in 1999 three former employees of ITC's Bukhara restaurants, together with several other people, opened a restaurant in New York called Bukhara Grill. A second Bukhara Grill restaurant with common ownership opened in 2001. Numerous reviews and media articles identified Bukhara Grill as associated with ITC's Bukhara. Bukhara Grill's owners discussed their relationship with ITC's Bukhara in several interviews and news articles. Bukhara Grill's own publicity billed the Bukhara Grill as a re-creation of the New Delhi Bukhara.

The Bukhara Grill restaurants not only copied the name but also the waiter uniforms, tableware, menus on wood slabs, red-chequered bibs used in lieu of napkins, an open or see-through kitchen, heavy, wooden furniture and other rustic, decorative elements contribute to an overall look and feel that one of the owners of Bukhara Grill has described as "quite like Delhi's Bukhara."

The Litigation

In February 2003 ITC filed an action against Bukhara Grill claiming that defendants' actions were acts of infringement and also acts of unfair competition prohibited by the Lanham Act and under New York state common law. ITC based its claims for unfair competition, in part, on the well-known marks or famous marks doctrine, through which "a trademark or service mark is protected within a nation if it is well known in that nation even though the mark is not actually used or registered in that nation" (J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition ,29:61 (4th ed 2002)).

The district court granted summary judgment to the defendants and that decision was affirmed by the Second Circuit, which held that ITC had abandoned its federal trademark registration and any trademark rights acquired through use, so the only possible basis for ITC to assert rights in the BUKHARA mark was through the well-known marks doctrine. And, the court held, U.S. federal law does not recognize the famous marks doctrine, despite the court's acknowledgement that the United States was required to adopt a well-known marks doctrine under the Paris Convention and the TRIPs Agreement.

Other Circuit Decisions

Besides the Second Circuit, the only other U.S. circuit court of appeals to have weighed in on the famous marks doctrine was the Ninth Circuit in Grupo Gigante SA de CV v Dallo & Co Inc. (391 F3d 1088 (9th Cir 2004)). While not fully articulated in its opinion, the Ninth Circuit recognized that the famous marks doctrine required by the Paris Convention and the TRIPs Agreement is found in the federal trademark act (known as the Lanham Act), noting that the plaintiff's claim under an international treaty recognizing the famous marks doctrine "is duplicative of its claim that, because [its] mark is well-known, that mark is entitled to protection under the Lanham Act."

It makes sense that the Ninth Circuit would conclude that the plaintiff's famous marks claim is found in the Lanham Act, as the Lanham Act was enacted, in part, to codify the then existing federal common law of trademarks. The Senate Report accompanying passage of the Lanham Act states that "[t]he purpose of this bill is to place all matters relating to trademarks in one statute and to eliminate judicial obscurity This bill effects this necessary codification and coordination" (see S Rep No 79-1333 (1946) reprinted in 1946 USCCAN 1274, 1274). Presumably, this would include the common law recognizing rights through reputation rather than use.

Finally, the Ninth Circuit also explained how the famous marks doctrine is consistent with policy considerations, because "[a]n absolute territoriality rule without a famous-mark exception would promote consumer confusion and fraud" (* Id* at 1094). Describing the United States as a "nation of immigrants" in which commerce and people regularly cross borders, the court described that "[t]rademark [law] is, at its core, about protecting against consumer confusion and palming off." Thus, the court concluded, "[t]here can be no justification for using trademark law to fool immigrants into thinking that they are buying from the store they liked back home."

International Obligations

The Second Circuit's opinion effectively renounces U.S. international obligations to protect foreign marks that are well-known in the United States unless the mark owner also has independent domestic rights through U.S. use or registration.

The United States is obliged to protect famous marks under both the Paris Convention and the TRIPs Agreement. Likewise, Article 16(2) of the TRIPs Agreement extends the well-known marks doctrine to apply to service marks and explains the basis upon which a mark becomes well-known, namely, "knowledge of the trademark in the relevant sector of the public, including knowledge in the member concerned which has been obtained as a result of the promotion of the trademark."

These sections have been enacted or recognized as binding by Congress in various ways, including through Section 44 of the Lanham Act, which expressly provides foreigners the right to assert unfair competition claims under the Lanham Act. Section 44, when read together with the unfair competition provisions of the Lanham Act (Section 43(a)), effectively incorporates provisions of treaties of which the United States is a member - including, presumably, the provisions of the Paris Convention and the TRIPs Agreement that confer protection of famous marks.

ITC sought review of the Second Circuit's decision by the United States Supreme Court, which petition was recently denied. The Supreme Court's determination not to resolve the split between the Second and Ninth Circuits over the status of the well-known marks doctrine in the United States leaves U.S. law on the issue inconsistent.

In addition to its decision in federal recognition of the well-known marks doctrine, the Second Circuit certified two questions of state unfair competition law to the New York Court of Appeals, the highest court in New York state. The New York court has accepted the certification. As under the New York common law of unfair competition it is well established that the proper focus is on whether the defendant's actions were unfair, and so New York law does not require that the parties be in competition nor any level of notoriety for the trademark at issue. Rather, the well-known marks doctrine should properly be viewed as a subset of unfair competition under New York law, which, in accordance with the general principles of unfair competition, does not have a minimum threshold of notoriety constituting fame. The hearing before the New York Court of Appeals is scheduled for November 13.

Practical Implications For Mark Owners

TRIPs arose out of the need for international protection of intellectual property because of its significant and growing importance in international trade and economic relations. This need is particularly keen with respect to famous marks in today's age of instantaneous international communications and widespread global travel.

Owners of famous marks have cause to be concerned about the Second Circuit's decision because it amounts to a failure by the U.S. to comply with its treaty obligations. Such failure should not be viewed lightly because this decision will make it more difficult for the U.S. to ensure that other countries comply with TRIPs. The well-known marks doctrine is central to international protection for U.S. trademark owners, because it is often U.S. trademarks and brands that are being infringed or misused in other countries. Of the top 100 globally used trademarks, the United States accounts for over half, including the top five: Coca-Cola, Microsoft, IBM, GE and Intel (see http://bwnt.businessweek.com/brand/2006/). The estimated property value of the 51 U.S. trademarks listed in the top 100 is over $715 billion alone. But if U.S. courts are seen as failing to protect foreign interests, U.S. companies will be in a weaker position to assert their rights as U.S. entities under the TRIPs Agreement in the courts and tribunals of foreign jurisdictions. And for the same reason, the efforts of the United States to compel other countries to live up to their obligations under the TRIPs Agreement may be seriously compromised. Thus, U.S. owners of famous marks may find protecting their rights internationally to be more difficult in light of the decision.

Ethan Horwitz is a partner and Jill Wasserman is an associate in the IP group at King & Spalding. Both are counsel to ITC Limited in this case.

Please email the authors at ehorwitz@kslaw.com or jwasserman@kslaw.com with questions about this article.