Addressing issues of international comity, res judicata, and laches, the U.S. Court of Appeals for the Second Circuit affirmed in part and vacated in part the district court’s decision concerning a dispute over rights to the trademarks for Stolichnaya. Fed. Treasury Enter. Sojuzplodoimport et al. v. Spirits Int’l B.V., et al., Case Nos. 14-4721, 15-152 (2nd Cir., Jan. 5, 2016) (Jacobs, J.).

This is the latest chapter in the saga concerning the ownership of this well-known vodka brand (IP Update, Vol. 13, No. 11; IP Update, Vol. 16, No. 9). Defendant Sprits International (SPI) claimed ownership of the Stolichnaya trademark through the privatization of a Soviet Union state enterprise, VVO-SPI, the original owner of the United States trademark registration for the Stolichnaya mark. In 2000, a Russian court held that VVO-SPI had not been validly privatized, meaning that the Soviet Union and thus now the Russian Federation retained ownership of the Stolichnaya mark. The Russian Federation then formed the plaintiff Federal Treasury Enterprise (FTE) to serve as its successor to the Stolichnaya marks. In an earlier lawsuit, FTE sued SPI for violating § 32(1) of the Lanham Act, alleging infringement of a registered trademark and other analogous federal and state claims. The court dismissed FTE’s § 32(1) claims for lack of standing because the Russian Federation retained “too great an interest” in the Stolichnaya marks for FTE to be considered an “assign” of the marks. FTE’s non-§ 32(1) trademark claims were either dismissed or otherwise dropped from the litigation.

In light of the court’s ruling, the Russian Federation directed that its Federal Agency for State Property Management assign to FTE the rights of the Russian Federation in the Stolichnaya marks. FTE then filed this latest lawsuit, again asserting Lanham Act § 32(1) claims and non-§ 32(1) claims against SPI. The district court again held that FTE lacked standing to assert its § 32(1) claims, this time because the assignment was not valid under Russian law. The court also ruled that FTE’s non-§ 32(1) claims were barred by res judicata and laches. FTE appealed.

On appeal, the 2nd Circuit held that the district court was precluded from considering the validity of the assignment of rights to the Stolichnaya marks under two related doctrines—international comity and the act-of-state doctrine. Under international comity, courts should refuse to review actions of foreign governments, unless those actions would be contrary to the policies of the United States. The 2nd Circuit found no countervailing policy interest to justify the district court’s decision. Under the act-of-state doctrine, courts of one sovereign state are precluded from reviewing the acts of government of another sovereign state performed within that state’s territory. Rejecting SPI’s argument that the act-of-state doctrine did not apply to commercial actions, the 2nd Circuit found that the assignment of rights in the marks was the act of a foreign sovereign, effectuated within the boundaries of Russia. The court also held that res judicata did not bar FTE from asserting its § 32(1) claims because those were not previously adjudicated on the merits.

Though the 2nd Circuit vacated and remanded the district court’s dismissal of FTE’s § 32(1) claims, it did affirm in part the district court’s dismissal of FTE’s non-§ 32(1) claims. The 2nd Circuit agreed that res judicata barred those claims because they were either previously adjudicated on the merits or could have been asserted in prior litigation. Laches also barred FTE’s non-§ 32(1) claims, as they were brought many years after the six-year statutory presumption for an unreasonable delay.