Denial of Section 37 relief affirmed in dispute over COHIBA mark

In Empresa Cubana del Tabaco v Culbro Corporation (Case 07-1248, September 4 2008), the US Court of Appeals for the Second Circuit has affirmed the district court’s denial of a motion for relief filed by the defendants. 
In 1997 Empresa Cubana del Tabaco, which does business under the name Cubatabaco, initiated an action against the defendants (collectively General Cigar) before the Trademark Trial and Appeal Board (TTAB). Cubatabaco sought the cancellation of General Cigar’s registration for the trademark COHIBA for cigars on the grounds, among others, that Cubatabaco was the rightful owner of the trademark. 
Thereafter, Cubatabaco filed the instant lawsuit against General Cigar in a New York federal district court and the TTAB proceedings were suspended pending the outcome of the litigation. Cubatabaco had also filed a trademark application for the mark COHIBA, which was also suspended pending the outcome of the proceedings between the parties. Over the intervening years, several district court and appellate court decisions (see Empresa Cubana del Tabaco v Culbro Corp (399 F3d 462 [2005])) established, among other things, that:
  • Cubatabaco had no rights in the COHIBA mark in the United States; and
  • General Cigar’s use and registration of the name in the United States were not improper. 
The present decision arose from an attempt by General Cigar to use the decisions of the district court and appellate court as a basis for summarily disposing of the pending TTAB case.
Following the dismissal of Cubatabaco’s claims against General Cigar, General Cigar filed a motion under Section 37 of the Lanham Act, seeking an order from the district court directing that the commissioner of patents and trademarks dismiss both the pending cancellation proceeding and Cubatabaco’s pending trademark application. Section 37 provides that:
"In any action involving a registered mark, the court may determine the right to registration, order the cancellation of registrations [...] and otherwise rectify the register with respect to the registrations of any party to the action."
General Cigar argued that in view of the district court’s decision that Cubatabaco was not entitled to the COHIBA mark in the United States, the court should simply order the commissioner to dismiss the pending petition for cancellation and Cubatabaco's application.
The district court viewed General Cigar's motion as a motion to amend or alter the judgment pursuant to Rule 59(e) of the Federal Rules of Civil Procedure. In this regard, the court determined that because General Cigar had not made a Section 37 claim in its pleadings in the underlying case (by way of a counterclaim for cancellation, for example), the motion to amend to the judgment was untimely. 
On appeal, the Second Circuit reviewed the district court decision from two perspectives. First, it examined the motion made by General Cigar in the context of a motion to amend the judgment. On that front, the court agreed with the district court that because General Cigar had not raised the Section 37 claim in the pleading stage of the case, it was within the discretion of the district court to have denied the motion. The Second Circuit based its decision on the language of the statute, which is clearly permissive in nature in that it states that the court "may" grant relief (and not that the court "shall" grant relief). The court also pointed out that General Cigar was free to argue to the TTAB that the decision in the court proceedings should act as an estoppel to Cubatabaco’s arguments in the US Patent and Trademark Office, but the court would not go so far as to order the commissioner to take a particular action given the facts of this case.
The Second Circuit then went on to examine General Cigar's motion in the context of the district court’s ancillary jurisdiction. Essentially, General Cigar’s argument was that the courts have the inherent power to take the steps necessary to enforce their judgments. Therefore, the district court should give effect to the judgment by ordering the commissioner to do what he would eventually have to do anyway - namely, to dismiss the cancellation proceedings. However, the Second Circuit, citing the Supreme Court’s caution against the exercise of such jurisdiction where the relief sought is of a different kind or is based on a different principle than that of a prior decree, noted that the claim for Section 37 relief was not before the district court during the underlying action, or previously on appeal. As such, the court concluded that the requested Section 37 relief was a different kind of relief than that contemplated by the district court’s judgment. 
Moreover, since what General Cigar actually requested was premised more on an estoppel theory (ie, Cubatabaco was estopped from challenging General Cigar's registration) than on the theory of the underlying case, General Cigar’s requested relief was based on a different legal principle than had been contemplated below. Accordingly, the Second Circuit affirmed the district court decision refusing to issue an order directing the commissioner to dismiss the cancellation proceedings and refuse registration, paving the way for the TTAB to finally bring some closure to this long-term dispute.
Timothy J Kelly, Fitzpatrick Cella Harper & Scinto, New York, with the assistance of Ralph Dengler

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