Federal Circuit reverses TTAB and holds that Cubatabaco can seek cancellation of COHIBA mark

In Empresa Cubana del Tabaco v General Cigar Co Inc (Appeal No 13-1465, June 4 2014), the US Court of Appeals for the Federal Circuit has vacated and remanded a decision of the Trademark Trial and Appeal Board (TTAB), and held that Empresa Cubana Del Tabaco (Cubatabaco) had a statutory cause of action under the Lanham Act to petition the TTAB to cancel General Cigar Co’s registrations for the COHIBA mark, and that such a cancellation petition was not barred by issue preclusion or claim preclusion based on a Second Circuit ruling on a trademark infringement claim involving the same marks.

This dispute began in 1997 when Cubatabaco, a Cuban company, filed an application to register COHIBA for cigars and related goods under Section 44(e) of the Lanham Act, based on its registration for the mark in Cuba. Cubatabaco’s application was refused registration based on a likelihood of confusion with General Cigar’s two existing US registrations for COHIBA for use in connection with cigars. Cubatabaco then filed cancellation actions against General Cigar’s two registrations. A few months later, Cubatabaco filed suit in the Southern District of New York against General Cigar, alleging trademark infringement, and seeking to enjoin General Cigar from using the COHIBA mark and requesting the cancellation of General Cigar’s registrations. 

The TTAB suspended the cancellation proceeding pending the outcome of the district court action. The District Court for the Southern District of New York permanently enjoined General Cigar from using the COHIBA mark and cancelled the registrations. The Second Circuit, however, reversed the district court's decision due to a perceived violation of the Cuban Assets Control Regulations (CACR). The CACR prohibits a Cuban entity from a number of actions, including selling products in the United States, and receiving a transfer of property rights from a person subject to US jurisdiction. The Second Circuit held that Cubatabaco was not entitled to the injunctive relief it sought because granting such a remedy would involve a prohibited transfer of property under the CACR, as it would ultimately allow Cubatabaco to obtain ownership of the COHIBA mark. The Second Circuit, however, left it to the TTAB to decide what preclusive effect its decision would have on the cancellation actions before the TTAB. 

The TTAB cancellation actions then resumed and General Cigar filed a summary judgment motion alleging that Cubatabaco lacked standing and that the principles of issue and claim preclusion barred Cubatabaco’s petition to cancel. The TTAB held in favour of General Cigar in light of the binding Second Circuit decision. Cubatabaco appealed the TTAB decision to the Federal Circuit. 

The Federal Circuit disagreed with the TTAB, and held that Cubatabaco did in fact have a cause of action under the Lanham Act to seek cancellation of General Cigar’s COHIBA registrations. The rejection of Cubatabaco’s application was based on a likelihood of confusion with General Cigar’s registrations. Thus, Cubatabaco had a legitimate interest in the cancellation proceeding and a reasonable belief of damage. Further, the CACR includes certain exceptions, including one that authorises Cuban entities to engage in transactions related to the registration and renewal of trademarks before the USPTO. The Federal Circuit noted that neither the Second Circuit, nor the CACR prohibits Cubatabaco from registering the mark: 

"The Second Circuit’s decision held only that the district court could not enjoin General Cigar from use of the COHIBA mark under its interpretation of the CACR’s prohibition against transfers of property. It specifically does not address Cubatabaco’s ability to seek cancellation of the registrations before the board, which the CACR authorises.” 

While the TTAB did not address General Cigar’s arguments with regard to issue and claim preclusion, the Federal Circuit did address these issues. The Federal Circuit found that issue preclusion did not bar any of the grounds under which Cubatabaco sought cancellation of General Cigar’s registrations because the claims related to cancellation were either not identical to the issues presented to the Second Circuit, were not addressed by the Second Circuit, or were not necessary to the Second Circuit’s final judgment. 

Similarly, the Federal Circuit held that claim preclusion did not apply because the Second Circuit did not issue final judgment on the merits of Cubatabaco’s cancellation claims. Instead, the Second Circuit decision was related to a claim of infringement and a request for injunctive relief. Claim preclusion cannot serve to bar a petition for cancellation based upon an earlier infringement proceeding. 

Thus, the Federal Circuit vacated the TTAB decision and remanded for further proceedings on Cubatabaco’s petition to cancel General Cigar’s existing registration. 

Lara A Holzman and Maritza C Schaeffer, Alston & Bird LLP, New York