(CN) - A dispute over who owns the Stolichnaya vodka trademarks will move forward after the 2nd Circuit overturned a judge's ruling that the marks are "incontestable."
The federal appeals court in Manhattan said the judge who dismissed the trademark claims "improperly conflated incontestability with the analytically distinct issue of whether a subsequent transfer of the marks was valid."
In 1969, a Soviet-owned entity called the All-Union Association Sojuzplodoimport registered a U.S. trademark for the term "Stolichnaya," Russian for "from the capital" and used by the Soviet government to market vodka domestically and abroad.
The Soviet government then assigned the rights to the U.S. trademarks to PepsiCo in 1990.
When the Soviet Union officially dissolved in 1991, directors and staff of the former All-Union Association Sojuzplodoimport registered a Russian corporation called the Foreign Economic Joint Stock Company Sojuzplodoimport (VAO-SPI) and transferred the All-Union Association's assets, including the Stolichnaya rights, to the new company.
PepsiCo apparently acknowledged VAO-SPI as the Soviet-owned entity's successor and referred to it as the owner of the Stolichnaya trademarks.
Through a complex series of transfers, the rights claimed by VAO-SPI were eventually sold to a Dutch company and its U.S. subsidiary, Allied Domecq International Holdings B.V. and Allied Domecq Spirits & Wine USA.
But the Soviet-owned All-Union Association continued to exist while VAO-SPI allegedly misappropriated and then sold the Stolichnaya rights.
Russia created Federal Treasury Enterprise Sojuzplodoimport (FTE) in 2001 to recover its international vodka trademarks. FTE sued Allied Domecq and the group who allegedly sold it the trademark rights: Spirits International N.V., SPI Spirits Limited, SPI Group SA, Yuri Shefler and Alexey Oliynik.
A federal judge dismissed FTE's trademark infringement, misappropriation and unfair competition claims on the grounds that the trademarks had become "uncontestable" in 1974.
But the federal appeals court in Manhattan said this ruling misses the mark, because it overlooks the question of whether the transfer of rights to Allied Domecq was a valid transaction or whether it was "tainted by fraud."
"Thus, if at the end of the day FTE is able to prove that its marks were unlawfully assigned, then the district court would be obligated to consider appropriate relief," Circuit Judge Barrington Parker wrote.
The 2nd Circuit reinstated the trademark infringement, misappropriation and unfair competition claims, but upheld dismissal of FTE's claims for fraud and unjust enrichment.