CAFC Reverses TTAB's THUMS UP and LIMCA Decision: Coca-Cola Failed to Prove Use or Reputation in the U.S. and So Lacked Statutory Standing

Concluding that Coca-Cola failed to establish statutory standing based on lost sales or reputational injury, the CAFC reversed the TTAB’s decision [TTABlogged here] ordering cancellation of Meenaxi Enterprise's registrations for the marks THUMS UP and LIMCA for soft drinks. The Board found that Meenaxi had used the registered marks to misrepresent the source of its goods, in violation of Section 14(3) of the Lanham Act, and that Coca-Cola had met the zone-of-interests and damages prongs of the Lexmark test for statutory standing. Meenaxi Enterprise, Inc. v. Coca-Cola Company, 2022 USPQ2d 602 (Fed. Cir. 2022) [precedential].

Coca-Cola has been selling THUMS UP and LIMCA beverages in India for decades, but not in the United States. Meenaxi began distributing its THUMS UP and LIMCA products in the United States in 2008 and registered the marks in 2012. The Board found that Coca-Cola’s brands “had reputations that would be familiar to Indian Americans in the United States, and that Meenaxi was attempting “to dupe consumers in the United States.”

There was no question that Meenaxi had Article III standing to bring this appeal, since its registrations were ordered cancelled. Cf. Brooklyn Brewery Corp. v. Brooklyn Brew Shop, 2021 USPQ2d 1069 (Fed. Cir. 20211) (“[A]lthough Article III standing is not necessarily a requirement to appear before an administrative agency [such as the TTAB], once a party seeks review in a federal court, ‘the constitutional requirement that it have standing kicks in.’”). However, in the underlying cancellation proceeding Coca-Cola was required to prove entitlement to a statutory cause of action (“statutory standing”) under Section 1064(3) of the Trademark Act (Lanham Act § 14(3)).  See Austl. Therapeutic Supplies Pty. Ltd. v. Naked TM, LLC, 965 F.3d 1370, 1373–74 (Fed. Cir. 2020), cert. denied, 142 S. Ct. 82 (2021).

Whether a party has statutory standing is a legal determination subject to review de novo.  The CAFC confirmed that “the Lexmark zone-of-interests and proximate-causation requirements control the statutory cause of action analysis under § 1064.” In Lexmark, the Supreme court further held that a party must allege an “injury to a commercial interest in reputation or sales.”

Meenaxi contended that the Coca-Cola lacked any cause of action because of the basic principle of territoriality: “trademark rights exist in each country solely according to that country’s statutory scheme.” Person’s Co. v. Christman, 900 F.2d 1565, 1568–69 (Fed. Cir. 1990). While recognizing its importance, the CAFC pointed out that the territoriality principle “does not govern here” because Coca-Cola "does not claim to have U.S. trademark rights in the THUMS UP or LIMCA brands." Instead, it argued that § 14(3), like § 43(a), is not limited to protection of trademark rights. The CAFC agreed:

Both § 43(a) and § 14(3) extend to the improper use of marks that cause commercial injury even if the injured party is not itself a trade-mark holder. The Fourth Circuit clarified in Belmora that both § 43(a) and § 14(3) extend beyond trademark protection, as the “the plain language of § 43(a) does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action.” 819 F.3d at 706. In this respect, the court noted the similar basis and interests of § 14(3) and § 43(a) claims: “To determine if a petitioner falls within the protected zone of interests, we note that § 14(3) pertains to the same conduct targeted by § 43(a) false association actions — using marks so as to misrepresent the source of goods.” Id. at 714–15.

The court noted that Belmora – which suggested that commercial injury to a company’s foreign sales qualifies as damages for purposes of § 14(3) and § 43(a) – has been criticized in the academic literature, and there is limited authority as to whether such claims may be based on lost sales or reputational injury occurring solely outside the United States. However, that question does not arise here, since Coca-Cola based its claim solely on alleged injury in the United States.

Lost Sales: The CAFC agreed with Meenaxi that Coca-Cola failed to identify any lost sales in the United States. Unauthorized resale of product imported from India by third parties “do nothing to establish lost sales by Coca-Cola in the United States.” Coca-Cola provided no evidence that it sells LIMCA soda in this country, and as to THUMS UP, sales were de minimis. Its “nebulous” plans for future sales were irrelevant.

Reputational Injury: Coca-Cola did not rely on the “well-known marks” exception to the territoriality principle. It claimed reputational injury in the United States because Indian Americans are aware of the THUMS UP and LIMCA marks and Meenaxi trades on its goodwill by misleading Indian-American consumers into believing that its beverages were the same as those sold by Coca-Cola in India. However, the CAFC observed, Coca-Cola failed to explain how its alleged reputational injury “affected its commercial interests other than to speculate that a consumer dissatisfied with Meenaxi’s product might blame Coca-Cola.” In short, its claim (accepted by the TTAB) that the Indian-American community is aware of the THUMS UP and LIMCA marks was not supported by substantial evidence.

The Board’s conclusion that reputation of the THUMS UP and LIMCA marks would extend to the millions of Indian Americans appears to rest in part on an assumption that Indian Americans would necessarily be aware of the marks’ reputations in India. There is no basis to assume that an American of Indian descent is aware of brands in India. The Board did not consider what portion of Indian Americans had spent time in India, i.e., how many had visited India or lived in India. The Board’s conclusion relies at least in part on stereotyped speculation.

Since Coca-Cola failed to prove that the reputation of its THUMS UP and LIMCA marks extended to the United States, it did not establish reputational injury in the United States.

Conclusion: Because Coca-Cola failed to prove lost sales or reputational injury, it failed to prove that it has a cause of action under Section 14(3). And so, the court reversed the Board's decision.

Concurrence: Judge Reyna concurred in the majority's decision, but in his view the case is "governed by the territoriality principle." He concluded that because Coca-Cola did not prove use of the THUMS UP and LIMCA mark in the United States, it failed to show the element of damage necessary for statutory standing.

As the majority acknowledges, Coca-Cola failed to establish any damage to goodwill associated with its use of the marks in U.S. commerce. And to the extent Coca-Cola relies on damage to its foreign trademark rights to establish statutory standing, the territoriality principle mandates that such an injury does not fall within the “zone of interests” that Congress intended to protect by enacting § 14 of the Lanham Act.

Judge Reyna also agreed with the conclusion that Coca-Cola failed to establish standing because it failed to prove damage to its reputation among U.S. customers. However, he believes that, in view of the territoriality principle, protection of reputation without use requires invocation of the "well-known marks" exception to the territoriality principle. Since Coca-Cola disavowed reliance on that exception, the issue of reputation was "immaterial."

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TTABlogger comment: Even if, under the majority's approach, Coca-Cola established that the two marks had a reputation in this country, wouldn't it also have to show that consumers connected that reputation with Coca-Cola? In other words, maybe consumers know of the marks but don't know who the source of the Indian product is. Think "anonymous source." 

The CAFC had the opportunity to reject the loophole made in the territoriality principle by the Belmora decision, but it punted. 

Judge Reyna's embrace of the traditional view of territoriality is in accord with the academic literature cited by the court, including Professor Christine Farley's article criticizing the Belmora  decision (which may be downloaded here), and an article by Professor Mark McKenna and Shelby Niemann (found here).

P.S. For a discussion of U.S. law vis-a-vis trademark protection based on reputation without use, see Martin B. Schwimmer and John L. Welch, "U.S. Law Inches Towards Protecting Trademark Reputation Without Use," 81 World Trademark Review (Autumn 2019). [pdf here]. Mr. Schwimmer and I represented Belmora before the district court (dismissal) and the court of appeals (reversal) in the first round of decisions.

Text Copyright John L. Welch 2022.