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Victory: April 2016: Appellate Victory Concerning the Stolichnaya Trademarks

April 2016

The firm recently obtained a crucial appellate victory in its long-standing fight on behalf of Federal Treasury Enterprise Sojuzplodoimport (“FTE”), a Russian government agency that is seeking to recover ownership of the world-famous Stolichnaya trademarks.

The STOLI trademarks were fraudulently privatized and stolen from the Russian people amidst the collapse of the Soviet Union. A Russian businessman named Yuri Shefler eventually gained control over the marks and maneuvered them out of Russia to corporations in Switzerland, Cyprus, and elsewhere. Several years later, while investigating a company controlled by an associate of Shefler, the Russian government discovered that the STOLI marks had not been properly privatized, and began its effort to recover the STOLI marks around the world. In rulings confirmed by the European Court of Human Rights, the Russian Federation established in the Russian courts that the marks were not properly privatized and that they belonged to the Russian Federation as the successor of the Soviet. FTE was then organized and tasked with, among other things, establishing the Russian Federation’s rights over the STOLI trademarks in other countries, including the United States, the second largest market in the world for STOLI vodka.

FTE first filed suit in the United States in 2004, asserting trademark infringement and other claims against Shefler, his companies, and various distributors. After several years of preliminary litigation and failed attempts at a global settlement, this suit was dismissed, primarily on the ground that the Russian Federation had retained too great of an interest in the trademarks to permit FTE to qualify as an owner under the Lanham Act, and therefore FTE lacked standing under the Act.

After the Second Circuit affirmed that ruling, the Russian Federation executed an assignment transferring all right, title, and interest in the STOLI trademarks to FTE, and FTE filed a new suit, claiming standing based on this assignment. The district court once again dismissed FTE’s claims. In addition to finding that some subsidiary claims were barred by res judicata and laches, the district court held that the Russian Federation’s assignment failed to confer standing on FTE because the assignment was invalid under Russian law. In so doing, the district court resolved a question of first impression against FTE and the Russian Federation based upon its assessment of expert testimony on Russian law.

On appeal, FTE persuaded the Court of Appeals that the district court erred in even considering whether the Russian Federation’s had violated its own law in making the assignment to FTE. The Second Circuit unanimously ruled that principles of international comity and the Act of State doctrine barred the district court from judging the validity of a foreign government’s conduct under foreign law. Accordingly, the Second Circuit reversed the district court’s standing holding and reinstated FTE’s primary claims for trademark infringement.
As a result, after more than a decade of litigation, FTE’s claims are now ready to be considered on their merits.