New York is a major hub for international business. Even relatively small New York businesses may deal with foreign companies on a regular basis. This means foreign law may affect your business interests, and if you end up in commercial litigation, those laws may prove essential towards deciding a case for or against you.
U.S. Court Will Not Question Russian Government's Control of Vodka Trademark
Consider a recent decision by the U.S. Second Circuit Court of Appeals in New York. The underlying commercial litigation involves a trademark dispute. But the case turns on the interpretation and application of Russian, not American, law.
Actually, this particular case dates back to the Cold War days of the Soviet Union. Beginning in the 1940s, the Soviet government marketed a line of premium vodka through a state-owned corporation. This corporation obtained a trademark in the United States for its vodka and then licensed its rights to a number of U.S. companies, including PepsiCo.
The Soviet Union dissolved at the end of 1991. The directors and managers of the formerly state-owned vodka company purportedly privatized the business and asserted it was now the lawful owner of the U.S. trademarks. After the PepsiCo license expired in 2000, the private company signed new licensing agreements with different U.S. distributors.
Meanwhile, a Russian Federation court held in 2000 that the privatization of the former Soviet vodka company was illegal. According to this judgment, the U.S. trademarks remained state property and conveyed to the Russian Federation upon the Soviet Union's dissolution. The Russian government then formed its own company to market the vodka and signed its own licensing agreement with an American distributor.
The Russian-backed company and its licensee then sued the other company (and its licensee) for trademark infringement in New York federal court. This court dismissed the case because the Russian-backed company lacked proper standing to assert trademark rights. In response, the Russian government issued a decree unambiguously assigning its trademarks to the Russian-backed company, which then filed a new trademark lawsuit in New York.
The defendants argued this assignment was still invalid even under Russian law. But as the Second Circuit explained, “The declaration of a United States court that the executive branch of the Russian government violated its own law by transferring its own rights to its own quasi‐governmental entity would be an affront to the government of a foreign sovereign,” and therefore inconsistent with U.S. law. Indeed, the court explained, American judges may not even pursue an inquiry into whether the Russian government violated its own laws on Russian soil. The trial court's role in this case is therefore limited to deciding whether the defendants violated the Russian-backed company's trademarks, not whether the Russian government's assignment of said trademarks were valid.