Antitrust Law Daily Wrap Up, ADVERTISING—D.P.R.: Coffee manufacturer may be roasted for selling coffee with infringing marks, (Dec 14, 2015)

By Jody Coultas, J.D.

Puerto Rico Coffee Roasters LLC (PR Coffee) stated Lanham Act trademark infringement and false advertising claims against competitor Pan American Grain Manufacturing Co., Inc. for allegedly selling coffee in Florida with infringing marks and slogans, as well as engaging in a disparaging advertising campaign against PR Coffee, according to the federal district court in San Juan, Puerto Rico (Puerto Rico Coffee Roasters LLC v. Pan American Grain Manufacturing Co., Inc., December 11, 2015, Fusté, J.).

The parties are competitors in the market for Puerto Rican coffee. PR Coffee alleged that Pan American infringed PR Coffee’s trademarks in its “Café Rico” brand of coffee and its alleged trademark in the slogan “The Coffee of Popes & 3 Kings” for its “Alto Grande” coffee.

Lanham Act infringement claims. PR Coffee sufficiently alleged that Pan American infringed its “Café Rico” trademark in violation of the Lanham Act, according to the court. Pan American allegedly sold coffee using the brand Rico Coffee in Florida, using the same name, packaging format, and color scheme as PR Coffee. The products were marketed to the same type of consumers, such as “the Puerto Rican community in Florida, who know and have been consuming Café Rico for more than 70 years,” and sold through the same channels. It was likely, based on the facts alleged, that customers would be confused by Pan American’s use of the mark. Because the pleadings were factually sufficient, the mere “possibility” that Pan American may have a factual defense to its alleged infringement based on its senior use of the trademark was inadequate to prevail on a motion to dismiss.

PR Coffee alleged that Pan American used a name, image, and phrasing that was confusingly similar to its Café Rico brand to “creat[e] the false … impression that its coffee originates with or is affiliated, connected, or associated” with PR Coffee. Café Rico is a descriptive Spanish phrase meaning “delicious, rich coffee.” Because the mark was unregistered and descriptive, PR Coffee presented evidence that the mark acquired secondary meaning based on continuous use since the 1930s and historic examples of the advertising and promotion of the mark. PR Coffee met the requirement that, in Florida, the Café Rico mark was “capable of functioning as a source-identifier of” its coffee. Proof of secondary meaning at the summary judgment stage will require vigorous evidentiary requirements.

Trade dress claims. Pan American argued that PR Coffee “failed to properly allege and identify the trade dress(es) that it purportedly owns.” However, PR Coffee was not pursuing a trade dress claim. The doctrine of judicial estoppel will bind PR Coffee Roasters to that representation, according to the court.

Lanham Act false advertising claims. PR Coffee adequately pleaded a Lanham Act false advertising claim against Pan American regarding Pan American’s alleged literally false statements about PR Coffee and its products, according to the court. The advertising at issue, which was circulated in the press and on social media, accused PR Coffee “using child labor to produce its coffee, [of] receiving benefits from the Government to buy cheaper coffee, [of] selling imported coffee as local coffee, [of] alleged[ly] adulterati[ng] its coffee, [of] running a monopoly in the coffee industry and destroying the local coffee growers, and [of] jointly participating [with the Government] in efforts to undermine the Puerto Rico coffee industry.” Pan American conceded that such statements had been made and dealt “a very hard blow to P.R. Coffee Roasters’ commercial image among consumers.”

Pan American’s advertising that, contrary to PR Coffee, it protected locally produced coffee and promoted that “consumers [should] only 5 purchase coffee made with 100% Puertorrican coffee” also may have violated the Lanham Act, according to the court. The claims fell within Congressional authority under the Commerce Clause to regulate the channels and instrumentalities of interstate commerce. Anything that travels via the Internet travels in interstate commerce. Also, “an adverse effect on the sales or goodwill of one whose trademark is used in interstate commerce is a sufficiently substantial effect on interstate commerce to entitle [P.R. Coffee Roasters] to invoke the protection of the Lanham Act, even if the [acts] of [Pan American’s] are wholly intrastate.”

Puerto Rico trademark claims. The court found that PR Coffee failed to state a valid trademark infringement claim under Puerto Rico law based on sales in Florida. The statute prohibits the unlicensed and misleading use of “any mark identical or similar to a mark” that is either registered with the Puerto Rico Department of State or the property of a senior user of the mark in Puerto Rico trade. Extraterritorial application of Puerto Rico law would “unravel the delicate balance between free speech and property rights struck in the Lanham Act.”

Trademark misuse. PR Coffee did not identify a cause of action for trademark misuse. The Lanham Act only supports a defense against an incontestable registered mark on the ground that “the mark has been or is being used to violate the antitrust laws of the United States.” The statute does not create a cause of action, according to the court. The law does not apply extraterritorially.

Puerto Rico tort claims. The only claim that survived Pan American’s motion to dismiss was a tort claim under Article 1802 that merely duplicated the valid Lanham Act trademark claims, according to the court.

Remaining claims. The court declined to issue an advisory opinion about the scope of PR Coffee’s trademark rights “in connection with coffee and coffee-related goods,” and declined to declare Pan American’s liability under the valid trademark claims. The “sheer breadth” of the declaratory judgment motion was “shocking.” The court dismisses this last aspect of the count as “a duplicative claim.” PR Coffee’s motion for injunctive relief was denied as “merely a remedial measure disguised as a cause of action.”

The case is No. 3:15-CV-02099 (JAF).

Attorneys: Maria D. Bertolez (Pietrantoni Mendez & Alvarez) for Puerto Rico Coffee Roasters LLC. Aileen Edme Vazquez (Hoglund & Pamias, PSC) for Pan American Grain Manufacturing Co., Inc.

Companies: Puerto Rico Coffee Roasters LLC; Pan American Grain Manufacturing Co., Inc.

Cases: Advertising PuertoRicoNews