IP Law Daily, TRADEMARK—S.D.N.Y.: Estoppel order barring Napa winery from using LIANA mark extended to related winery, (Aug 4, 2022)

By Robert B. Barnett Jr., J.D.

Winery’s admission that a prior defendant was related for purposes of a laches defense made it subject to an earlier collateral estoppel order.

After a New York City federal district court had ruled in a trademark infringement suit that Peju Province Winery, a Napa Valley winemaker, was collaterally estopped from re-litigating the issue of the likelihood of confusion between the registered LIANO mark and the upstart LIANA mark because a 2004 TTAB decision had settled the question, the district court granted summary judgment to the Italian winemaker plaintiff to extend collateral estoppel to the current defendant, Peju Partnership, because Peju Province and Peju Partnership were “effectively one and the same.” The court also rejected Peju’s argument that the Italian winemaker’s claims were time-barred. The statute of limitations did not begin to run until Peju Partnership resuscitated the name LIANA for wine sales in 2014, which was less than six years before the Italian winemaker filed suit (Cesari S.r.l. v. Peju Province Winery L.P., August 3, 2022, Buchwald, N.).

Background. Cesari S.r.l., an Italian winemaker, has sold wine globally under the name “Liano” since 1989. In 2003, it obtained a U.S. trademark registration for LIANO for the sale of wine in International Class 33.

Peju Province Winery L.P. is a family-owned winery in Napa, California. In 2012, the family formed Peju Family Operating Partnership L.P. as part of its corporate restructuring. In effect, operating control was transferred from the parents, Anthony and Herta Peju, to their daughters, Ariana and Lisa (“Liana” is a portmanteau of their names).

In 2003, Peju Province Winery began selling a Chardonnay under the name “Liana.” Peju Province also sought to register the mark LIANA with the U.S. Patents and Trademark Office. When Cesari learned of the application, it filed an opposition. In 2004, the Trademark Trial and Appeal Board (TTAB) ruled in Cesari’s favor, rejecting the application, finding that Cesari was first to market wine suing the LIANA mark, and ruling that a likelihood of confusion existed between the two marks. Peju did not appeal, and it filed a Notice of Abandonment of the mark in 2004. Despite filing the Notice of Abandonment, however, Peju apparently continued to sell the Liana wine. A 2002 Liana-branded wine, which it began selling in 2005, was almost entirely sold out by 2007.

In 2014, Peju Family Operating Partnership announced “the return of Liana” with a new 2013 vintage (apparently, the two daughters were unaware of the earlier litigation). In 2016, Peju Partnership sought to register the mark “LIANA” for the sale of wines and spirits in International Class 33, the same class cited in the 2003 application. Once again, Cesari opposed the application.

This time, however, Cesari also filed suit in 2017 in New York federal court, asserting trademark infringement against Peju Province Winery, Peju Family Operating Partnership, and Peju Province Corporation. Peju continued selling Liana wines through July 2018, at which point Peju rebranded its wine in response to a pending preliminary injunction motion. In 2019, Peju abandoned its application with the USPTO.

Meanwhile, this case ground on for five and a half years. In 2017, the court ruled that Peju Province was collaterally estopped from re-litigating the issue of the likelihood of confusion between the parties’ marks, based on the TTAB’s 2004 decision. More recently, Peju filed a motion for summary judgment, seeking dismissal of all claims on the ground that they were time-barred under trademark law and by laches. Cesari then filed its own motion for summary judgment, seeking a ruling that the court prior’s collateral estoppel against Peju Province should be extended to Peju Partnership.

Collateral estoppel. The court addressed Cesari’s motion first. To establish a trademark infringement claim, Cesari was required to prove two elements, that its mark merited protection and that Peju’s use of the similar mark was likely to cause consumer confusion. The court’s prior ruling on the likelihood of confusion was crucial, of course, because it allowed Cesari to establish the second element without having to relitigate it. The earlier ruling, however, applied only to Peju Province. The issue for this current summary judgment filed by Cesari was whether the earlier finding could be extended to Peju Partnership.

This court had previously refused to extend the ruling to Peju Partnership in a prior summary judgment motion, concluding that Cesari’s allegations had failed to link the two entities. Peju had consistently maintained throughout the litigation that the two entities were separate and distinct.

Interestingly, after five and a half years, Peju reversed course and began arguing that the two entities “are effectively one and the same entity because they share common ownership and control.” Why the change? Peju altered its position for strategic legal reasons. In its summary judgment motion (see below), Peju was now arguing that the claims should be dismissed because they were time-barred. In order to trace the claims back beyond the statute of limitations period and to pursue the statute of limitations and laches arguments, however, Peju needed the two entities to be treated as one continuous entity.

The court jumped on the changed position, agreeing with Cesari that Peju’s concession was “sufficient as a matter of law to establish the requisite control needed to extend the court’s collateral estoppel ruling to Peju Partnership.” There was now, the court concluded, “sufficient identity between Peju Province and Peju Partnership such that the latter may be bound by judicial determinations made against the former.”

The court also rejected all efforts by Peju Partnership to backtrack on its concession. The court concluded that the two entities had “the same interests at stake and the same authority of representation in both the 2003 TTAB proceedings and the present action.” Anthony Peju signed both the 2003 application on behalf of Peju Province and the 2016 application on behalf of Peju Partnership. The same website was also used to promote both efforts to sell Liana wines.

The court ruled, therefore, that its 2017 order finding collateral estoppel for Peju Province was extended to Peju Partnership.

Statute of limitations. Turning back to Peju’s summary judgment motion, the court concluded that, in the absence of a statute of limitations in the Lanham Act, the most analogous state statute of limitation was New York’s six-year statute of limitations for fraud claims. Thus, Cesari’s claims would have been timely filed if they were filed within six of years of the cause of action accruing.

Peju argued that the claim accrued in 2003 and that the six years had run before the complaint was filed because Cesari had knowledge that Peju was using the LIANA mark as early as 2003. The court rejected that argument for two reasons. First, no evidence existed that Cesari knew or reasonably should have known that Peju continued to use the mark after the application was rejected and deemed abandoned in 2004. Second, the claims that Cesari was asserting arose “solely from infringing conduct starting in 2014, when defendants began marketing new vintages of wine branded with the LIANA label.”

In addition, regarding the first point, not only did no evidence exist that Cesari had actual or constructive notice of the continued use but also Cesari had no “duty of inquiry” to continue monitoring Peju’s conduct. Cesari had every reason to believe that the improper sales ceased after both the TTAB decision was rendered and the application was voluntarily abandoned. The court concluded that “it was entirely reasonable for Cesari to assume that Peju would cease using the LIANA mark.”

And if that were not enough, even if Cesari had a duty of inquiry, the inquiry would not have revealed that Peju was using the LIANA mark because, from 2004 until 2014, Peju’s use of the LIANA mark was “minimal to nonexistent.” In fact, the court noted that the 2005 sales that were sold out by 2007 were so minimal that “it appears not even Anthony Peju knew about them at the time.” Between 2008 and August 2014, no such wine was sold.

Ultimately, the court ruled, “the record demonstrates that plaintiff did not know, had no obligation to investigate, and with reasonable diligence would not have known, that it had a ripe trademark infringement claim until August 2014 at the earliest.” Because that date was well within the six-year limit, the claim was not time-barred.

The first sale of wine with the resurrected LIANA brand occurred in August 2014. As a result, Cesari’s claims arose from conduct that began in 2014. “All of plaintiff’s claims thus are timely,” the court concluded. Peju’s summary judgment motion based on the statute of limitations was denied.

Laches. The court went on to say that the laches argument also failed for two reasons. First, Peju could not satisfy the threshold requirement that it come into court with clean hands. It did not use the LIANA mark in 2004-2007 in good faith, when it sold wine using the Diana name in direct contravention to the TTAB ruling. Furthermore, even though the daughters may have been unaware of the earlier litigation, Peju acted in bad faith when it pursued registration for a second time. Given that the father signed both applications, at least he knew that the first effort failed.

Second, even if Peju had clean hands, the laches defense would have failed because Peju could not establish “any of the three required elements”: (1) that plaintiff had knowledge of defendant’s use of its mark, (2) that plaintiff inexcusably delayed in acting, and (3) that defendant will be prejudiced if the plaintiff were permitted to pursue its claim. First, as previously established, Cesari had no actual or constructive knowledge of the infringing use. Second, Cesari acted “promptly and diligently” in defending his rights. Third, no evidence of prejudice existed. Peju knew way back in 2003 that Cesari was contesting Peju’s use of the LIANA mark. The court opined that “any detriment Peju suffered was of its own making.”

The court, therefore, denied Peju’s summary judgment motion in its entirety. Thus, Peju’s affirmative defenses of the statute of limitations and laches were dismissed with prejudice. The court also granted Cesari’s motion for summary judgment, which extended the court’s prior collateral estoppel ruling to Peju Partnership.

The Case is No. 1:17-cv-00873-NRB.

Attorneys: Valeria Calafiore Healy (Healy LLC) for Cesari Srl. Joel Geoffrey MacMull (Mandelbaum Barrett, P.C.) for Peju Province Winery LP and Peju Family Operating Partnership, LP.

Companies: Cesari Srl; Peju Province Winery LP; Peju Family Operating Partnership, LP

Cases: Trademark NewYorkNews