Puerto Rico registration can’t constitutionally extend elsewhere

Puerto Rico Coffee Roasters LLC v. Pan American Grain
Manufacturing Co., Inc., 2015 WL 8551102, No. 3:15–CV–02099 (D.P.R. Dec. 11,
P.R. Coffee Roasters, which sells “Café Rico” coffee in
P.R., sued Pan American for trademark infringement, false advertising, and
related claims under federal and Puerto Rico law based on Pan American’s
conduct in the coffee industry, specifically its Florida sales of “Rico Coffee”
 using the same name, packaging format,
and color scheme as P.R. Coffee Roasters’ Café Rico,” along with alleged
disparagement of P.R. Coffee Roasters. P.R. Coffee Roasters further alleged
that the statement on packages of Rico Coffee, that “it is no accident
Puertorrican coffee is the preferred coffee of Popes and Kings” infringed P.R.
Coffee Roasters’ trademark in the slogan “The Coffee of Popes & Kings,” on
packages of “Alto Grande” coffee, another P.R. Coffee Roasters brand.  (I imagine the nominative use argument might
be an uphill battle here, but it’s an interesting thought.)

Plaintiff’s Café Rico
Plaintiff’s Alto Grande, The Coffee of Popes & Kings

Defendant’s Rico Coffee
Defendant’s coffee: It is no accident that Puertorrican Coffee is the preferred coffee of popes & kings

Also, P.R. Coffee Roasters alleged that Pan American was waging
a “defamation campaign” that accusds P.R. Coffee Roasters of “using child
labor,” “selling imported coffee as local coffee,” and “participating in
efforts to undermine the Puerto Rico coffee industry,” etc.  The court pointed out that, to some extent,
the allegations were that Pan American’s wrongs were at cross-purposes: seeking
to benefit from, but ultimately destroy, the reputation of P.R. Coffee
Roasters’ coffee brands.
P.R. Coffee Roasters alleged that Pan American knew of its
Café Rico trademark due to a series of deals and litigation by Pan American
involving the mark. Pan American’s Rico Coffee was allegedly marketed to the
same type of consumers as P.R. Coffee Roasters’ brands, such as “the Puerto
Rican community in Florida, who know and have been consuming Café Rico for more
than 70 years.”  
Pan American argued that it had senior rights, but that
certainly couldn’t be resolved on the pleadings. Plus, Pan American seemed to
base its claim on its incontestable right to use the trade dress for “Arroz
Rico,” a brand of packaged rice.  But
P.R. Coffee Roasters alleged the use of its Café Rico mark for coffee since
“approximately 1936” and that it was the senior user of the mark for coffee.
P.R. Coffee Roasters thus sufficiently pled infringement of
its registered and unregistered marks/designs, though it didn’t allege a
separate trade dress claim and would be held to that concession.  “Café Rico” was unregistered under federal
law, so P.R. Coffee Roasters would ultimately have to prove secondary meaning
under a rigorous standard, but it adequately pled secondary meaning by alleging
that the word mark had been in continuous use since the 1930s, such that “the
Puerto Rican community in Florida … know[s] and ha[s] been consuming Café
Rico for more than 70 years,” and by appending to the complaint historic
examples of the advertising and promotion of the mark.  Thus, P.R. Coffee Roasters sufficiently
alleged that its mark could identify the source of coffee in Florida.
The false advertising claim was also sufficiently pled.  P.R. Coffee Roasters alleged that the
falsities were “disseminated under the Facebook accounts for Pan American’s
brand Café Mami and the campaign ‘Salvemos el café 100% puertorriqueño,’
controlled by Pan American’s public relations team.”  “Whether a P.R. Coffee Roasters coffee is
cheap or good, imported or local, adulterated or pure, destructive of Puerto
Rico or supportive of it, and complicit in child labor or standing against it
are all material representations about the coffee because they all ‘relate[ ]
to a characteristic that defines the product at issue, as well as the market in
which it is sold.’” The alleged accusations struck at the heart of P.R. Coffee
Roasters’ brand.  And the allegations
were of explicit falsity, requiring no extrinsic evidence of consumer
deception.  Likewise, P.R. Coffee
Roasters properly alleged that Pan American made false statements about itself:
that it was protecting locally produced coffee, using the “slogan ‘Salvemos el
Café 100% puertorriqueño’ (Save the 100% Puertorrican Coffee),” while at least two
of the three brands affiliated with Pan American, Del Patio and De Mi Tierra, used
imported coffee. P.R. Coffee further alleged that Pan American was abusing its
control of 90% of the fertilizer market to harm P.R. coffee growers, contrary
to its representations.
Pan American argued that the court lacked jurisdiction
because all the allegedly disparaging statements occurred in Puerto Rico and
were directed at the consuming public there. 
But Congress legislated to the full extent of its Commerce Clause power
in the Lanham Act.  Pan American
allegedly waged part of its defamation campaign through online “ads and
sponsored social media sites.” And anything that has “traveled via the
Internet” has “traveled in interstate commerce.” Separately, “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.”
The court also rejected Pan American’s First Amendment
defense at this stage, since the First Amendment didn’t give Pan American a
right to engage in misleading commercial speech.
However, P.R. Coffee Roasters couldn’t bring a Puerto Rico
trademark claim, because Puerto Rico trademark law didn’t apply
extraterritorially, both on statutory interpretation and Dormant Commerce
Clause/First Amendment grounds. (Note interesting invocation of the First
Amendment here—as we’ll see, the court suggests that there is a First Amendment
right of others to use descriptive terms without secondary meaning.  That would suggest some trouble for
incontestability.)  Extraterritorial
application of trademark rights in “Café Rico” would conflict with the PTO’s
holding that P.R. Coffee Roasters was required to disclaim rights in the word
mark, other than as shown in the design mark, because “Café Rico” is a
descriptive phrase in Spanish, meaning “delicious, rich coffee.” “The
extraterritorial application of Puerto Rico law in this case would not only
unravel the delicate balance between free speech and property rights struck in
the Lanham Act, but it would also unconstitutionally impede interstate trade
and speech.”

The court dismissed P.R. Coffee Roasters’ trademark misuse claim, because there
was no cause of action for that. 
However, P.R. Coffee Roasters could bring Puerto Rico tort claims to the
extent that they adopted the Lanham Act—so P.R. Coffee Roasters could sue
another Puerto Rico citizen, as Pan American was, for conduct in the state of
Florida that violated the Lanham Act. 
The court reserved the question of whether, if Puerto Rico law provided
extra remedies (as it might), such remedies would be preempted.
By contrast, P.R. Coffee Roasters’ defamation claim under
Puerto Rico law failed.  Although Pan
American didn’t show it was a public figure, P.R. Coffee Roasters still needed
to plausibly allege negligence. 
Negligence is assessed based on the “nature of the published
information,” the “[o]rigin of the information and reliability of its source,”
and the “[r]easonableness of the process for checking the truthfulness of the
information.”Although discovery would be required to prove negligence, P.R. Coffee Roasters still had the burden at this
stage to plead negligence in a non-conclusory manner supported by pertinent
facts. This it did not do.

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