Gallo Whines Its Way Into the Tequila Business
September 19 2014
In the not so distant past, E & J Gallo Winery (“Gallo”) decided that it was not satisfied with only being a player in the wine business. It decided to expand his horizons and venture into the tequila business, which is currently filled with such players as Patron, Don Julio, Jose Cuervo, and perhaps most importantly, 1800 Tequila (“1800”). After placing a significant amount of time and effort into the release of its new tequila, Camarena, Gallo was informed that its supplier, Tequila Supremo, had received a cease and desist letter from Agavera Camichines S.A. de C.V. (“Agavera”), the holder of trademark and trade dress rights for the “1800 Tequila” brand. Accordingly, Gallo brought suit for declaratory relief in the United States District Court in the Eastern District of California.
Agavera and co-defendant, Proximo Spirits Inc. (“Proximo”), counterclaimed that Gallo’s Camarena bottle design infringes Proximo’s registered trade dress and also constitutes false designation of origin under the Lanham Act and unfair competition under common law. Gallo sought and prevailed on its motion for summary judgment before the Honorable Judge Lawrence J. O’Neill of the Eastern District of California. Judge O’Neill found that Proximo failed to raise a genuine issue as to whether its trade dress was distinctive. Furthermore, it was found that there was no likelihood of confusion between 1800 Tequila and Camarena. Proximo moved for reconsideration on grounds that its trademark registration and related description of the 1800 Tequila bottle and stopper should have constituted sufficient evidence for a trier-of-fact to rely on in deeming the bottle distinctive. Nonetheless, Judge O’Neill denied the request. The court also denied Proximo’s motion to dismiss the declaratory judgment action on grounds that the court lacked subject matter jurisdiction. As a result, Proximo appealed the decision to the Ninth Circuit to challenge the court’s ruling on the motion to dismiss and its grant of summary judgment on the counterclaims.
The Ninth Circuit affirmed each point and held that under the Declaratory Judgment Act (“DJA”), an actual controversy exists between the parties. Discovery revealed that Agavera and Proximo are part of a conglomerate known as “Grupo Cuervo.” The Ninth Circuit stated that, “[I]n light of its findings, which are undisputed and supported by ample record evidence, the court did not err in holding that an actual controversy exists under the “DJA.” The Ninth Circuit found that Proximo’s argument that Judge O’Neill deprived himself of jurisdiction to enter final judgment when he granted a motion by Gallo to voluntarily dismiss under Federal Rule of Civil Procedure 41(a)(2) was “almost out of hand.” The Ninth Circuit stated that “[I]n this instance, the Court had already entered judgment on Appellants’ counterclaims and received Appellants’ statement of no opposition when it granted Gallo’s motion to voluntarily dismiss the declaratory action. The contention that the granting of that unopposed motion somehow disposed of prior rulings on which judgment had already been entered is without merit.”
With regard to the merits of the counterclaim, the Ninth Circuit acknowledged that the disposition of an infringement claim is generally disfavored on summary judgment, and remained “mindful that likelihood of confusion is typically a question for the jury,” but nonetheless found “no factual dispute worthy of a jury.” The Ninth Circuit stated that, “[A]fter reviewing the bottles and the record de novo, we conclude that the Camarena and 1800 trade dresses are so dissimilar that no reasonable juror could conclude otherwise.” Thus, the Ninth Circuit affirmed every decision at issue in the appeal and the matter was concluded with Camarena to be distributed without further intellectual property contestations from Proximo.