European Trademark Law Unknowns Settled in Case Against LA Winery

In IP Blog

By: Katherine Bond and Jeffrey Sheldon

Two unknowns of European trademark law were just answered in a case involving one of the oldest and largest wineries in Los Angeles, San Antonio Winery: First, can it be trademark infringement to manufacture a product in Italy with a mark that is alleged to be confusingly similar to a third party’s mark on the product, where sales are only outside of Italy? And second, in a trademark registration cancellation action for non-use, who has the burden of proof — the registrant to prove use or the challenger to prove non-use?

With the help of multiple local producers in Piedmont, Italy, San Antonio Winery has been manufacturing STELLA ROSA wine in Italy for the past 15 years. Despite having an Italian trademark registration issued in 2006 for the mark STELLA ROSA for use in connection with wine, a wine producer challenged the company’s right to make and export wine asserting the following Italian law:

“Without prejudice to the rights of the owners acquired before the filing date or the priority date of the registered trademark, the owner of this registered trademark has the right to prohibit third parties … (a) from affixing the sign to products or on their packaging; Article 10 of the EU Directive 2015/2436, Paragraph 2”

The opposing party had obtained rights to the mark STELLA in 1978 in both Germany and Italy. For over 10 years, San Antonio Winery had been producing its wine without interruption. In 2016, it found itself facing an action in Italy of what would be equivalent to a temporary restraining order in the United States. The company was successful in defeating this initial attempt with the judge holding that STELLA was weak, and the brands STELLA and STELLA ROSA distinguishable such that confusion would not be likely.

Unanswered was whether mere bottling in Italy without sales in Italy could even be an infringement.

Undeterred, the challenging party went to Alicante, home of the European Union Intellectual Property Office, trying to cancel six STELLA ROSA trademark registrations.

San Antonio Winery filed a declaratory judgment action in Italy seeking to confirm the position that STELLA is a weak mark in that numerous wines in Italy comprise the word “stella”; thus consumers can differentiate products through minor differences — and this, coupled with the fact that San Antonio wines were not sold in Italy, made it impossible to be a likelihood of confusion. (Unlike the U.S., the action in Alicante was a new case with a new judge.) In addition to there being no confusion, in Alicante, San Antonio Winery had what would be akin to a laches or estoppel defense in that the opposing party had actual knowledge of San Antonio Winery’s use of STELLA ROSA for more than five years prior to any enforcement efforts. (The concept of incontestability of a registered mark does not apply in Italy.)

Ultimately, the court issued a ruling mirroring the refusal of the temporary restraining order.

To no avail, the challenger took the case to the Italian appeals court. On May 20, the court confirmed the lower court’s ruling, holding that the STELLA mark is weak and that there is no confusion between the respective marks.

The court went on to note that, “Stella Rosa branded wines are not sold on the Italian market … nor, on the other hand, [have] those with the Stella brand … ever been exported to the US.” In essence, for the first time, an Italian appeals court held there could be no confusion because the products are never offered to consumers in Italy. Thus, mere bottling in Italy without sales in Italy cannot be infringement.

The Collateral German Supreme Court Decision

Also noteworthy, in Germany, San Antonio Winery petitioned to cancel the challenger’s STELLA mark for non-use, as this may have impacted the proceedings in Alicante. The STELLA registrant provided the German courts “invoices” to show use during the relevant periods of time in Germany.

“On January 14, 2021, the German Federal Supreme Court annulled the decision of the Munich Court of Appeal holding that contrary to its previous case law, that in a revocation action the burden of proof of use, as asserted by San Antonio Winery, is entirely on the proprietor (Registrant) of the contested trademark, and also holds, again contrary to its previous case law, that the five-year period of non-use must be counted back from the time of bringing the revocation action, rather than from the time of last hearing. This case will be remanded to the lower court where the Registrant will be required to prove actual use of the STELLA mark in Germany.”

San Antonio Winery has significantly invested in the STELLA ROSA brand, making it a target for challenges. Not only was the production of its brand in jeopardy but also the livelihoods of several individuals and businesses in Italy. These successes illustrate that the law can be changed to reflect the circumstances of the present.

Katherine Bond and Jeffrey Sheldon are attorneys at Cislo & Thomas. They represent San Antonio Winery.