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R.J. REYNOLDS TOBACCO CO. v. PREMIUM TOBACCO STORES

July 16, 2004.

R.J. REYNOLDS TOBACCO COMPANY and GMB, INC., Plaintiffs,
v.
PREMIUM TOBACCO STORES, INC. d/b/a CIGARETTES CHEAPER; C.E.I. INTERNATIONAL, INC. d/b/a Crown Energy, Inc.; CANSTAR (U.S.A.) d/b/a CEI Distributors Tobacco Divisions; GENOVA TRACING, INC.; VARIOUS JOHN DOE RETAILERS; CIGARETTES CHEAPER f/k/a Premium Tobacco Stores, Inc. Defendants. CIGARETTES CHEAPER f/k/a Premium Tobacco Stores, Inc. Counterplaintiff, v. R.J. REYNOLDS TOBACCO CO. Counterdefendant.



The opinion of the court was delivered by: CHARLES KOCORAS, District Judge

MEMORANDUM OPINION

This matter comes before the court on five post-trial motions filed by Defendant-Counterplaintiff Cigarettes Cheaper! ("CC") and two motions filed by Plaintiff-Counterdefendant R.J. Reynolds Tobacco Company ("RJR"). For the reasons set forth below, CC's motions are denied. RJR's motion for summary judgment is denied and its motion in limine to bar John Roscoe's damages testimony is granted in part and denied in part.

BACKGROUND

  The factual and procedural history of this case is extensive, tortuous, and set forth in previously rendered opinions, so we only briefly recap the highlights. RJR is a tobacco company that manufactures Camel, Winston, and Salem cigarettes. CC is a discount cigarette retailer owned and operated by John Roscoe and his family. At the time pertinent to this case, RJR produced Camels, Winstons, and Salems for the U.S. domestic market as well as other markets overseas, in duty-free shops, and on U.S. military bases. The parties have debated the proper moniker for the latter category of products; for simplicity's sake, we will refer to them as "parallel." In the late 1990s, CC began purchasing parallel market cigarettes and selling them at its stores within the domestic market. RJR filed suit in 1999, alleging that CC's practices amounted to unfair competition, including infringement and dilution of the Camel, Winston, and Salem trademarks.

  In response to RJR's complaint, CC launched a counterclaim, alleging that RJR had engaged in antitrust activities by denying CC favorable treatment that RJR had given to its competitors. After a considerable pretrial period and plentiful motion practice, the parties went to trial for the first time in January 2004 on both the trademark and antitrust claims. A mistrial was declared, but not before this court ruled on several motions in limine. Shortly thereafter, RJR filed a motion for summary judgment on CC's counterclaims. This ruling considers that motion as well as a motion in limine pertaining to the antitrust claims.

  Before the second trial commenced, we severed the trademark and antitrust claims. The trademark portion went to trial in April 2004 and resulted in a verdict in RJR's favor on all counts. Finding that CC had profited from the cigarette sales to the tune of $3,560,002, the jury awarded RJR that amount. CC's five motions all challenge different aspects of this outcome.

  DISCUSSION

  A. CC's Motions for Judgment as a Matter of Law

  CC moves for judgment as a matter of law on all of RJR's claims*fn1 and separately for judgment as a matter of law on the issues of trademark dilution and willfulness. In considering these motions, we must view the evidence in the light most favorable to RJR, drawing all reasonable inferences in its favor. David v. Caterpillar, 324 F.3d 851, 858 (7th Cir. 2003). We cannot second-guess the jury's view of evidence that was contested; instead, we must ask whether, within the totality of the evidence, there is sufficient support for a reasonable jury to find for RJR. Id.

  1. The "Genuineness" of the Parallel Product

  CC first insists that RJR could not have shown infringement of its trademarks because the parallel market cigarettes were manufactured by RJR. Relying on the Ninth Circuit's decision in NEC Elec. v. CAL Circuit Abco, CC claims that this made the cigarettes "genuine goods bearing a true mark," which cannot be infringing. 810 F.2d 1506, 1509 (9th Cir. 1987).

  CC's argument fails for two reasons. First, as we explained in our June 30, 1999, denial of CC's motion to dismiss the original complaint, we are convinced that the applicable rationale for this case is supplied by two cases from the D.C. Circuit. See Lever Bros. Co. v. U.S., 981 F.2d 1330 (D.C. Cir. 1993) ("Lever II"); Lever Bros. Co. v. U.S., 877 F.2d 101 (D.C. Cir. 1989) ("Lever I"). The Lever cases held that goods intended for foreign sale that are physically different from those sold within the United States are not genuine goods from the perspective of American consumers; as a result, their sale can violate the provisions of the Lanham Act. See Lever II, 981 F.2d at 1338; Lever I, 877 F.2d at 111. RJR produced evidence as to each brand that physical differences were present between domestic and parallel cigarettes. For example, parallel Camels and Winstons lacked loyalty program materials, parallel cigarette packages indicated that the product they contained was tax-exempt and not for sale within the United States, and parallel cigarette packaging differed in color and style from its domestic counterpart. Thus, the fact that RJR manufactured the parallel product does not mandate judgment for CC.

  Second, even if we were to follow the Ninth Circuit's lead on the issue of when goods are "genuine," we are not persuaded that the NEC court's reasoning would result in a victory for CC. In NEC, a foreign manufacturer attempted to make its U.S. subsidiary the exclusive source of NEC goods within the United States. When an importer bought NEC products overseas and resold them in this country in direct competition with NEC's subsidiary, the foreign parent brought suit under U.S. trademark law. Thus, the parent had no quarrel with the sale of its products within the United States, as long as the product came only from its affiliate. The Ninth Circuit found this activity an attempt to artificially insulate the market to the detriment of American consumers, as evidenced by the court's stinging rebuke of the trademark holder and its parent company at the close of the opinion. Id. at 1511. As a result of the tactic of limiting consumer choices by invoking a law intended to foster honest competition, the equities in NEC clearly weighed against the trademark holder. In this case, by contrast, RJR manufactured parallel product exclusively for non-domestic markets and made no attempt to reintroduce the goods into the domestic market through an exclusive source. This difference distinguishes NEC and bolsters our conviction that the ...


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