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United Food Imports, Inc. (?United Food?), a wholesale distributor of packaged food products imported from Egypt, sued several food distributors alleging trademark infringement for the unauthorized use of the mark BASMA in connection with products being sold to members of the Middle Eastern community residing in the United States. See United Food Imports, Inc. v. Baroody Imports, Inc. et al, Case No. 09-cv-02835 (D. N.J.).

As part of the Defendants? counterclaims against United Food, Defendants claimed that a company named Orouba Agrifoods Processing Co. (?Orouba?), which produced the allegedly infringing goods distributed by the Defendants, is the rightful owner of the BASMA mark which United Food is claiming as its trademark. United Food filed a motion to dismiss Defendants? counterclaims arguing that Defendants? counterclaims improperly asserted a jus tertii defense (i.e., a claim asserting that a third party has rights in a trademark superior to the party claiming trademark rights).

Defendants allegations incorporated the factual allegations that Orouba set forth in its own petition to cancel United Food?s U.S. trademark registration of the BASMA mark. See Orouba Agrifoods Processing Company v. United Food, Cancellation No. 92050739 (T.T.A.B. Filed March 23, 2009). In short, Orouba claimed that it began using the BASMA mark in the United States in late 1999 (although its own application for the BASMA mark currently reflects date of first use anywhere as December 31, 1999 and use in commerce as February 17, 2003) and owns several foreign registrations of such mark (in Egypt, Turkey, United Arab Emirates, and Germany). In 1998, Orouba entered into an agreement to supply United Food with goods for resale in the United States. In 2004, United Food filed a trademark registration application with the United States Patent and Trademark Office (?PTO?) to register the BASMA mark in connection with various frozen fruits and vegetables (claiming use since January 1, 1998). Orouba terminated its agreement with United Food in September 2005. Orouba attempted to oppose United Food?s application (see Orouba Agrifoods Processing Company v. United Food, Opposition No. 91172895 (T.T.A.B. Filed September 15, 2006), but the opposition was dismissed with prejudice by the Board on February 12, 2008, after Orouba failed to file a brief on the merits in the case. The mark was then registered by the PTO on March 18, 2008. On March 23, 2009, Orouba filed the aforementioned cancellation petition, which was suspended in July 2009 pending the outcome of a separate lawsuit by United Food alleging trademark infringement against Orouba. See United Food Imports, Inc. v. Orouba Agrifoods Processing Co., Case No. 09-cv-04484 (S.D.N.Y.).

Defendants? counterclaims in the instant case sought a judgment declaring that Orouba is the rightful owner of the BASMA trademark, cancellation of United Food?s registration, and damages arising from United Food?s fraudulent registration (pursuant to 15 U.S.C. § 1120).

While the court granted United Food?s motion to dismiss the counterclaims on the grounds that Defendants do not have standing to bring claims that affirmatively assert Orouba?s rights, the court chose not to prevent Defendants from asserting its arguments as an affirmative defense since the Defendants were in privity with Orouba. See United Food Imports, Inc. v. Baroody Imports, Inc. et al, 2010 U.S. Dist. LEXIS 33585 (D. N.J. April 6, 2010) (unpublished).

The court noted that Defendants? counterclaims were essentially claims against United Food on behalf of Orouba. As such, the court dismissed such counterclaims outright for lack of third party standing on the part of the Defendants to bring these claims on behalf of Orouba. Moreover, the rare exceptions where third party standing is acceptable (i.e., where the third party is unable to assert their rights and there is an identity of interests between the third party and the party bringing claims) did not apply in light of the ongoing litigation between United Food and Orouba in which Orouba could assert such claims against United Food.

Defendants then argued in the alternative that their arguments should be allowed as an affirmative defense instead of a counterclaim. United Food argued that Defendants should not be allowed to assert any arguments regarding Orouba?s rights on the basis that it would constitute an improper jus tertii defense:

The court decided in favor of allowing Defendants to assert Orouba?s rights as a jus tertii defense given the contractual relationship that allegedly existed between Defendants and Orouba in that Orouba supplied the Defendants with the allegedly infringing goods. This contractual relationship placed the Defendants in privity with Orouba such that Defendants could claim some entitlement to the priority rights of Orouba with respect to the BASMA mark.

Accordingly, while the court dismissed Defendants? counterclaims, because the court could infer from the allegations that Orouba and Defendants were in privity with one another, the court decided not to preclude the Defendants at this pleading stage of the case from presenting their arguments as an affirmative defense to the suit.

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