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The Cold War over Vodka is Over…Again

by Ap Press

In an amazing turn of events nearly a year and a half in the making, the Federal litigation arising over the Happy Vodka trademark dispute has come to an abrupt end.

In an amazing turn of events nearly a year and a half in the making, the Federal litigation arising over a trademark dispute for an internationally known alcoholic beverage brand has come to an abrupt end. Happy Vodka Corporation, a Jacksonville Florida based organization has come out the clear winner in a protracted litigation watched by many in the spirits industry, from both the US and Russia. As Russia moves closer to being inducted into the WIPO, disputes such as this caused issues that could stall their progress.

Smirnov vs. Smirnoff was one of the early cases of “Who owns the brand?” between Russian and British/US interests. The Russian Government claimed ownership of Stolichnaya and Pepsico, SPI and others involved had their hands full with litigation, fraud charges and even machine-gun armed resistance. This time, the brand in the crosshairs of the Russian snipers was Happy Vodka, a product that from the onset seemed to be kept alive if not by just goodwill, then also by sheer luck. Here is what we can tell from the public records of this enthralling story:

In 2001 a new concept in vodka marketing focusing on the simple idea of ‘having fun’ while consuming alcohol was sparked by C. J. Eiras, who formed Happy Vodka Corporation. The brand began to build customers such as the US Army & Air Force Services (AAFES) and US Navy Exchange (NEX) as well as distributors and control state sales. In late 2003, NWB Imports & Exports, a single brand spirits importer of this little known ‘Happy Vodka’ product, along with Eduard Kinosiants a Russian businessman and Mishel “Mike” Shumilov a Russian-American vodka consultant were terminated by Happy Vodka Corporation. This sparked a quest by NWB and the Russians to remove Happy Vodka ‘the product’ from the ownership and control of Happy Vodka ‘the Corporation’.

C. J. Eiras was stunned by the turn of events, and utilized former Florida Bar President and Managing Partner of Marks Gray, PA Mr. James Rinaman along with attorneys Justin Mallot and Raynarldo Whitty as the Defendant’s council for the case. Eiras filed an affidavit and counterclaims showing that his company was in fact the rightful owner of the Happy Vodka brand along with an exhibit list (according to records) of more than 11,000 pages, which Eiras claimed would prove his rightful ownership of the brand, including his ownership of www.HappyVodka.com among other “Happy” domains.

NWB and the Russians filed documents with the court showing their Russian registration of Happy Vodka and “Udachnaya” (purportedly Happy in Russian, but does not translate to “Happy” in English), none of which were dated prior to the creation of Happy Vodka by Eiras in the US. The Honorable Federal District Judge Corrigan was faced with a dilemma that has turned up so many times in import vodka industry…“Who owns the brand?”    

The trademarks for the Happy Vodka brand in the United States Patent and Trademark Office (USPTO) were both applied for in 2001 by Eiras for Happy Vodka Corporation. The issue was due to the lapse of both applications, which caused them to be listed with the USPTO as “Abandoned” unbeknownst to Eiras. The Plaintiffs submitted documents to the court stating that Happy Vodka Corporations’ trademarks could never be revived. This seemed to be a great source of issue with the case, as Kinosiants filed for the same marks with the USPTO in late 2003, which likely caused his termination and the beginning of the legal turmoil. However, the trademark abandonment was resolved several months into the litigation by the USPTO, which revived Eiras’ applications and issued the marks to Happy Vodka Corporation, and shortly thereafter, issued a suspension of Kinosiants’ applications for the same marks. Despite this turn of events, Plaintiffs and their attorneys John Gallant and Timothy Ervin from Gallant & Ervin of Boston, Massachusetts continued on.

This bizarre string of losses suffered by NWB et al continued as a meandering journey that included several Motion to Compel hearings, a second unsuccessful hearing for restraint of Happy Vodka Corporation because they were having a ‘Release Party’ along with several requests for sanctions against the Bostonian attorneys. To put it bluntly, it was a bloody court battle.

In the hearing transcripts, the Plaintiffs NWB et al claimed that Kinosiants was the rightful sole owner of the Happy Vodka product because he formulated a recipe, stated as the main reason people purchased Happy Vodka. The claim based the consumers’ draw to the vodka because of superior quality, not because of the attractive packaging, and went further to claim the round winking smiley-faced bottles could not be sold apart from the vodka formula created by Kinosiants. Plaintiffs questioned Eiras on the stand about letters to customers from Happy products distributor Liquor Group, written by the managing member Gray C. Solomon, which described the quality of the vodka product within the fun packaging which was a cause of repeat sales.

The Defendants argued that Happy Vodka was attractive to customers because of the words ‘Happy Vodka’ on the bottle along with the winking eyed smiley face, which had value even without vodka, which was demonstrated to the Judge by Eiras who showed irrefutable evidence that “People purchase the empty bottles on eBay for more money than we sell the full bottles on liquor store shelves!” By reading the transcripts, this unusual fact seemed to amaze Judge Corrigan, who asked witness Eiras directly to explain to him the details of this phenomenon. The judge struck down the Plaintiffs initial requests to enjoin Happy Vodka Corporation from producing and selling Happy products, allowing Happy Vodka Corporation to continue production of their mischievous winking vodka without the Plaintiffs involvement as importers nor production coordinators. By this point Happy Vodka Corporation was spending 5 times their marketing budget on legal fees, yet somehow the brand kept growing.

Months later, the Plaintiffs went so far as to appeal this early rulings against them to the 11th Circuit Federal Court of Appeals in Atlanta, Georgia. The Court of Appeals, the second highest court in the land issued a staunch “Affirmed Without Opinion” ruling from the panel of three Judges, one of which was an International Trade Law Judge. Yet another slap in the face of the Plaintiffs attorneys and their case as a whole, but the case moved on with no end in sight. Under any other circumstance the case against Happy Vodka Corporation would have been dropped, but again the Plaintiffs carried on as if nothing would stop them.    

Over the many months after the initial hearings, Happy Vodka Corporation began production of not only the new Happy Vodka, a Russian vodka bottled in the US, but they also launched Happy Rum from Trinidad, Happy Gin from the UK and Happy Tequila from Mexico though Todhunter International, a major spirits bottler and owner of Florida Distillers. These new Happy products launched into the US and Canadian market and found their way into many major clients hands. Judging from Happy Vodka Corporation’s marketing materials and press releases, these products became instant successes in the marketplace, and continue to gain ground in the spirits industry.

According to tax records, Happy Vodka and related Happy products sold more Happy from August of 2004 to March of 2005 than they sold during the entire history of the company, enjoying a 500%+ increase in sales over 8 months! With the recent sale of Grey Goose Vodka brand for nearly $2 Billion dollars, mid-sized brands with multi spirit product reach such as Happy can easily valuate at $50 to $100 million according to market analysts. Sadly, Happy Vodka Corporation is a privately held company, so don’t bother searching NASDAQ or NYSE for it, we already have…with no results.

As the trial grew closer, the Happy product seemed unstoppable, making major branding plays with events such as the NBA All Star Parties, The Emmy’s, Cannes Film Festival and even the Super Bowl, held serendipitously in Happy Vodka Corporations’ backyard of Jacksonville, Florida.

Meanwhile according to the public website of the Federal Department of the Treasury’s Tax and Trade Bureau (TTB – formerly the ATF), In early 2004 NWB surrendered their ability to import any Happy Vodka product into the US, and received a use up permit to clear the remaining product that expired in November 2004. According to the TTB, even if the product continued to emanate from the original suppliers in Russia, for undisclosed reasons NWB would no longer be able to import Happy Vodka. This meant that NWB had no ability to import any spirits product at all, yet the case moved on.

With this much working against the Plaintiffs, one would think the boys from Boston would call it quits, after all, during the time span of this litigation Boston won two Super Bowls and the World Series, what more did they want? For some odd reason, the Plaintiffs pushed ahead, even though from an outsiders’ point of view legally, ethically and morally, it made no sense for them to continue.

On the last business day prior to the trademark hearing, in the dramatic style found throughout this litigation the case was disposed of. Happy Vodka Corporation retained the rightful ownership of the excusive worldwide right, title and interest in the Happy Vodka brand and all the related trademarks for any and all Happy products throughout the world. This was re-confirmed by stipulation of NWB et al, Shumilov and Kinosiants to the Federal District Court. In fact, by court order NWB et al can not have any further interaction or involvement with the Happy Brands anywhere in the world, and they gave up the right to appeal or re-file the case in any court. At the time of this report, NWB President Diana Shumilova, Mishel “Mike” Shumilov, Eduard Kinosiants and their attorneys Timothy Gallant and John Ervin were not available for comment on the outcome of the case.

Happy Vodka Corporation did not pay the Plaintiffs any money or other remuneration to achieve this winning result. This marks a complete vindication for Happy Vodka Corporation as the rightful and sole brand owner of Happy Vodka and related products, but it is surely a black eye on the trade relations between Russia and the United States, and a further black mark against litigation in the US as a whole.

As long as there are attorneys willing to see and use only the technicality of the law to achieve results for their clients rather than the facts of the matter and common sense, small companies such as Happy Vodka Corporation will suffer the expensive and morale draining yoke of civil litigation. Tort reform is necessary for business development to flourish in the US, which cases such as this one prove beyond a shadow of the doubt. The Russian Government should consider revising their laws to avoid such altercations in the future, as the loss of revenue for Russian suppliers of vodka surely hurts their fragile economy.

Now I am going to leave my office and purchase a ‘full’ bottle of Happy Vodka, (as opposed to an empty bottle on eBay) as I am sure Happy Vodka Corporation can use the money and I can use the smile! Cheers!

 

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