Ninth Circuit: Trademark claim against tribal corporation does not confer tribal court jurisdictionMarch 23, 2009

In a recent decision, the Ninth Circuit reversed a district court's grant of a motion to stay federal trademark claims against Indian tribal defendants pending a determination of jurisdiction by a tribal court. The trademark claims were for alleged passing off of cigarettes on the Internet, on the reservation of another tribe, and elsewhere. The district court ruled that there was at least a colorable claim to tribal jurisdiction under Supreme Court precedent and granted a stay of federal proceedings pending a determination of jurisdiction by the tribal court.The Ninth Circuit reversed, holding there was not a colorable claim of jurisdiction in tribal court insofar as it implicated the plaintiff's federal trademark claim against the tribal defendants and its principals, members of the Yakama Tribe. Accordingly, allowing exhaustion of tribal remedies would serve no purpose other than delay. As a result, the court reversed the district court's decision and remanded for the case to proceed.More on Philip Morris USA, Inc. v. King Mountain Tobacco Co. after the jump. The plaintiff, Philip Morris, manufactures and markets Marlboro cigarettes, one of the most recognized brands of cigarettes in the world. The packaging of Marlboro cigarettes bears a distinctive "red roof" design, featuring two red triangles filing in the top corners of its mainly white package such that there is a white peak.King Mountain is a tribal corporation on the Yakima Indian Reservation owned by Yakama members, Delbert Wheeler and Richard "Kip" Ramsey. King Mountain was formed in 2004 and began selling cigarettes to stores on the Yakama Reservation in early 2006. Shortly thereafter, King Mountain began selling cigarettes to members of other tribes and to the general public through various internet websites. King Mountain's cigarette package features an image of a snow-covered mountain against a red backdrop. The mountain depicted is Mt. Adams – known as "Pahto" to Yakama Tribe members – a mountain of spiritual significance to the Tribe. King Mountain applied to register its package design but the USPTO refused registration citing two of Philip Morris's registrations.A side-by-side comparison of the packaging illustrates the reasons for the rejection: Philip Morris filed various federal and state trademark infringement and dilution claims against King Mountain in federal court in the Eastern District of Washington. King Mountain, in turn, filed an action for declaratory relief against Philip Morris in Yakama Tribal Court. The action for declaratory relief prompted Philip Morris to seek an injunction in federal court against the tribal proceedings.At the district court level, King Mountain argued that any resemblance to Philip Morris' packaging was inadvertent and incidental as it was only meant to depict Pahto. King Mountain also asserted that Philip Morris had not shown a likelihood of success on the merits of its Lanham Act claims. In response to Philip Morris's efforts to enjoin use of the infringing package, King Mountain argued that Philip Morris had failed to exhaust tribal remedies and moved to stay the federal case to allow the Tribal Court to address its own jurisdiction.The district court denied Philip Morris' requested injunctions and granted King Mountain's motion to stay. According to the court, it was not clear whether tribe would not have regulatory authority over trademarks and whether tribal courts have adjudicative authority to address trademark claims against tribal members whose conduct occurred on reservation lands. These uncertainties led the district court to conclude that there was a colorable question of existence of tribal jurisdiction.On appeal, the court was tasked with divining the teachings of three Supreme Court cases: Montana v. United States, Strate v. A-1 Contractors, and Nevada v. Hicks. According to the court:

As a general rule, tribes do not have jurisdiction, either legislative or adjudicative, over nonmembers, and tribal courts are not courts of general jurisdiction. Nevertheless, stemming from their inherent sovereignty, tribes do have legislative jurisdiction within the two Montana exceptions.

The two Montana exceptions are (1) "nonmembers who enter consensual relationships with the tribe or its members;" and (2) "activity that directly affects the tribe's political integrity, economic security, health, or welfare."Applying this framework to the issue at hand, the court disagreed with the district court that tribal court has colorable jurisdiction over King Mountain's declaratory relief insofar as it implicated Philip Morris' federal trademark infringement claim against King Mountain and its principals, Yakama Tribe members. The court was unable to find any nexus between Philip Morris' contacts with the various sellers of its cigarettes among the Yakama Tribe and the activity giving rise to the lawsuit, the sale of King Mountain cigarettes. Put more simply, the mere fact that Philip Morris had some consensual commercial contacts with Yakama Tribe members did not mean that the tribe had jurisdiction over all suits involving Philip Morris. As stated by the court, "it is not in for a penny, in for a Pound."The court further concluded that exhaustion of tribal court remedies would serve no purpose other than to delay the case. The court framed the matter bluntly, stating "surely the district court is not suggesting that the tribe would have regulatory authority over federal trademark registration. Significantly, Philip Morris holds federal trademarks and trade dress registered under the Lanham Act, trademarks whose validity King Mountain apparently challenges."In a separate opinion, Judge Fletcher concurred in the result but wrote to express his dissatisfaction with majority's treatment of the presumption concerning party alignment. Namely, that the court was "engag[ing] in extended dicta in an attempt to undermine" certain long-standing tribal jurisdiction cases.To read the full decision in Philip Morris USA, Inc. v. King Mountain Tobacco Co., click here.