Geographic Indications and International Trade (GIANT)

TED Case Studies
Number 703, 2003
by Tim T. Zhakselekov

Smirnoff vs Smirnov

General Information
Legal Cluster
Bio-Geographic Cluster
Trade Cluster
Environment Cluster
Other Clusters

I. Identification

1. The Issue

2. Description and History

In 1860s Piotr Arsenietvich Smirnov founded a Trading House of PA Smirnov, a vodka distillery. Smirnov was the first to use charcoal in the filtration process, thus making his product of very high quality. After the Bolshevik revolution the Smirnov distillery was confiscated and turned into a state garage. One of Piotr Smirnov’s sons, Vladimir, was able to escape Russia, first to Turkey, then to Poland and later France. There he changed his last name to Smirnoff. In 1920s he sold his family business to another Russian emigrant by the name of Kunnett, who later came to the US. In 1930s, Kunett after making a good name for now Smirnoff vodka sold the company to Heublein Co., which took the brand to another level with marketing and promoting the vodka throughout the US and the world. On the other hand, another descendant ,the great grandson of Piotr Smirnov, who now heads the Trading House of PA Smirnov claims that he owns the family name of Smirnov and use of Smirnoff trademark by Diageo is illegal. Alfa-Eco manages the "Trading House”. Similar to Diageo they promote and market what they hold to be the true Smirnov vodka. Under their management “Smirnov was awarded gold medals in three categories at the Saint Petersburg Wine and Vodka Fair-2000.” Moreover, in early in 2003, the brand received one gold, two silver and two bronze medals at the 10th anniversary of a lucrative international exhibition Prodexpo-2003 in Moscow. Since coming under the management of Alfa Eco the range of Smirnov products and sales volumes increased significantly. It was only in the early 1990s that Russian descendants of Piotr Smirnov started the Trading House and with guidance of Alfa Eco there are now many producers who are interested in franchising opportunities. In fact, there are number of Smirnov franchising plants have already been launched in a number of Russian cities, as well as in Ukraine and Kazakhstan. Unlike Smirnoff, Smirnov doesn’t have an established network of distributors and producers. However, Smirnov has a strong presence in countries of former Soviet Union. With Alfa Eco being the largest privately held company in Russia, the Russian government will continue to protect the economic interests of Smirnov.

3. Related Cases

Weis Beer	Polish Vodka
Bacardi	Grappa
Budweis	Mexico Sugar

4. Author and Date: Tim T. Zhakselekov 11/11/2003

II. Legal Clusters

Smirnoff vs. Smirnov is a dispute that would fall under the realm of WTO regulations on trade. In 1993 Russia has applied to become a member of WTO. Under the WTO rules there are set international standards for trademark registration. Moreover, WTO requires that the member states recognize the trademark under the principle of “well-knowness”. “A well known trademark is a trademark that is recognized extensively due to the broad promotion of the trademark worldwide, large international market presence and trademark registration in several countries.” Essentially, the process for establishing well-knowness is polling. An independent organization is brought in to sample the population’s response to the brand. If more than sixty percent of the sampled population recognize the trademark, it is designated as well-known.Smirnoff has applied for exclusive rights to the name and it variations, along with distribution rights in Russia in 1992. Later that year the Russian government has granted rights to the name to Smirnov, a Russian company that was started by the descendents of the P. Smirnov the founder of the company. Smirnoff has registered over two thousand products worldwide and has exclusive trademark rights in numerous countries. On the other hand Smirnov doesn’t have as great of a presence as Smirnoff, however has patented its trademark in most of the former Soviet republics and several other countries. If one were to read broadly into
the WTO Smirnoff has the greater name recognition around the world and thus should have exclusive rights to the name. However, Russia is not a member of WTO and thus does not have to abide by the rules that WTO put forth. Moreover, if Russia does become a member of WTO, the Smirnoff vs. Smirnov dispute may not have any effect on the membership in the
organization. Russia is currently a signatory to the World Intellectual Property Organization and the Paris Convention, yet it does not prevent it from allowing a multitude of trademark and patent disputes to go on unresolved. What has been taking place since the Smirnoff vs. Smirnov dispute is that both companies have appealed to courts in countries where they have a market share. In several instances they had even taken their respective cases to regional courts in countries where they engage in production and distribution. A recent break up of the Smirnov brothers has caused for another Smirnov trademark to emerge “Boris Smirnov”. The new “Boris Smirnov” vodka looks exactly like Smirnov and includes all of the imperial insignia, which is also displayed on the Smirnoff products. This twist adds another legal dispute to the case. The dispute may now turn into Smirnoff vs. Smirnov vs. Boris Smirnov.

6. Forum and Scope: WTO, Regional

7. Decision Breadth: Multi

8. Legal Standing: Law

III. Geographic Clusters

c. Geographic Impact: Russia, Central Asia, Eastern Europe, USA

10. Sub-National Factors: No

11. Type of Habitat: Snow Forests [Cool]

IV. Trade Clusters

12. Type of Measure: IPROP

13. Direct v. Indirect Impacts: DIR

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product:

b. Indirectly Related to Product:

c. Not Related to Product:

d. Related to Process:

15. Trade Product Identification:

16. Economic Data

Boris Smirnov started his company about ten years ago. In 1997 Smirnov moved his operation to a factory outside of Moscow, where they produced 200,000 bottles per month in 1996 and close to 3 million per month presently, just at the Moscow factory. There are several factories throughout countries of former Soviet Union, including Russia and Kazakhstan. The company has contracts with distributors throughout the world for the next six years.

17. Impact of Trade Restriction:

In March 2001 Latvia has banned sales and distribution of previously registered Smirnov vodka trademark. The petition to cancel the trademark registration was brought by US company UDV North America Inc., which demanded that the “figurative trademark Smirnov vodka, comprised of the Cyrillic name elements Smirnovskaya vodka Nr. 21, be revoked in Latvia, and that its international registration be applied to the territory of Latvia.” The company also petitioned for the cancellation of the application in Latvia of the international trademarks Smirnov vodka - stolovoje vino Nr. 31, and Smirnov vodka - stolovoje vino Nr. 32, as well as the registration of these marks in Latvia. On the other hand when Smirnov attempted to take their case to the Third Circuit found that Russian vodka producers did not have standing to sue the American makers of Smirnoff vodka [Joint StockSociety v. UDV N. Am., 266 F.3d 164 (3d Cir. 2001)]. The plaintiffs, the descendants of P.A. Smirnov, the Smirnov vodka legacy, sued the American vodka producer alleging that it was falsely promoting its products as the “vodka of the czars.” The court found that the plaintiffs could not have been injured because they had “not adduced any evidence establishing that they are prepared at this time to sell any vodka in this country.” Moreover, currently US does not allow for import and distribution of Smirnov or Boris Smirnov vodkas in the United States.In Russia Smirnoff is involved in a joint venture, where its products are produced and then distributed in the country in a partnership with Livitz Distillery. The Russian government does not ban Smirnoff and allows for the operation of both Smirnov and Smirnoff.