Arsa Distributing, Inc. v. Salud Natural Mexicana SA de CV

CourtDistrict Court, E.D. Virginia
DecidedNovember 6, 2023
Docket1:22-cv-01367
StatusUnknown

This text of Arsa Distributing, Inc. v. Salud Natural Mexicana SA de CV (Arsa Distributing, Inc. v. Salud Natural Mexicana SA de CV) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arsa Distributing, Inc. v. Salud Natural Mexicana SA de CV, (E.D. Va. 2023).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division

ARSA DISTRIBUTING, INC., ) Plaintiff-Counter Defendant, ) ) v. Case No. 1:22-ev-1367 SALUD NATURAL MEXICANA SA de ) CV, ) Defendant-Counter Claimant. ) MEMORANDUM OPINION This is a trademark dispute between Plaintiff-Counter Defendant Arsa Distributing, Inc. (“Arsa”) and Defendant-Counter Claimant Salud Natural Mexicana SA de CV (“Salud”) over the rights to the mark EUCALIN for certain products, including nutritional supplements.! The parties have filed cross motions for summary judgment, which have been fully briefed and argued and are therefore now ripe for disposition. For the reasons that follow, Salud’s motion for

summary judgment must be denied in full and Arsa’s motion for summary judgment must be granted in part and denied in part. Arsa’s motion must be granted in part insofar as Salud’s status

as a specially designated narcotics trafficker (“SDNT”) does not provide a basis for finding excusable nonuse of the EUCALIN mark by Salud during the period Salud was designated an SDNT. In all other respects, Arsa’s motion for summary judgment is denied. The remaining issues involve disputed questions of material fact and will therefore be resolved in the course of a bench trial to be scheduled.

| The trademark applications in dispute involve use of the EUCALIN mark in connection “[pJharmaceutical products, namely, vitamin supplements, nutritional supplement made with a syrup with jelly base, honey base, and with a mixture of plants with propolis base, and herbal remedies in the nature of herbal supplements,” as well as “[h]erbal supplements; [nutritional supplements; [and] [v]itamin supplements.” United States Patent and Trademark Office (“USPTO”) Record of Salud’s Application No. 86/779,422 (Dkt. 21-W); USPTO Record of Salud’s Application No. 87/638,836 (Dkt. 21-X).

Rule 56(a), Fed. R. Civ. P., provides that a party may seek summary judgment on all or

any part of a claim. Accordingly, where appropriate, a court may resolve all or any part ofa claim at the summary judgment stage. This memorandum opinion resolves only the question of whether Salud’s status as an SDNT constitutes excusable nonuse of the mark EUCALIN for the

purpose of determining abandonment. Accordingly, the undisputed facts listed here focus chiefly on the facts material to that issue. e Arsa is closely held Texas corporation. e Salud is a foreign corporation based in Mexico. Beginning in 1999 and continuing to 2008, Salud manufactured and supplied a dietary supplement to Arsa pursuant to an unwritten contractual relationship. Arsa thereafter sold this product in the United States using the unregistered trademark EUCALIN.

e Before October 2008, neither Arsa nor Salud successfully registered the trademark EUCALIN in the United States. In August 2002, Salud filed a design mark application for use in connection with nutritional supplements, but Salud abandoned this application in 2003. See USPTO Record of Application Serial No. 78/156,970 (Dkt. 21-K). In October 2006 Salud filed an application for the word mark EUCALIN for use in connection with nutritional supplements, but Salud again abandoned this application for the word mark EUCALIN. See USPTO Record of Application Serial No. 77/010,013 (Dkt. 21-L). e In October 2008, the United States Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) designated Salud as an SDNT because OFAC determined Salud was part of the “financial and supply network” for the drug trafficking operations of the Amezcua Contreras Organization. See Treasury Dep’t Press Release dated Oct. 2, 2008 (Dkt. 21-4). According to OFAC, the Amezcua Contreras Organization created a “network of associates producing methamphetamines for distribution in the United States” and controlled “a network of businesses in Mexico that supplie[d] precursor materials for methamphetamine production.” /d. In relation to this network, OFAC designated Salud as an SDNT under the Foreign Narcotics Kingpin Designation Act (“the Kingpin Act”), codified at 21 U.S.C. § 1901 ef seq. e Asaresult of being designated an SDNT for its participation in illicit drug trafficking, Salud was banned by operation of law from conducting any commercial business in the United States beginning in October 2008. As a sanction for engaging in drug trafficking, during the period that Salud was designated an SDNT, United States law banned Salud

from selling or distributing any products in the United States.? 21 U.S.C. § 1904(c)(1); Treasury Dep’t Press Release dated Oct. 2, 2008 (Dkt. 21-4). e OFAC further determined that Salud’s president, Maria Teresa Tirado-Diaz, and most of Salud’s owners, including Telesforo Baltazar Tirado Escamilla, Luis Alfonso Tirado Diaz, and Rolando Tirado Diaz, were part of the “financial and supply network” for the Amezcua Contreras Organization. Treasury Dep’t Press Release dated Oct. 2, 2008 (Dkt. 21-4); see also Salud Financial Interest Disclosure Statement (Dkt. 12); Declaration of Maria Teresa Tirado-Diaz (Dkt. 18-2). e During the period Salud was designated an SDNT, Salud did not sell goods under or in connection with the mark EUCALIN in United States commerce or to customers in the United States. In fact, Salud has never directly sold goods under or in connection with the mark EUCALIN in United States commerce or to customers in the United States.

e In October 2008, soon after Salud was banned from conducting business in the United States, Arsa filed a trademark application for the mark EUCALIN for use in association with dietary and nutrition supplements. Arsa’s application matured into a registered trademark on February 1, 2011. Later, however, on September 8, 2017 after Arsa failed to file the requisite declaration of continued use pursuant to 15 U.S.C. § 1058 Arsa’s trademark for EUCALIN used for dietary supplements was cancelled. See USPTO Record of Arsa’s Mark Serial No. 77/598,565 / Registration No. 3,912,708 (Dkt. 21-F). e During the period that Salud was a designated as an SDNT, Arsa sold dietary and nutritional supplements using the EUCALIN mark in the United States.

e It appears that Salud requested removal from the SDNT list on May 5, 2010. See Letter from OFAC dated April 7, 2011 (Dkt. 18-11). Five years later, by letter dated May 22, 2015, OFAC removed Salud from the SDNT list, thereby lifting the statutory ban on Salud’s participation in United States commerce. The May 22, 2015 letter in which OFAC informed Salud’s attorneys that Salud was being removed from the SDNT list did not indicate that the removal was because Salud was innocent of supporting the drug trafficking operations of the Amezcua Contreras Organization or that placing Salud on the list was a mistake. Instead, in the letter, OFAC merely stated that Salud “no longer [met] the criteria for designation.” See Letter from OFAC dated May 22, 2015 (Dkt. 18-4).

2 The parties dispute whether the SDNT sanction on Salud was for a definite or indefinite time period. Arsa argues that the ban was for an indefinite period, whereas Salud argues that it was for a specified time. Nothing in the Kingpin Act suggests that the sanction on Salud was imposed for a specified period of time and Salud provides no basis in law or fact for its contention that the sanction imposed on Salud as an SDNT was for a then-specified period of time.

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Arsa Distributing, Inc. v. Salud Natural Mexicana SA de CV, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arsa-distributing-inc-v-salud-natural-mexicana-sa-de-cv-vaed-2023.