Opinion
Civil Action No. CCB-08-065.
May 30, 2008
MEMORANDUM
Now pending before the court is a motion for a preliminary injunction filed by plaintiff Gruppo Essenziero Italiano, S.p.A. ("GEI"), an Italian company, against defendant Aromi d'Italia, Inc. ("ADI"). GEI seeks to enjoin ADI from using the registered trademark "Aromi d'Italia" in the wholesale market for gelato products, including gelato mix sold under the "Berzaci" brand name. The issues in this case have been fully briefed and a hearing was held on May 16, 2008. Because GEI has not made a strong showing that the balance of hardships weighs in its favor or that it is clearly likely to prevail on the merits, the motion for a preliminary injunction will be denied.
BACKGROUND
The factual underpinning of GEI's lawsuit against ADI centers around an Exclusive Distributor Agreement signed by the parties on April 22, 2000 that provided for ADI to become the exclusive distributor of GEI's gelato mix and ingredient products in the United States. ADI had the option to sell GEI's gelato ingredients under GEI's "Aromitalia" brand name or under its own registered "Aromi d'Italia" trademark. At some point over the course of this seven-year business relationship, disputes began to arise concerning, in part, credits and adjustments allegedly due to ADI and unpaid invoices allegedly owed to GEI. On July 2, 2007, GEI issued a letter in which it formally stated it was "terminating" the Agreement. Following this termination, ADI began distributing gelato products from manufacturers other than GEI, but continued using the name brand Aromi d'Italia and product codes similar to those used by GEI. Recently, ADI began distributing "Berzaci" brand gelato products. It appears that ADI either entirely, or at least partially, owns the Berzaci manufacturing plant located in West Virginia. Although the Berzaci packaging originally contained small print in the lower corner of the label noting that the brand is distributed by Aromi d'Italia, it now appears that ADI has voluntarily removed this text. ADI does plan, however, to divide booth space at gelato trade shows between its Aromi d'Italia finished gelato products and Berzaci gelato ingredients.
Also related to this preliminary injunction request, GEI has narrowed its product code infringement claim to ADI's use of the "BF" product code, which applies to fruit base gelato mix; GEI apparently uses the letters "DBF" to refer to its fruit bases. In response, ADI argues that the Italian words "base frutta" mean fruit base, and thus are the basis of the "BF" product code designation. Finally, GEI seeks to enjoin ADI's use of the website www.aromiditalia.com as it is used to market and advertise in the wholesale market for gelato products.
The product code issue was mentioned by GEI only in passing during the hearing. While it may be prudent for ADI to avoid the issue by further differentiating its fruit base product codes from GEI's, this narrowed issue does not materially affect the court's preliminary injunction analysis.
Relevant to this preliminary injunction hearing is the disputed background concerning the application and registration of both GEI's Aromitalia and ADI's Aromi d'Italia trademarks. According to GEI, both GEI and ADI, which were represented by the same law firm in 1998, essentially agreed to divide between themselves the wholesale and retail markets for gelato and related products in the U.S. GEI would manufacture gelato ingredients and ADI would distribute those ingredients as well as focus on retail aspects of the gelato industry. ADI and GEI waived any objection to the conflict of interest in their legal representation, and were advised that problems could arise if the relationship between the companies soured. More specifically, ADI and GEI were warned that the validity and priority of their respective trademarks could depend on "the order in which the [trademark] applications are filed." (Pl.'s Mem. at Exs. 2, 3.) Both companies were advised that because of the similarity between the Aromitalia and Aromi d'Italia names, the best course of action would be to register both names under one company, and license the use of the names to the other. (Id. at Ex. 3.) Despite this prudent advice, ADI and GEI chose to register their marks independently.
As noted in the ADI and GEI trademark applications, which were filed simultaneously with the USPTO, the Aromitalia trade name was intended to cover gelato base and other ice cream ingredients, while the Aromi d'Italia brand was to be used for "pastry, coffee, ice cream, bread, panini, salads, soup, pasta, cups, hats and T-shirts." (Id. at Exs. 4, 5, 6, USPTO Filings.) Although these products may be related, GEI argues that the trademark applications demonstrate that GEI was securing the wholesale market for gelato products and ADI the retail market. GEI does not now challenge the Aromi d'Italia brand name as used by ADI in the retail market, but rather only in the wholesale market.
ADI refutes GEI's assertion that the parties had agreed to effectively divide markets into retail and wholesale sectors in 1998. Instead, ADI argues that it intended to develop the broader gelato industry in the U.S., while GEI would serve as the manufacturer of one component of that industry, the gelato ingredients. Moreover, under the terms of the Agreement, GEI authorized ADI to use GEI's trade name Aromitalia or to use ADI's trade names, including Aromi d'Italia, with respect to GEI's gelato products. It appears that GEI's gelato products were sold in the U.S. by ADI under either an Aromitalia or Aromi d'Italia package label, depending on the specific order and whether ADI added additional ingredients. Furthermore, although GEI consented to ADI's use of the Aromitalia name, there is nothing in the Agreement that demonstrates GEI's alleged understanding that it had consented to the viability of the Aromi d'Italia trade name only within the confines of the Agreement. Instead, the Agreement appears to recognize both trade names as valid, and does not limit their coverage or use. Nothing in the Agreement explicitly precludes ADI from using its Aromi d'Italia name in the event the Agreement is terminated. Over the next seven years, ADI used its Aromi d'Italia name brand in its retail endeavors, in serving as GEI's exclusive distributor of gelato ingredients, and in its related promotional activities in the industry.
ANALYSIS
In determining whether to grant a preliminary injunction a court must consider: "(1) the likelihood of irreparable harm to the plaintiff if the preliminary injunction is denied, (2) the likelihood of harm to the defendant if the requested relief is granted, (3) the likelihood that the plaintiff will succeed on the merits, and (4) the public interest." The Scotts Co. v. United Indus. Corp., 315 F.3d 264, 271 (4th Cir. 2002) (quoting Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 812 (4th Cir. 1991)). In cases where the balance of hardships tips decidedly in favor of the plaintiff, the plaintiff's burden in demonstrating likely success on the merits decreases accordingly. Id. "But if the balance of hardships is substantially equal as between the plaintiff and defendant, then `the probability of success begins to assume real significance, and interim relief is more likely to require a clear showing of a likelihood of success.'" Id. (quoting Direx, 952 F.2d at 808)); see also Microstrategy Inc. v. Motorola, Inc., 245 F.3d 335, 340 (4th Cir. 2001) (noting that where the balance of hardships appears equal, a plaintiff's burden may be even greater in trademark cases). Finally, the Fourth Circuit has cautioned that "preliminary injunctions are extraordinary remedies involving the exercise of very far-reaching power to be granted only sparingly and in limited circumstances." Microstrategy, 245 F.3d at 339 (quoting Direx, 952 F.2d at 816)).
A. Irreparable Harm to GEI
GEI argues that ADI's use of its Aromi d'Italia trademark is causing irreparable harm to GEI that is presumed by the law. In order to make this argument, GEI attempts to frame this dispute as one arising from the termination of a typical licensor-licensee relationship. GEI notes that some circuits have adopted a presumption of irreparable harm in trademark infringement cases between a terminated licensee and former licensor, or when a clear prima facie showing of infringement can be made. In this context, GEI cites to a case from this district, Fairbanks Capital Corp. v. Kenney, 303 F. Supp. 2d 583, 590 (D. Md. 2003), which applied a presumption of harm where an infringement was obvious. Despite ADI's argument to the contrary, the Fourth Circuit has indicated that, in some circumstances, a presumption of harm may be applied if a plaintiff can make a showing of infringement and a likelihood of confusion. See Scotts Co., 315 F.3d at 273-74; Lone Star Steakhouse Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 939 (4th Cir. 1995).
Regardless of whether a presumption of irreparable harm applies to trademark disputes between licensors and licensees, however, a plaintiff would not be entitled to such a presumption unless he could show that the previous relationship with the defendant was in fact one of a licensor-licensee, and that the defendant's use of the plaintiff's trademark therefore constitutes prima facie infringement rather than the valid use of a registered mark. See generally Scotts Co., 315 F.3d at 274. Here, GEI can do neither. At least in the context of the trademarks, there is nothing in the Agreement that can be construed as a licensing arrangement between GEI and ADI concerning the Aromi d'Italia trademark, even if it does establish ADI as GEI's sole exclusive distributor of gelato products in the U.S. The relevant section of the Agreement provides that:
[GEI] consents to permitting [ADI] to use the name "AROMITALIA" exclusively in the Territory and also consents to have [ADI] register the Gelato Products that it will be selling and distributing in the Territory under its own tradenames or trademarks of "AROMI D'ITALIA" and/or "AROMI" and/or "BORDAVI" . . . and [ADI] shall have the exclusive right to register any or all of these names in the United States and Canadian Patent Offices as its exclusive property. Nothing in this Agreement shall give [ADI] any ownership interest in [GEI's] tradename "AROMITALIA" except the right to use it in connection with the sale of the Gelato Products within the Territory.
(Pl.'s Mem. at Ex. 7, Agreement at ¶ 7 (emphasis added).) The Agreement further requires GEI to print whatever trade name and logo ADI designates on the Gelato Product packaging prior to shipment. (Id.)
Although this contract provision does grant ADI the right to use GEI's Aromitalia brand name, the language does not explicitly, or even implicitly, limit ADI's right to use its Aromi d'Italia name as it chooses. Instead, the Agreement appears to recognize that the Aromi d'Italia name is a valid trademark registered to ADI wholly apart from the contract, and that ADI may use the name on the packaging of GEI's gelato ingredients. Therefore, following termination of the Agreement, ADI no longer had the right to use the Aromitalia brand name. It is far from clear, however, that ADI gave up the right to use its own Aromi d'Italia trade name.
In arguing that the Agreement merged the right to control and license the name Aromi d'Italia to GEI, GEI relies, in part, on Bunn-O-Matic Corp. v. Bunn Coffee Serv. Inc., 88 F. Supp. 2d 914, 922 (C.D. Ill. 2000), where the court stated that "[a] likelihood of confusion exists as a matter of law if a licensee continues to use marks owned by the licensor after termination of the license." In that case, the Bunn-O-Matic Corp. ("Bunn-IL"), which manufactures coffee products, discovered that a New York company, Bunn Coffee Service ("Bunn-NY"), had been using the "Bunn" name in registering various trademarks. Threatening a lawsuit, Bunn-IL entered into an agreement with Bunn-NY, whereby the court found that Bunn-NY accepted the position of licensee, acknowledged Bunn-IL's superior rights in the Bunn name, and acknowledged Bunn-IL owned the marks. Id. at 923-24. The court noted that in entering the agreement, Bunn-NY "lost any independent claim of right to the [Bunn] name when it signed the license," because "[a] licensee's prior claims of any independent right to a trademark are lost, or merged into the license, when he accepts his position as a licensee." Id. at 923. Therefore, when Bunn-IL subsequently terminated the agreement, Bunn-NY lost the right to use the "Bunn" name. Id. at 924.
As explained above, however, the Agreement here does not appear to license to ADI the right to use the name Aromi d'Italia. To the contrary, the Agreement implicitly recognizes the trademark as valid, registered, and belonging to ADI. Therefore, if the GEI-ADI relationship is not considered to be one of traditional licensor-licensee, then what the court is left with are two companies holding very similar registered trademarks. A presumption of irreparable harm is thus not appropriate, and instead the court is faced with a case resembling a more classic trademark battle between two competitors.
The court's ruling here does not preclude GEI from eventually demonstrating that its relationship with ADI was akin to a licensor-licensee agreement. The court merely finds that for the purposes of the requested preliminary injunction, GEI has failed to offer sufficient evidence within and beyond the Agreement to establish ADI as a licensee that loses its right to the Aromi d'Italia name upon termination of the Agreement. Therefore, when considering the extraordinary relief requested by GEI, the court will not presume irreparable harm, nor find that GEI is accordingly likely to succeed on the merits. Cf. Bunn-O-Matic Corp. v. Bunn Coffee Serv. Inc., 88 F. Supp. 2d 914, 922 (C.D. Ill. 2000) ("A likelihood of confusion exists as a matter of law if a licensee continues to use marks owned by the licensor after termination of the license.").
Because a presumption does not apply, GEI must make a showing of irreparable harm. For the purposes of the preliminary injunction, however, GEI relied heavily on a presumption of harm and did not otherwise offer significant evidence on the issue. Although ADI appears to have distributed a not inconsequential volume of GEI's gelato products with Aromitalia labels and packaging, it is not clear that GEI has ever attempted to establish its brand in the U.S. Indeed, the Agreement established ADI as the exclusive distributor in this market, and GEI permitted ADI to sell the gelato products under its own Aromi d'Italia brand name. Until recently, ADI appears to have been the only one of the two parties seeking to develop the US gelato industry. To the extent that GEI is now attempting to develop or capitalize on its Aromitalia brand name in the U.S., it certainly may argue that ADI's mark causes confusion. The court recognizes that confusion over the trade names could impact the reputation and image of each company. ADI has, however, reduced the likelihood of confusion in the wholesale market by distributing gelato mix under the brand name Berzaci instead of Aromi d'Italia. Furthermore, many customers in the wholesale market and at trade shows are relatively sophisticated business entities and any confusion may thus be easier to resolve. Moreover, until the merits of this case are decided, ADI could just as easily argue that it is suffering harm to its registered trademark from GEI's use of the Aromitalia name in the U.S. Finally, when considering harms, the court finds it relevant that GEI was warned by legal counsel in 1998 that problems could arise concerning the trademarks should its relationship with ADI sour. It would be somewhat troubling to grant extraordinary preliminary relief given GEI's voluntary assumption of this risk.
B. Harm to ADI
Even if ADI does not ultimately prevail in this dispute with GEI, it has demonstrated the significant harm it would suffer if a preliminary injunction were granted at this time. As the Fourth Circuit noted in a case where each side maintained that it "ha[d] superior rights" to the use of a trademark, "the parties' arguments on irreparable harm present two sides of the same coin." Microstrategy, 245 F.3d at 339. The court went on to state that the defendant, in fact, may suffer more from a grant of an injunction, because it had invested significant resources into marketing the trademark. Id. Similarly, here, ADI asserts that it has spent the past seven years attempting to develop the American gelato industry, both through the wholesale and retail markets. ADI suggests that if this court were to enjoin the continued use of the Aromi d'Italia brand and website (www.aromiditalia.com) in the wholesale market, the company could face financial difficulties or even closure. Therefore, to the extent that GEI can demonstrate hardship, ADI has made at least an equal showing.
C. Success on the Merits
As previously noted, "[w]hen, as here, the balance of hardship `does not tilt decidedly in plaintiff's favor' then a plaintiff must demonstrate a `strong showing of likelihood of success' or a `substantial likelihood of success' by `clear and convincing evidence' in order to obtain relief." Microstrategy, 245 F.3d at 340 (quoting Direx, 952 F.2d at 818). In order to prevail on a trademark infringement claim, a plaintiff "must demonstrate that it has a valid, protectible trademark and that the defendant's use of a colorable imitation of the trademark is likely to cause confusion among consumers." Lone Star, 43 F.3d at 930.
Here, even assuming the two trademarks in question are likely to cause confusion among consumers, the parties have failed to provide a sufficient factual record to determine which trademark assumes priority and how broad is its scope. In fact, GEI's legal counsel specifically warned in 1998 that ADI's and GEI's trademark applications may be denied by the USPTO, because of their similarity, or that the viability of the marks may turn on which was the first to be filed. Moreover, the Fourth Circuit has noted that "[t]o acquire ownership of a trademark it is not enough to have invented the mark first or even to have registered it first; the party claiming ownership must have been the first to actually use the mark in the sale of goods and services." Emergency One, Inc. v. American Fire Eagle Engine Co., Inc., 332 F.3d 264, 267 (4th Cir. 2003); see also 11 U.S.C. § 1115(b)(6) (prior use defense). It is not clear when and where ADI and GEI began using their respective trademarks, or whether GEI stated a preference that its gelato products be distributed in the U.S. with Aromitalia packaging. What is clear is that the court is not currently in a position to assess the strength of either ADI's or GEI's trademark. Noting that a registered trademark is presumed valid, see Emergency One, Inc., 332 F.3d at 268-69, the court finds that GEI has not made a strong showing of likelihood of success on the merits.
During the hearing, the parties made some representations concerning prior use of their respective trademarks based on assertions made in the trademark applications, but the record is not sufficiently developed to serve as a basis for determining the likelihood of success on the merits.
D. Public Interest
"Preventing infringement . . . serves the public interest in preventing consumer confusion." Merry Maids Ltd. P'ship v. Kamara, 33 F. Supp. 2d 443, 446 (D. Md. 1998). Where it is unclear, however, which party will prevail in a trademark dispute, a court is unable to weigh the public interest in favor of one side over the other. GEI owns the rights to the registered Aromitalia name, and plans to expand its operations within the U.S. ADI owns the rights to the registered Aromi d'Italia name, and has invested significant time and resources into developing the gelato industry in the U.S. for at least the past seven years. Therefore, the court finds that the public interest does not significantly alter its analysis.
CONCLUSION
In summary, the court finds that, at the least, the balance of hardship does not tilt in favor of GEI. Moreover, GEI has failed to demonstrate a strong likelihood of success on the merits. Noting that this ruling does not preclude GEI from ultimately prevailing in this dispute, the court will deny GEI's motion for a preliminary injunction.
A separate order follows.