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finding that a complaint asserting defendant “ ‘willfully, intentionally, and knowingly used a designation confusingly similar’ to Plaintiff's mark” sufficiently alleged bad faith, as “any determinations regarding Defendant's potential bad faith, which would involve a factual inquiry, would ... be premature”
Summary of this case from Pulse Creations, Inc. v. Vesture Grp., Inc.Opinion
No. 04 Civ. 2536 (LTS)(MHD).
July 30, 2004
NIXON PEABODY LLP By: Marc L. Fried, Esq. Robert P. Sherman, Esq. Mark D. Robins, Esq. New York, New York, Attorneys for Plaintiff. Hearts On Fire Company, LLC.
PATTERSON, BELKNAP, WEBB TYLER LLP By: Jeffrey I.D. Lewis, Esq. New York, New York, Attorney for Defendant, L C International Corp.
MEMORANDUM OPINION AND ORDER
Plaintiff Hearts On Fire Company, LLC ("HOF") brings this action asserting causes of action for unfair competition and false designation of origin in violation of the Lanham Act, 15 U.S.C. § 1125(a), dilution under New York State General Business Law § 360-I, and unfair competition under common law against Defendant L C International Corp. ("L C International"). This matter comes before the Court on the motion of Defendant pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint for failure to state a claim upon which relief may be granted. The Court has jurisdiction of this case pursuant to 28 U.S.C.A. §§ 1331 and 1338(a) and (b). The state law claims are properly before the court under 28 U.S.C.A. § 1367(a). Venue is proper pursuant to 28 U.S.C.A. § 1391(b) and (c).
The Court has considered thoroughly all of the parties' submissions relating to the instant motion. For the foregoing reasons, Defendant L C International Corp.'s motion to dismiss is denied in its entirety.
BACKGROUND
The following relevant facts are alleged in the Plaintiff's Amended Complaint. Hearts On Fire Company, LLC is a Massachusetts company with its principal place of business in Boston, Massachusetts. (Amend. Compl. ¶ 1.) HOF provides jewelry and cut diamonds to authorized retailers. (Id.) The company is a major distributor of branded diamonds, which are diamonds containing source-designated trademarks, and sells high-quality stones to authorized retailers throughout the United States. (Id. ¶ 6.) HOF has been the exclusive user of the Hearts On Fire mark in its distribution, sale, and advertising since 1996. (Id. ¶ 10.) HOF alleges that beginning on January 1, 1997, it began using the marks "The World's Most Perfectly Cut DiamondTM" and "The Most Perfectly Cut Diamond in the WorldTM" exclusively and continuously in its distribution, sale, and advertising of cut diamonds. (Id. ¶ 12.) HOF asserts that the general public associates these marks with its goods and services. (Id. ¶ 13.)
L C International Corp. is a New York corporation with its principal place of business in New York, New York. (Id. ¶ 2.) L C International is a provider of loose diamonds, and promotes its diamond sales through its website, www.lcidiamonds.com. (Id. ¶¶ 14-15.) L C International specializes in the "Hearts and Arrow Ideal Cut" diamond, creating a pattern within the diamond that is similar to the specialized cut diamond of the Plaintiff. (Mem. of Law in Supp. of Defs.' Mot. to Dismiss at 4.)
In the Complaint, Plaintiff alleges that Defendant is infringing on the two subsidiary marks by promoting and distributing the phrase "the most perfectly fashioned diamond in the world." (Id. ¶¶ 16-18.) Plaintiff alleges that L C International's use of this phrase in connection with its location in its advertising demonstrates Defendant's intent to confuse customers. (Id. ¶¶ 16-17.) Plaintiff claims that the phrase "is likely to cause confusion, mistake, and deception among the general public" regarding the origin of the goods and affiliation with HOF cut diamonds. (Id. ¶ 18.) Plaintiff seeks injunctive relief pursuant to 15 U.S.C.A. § 1116, damages under § 1117(a), and destruction of articles infringing HOF's marks under § 1118. (Id. ¶¶ 24-26.)
DISCUSSION
Rule 12(b)(6) StandardA motion to dismiss a complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure requires the court to accept as true the material facts alleged in the complaint and draw all reasonable inferences in favor of the plaintiff. Courtenay Communications Corp. v. Hall, 334 F.3d 210, 213 (2d Cir. 2003) (internal citations omitted). A motion to dismiss should not be granted unless "it appears beyond doubt that the plaintiff[s] can prove no set of facts in support of [their] claim which would entitle [them] to relief."' Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Rule 8 of the Federal Rules of Civil Procedure requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(1). "Such a statement must simply 'give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.'"Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002) (citingConley v. Gibson, 355 U.S. at 47).
Lanham Act Claim
Plaintiff brings trademark claims under the Lanham Act for unfair competition and false designation of origin. Section 1125 of the Act prohibits infringement of unregistered trademarks. 15 U.S.C.A. § 1125(a) (2004). To prevail on a claim of trademark infringement under this section, a plaintiff must show that it owns a trademark that (1) is entitled to protection, and (2) the defendant's unauthorized use of similar marks in commerce is likely to cause confusion. See Virgin Enterprises LTD v. Nawab, 335 F.3d 141, 146 (2d Cir. 2003). The strength of the mark determines whether it is entitled to protection. The Second Circuit evaluates the strength of trademarks according to the test articulated in Abercrombie Fitch Co., Inc. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976). Marks are classified as (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, or (5) fanciful. Id. Generic marks are not entitled to protection; however, marks that are either inherently distinctive or have acquired distinctiveness through secondary meaning are protected. See Two Pesos, Inc. v. Taco Cabana, Inc., 112 S.Ct. 2753, 2757 (1992). To establish secondary meaning, "a manufacturer must show that, in the minds of the public, the primary significance of a product feature or term is to identify the source of the product rather than the product itself." Bristol-Myers Squibb Company v. McNeil-P.P.C., Inc., 973 F.2d 1033, 1041 (2d Cir. 1992) (citing Inwood Laboratories v. Ives Laboratories, 456 U.S. 844, 851 (1982)). Judge Friendly outlined factors in Polaroid Corp. v. Polarad Elecs. Corp. that have been consistently used within the Second Circuit to determine whether a likelihood of confusion exists. 287 F.2d 492, 495 (2d Cir. 1961). The non-exclusive factors are (1) the strength of the mark, (2) the degree of similarity between the two marks, (3) the proximity of the products, (4) the likelihood the prior owner will bridge the gap, (5) actual confusion, (6) the defendant's good faith in adopting the mark, (7) the quality of the defendant's product, and (8) the sophistication of the buyers. Id.; see also New York Stock Exchange, Inc. v. New York, New York Hotel, LLC, 293 F.3d 550, 557 (2d Cir. 2002).
Defendant argues that Plaintiff's phrases are generic and descriptive and thus, even if they have acquired secondary meaning, they are not entitled to protection under the Lanham Act. (Memo. of Law in Supp. of Defs.' Mot. to Dismiss at 6-14.) Defendant also asserts a fair use defense, claiming that the wording is laudatory and therefore not entitled to protection. Id. The classification of a mark, however, is based on how the purchasing public for the particular good perceives the mark. Courtenay Communications Corp. v. Hall, 334 F.3d at 215. This initial classification, which is a requisite determination for a trademark infringement claim, is a factual determination. Id. As the Second Circuit recently explained:
It is usually true that the classification of a mark is a factual question, and that the question turns on how the purchasing public views the mark. The pleadings and documents necessarily relied upon by plaintiff's complaint, which were all that the district court could rightfully consider in deciding the motion to dismiss for failure to state a claim, are insufficient for determining the critical fact of how the public views [a] mark.Id. (internal citations omitted). Defendant's classification argument is thus premature.
Plaintiff's Amended Complaint alleges that the marks are entitled to protection as they have become associated with HOF's diamond products. (Amend. Compl. ¶ 21.) Plaintiff further alleges that Defendant's use of a similar mark without permission is likely to cause confusion among the public. (Id. ¶¶ 22, 25.) Plaintiff has pleaded that its phrases have acquired distinctiveness through continuous and exclusive uses since 1997 and that Defendant's phrase is likely to cause confusion. (Id. ¶¶ 21-22, 25-26.) Plaintiff has therefore pleaded facts supporting all elements of the Lanham Act cause of action asserted in the Amended Complaint. Accordingly, it does not appear beyond doubt that Plaintiff can prove no set of facts to support his claim for relief. The motion to dismiss the Lanham Act claim is therefore denied. Dilution Under Common Law
The Defendant has not challenged the contributory infringement claim asserted by Plaintiff in Count One of the Complaint. As the Lanham Act elements are critical to a finding of contributory infringement, the contributory negligence claim is also not ripe for dismissal according to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
Plaintiff alleges that Defendant violated New York State General Business Law § 360-I. (Amend. Compl. ¶ 28.) To plead a successful cause of action under the New York dilution law, a plaintiff must prove (1) ownership of a mark that is distinctive or has acquired distinctiveness through secondary meaning, and (2) a likelihood of dilution through blurring or tarnishment. See New York Stock Exchange, Inc., 293 F.3d at 557-558. Six factors are often used to determine the likelihood of blurring: (1) similarity of the marks, (2) similarity of the products covered, (3) sophistication of the consumer, (4) predatory intent, (5) renown of the senior mark, (6) renown of the junior mark. See Katz v. Modiri, 283 F. Supp.2d 883, 901 (S.D.N.Y. 2003) (citing Deere Co. v. MTD Products, Inc., 41 F.3d 39, 43 (2d Cir. 1994)).
Blurring occurs when the defendant uses a mark that is the same or similar to the plaintiff's mark to identify its goods, causing a potential loss of distinctiveness of the plaintiff's mark to the plaintiff's product. See New York Stock Exchange, Inc. v. New York, New York Hotel, LLC, 293 F.3d 550, 558 (2d Cir. 2002).
Tarnishment occurs when the defendant uses the mark in a way that dilutes the quality or prestige associated with the plaintiff's mark because of confusion between the two marks.See New York Stock Exchange, Inc. v. New York, New York Hotel, LLC, 293 F.3d 550, 558 (2d Cir. 2002).
Defendant moves to dismiss the common law dilution claim, asserting that Plaintiff's marks are not strong or distinctive, as required by statute, and are instead generic and descriptive. (Mem. of Law in Supp. of Defs.' Mot. to Dismiss at 15-16.) Plaintiff's Amended Complaint, however, alleges that the marks have acquired distinctiveness due to the public's strong association of the mark with Plaintiff's product. (Amend. Compl. ¶ 21.) Furthermore, the Amended Complaint alleges that Plaintiff's reputation has suffered due to confusion between the two products. (Id. ¶¶ 24-25.) Defendant therefore has not established beyond doubt that Plaintiff can prove no set of facts to support its New York dilution claim for relief. Defendant's motion to dismiss the New York State General Business Law § 360-I claim is therefore denied.
Unfair Competition Under Common Law
Plaintiff alleges that Defendant committed unfair competition under common law. The elements of an unfair competition claim under New York law are the same as the Lanham Act elements listed above, with an added bad faith requirement. See Genesee Brewing Company, Inc. v. Stroh Brewing Company, Inc., 124 F.3d 137, 149-150 (2d. Cir. 1997). As previously explained, proof of a likelihood of confusion requires an analysis of the Polaroid factors, resolution of which would constitute premature fact finding inappropriate upon a motion to dismiss. See Courtenay Communications Corp., 334 F.3d at 213. Similarly, any determinations regarding Defendant's potential bad faith, which would involve a factual inquiry, would also be premature. See Castle Rock Entertainment v. Carol Publishing Group, Inc., 955 F. Supp. 260, 274 (S.D.N.Y. 1997). Plaintiff has made allegations sufficient to support a cause of action against Defendant for unfair competition. Additionally, the Amended Complaint asserts that Defendant has "willfully, intentionally, and knowingly used a designation confusingly similar" to Plaintiff's marks. (Amend. Compl. ¶ 37.) The Court therefore cannot conclude that there is no set of facts which would support the plaintiff's common law unfair competition claim for relief. Accordingly, Defendant's motion to dismiss the common law unfair competition claim is denied.
For the foregoing reasons, Defendant's motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is denied in its entirety.
SO ORDERED.