Opinion
02-CV-0450E(F).
October 7, 2004
MEMORANDUM and ORDER
This decision may be cited in whole or in any part.
Plaintiffs Daniel Mele d/b/a Blizzard Records and Blizzard Records, Inc. (collectively "Blizzard Records") filed this declaratory judgment action on June 21, 2002 against defendant Davidson Associates, Inc. On February 24, 2003 plaintiffs filed an Amended and Supplemental Complaint ("ASC") seeking injunctive relief and damages in addition to a declaration of the parties' rights. Five causes of action are alleged. The first three causes of action seek a declaration that plaintiffs' use of the BLIZZARD RECORDS designation (1) does not infringe defendant's trademarks pursuant to 15 U.S.C. §§ 1114(1) and 1125(a), (2) does not constitute unfair competition under state law and (3) does not dilute defendant's trademarks under state or federal anti-dilution statutes. The fourth cause of action seeks a declaration that defendant's use of the "marks BLIZZARD and BLIZZARD ENTERTAINMENT in any aspect of the music industry is in violation of Plaintiffs' rights under 15 U.S.C. § 1125(a)" and plaintiffs therefore ask the Court to enjoin defendant's use of the BLIZZARD and BLIZZARD ENTERTAINMENT marks in the music industry. (ASC ¶ 37.) The fifth cause of action seeks damages and attorneys' fees for false designation of origin and unfair competition under 15 U.S.C. §§ 1125(a) and 1117.
Defendant has filed two motions for partial summary judgment. In the first such motion, defendant seeks a declaratory judgment that it has an incontestable right to use its BLIZZARD ENTERTAINMENT trademark in connection with computer programs for video and computer games pursuant to 15 U.S.C. § 1065. The second such motion is aimed at a portion of plaintiffs' fourth cause of action and plaintiffs' fifth cause of action. In particular, defendant claims that (1) it acquired rights in its trademarks before plaintiffs acquired any trademark rights in BLIZZARD RECORDS, (2) plaintiffs did not own any enforceable rights in the BLIZZARD RECORDS designation before August 1999 and (3) if plaintiffs did acquire trademark rights to BLIZZARD RECORDS, they abandoned those rights between 1987 and 1995. Thus, defendant seeks summary judgment declaring that plaintiffs' mark is not entitled to protection. Additionally, defendant seeks summary judgment dismissing plaintiffs' damages and attorneys' fees claims because defendant contends that there is no evidence of actual confusion and no evidence of any willful infringement on defendant's part. For the reasons set forth below, defendant's first Motion for Partial Summary Judgment will be denied and defendant's Second Motion for Partial Summary Judgment will be denied in part and granted in part. Plaintiffs' Use of the BLIZZARD RECORDS Mark.
The facts in the light most favorable to the plaintiffs — the non-moving parties — are found as follows and are undisputed except where otherwise noted. Plaintiff Mele adopted the BLIZZARD RECORDS trademark in July 1986 for use in connection with the promotion of recording artists and the sale and distribution of pre-recorded music. He filed an assumed name certificate for "Blizzard Records Company" in Buffalo, N.Y. on July 14, 1986 and operated his business under the names "Blizzard Records" and "Blizzard Records, Inc." On July 13, 2000 plaintiff Mele filed an application for the BLIZZARD RECORDS trademark with the United States Patent and Trademark Office ("USPTO") for "computerized on-line retail store services featuring prerecorded compact discs and audio tapes featuring music; and promotion of recording artists via a global computer information network." The registration is still pending due to this action and to opposition pending at the Trademark Trial and Appeal Board. In November 2000 plaintiff Mele licensed the BLIZZARD RECORDS trademark and trade name to Blizzard Records, Inc.
Plaintiff did not register such with the United States Patent and Trademark Office.
In 1986 plaintiffs began promoting a heavy-metal rock band known as "Zillion," with Mark Fretz, Mike Terrana, Kenny Kanowski and Vincent Mele as members. During 1986 and 1987 Zillion toured and distributed musical recordings. No money was made from such touring or record distribution and plaintiff Mele used the money he made from his other businesses to pay Blizzard Records' expenses. Plaintiffs promoted and provided services to Zillion; they provided the band with a bus for touring, arranged rehearsals and recording sessions, covered expenses incurred on tours and for rehearsals and recording sessions, promoted the band through media channels, distributed cassette demos and other promotional items such as T-shirts, posters and stickers during live performances and, at other times, designed the promotional items, arranged for performances, coordinated with recording studios and arranged for media attention and press releases. However, plaintiff Mele admits to not having any physical evidence of promotional materials showing the use of the mark BLIZZARD RECORDS with Zillion during this period. Moreover, Blizzard Records is mentioned rarely, if at all, in the magazine features that promoted Zillion. Additionally, plaintiffs do not have documentation in any form relating to plaintiffs' costs during this time; plaintiffs claim all purchases of promotional items, wages to band members and touring costs (including cost of gas, fuel and truck) were paid in cash.
Zillion had existed for two to three years prior to Blizzard Records' involvement with the group.
Vincent Mele is plaintiff Mele's younger brother.
Plaintiff Mele used his "personal money" to finance the tour. Plaintiffs were not getting paid for Zillion's shows. Sometimes, however, Zillion band members would get paid for their performances by vendors or distributors.
For example, plaintiff Mele was interviewed for an article about Zillion in "Metal Mayhem" magazine and Blizzard Records is not mentioned anywhere therein.
Plaintiff Mele was the owner of Blizzard Records and Kenny Kanowski and Vincent Mele were full-time employees of Blizzard Records. However, plaintiffs did not report those wages to the IRS on the proper schedules.
Zillion recorded its first album, "Heart of a King," on or around September 7, 1986 under the direction of Blizzard Records and distributed under the BLIZZARD label. It is unclear whether the BLIZZARD mark was displayed on the demo cassettes of Zillion's music. Plaintiffs were not able to produce any finished copies or demos of the "Heart of a King" album bearing the BLIZZARD RECORDS mark. Additionally, plaintiffs do not have any records showing the dates and amount of Zillion's record sales. Plaintiffs claim this is because everything was done on a cash basis.
Plaintiffs negotiated a deal with a recording studio in Toronto, Canada for time to record Zillion's album. According to Vincent Mele, plaintiff Mele was "in charge of the band, the promoting, managing, everything. He was in charge of everything." (V. Mele Dep. at 16: 24-25 and 17: 1.) In plaintiff Mele's deposition, he said that he was the manager of Zillion and that Blizzard Records' role was in supplying the recordings and records in addition to any promotional advertising. He identified Blizzard Records' role as being Zillion's record company while he was in his individual capacity the manager of Zillion.
Zillion signed an agreement on May 15, 1985 with Axe Killer Records to record and distribute an album. There is some dispute or confusion as to whether it was Blizzard Records or Axe Killer Records who distributed Zillion's album. Plaintiffs claim Blizzard Records distributed the album. However, there are several documents in evidence — for example, magazines, the Chillin' Sun (formed by former members of Zillion) album synopsis and plaintiff Mele's May 6, 1986 Application for Publisher Affiliation — that state that Zillion was on Axe Killer Records.
According to plaintiff Mele, the demo tapes probably did not have the Blizzard Records mark on them but it would be "unusual" for a finished product not to display it. (Mele Dep. at 51: 12-20.)
Plaintiffs did produce copies of unpublished materials of Zillion recordings that displayed the BLIZZARD RECORDS mark. (See Banas Decl. Exhibits F and G.)
In 1987 two of the Zillion members left. The remaining two members — Kenny Kanowski and Vincent Mele — moved to California to continue to pursue their music careers under Blizzard Records' guidance. Zillion's last performance was in the mid-1980s. Until 1999 plaintiffs represented only two bands — Zillion and Chillin' Sun, formed in 1993 by Kanowski and Vincent Mele of Zillion. It is during this period — after Zillion's last performance in 1987 to 1995 when Chillin' Sun began to record its album — that is the factual focus of the dispute in this case.
From 1987 to 1993 Blizzard Records provided studio time for its artists for rehearsing and recording, paid the artists for writing music and attracted new artists to the band by giving the existing members of Zillion "phone numbers to call." (V. Mele Dep. at 59:10.) Zillion spent this time rehearsing and writing songs while Blizzard Records tried promoting itself in the music industry by "never passing up an opportunity to hand out a business card displaying the BLIZZARD mark." (Banas Decl. ¶ 23.) Plaintiffs claim that it was important for them to build the BLIZZARD RECORDS name as an independent record label. Yet, plaintiffs rarely, if ever, included the BLIZZARD RECORDS mark on their documents, letters, contracts or promotional materials.
Plaintiff Mele can remember only two drummers who worked on the Chillin' Sun project in addition to musicians Kenny Kanowski and Vincent Mele.
Blizzard Records was not a party to the management contract, songwriter's contract and recording agreement. Instead, plaintiff Mele's DM Productions was the party.
Plaintiffs produced only one promotional poster that had both Zillion's name and the BLIZZARD RECORDS mark on it.
In 1993 some of the members of Zillion formed a new band, "Chillin' Sun." As it had done with Zillion, plaintiff Mele and Blizzard Records supported and promoted Chillin' Sun by paying for rehearsal time and paying the two artists for writing songs. Blizzard Records arranged for Chillin' Sun to rehearse and record its music in California. Beginning in early 1995 plaintiffs arranged for an entertainment attorney to help secure a distribution agreement for Chillin' Sun's recording on the BLIZZARD label. In August 1995 plaintiffs secured Chillin' Sun's attendance at two live showcases, circulated invitations to the showcases, and obtained numerous demo tapes of Chillin' Sun's songs for distribution to members of the music industry and general public. Again, as with services provided to Zillion, plaintiffs do not have any records identifying the costs, dates and locations of the goods and services — in particular, the promotional and recording services and concert support — provided by plaintiffs to Chillin' Sun.
A showcase is where record companies, management companies and music promoters watch and listen to musicians.
While Blizzard Records was working with Chillin' Sun sometime around 1993 or 1994, two of Chillin' Suns' members, Kanowski and Vincent Mele, were approached by the band "Steel Heart" to perform one of the songs Kanowski and Vincent Mele had originally written for the Chillin' Sun album. Blizzard Records allegedly negotiated the terms of the arrangement between the Chillin' Sun members and Steel Heart on behalf of the Chillin' Sun artists and paid for rehearsal facilities for the recording. The Chillin' Sun song was released on Steel Heart's album entitled "Wait," which was not released under the Blizzard Records label and plaintiffs did not pay for the recording of the song. In fact, there were no references to Blizzard Records, Chillin' Sun or Danielle Mele on the Wait album.
According to plaintiff Mele, Kanowski and Vincent Mele "asked for [plaintiff Mele's] blessings on [the Steel Heart project] and [plaintiff Mele] gave it to them." (Mele Dep. at 106.)
Between 1988 and 1994 plaintiffs did not entertain the public through any acts; the only public exposure of BLIZZARD RECORDS was through the already-distributed Zillion albums and possibly some Chillin' Sun demos on compact discs ("CDs"), neither of which plaintiffs could produce. Until 1997 Chillin' Sun did not perform any live performances except two August 1995 showcases and Blizzard Records did not produce any T-shirts or posters and only produced one flyer advertising Chillin' Sun. When defendant's counsel asked plaintiff Mele how defendant was expected to know about Blizzard Records in 1994, plaintiff Mele did not have a coherent response. He first said that, if one wanted to find a company, one could. (Mele Dep. at 121.) He then said that Buffalo, N.Y. is "known for * * * [having] the world's biggest blizzard. * * * [Blizzard Entertainment] should have known to [go] down to the City Hall of Buffalo and check if anybody had the name Blizzard in Buffalo, New York." (Mele Dep. at 136-137. See generally Mele Dep. at 121-124, 137-139.)
The invoice from Mark's Custom Recording Service, Inc. for Chillin' Sun's demo cassettes and CDs is dated in 1995.
Between December 29, 1994 and 1997, Chillin' Sun worked with Blizzard Records and Mark's Custom Recording Service, Inc. to produce Chillin' Sun's first release on the BLIZZARD label. Mark's Custom Recording Service, Inc. produced 1098 Chillin' Sun CDs in July 1997, of which almost 800 were distributed for free to the public between 1997 and 1999. The CDs had the BLIZZARD RECORDS mark on them and also included a synopsis of Blizzard Records' role in the band's first album.
There is some confusion regarding when plaintiffs began working with Mark's Custom Recording Service, Inc. According to the statement of facts in the declaration of plaintiffs' attorney, Chillin' Sun worked with Mark's Custom Recording Service, Inc. in 1994. However, in the deposition of Mark Morette, the owner of Mark's Custom Recording Service, Inc. suggests that they started working together in July 28, 1993 inasmuch as that was the first document listed under "Chillin' Sun." He does not, however, know about the 1993 work because he was not the owner at that time. The invoices produced by plaintiffs dated back to October 16, 1996.
According to plaintiff Mele, only "a handful" of the Chillin' Sun CDs were sold. The rest were given away. (Mele Dep. at 191-193.)
Besides the handing out of several hundred CDs, plaintiffs did not perform any other activities until 1999 when they launched their website. The vast majority of the sales of the Chillin' Sun album occurred after 1999.
Starting in August 1999 and continuing through today, Blizzard Records promotes and sells music and musical recordings internationally through the internet using the domain name "blizzardrecords.com". Every CD that is sold on this website is produced by Blizzard Records and has the BLIZZARD RECORDS mark on it. Prior to the launch of their website, plaintiffs had only promoted Zillion and Chillin' Sun. Now, less than five years later, Blizzard Records promotes more than seven hundred artists worldwide.
Defendant's Use of the BLIZZARD and BLIZZARD ENTERTAINMENT Marks.
Defendant Davidson Associates, Inc., a video and computer game development company, first adopted the BLIZZARD trademark in May 5, 1994 upon filing an intent-touse application for the BLIZZARD ENTERTAINMENT mark with the USPTO. Defendant first used the mark in commerce as early as November 15, 1994 and has continuously and without interruption used the mark in connection with the goods identified in its registration. The mark was published for opposition on December 20, 1994 and was registered on the principal register on August 13, 1996 for use in connection with "computer programs for video and computer games and instruction manuals sold as a unit with the programs."
Defendant is owner of trademark registration 1,993,894 for BLIZZARD ENTERTAINMENT in International Class 28 for use in connection with "computer programs for video and computer games and instruction manuals sold as a unit with the programs."
On August 14, 2001 defendant filed a Section 15 affidavit with the USPTO stating that defendant's trademark has been used on a continual basis for five consecutive years after the date of registration. The USPTO acknowledged receipt of such affidavit.
Section 15 of the Trademark Act, 15 U.S.C. § 1065, provides a procedure by which the exclusive right to use a registered mark in commerce or in connection with the goods or services covered by the registration can become "incontestable:" the registrant must file a Section 15 affidavit stating that the mark has been in continuous use in commerce for a period of five years after the date of registration. 15 U.S.C. § 1065. Section 15 affidavits "set forth" the specified information; thus, no showing or proof beyond the registrant's sworn statement is required. Trademark Manual of Examining Procedure, § 1605.04 (3d ed. 2003). Section 15 of the Trademark Act has an exception to incontestability when "the use of a mark registered on the principal register infringes a valid right acquired under the law of any State or Territory by use of a mark or trade name continuing from a date prior to the date of registration[.]" 15 U.S.C. § 1065.
Prior to acquiring the BLIZZARD trademark, defendant had been called "Chaos Studios," but then discovered that another company was doing business as Chaos Technologies. Defendant had to find a new corporate name and, after a series of brainstorming sessions, settled on "Blizzard Entertainment" and asked its attorneys to conduct trademark searches. These searches did not identify any conflicting uses and defendant began using Blizzard Entertainment as its trade name.
Between 1994 and 1999 defendant produced, distributed and marketed a series of financially successful games under the BLIZZARD ENTERTAINMENT mark. In 1996 defendant, as Blizzard Entertainment, launched a website using the domain name "blizzard.com" to promote its products and services online. Defendant's games each consist of a collection of art, audio/music and computer code, for which defendant owns copyright registrations. Additionally, each computer program that operates a BLIZZARD ENTERTAINMENT game also incorporates an audio track, resulting in computer programs for games that contain both visual and audio components.
Defendant has marketed approximately thirteen different video and computer game titles under the BLIZZARD ENTERTAINMENT mark, including the popular Diablo, Starcraft and Warcraft series of games. In 1998 Blizzard Entertainment had gross sales of more than $80 million.
Defendant, in connection with its games, markets the soundtracks contained in its games through the sale of CDs containing music soundtracks. Defendant also sells games packaged with separate CDs containing the soundtrack from the games. Additionally, defendant provides links on its website to allow users to separately download music tracks featured in the games. Finally, defendant's games come with instructions on how to download the music from the CDs on which the games are stored onto separate music files, either on the user's hard drive, onto a recordable CD or an MP3 player or on other devices for playing music, which can then be listened to wholly apart from the game and from the computer itself. From the record before this Court, it is very difficult to ascertain when defendant first started using its trademark in separately marketing the music in its games because defendant did not introduce any evidence related to this issue. The best this Court can determine is that defendant started such use (hereafter "music-only CDs and downloads") sometime in 2000. On February 26, 2002, after learning about plaintiffs, defendant filed an intent-to-use application for the BLIZZARD ENTERTAINMENT mark with the USPTO for, inter alia, music. The application is pending the resolution of this action.
For example, through the Blizzard Entertainment Online Store, defendant sells a music CD entitled "Starcraft Game Music (Vol. 1)." The description for the music CD states: "Inspired by the best-selling game, this music CD has 2 tracks from the game and 11 original songs created by some of the top musicians in Korea. A must have for hardcore Starcraft players and music collectors alike."
For example, defendant's Warcraft III Collector's Edition includes, inter alia, the Warcraft III Soundtrack CD. Also, in 2000, defendant offered a pre-recorded music CD for its Diablo II game which was packaged with the game.
For example, in late 2003, defendant announced on its website that the "World of Warcraft music [is] available." The promotion reads: "Players interested in World of Warcraft, Blizzard's upcoming online role-playing game set in the Warcraft universe, can download two new songs to tide them over until the game's release. This morning, Blizzard made available arrangements from the regions of Elwynn and Duskwood on its World of Warcraft Web site. Each score is around 40 seconds in length and consists of instrumental, ambient music."
For example, the game manual included with the Warcraft games explains how to use the "Sound Editor" on the CD to import and export the music tracks contained on the CD.
Defendant's application was for the BLIZZARD ENTERTAINMENT mark to be used in connection with "[e]lectronic commerce services, namely, providing online retail, mail order services, featuring computer games, music, clothing, books, movies, DVDs, mouse pads, toys, games, videotapes, audiocassettes, compact discs, floppy discs and CD-ROMS[.]" (emphasis added).
Defendant first learned about plaintiffs in late November 2000 by happenstance. One of defendant's former employees received a promotional E-mail from one of plaintiffs' employees. On November 28, 2000 defendant's lawyers sent a letter to plaintiffs demanding that plaintiffs stop using the BLIZZARD mark or potentially be sued for infringement. The dispute escalated and, on June 21, 2002, plaintiffs brought this action. Before this Court, as mentioned earlier, are defendant's two motions for partial summary judgment.
Summary judgment may be granted if the evidence offered shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Rule 56(c) of the Federal Rules of Civil Procedure ("FRCvP"). There is no genuine issue for trial unless the evidence offered favoring the non-moving party is sufficient to sustain a jury's verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Thus, when reasonable minds could not differ as to the outcome of an issue, summary judgment is appropriate on that issue. Id. at 251-252. The moving party initially bears the burden to show that no genuine issue of material fact is present but then the opposing party "must set forth specific facts showing that there is a genuine issue for trial." Id. at 250 (quotations and citation omitted). If the non-moving party fails to establish, after a reasonable opportunity for discovery, the existence of an element essential to that party's claim and on which it will bear the burden of proof at trial, summary judgment is appropriate because such failure to establish an essential element of the case renders all other facts immaterial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-333 (1986).
When assessing the record in making a summary judgment determination, a court must view all ambiguities and factual inferences in the light most favorable to the non-moving party. Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). However, the nonmovant "cannot defeat the motion by relying on the mere allegations in his pleading, or on conclusory statements, or on mere assertions that affidavits supporting the motion are not credible." FRCvP 56(e); Gottlieb v. County of Orange, 84 F.3d 511, 518 (2d Cir. 1996).
DEFENDANT'S FIRST MOTION FOR PARTIAL SUMMARY JUDGMENT
Defendant's first Motion for Partial Summary Judgment seeks a declaratory judgment that defendant has an incontestable right to use its BLIZZARD ENTERTAINMENT trademark in connection with computer programs for video and computer games pursuant to 15 U.S.C. § 1065. As defendant admits, the scope of defendant's motion is limited — viz., "Defendant's Motion is not directed at music-only compact discs or MP3 downloads." (Def.'s Reply Pls.' Opp'n Mot. Partial Summ. J. at 2.) Plaintiffs, however, are not contesting defendant's trademark rights in connection with its computer programs. Instead, plaintiffs claim the music that can be separated or is separate from defendant's games is not covered by defendant's trademark in computer programs. Defendant does not address this issue in its Motion, and affirmatively states that this is not the issue being addressed.
Defendant admits that the "primary emphasis of plaintiffs' * * * [ASC] is the use of the BLIZZARD ENTERTAINMENT trademark in connection with compact discs containing only music. Davidson's motion for partial summary judgment is not directed at its music-only compact discs." (Def.'s Mem. Supp. Partial Summ. J. Regarding Inconstestability at 1.)
In their ASC, plaintiffs define the music industry as "the business of distributing prerecorded music, including compact discs and audio tapes, and promoting recording artists". (ASC ¶ 6.) Plaintiffs want to bar the extension of defendant's trademark rights in the computer game industry to the music industry and seek a declaratory judgment that defendant's use of the BLIZZARD and BLIZZARD ENTERTAINMENT marks in any aspect of the music industry violates plaintiffs' rights under 15 U.S.C. § 1125(a). In particular, plaintiffs claim that defendant is expanding into the music industry by (1) providing separate CDs containing music tracks featured in defendant's games, (2) allowing users through defendant's website to download music tracks from defendant's games and copy those music tracks onto the user's computer's hard drive, a recordable CD or an MP3 player and (3) allowing the music tracks to be downloaded from the game CD and then played separately or apart from the game. Defendant's Motion specifically does not address these claims and instead seeks a declaratory judgment on an issue that plaintiffs did not raise in their ASC and defendant did not allege in its Answer — to wit, the use of defendant's trademark in connection with computer programs for video and computer games.
Plaintiffs' ASC defines "computer game industry" as "the business of designing and publishing entertainment software. [This includes] * * * computer software, * * * books for computer games, including instruction manuals, action figures and premier clothing items, such as hats and t-shirts." (ASC ¶ 7.)
It is well-established that a party cannot move for summary judgment on an issue that was not raised in the pleadings. A defending party is permitted to move for summary judgment, but only as to all or part of a claim, counterclaim or cross-claim that is asserted or a declaratory judgment that is sought against that party. FRCvP 56(b). Matters not raised in the pleadings are irrelevant to the action. When a claim is not alleged in the complaint or amended complaint, or a counterclaim alleged in the answer, it is irrelevant and not the subject of a summary judgment motion. See McPhatter v. Cribb, 1998 WL 401656, at *3 (W.D.N.Y. July 1, 1998). See, e.g., Atlas Chem. Indus., Inc. v. Moraine Prod., 509 F.2d 1, 7 (6th Cir. 1974) (refusing to allow recovery on a summary judgment motion because defendant had not filed a counterclaim and thus had deprived plaintiff of notice as to the nature of the claim or the relief that might be due); Johns-Davila v. City of New York, 2000 WL 1725418, at *7 (S.D.N.Y. Nov. 20, 2000) (refusing to consider on a summary judgment motion plaintiff's claim that was not pled).
Defendant's Motion is directed at an issue that is not part of a claim or declaratory judgment that is sought against it. Rather, defendant is seeking affirmative relief in the form of a declaratory judgment, and must become a claimant and assert the proper pleading. Atlas Chem., at 7; FRCvP 13(b). In order for a court to declare the rights of a party seeking a declaratory judgment, the appropriate pleadings must be served and filed. 28 U.S.C. § 2201; FRCvP 57. Defendant did not fulfill its obligation and assert the proper pleading that seeks the affirmative relief sought in defendant's motion; thus, this Court must deny defendant's first Motion for Partial Summary Judgment.
DEFENDANT'S SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT: ENTITLEMENT TO PROTECTION
Defendant's first argument in support of its Second Motion for Partial Summary Judgment is aimed at a portion of plaintiffs' fourth cause of action — to wit, that defendant's use of the BLIZZARD and BLIZZARD ENTERTAINMENT marks in the music industry violates plaintiffs' rights and must therefore be enjoined. Defendant claims that its actions do not infringe on plaintiffs' rights because (1) defendant acquired rights in the BLIZZARD and BLIZZARD ENTERTAINMENT trademarks before plaintiffs acquired their trademark rights, (2) plaintiffs did not own enforceable rights in the BLIZZARD RECORDS designation until August 1999, which is five years after defendant had acquired its rights, and (3) even if plaintiffs did own enforceable rights in the designation, they abandoned those rights between 1987 and 1995. Defendant, very similarly to its first Motion for Summary Judgment, seems to ignore or avoid the focus of plaintiffs' ASC — namely, trademark rights in the music industry. Plaintiffs are not interested in contesting any of defendant's trademark rights in its games; they are only contesting defendant's music-only CDs and downloads. Although defendant does not make an argument regarding its rights in the music industry, this Court will give attention to when each party acquired rights to the BLIZZARD mark for music.
A claim of trademark infringement brought under 15 U.S.C. § 1125(a) is analyzed under a two-prong test: (1) whether plaintiffs' mark is entitled to protection and (2) whether defendant's use of the mark is likely to cause consumer confusion. Virgin Enters. Ltd. v. Nawab, 335 F.3d 141, 146 (2d Cir. 2003). Defendant is only challenging the first prong of the trademark infringement test. To prove entitlement to protection, plaintiffs must show prior use and ownership. Ibid. To show prior use, plaintiffs must demonstrate (1) that they acquired trademark rights prior to the date of defendant's trademark registrations, (2) that plaintiffs' use of the BLIZZARD RECORDS designation has continued since a date prior to defendant's registrations and (3) that plaintiffs' prior use is on products with respect to which infringement has been shown. Cullman Ventures, Inc. v. Columbian Art Works, Inc., 717 F. Supp. 96, 113 (S.D.N.Y. 1989). Defendant claims plaintiffs cannot show they are entitled to protection because defendant registered its trademark before plaintiffs had acquired any rights in BLIZZARD RECORDS. Thus, defendant's Motion is aimed only at the first prong of the prior use test and, as such, the Court will only address the issue of whether plaintiffs acquired trademark rights before defendant acquired trademark rights for use in connection with music.
To determine when plaintiffs acquired rights in the BLIZZARD RECORDS designation, this Court first addresses defendant's third argument that plaintiffs abandoned whatever rights they may have had and then addresses defendant's first claim as to who first acquired rights to use the mark in the music industry — specifically whether defendant's trademark rights in its games extends to the music industry. For the reasons explained below, it is found that (1) plaintiffs abandoned their trademark rights between 1987 and 1995 due to lack of commercial use and then reacquired those rights as early as August 1995, (2) defendant acquired rights in the BLIZZARD and BLIZZARD ENTERTAINMENT marks in 1994 but only for its games and (3) defendant's trademark rights in its games do not extend to trademark rights for music-only CDs and downloads. Therefore, this portion of defendant's Second Motion for Partial Summary Judgment will be denied. Abandonment.
Defendant claims that plaintiffs abandoned any trademark rights they may have had by making no trademark use between 1988 and at least 1995. Plaintiffs contend that they did make use of the trademark during that period. First, plaintiffs argue Blizzard Records continued from 1988 to 1993 to assist the Zillion artists with their performance and recording efforts by helping find new artists to round out the Zillion band and by compensating the artists for songwriting for their new album. Second, in 1993 Blizzard Records rented a studio in which the artists recorded songs for a new album for the newly-renamed band, Chillin' Sun. The recorded songs helped to create a demo on which both Chillin' Sun and the BLIZZARD mark were displayed. Furthermore, Blizzard Records continued to try to secure showcases for its artists, handed out business cards throughout the country and negotiated contracts for its artists relative to the 1993 or 1994 Steel Heart project. In August 1995 Chillin' Sun performed at two live showcases and may have distributed some demos. Finally, in 1997 the demos were distributed directly to the music industry and people at large by Blizzard Records and members of the band.
By ending the abandonment period in 1995, defendant is tacitly admitting that plaintiffs reacquired their rights in 1995.
Defendant claims and plaintiffs admit, however, that from Zillion's last performance in 1987 to the Steel Heart project and the formation of Chillin' Sun both in 1993 or 1994, the BLIZZARD RECORDS mark was not publicized and no products were being associated with the mark. During this period plaintiffs can, based on the facts, only claim that (1) they gave money to Kanowski and Vincent Mele, for which they have no documentation prior to September 1995, (2) they attempted to hand out business cards and (3) old Zillion albums may or may not have been going around, although none of those potential albums were recently made, distributed or sold and plaintiffs were unable to produce evidence showing that the BLIZZARD RECORDS mark was on any of the distributed albums. Based on the facts viewed in the light most favorable to plaintiffs, plaintiffs did abandon whatever rights they may have had in the BLIZZARD RECORDS mark because they (1) did not make commercial use of the trademark for almost eight years and (2) did not show an intent to resume use within the reasonably foreseeable future.
Plaintiffs were not mentioned on the Steel Heart album, which helps defendant's claim that plaintiffs' mark was not used in commerce between 1988 and 1995.
Chillin' Sun's album was not released until 1997 and they performed in only two showcases, both in August 1995, which is at the close of the relevant time period.
The Lanham Act defines a mark as "abandoned" when its use has been discontinued with intent not to resume such use, which may be inferred from circumstances, and three consecutive years of nonuse shall be prima facie evidence of abandonment. 15 U.S.C. § 1127 (2004). Thus, there are two elements for abandonment: (1) non-use of the trademark by the legal owner and (2) no intent by that person or entity to resume use in the reasonably foreseeable future. Stetson v. Howard D. Wolf Assoc., 955 F.2d 847, 850 (2d Cir. 1992) ; Saratoga Vichy Spring Co., Inc. v. Lehman, 625 F.2d 1037, 1043 (2d Cir. 1980).
The burden of proving abandonment is on the party asserting it. Emmpresa Cubana Del Tabaco v. Culbro Corp. Gen. Cigar Co., Inc., 213 F. Supp. 2d 247, 268 (S.D.N.Y. 2002). Non-use for three consecutive years, however, constitutes prima facie evidence of abandonment, creating a rebuttable presumption of intent not to resume use, which must be refuted with "`more than conclusory testimony or affidavits.'" Id. at 271, quoting Imperial Tobacco, Ltd. v. Philip Morris, Inc., 899 F.2d 1575, 1581 (Fed. Cir. 1990), and also citing Cerveceria Centroamericana, S.A. v. Cerveceria India, Inc., 892 F.2d 1021, 1027 (Fed. Cir. 1989) (holding "vague" testimony regarding intent to resume given "little or no weight") and Rivard v. Linville, 133 F.3d 1446, 1449 (Fed. Cir. 1998) (finding evidence must be more than a mere denial of an intent to abandon). See also 15 U.S.C. § 1127. Once the presumption is established, the party opposing abandonment has the burden of producing "objective, hard evidence of actual `concrete plans'" to intend to resume use within the reasonably foreseeable future. Emmpresa Cubana Del Tabaco, 213 F. Supp. 2d at 268, quoting Silverman v. CBS Inc., 870 F.2d 40, 46 (2d Cir. 1989) (explaining that a mark is abandoned once use has been discontinued with an intent not to resume use within the reasonably foreseeable future). See also Rivard, at 1449 (finding that "[t]o prove excusable nonuse, the registrant must produce evidence showing that, under his particular circumstances, his activities are those that a reasonable businessman, who had a bona fide intent to use the mark in United States commerce, would have undertaken.").
The Lanham Act defines "use" as "the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark." 15 U.S.C. § 1127. Furthermore, the Act deems a mark to be used in commerce when:
(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce [.] Id.
The Second Circuit has held that the motive for cessation of use is irrelevant in determining non-use. Silverman, at 47. Additionally, use does not include the promotional use of the mark on goods in a different course of trade nor mere token use. Emergency One, Inc. v. Am. FireEagle, Ltd., 228 F.3d 531, 536 (4th Cir. 2000). See also, Silverman, at 47-48 (holding sporadic licensing of mark for non-commercial purposes was not a use under the Lanham Act). Furthermore, advertising alone is not sufficient to constitute use unless it reaches a substantial portion of the public. Lucent Info. Mgmt., Inc. v. Lucent Tech., Inc., 986 F. Supp. 253, 259 (D. Del. 1997), aff'd, 186 F.3d 311 (3d Cir. 1999). Here, plaintiffs' alleged distribution of business cards and potentially self-distributed albums over the course of eight years is weak advertising and no more than a token use.
The Second Circuit has held that a court must look to the trademark holder's occupation or business to determine what constitutes use of the mark. Stetson, at 851. Therein, the parties were seeking rights to the DIAMONDS trademark for a singing group. The group's manager held the trademark, and the Second Circuit found that it was the manager's actions that needed to contribute to the group's publicity in order for the manager to overcome non-use because the mark of a music group receives its public recognition through the visibility of the performers. For the manager's action to increase the popularity of the group and expand its public exposure, the manager should arrange tours, organize record production, negotiate contracts, find television and radio spots and perform other managerial activities; the manager should aim to help the public identify the group name with its members. See, e.g., Baker v. Parris, 777 F. Supp. 299, 303 (S.D.N.Y. 1991) (finding the plaintiff did not use the mark for purposes of the Lanham Act because he stopped recording for a couple of years and then associated himself with other names and organizations); Kingsmen v. K-Tel Int'l, Ltd., 557 F. Supp 178, 183 (S.D.N.Y. 1983) (holding plaintiffs used their name because they continuously promoted their previously recorded albums and received royalties).
From 1987 to 1995 plaintiffs did not use the BLIZZARD RECORDS mark in the ordinary course of trade. Their mark was not placed on their goods because they did not have any goods to sell or transport. See 15 U.S.C. § 1127. The only time anyone in the public saw their mark was on their business cards, which were not affixed to their records or on any documents associated with their records or the sale of their records. See Id. Plaintiffs did exactly what results in an abandonment of a mark in the music industry — to wit, neither Zillion nor Chillin' Sun toured, made or released records, nor received royalties from 1987 to 1995; Blizzard Records did not place its name or the name of its bands in any forum available to the public, resulting in no public exposure or visibility of the band or of Blizzard Records. The public no longer — if it ever had — identified Zillion with Blizzard Records. In fact, most of the public who had heard of Zillion associate it with Axe Killer Records. Therefore, defendant has established prima facie evidence of abandonment and shifted the burden to the plaintiffs to show they had an intent to resume use in the reasonably foreseeable future.
Plaintiffs claim Chillin' Sun began working on their album in 1993; however, the album was released in 1997 and the first time someone other than the band and plaintiffs heard their music was in August 1995.
Plaintiffs claim they did have an intent to resume use as evidenced by their continued financial support of their artists and their alleged attempts at promotion. However, plaintiffs have offered no evidence supporting their claim that they made efforts to promote their artists during that time except for conclusory affidavits and depositions; plaintiffs have not produced evidence of promotional materials with the BLIZZARD RECORDS mark on them and handing out business cards at random and finding only two names of potential new band members is not sufficient evidence of an intent to resume commercial use. The owner of a trademark cannot defeat an abandonment claim by simply asserting a vague, subjective intent to resume use of the mark at some unspecified future date. Silverman, at 46-47. Requiring the owner to have an intent to use the mark in the reasonably foreseeable future ensures that valuable trademarks are in fact used in commerce as the Lanham Act intends, rather than simply hoarded or warehoused without concrete intent to use it in the future. Silverman, at 46; Emergency One, at 537. The Silverman court explained: "This standard is sufficient to protect against the forfeiture of marks by proprietors who are temporarily unable to continue using them, while it also prevents warehousing of marks, which impedes commerce and competition."
Minor activities do not show an intent to resume use of the mark in the reasonably foreseeable future. Emmpresa Cubana Del Tabaco, at 270; Silverman, at 47. A minor activity is one that "does not sufficiently rekindle the public's identification of the mark with the proprietor, which is the essential condition for trademark protection, nor [does it] establish an intent to resume commercial use." Silverman, at 47-48. Plaintiffs' actions from 1987 to 1995 are minor activities; nothing plaintiffs did could be seen as rekindling the public's identification of the BLIZZARD RECORDS mark. Hoping that Zillion's records — the few that are out in the marketplace and which are so difficult to obtain that plaintiffs and the band members do not seem to have a copy — are being transferred among friends is not evidence of an intent to resume commercial use. Plaintiffs have simply not offered anything but conclusory affidavits and depositions that they used and intended to resume use of the BLIZZARD RECORDS trademark between 1987 and 1995. Therefore, plaintiffs abandoned their trademark rights.
A determination that a mark has been abandoned defeats the alleged owner's claim of priority because the abandoned mark reverts back to the public domain and may be appropriated by anyone who adopts the mark for his, her or its own use. Emmpresa Cubana Del Tabaco, at 267-268. Thus, the only way an abandoned trademark right can be regained is through later use. Id. In August 1995 plaintiffs secured Chillin' Sun's attendance at two live showcases. This was the first time either Chillin' Sun or BLIZZARD RECORDS was displayed to people other than the band and plaintiffs. Therefore, the earliest time plaintiffs began using their mark in commerce after they abandoned it was in August 1995. Defendant had already began using its mark in November 1994 and had already filed an application with the USPTO. Therefore, plaintiffs did abandon and did not reacquire their rights before defendant had acquired its rights in the BLIZZARD and BLIZZARD ENTERTAINMENT marks for use in connection with its games.
Although the general public is not invited to showcases, setting the reacquisition date for August 1995 as opposed to later in 1997 does not alter the analysis. Additionally, defendant agrees the abandonment period ended in 1995.
Trademark Rights for Use in Connection with Music.
Defendant admits that plaintiffs began owning trademark rights in 1999 in connection with their music distribution website, which still continues today. Additionally, defendant admits that they did not start distributing music-only CDs and downloads until 2000. Defendant's 1994 registered trademark in BLIZZARD and BLIZZARD ENTERTAINMENT is for use in connection with "computer programs for video and computer games and instruction manuals sold as a unit with the programs." This trademark registration does not list "music" or "soundtracks" or anything of a kindred nature. Instead, in February 2002 defendant filed an application that is still pending with the USPTO to allow its mark to be used in connection with, inter alia, "music." Therefore, the issue before this Court is whether defendant's trademark rights gained in 1994 apply to its music-only CDs and downloads or whether defendant gained trademark rights to distribute music in 2000 or 2002, which is after plaintiffs had re-acquired their trademark rights. For the foregoing reasons, this Court holds that defendant has trademark rights only in its video and computer games and that such do not extend to its music-only CDs and downloads. Therefore, defendant is not entitled to a declaratory judgment that defendant, by distributing music-only CDs, is not infringing on plaintiffs' trademark rights in the music industry. This Court holds that defendant registered its trademark for use in connection with music after plaintiffs had re-acquired their trademark rights in the music industry; therefore, defendant's first claim in its Second Motion for Partial Summary Judgment will be denied.
This Court will use the 1999 date as the date plaintiffs started owning trademark rights in BLIZZARD RECORDS after abandonment because defendant does not contest that date and admits that records became "widely distributed" on August 1999. (Def.'s Second Mot. Partial Summ. J. at 20, 22.) Given the facts before this Court, plaintiffs probably started using their trademarks sometime between August 1995 and 1997. However, for the purpose of this Motion, the 1999 date will yield the same result as the 1995 date.
Defendant, as part of its attempt to avoid the issue of trademarks in the music industry, did not introduce into evidence when they began distributing music-only CDs and downloads. They simply agreed with plaintiffs' research that such use by defendant started in "at least 2000." (Def.'s Reply Pls.' Opp'n Second Mot. Partial Summ. J. at 7.)
It is well established that trademark rights are based on use in the marketplace, not on registration. Berni v. Int'l Gourmet Rest. of Am., Inc., 838 F.2d 642, 646 (2d Cir. 1988); Huber Baking Co. v. Stroehmann Bros. Co., 252 F.2d 945, 955 (2d Cir. 1958) (holding that trademark rights are acquired by use or appropriation and that registration alone of the trademark does not increase the scope of such substantive rights); Jaffe v. Simon Schuster, Inc., 1987 WL 124312, at *1049 (S.D.N.Y. Jan. 16, 1987) (finding "[o]wnership of a mark is not determined by the race to the Patent Office, but by the race to the market"). Therefore plaintiffs, through the August 1995 Chillin' Sun performances at two showcases, the July 1997 release of Chillin' Sun's first album on the BLIZZARD RECORDS mark and the August 1999 launch of their website with the domain name "blizzardrecords.com", did use their BLIZZARD RECORDS mark by 1999 at the latest, and thus acquired trademark rights in BLIZZARD RECORDS.
The Court deems it unnecessary to develop this holding further because defendant is not contesting the August 1999 date of reacquisition of plaintiffs' trademark rights. Additionally, this Court cannot determine whether defendant acquired trademark rights in music in 2000 or before through use in commerce because defendant did not introduce such evidence and did not argue that it acquired rights to use its trademark in the music industry.
It is also well established that a registered trademark extends only so far as the goods or services noted in the registration certification. Avon Shoe Co. v. David Crystal, Inc., 279 F.2d 607, 613 n. 7 (2d Cir. 1960). The Lanham Act states:
Any registration * * * of a mark registered on the principal register provided by this Act and owned by a party to an action shall be admissible in evidence and shall be prima facie evidence of the validity of the registered mark and of the registration of the mark, of the registrant's ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the registration[.]15 U.S.C. § 1115(a) (emphasis added). Exclusive ownership rights to a trademark do not automatically entitle the owner to protection against all use of the mark on other products. Edison Bros. Stores, Inc. v. Cosmair, Inc., 651 F. Supp. 1547, 1553 (S.D.N.Y. 1987). See, e.g., Trustees of Columbia Univ. v. Columbia/HCA Healthcare Corp., 964 F. Supp 733, 742 (S.D.N.Y. 1997) (holding that, although the plaintiff has obtained federal service mark protection for the name COLUMBIA UNIVERSITY for educational services, the plaintiff does not own any federal trademark registrations for the mark in connection with medical or healthcare services). In Edison Brothers, the plaintiff was the owner of the trademark NOTORIOUS for use on women's clothing and shoes and sued to enjoin defendant from using the mark NOTORIOUS for perfume products. 651 F. Supp. at 1549. The court held that, while plaintiff was the senior user of the mark NOTORIOUS and owned valid trademark rights for women's clothing and shoes, those rights are not infringed by the use of NOTORIOUS on perfume, cosmetics or skin care products. Id. at 1553-1563. Similarly here. While defendant does have a valid trademark in BLIZZARD and BLIZZARD ENTERTAINMENT for use in connection with its games, those rights do not extend to all products using the name. In particular, defendant is not entitled to protection of its trademark against plaintiffs' use of the same mark on music because plaintiffs were the first users of the mark in connection with music.
Defendant is seeking summary judgment on plaintiffs' trademark infringement claims, arguing that plaintiffs' mark is not entitled to protection. However, defendant admits plaintiffs are entitled to protection, if not for defendant's trademark rights, after August 1999. Defendant argues that, because it acquired trademark rights in 1994 and plaintiffs acquired rights in 1999, plaintiffs cannot show they acquired trademark rights prior to the date of defendant's trademark registrations and thus plaintiffs are not entitled to trademark protection and defendant is entitled to summary judgment on plaintiffs' infringement claim. However, defendant's 1994 trademark rights do not extend to its use of the mark in distributing music-only CDs and downloads; defendant's trademark registration is only for use in connection with its games, not for its music-only CDs and downloads. Thus, plaintiffs did acquire trademark rights in the music industry before defendant did and defendant's first claim in its Second Motion for Partial Summary Judgment will be denied.
DEFENDANT'S SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT: DAMAGES AND ATTORNEYS' FEES
Defendant claims there is no evidence of actual confusion and no evidence of defendant willfully infringing plaintiffs rights; thus, defendant is seeking summary judgment on plaintiffs' fifth cause of action alleging that plaintiffs are entitled to recover damages and reasonable attorneys' fees. Under section 35 of the Lanham Act, a plaintiff can recover the defendant's profits and plaintiff's own damages, but such recovery is not automatic. The Lanham Act states:
When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, or a violation under section 1125(a) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. * * * The court in exceptional cases may award reasonable attorney fees to the prevailing party.15 U.S.C. § 1117(a). The Second Circuit has held that an award of damages must be supported by either actual confusion or deception and that an accounting for profits is warranted where the defendant is unjustly enriched, where the plaintiff sustained damages as a result of the infringement or to deter willful infringement. George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537-1540 (2d Cir. 1992). In this case there is no evidence of actual confusion; defendant has not been unjustly enriched and plaintiffs have not sustained damages as a result of any infringement. If anything, plaintiffs have benefitted from defendant's use of the similar trademark. Thus, the issue is whether plaintiffs can show that defendant willfully infringed plaintiffs' trademark rights.
Courts have insisted on a relatively egregious display of bad faith for a finding of willfulness — to wit, an "aura of indifference to plaintiff's rights" or a "deliberate and unnecessar[y] duplicating [of] plaintiff's mark * * * in a way that was calculated to appropriate or otherwise benefit from the good will plaintiff had nurtured." W.E. Bassett Co. v. Revlon, Inc. 435 F.2d 656, 662 (2d Cir. 1970). See also Stuart v. Collins, 489 F. Supp. 827, 831 (S.D.N.Y. 1980) (holding only infringing "done knowingly and with callous disregard of the rights of a mark holder" is willful infringement). Again, this clearly is not the case here. Defendant generates millions of dollars a year in profits and is nationally recognized among computer and video game consumers. Plaintiffs' business is very small in comparison. Thus, defendant is not benefitting from any alleged goodwill plaintiffs have generated. Additionally, it is undisputed that, when defendant first started using the BLIZZARD mark, it did not know about Blizzard Records.
Plaintiffs claim that defendant possessed an "aura of indifference" to plaintiffs' rights by threatening legal action and applying for a trademark registration in music. Defendant's threat of legal action in no way indicates an indifference to plaintiffs' rights, but rather, an interest in protecting its own rights. See, e.g., SecuraComm Consulting Inc. v. Securacom Inc., 166 F.3d 182, 187 (3d Cir. 1999) (finding defendant's refusal to stop using its mark upon learning of plaintiff is not bad faith because defendant had reason to believe it had the right to use the mark). Similarly, defendant's filing of an application with the USPTO is not a disregard of plaintiffs' rights but more an attempt to protect its own rights. Thus, plaintiffs cannot make a valid claim for damages.
Finally, to recover attorneys' fees, plaintiffs must show that this is an "exceptional case" under 15 U.S.C. § 1117(a), which requires evidence of fraud or bad faith. Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996). Again, there is no evidence of fraud or of any bad faith on defendant's part. Defendant did not know of Blizzard Records when it began using its trademark in commerce and has only acted to protect its own interests. Therefore, defendant's Second Motion for Partial Summary Judgment on plaintiffs' request for damages and attorneys' fees will be granted.
Accordingly, it is hereby ORDERED that defendant's first Motion for Partial Summary Judgment Regarding Incontestability is denied, that defendant's Second Motion for Partial for Summary Judgment is denied in part and granted in part, to wit — that plaintiffs' trademark infringement claim is not dismissed and that plaintiffs' request for damages and attorneys' fees is dismissed.