Opinion
11 cv. 9321 (BSJ)
10-17-2012
ROLEX WATCH U.S.A., INC., Plaintiff, v. ROLEX DELI CORP. and ALI MOHAMAD, Defendants.
Memorandum and Order
Plaintiff Rolex Watch U.S.A., Inc. ("Plaintiff" or "Rolex Watch"), brought this action against defendants Rolex Deli Corp. and Ali Mohamad (collectively "Defendants" or "Rolex Deli"), claiming trademark infringement, unfair competition, false designation, and false description under 15 U.S.C. §§ 1114 and 1125(a), as well as trademark dilution under 15 U.S.C. § 1125(c). Rolex Watch now moves for the entry of a default judgment and a permanent injunction barring Rolex Deli from further use of the registered trademark "ROLEX," and for an award of costs and attorneys' fees. For the reasons explained below, the motion is GRANTED in part and DENIED in part.
FACTS
Rolex Watch is the exclusive distributor and warrantor of ROLEX products in the United States. (Compl. ¶ 10.) Rolex Deli is a delicatessen located in Brooklyn, New York. (Id. at ¶ 7.) Rolex Watch owns the federally registered ROLEX trademark, which has become incontestable pursuant to 15 U.S.C. § 1065. (Id. at ¶ 16; Ex. 1.) At some time after the ROLEX mark became famous, Defendants began doing business under the name "Rolex Deli." (Id. at ¶ 21.) Beginning in 2010, Rolex Watch sent several cease-and-desist letters demanding that Rolex Deli stop using the ROLEX mark in connection with its business. (Id. at ¶ 23.) Rolex Deli never responded to these letters. (Id. at ¶ 24.)
On December 20, 2011, Rolex Watch filed this action. (Dkt. 1.) Defendants were served on January 4, 2012. (Dkt. 4.) Neither defendant filed a response and on February 28, 2012, the Clerk of the Court entered Certificates of Default against both Rolex Deli Corp. and Ali Mohamad. (Dkt. 6, 7.) On April 30, 2012, Plaintiff filed this Motion for a Default Judgment and notice of the motion was served on Defendants the same day. (Dkt. 8, 10.) On May 22, 2012, a notice of appearance by counsel was entered on behalf of Defendants. (Dkt. 11, 12.) Despite proper notice at each stage of this litigation, however, as of the date of this Order Defendants have failed to file any Answer or response to the instant motion.
DISCUSSION
"[A] party's default is deemed to constitute a concession of all well pleaded allegations of liability." Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Getty Images (US) Inc. v. Advernet, Inc., 797 F. Supp.2d 399, 411 (S.D.N.Y. 2011), recons. den. (Nov. 22, 2011). However, a district court need not concur that the alleged facts in the complaint constitute a valid cause of action and must evaluate whether the allegations in the complaint are sufficient to establish liability. Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981); Lenard v. Design Studio, No. 08-CV-10560, 2012 WL 3642402, at *5 (S.D.N.Y. Aug. 24, 2012). Put simply, a default by one party does not entitle the other to a judgment if the conceded allegations do not support a judgment on the merits. Cf. Getty Images, 797 F. Supp. at 411. Accordingly, the Court must determine whether the well pleaded allegations in the Complaint, admitted by Defendants on this motion, are sufficient to establish liability for the claimed causes of action.
I. Plaintiff's Claim for Trademark Infringement
In order to prevail on a claim for trademark infringement, Rolex Watch must show that (1) it owns a trademark entitled to protection and (2) Defendants' unauthorized commercial use of a similar mark is likely to cause confusion. See Virgin Enterprises LTD v. Nawab, 335 F.3d 141, 146 (2d Cir. 2003); Hearts on Fire Co., LLC. v. L C Int'l Corp., No. 04-CV-2536, 2004 WL 1724932, at *2 (S.D.N.Y. July 30, 2004). "The crucial issue in an action for trademark infringement is whether there is any likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question." Savin Corp. v. Savin Group, 391 F.3d 439, 456 (2d Cir. 2004) (citing Mushroom Makers, Inc. v. R.G. Barry Corp., 580 F.2d 44, 47 (2d Cir. 1978)) (alterations omitted).
To evaluate likelihood of confusion, courts in this Circuit look principally to the eight factors articulated in Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (1961), which are: (1) the strength of the senior mark; (2) the degree of similarity between the marks; (3) the proximity of the goods; (4) the likelihood that the senior user will enter the same market as the junior user (i.e. "bridge the gap"); (5) actual confusion generated by the junior mark; (6) whether the junior mark was adopted in good faith; (7) the quality of the defendant's product; and (8) consumer sophistication. Savin, 391 F.3d at 456.
The first two factors certainly support Rolex Watch's claims - the ROLEX mark is quite strong and Defendants' mark is identical. Plaintiff stumbles on the remaining elements, however. The products marketed by Rolex Watch - watches, clocks, and their components and cases - are a far cry from products sold in a delicatessen. It is also highly unlikely that Rolex Watch will bridge the gap and enter the food industry. Plaintiff has provided no evidence of actual confusion. Moreover, the Court cannot conclude that Defendants adopted their mark in bad faith. The Court is also confident that consumers will be sufficiently sophisticated to differentiate between the parties' goods despite the similarity of their marks.
In light of the disparate products offered by Rolex Watch and Rolex Deli, there is little to be gained by analyzing the quality of Defendants' goods.
Such evidence is "particularly relevant." Streetwise Maps, Inc. v. VanDam, Inc., 159 F.3d 739, 745 (2d Cir. 1998). "Without proof that Defendant's use of a mark has actually caused confusion, there is less chance that it likely will in the future." Giggle, Inc. v. netFocal, Inc., 856 F. Supp. 2d 625, 636 (S.D.N.Y. 2012).
Plaintiff's argument on this point is simply that "Defendants' bad faith . . . is evidenced by their choice to do business under the name ROLEX DELI." (Pl.'s Supp. Mem. at 7.) If this were true, bad faith could be shown even in cases of unintentional infringement.
In sum, there is simply no confusing correlation in this case. This is not surprising, as ownership of a mark "in one segment of commerce generally does not prevent others from using the same or a similar mark in a different, non-competing area" because "little confusion will result when the junior use is in an area of commerce that is outside the senior owner's area." TCPIP Holding Co., Inc. v. Haar Communications, Inc., 244 F.3d 88, 94-95 (2d Cir. 2001). The allegations in the Complaint establish only that Rolex Deli's mark is identical to Rolex Watch's famous mark. This is not enough. Based on the Polaroid factors and the sparse evidence in the record, the Court finds that Defendants' use creates no likelihood of confusion. Accordingly, Rolex Watch's claims for infringement, unfair competition, false designation, and false description under 15 U.S.C. §§ 1114 and 1125(a) must fail.
II. Plaintiff's Claim for Dilution
Famous, distinctive marks broadly recognized by the general public are afforded special protection under the Lanham Act. Cf. Gucci Am., Inc. v. Guess?, Inc., No. 09-CV-4373, 2012 WL 2304247, at *21 (S.D.N.Y. June 18, 2012). The owner of such a mark may seek "an injunction against another person who, at any time after the owner's mark has become famous, commences use of a mark or trade name in commerce that is likely to cause dilution . . . of the famous mark." 15 U.S.C. § 1125(c)(1). A claim of dilution may be for "blurring" or "tarnishment." Id.; see also New York Stock Exch., Inc. v. New York, New York Hotel LLC, 293 F.3d 550, 557-58 (2d Cir. 2002).
Although Rolex Watch alleges dilution by tarnishment (Compl. ¶ 33, 58.), it has offered no facts suggesting that Rolex Deli's use will bring the ROLEX mark into disrepute. As such, the Complaint fails to state a claim for tarnishment. See Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 588 F.3d 97, 111 (2d Cir. 2009) ("Dilution by tarnishment is an 'association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.'" (citing 15 U.S.C. § 1125(c)(2)(C)); Hormel Foods Corp. v. Jim Henson Productions, Inc., 73 F.3d 497, 507 (2d Cir. 1996) ("The sine qua non of tarnishment is a finding that plaintiff's mark will suffer negative associations through defendant's use."); Deere & Co. v. MTD Prods., Inc., 41 F.3d 39, 43 (2d Cir. 1994) ("'Tarnishment' generally arises when the plaintiff's trademark is linked to products of shoddy quality, or is portrayed in an unwholesome or unsavory context likely to evoke unflattering thoughts about the owner's product.").
Dilution by blurring occurs from an "association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark." 15 U.S.C. § 1125(c)(2)(B); see also Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 588 F.3d 97, 105 (2d Cir. 2009). Blurring can occur even in the "absence of actual or likely confusion, of competition, or of actual economic injury," 15 U.S.C. § 1125(c)(1), provided that the challenged use "rais[es] the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product." Deere & Co. v. MTD Products, Inc., 41 F.3d 39, 43 (2d Cir. 1994) (emphasis omitted); see also Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 219 (2d Cir. 1999), abrogated by Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003).
In order to prevail on a claim for dilution by blurring, a party must show that (1) the senior mark is famous; (2) the senior mark is distinctive; (3) the junior use is commercial; (4) the junior use began after the senior mark became famous; and (5) the junior is likely to cause dilution of the senior mark's distinctive quality. See Nabisco, 191 F.3d at 215; Gap, Inc. v. G.A.P. Adventures Inc., No. 07-CV-9614, 2011 WL 2946384, at *16 (S.D.N.Y. Jun. 24, 2011); Pan American World Airways, Inc. v. Flight 001, Inc., No. 06-CV-14442, 2007 WL 2040588, at *18 (S.D.N.Y. Jul. 13, 2007).
In Moseley, the Supreme Court held that the text of the Federal Trademark Dilution Act of 1995 ("FTDA") "unambiguously requires a showing of actual dilution, rather than a likelihood of dilution." 537 U.S. at 433. In 2006, however, Congress responded to this ruling by supplanting parts of the FTDA with the Trademark Dilution Revision Act of 2006 ("TDRA"). See Starbucks, 588 F.3d at 104; cf. Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 633 F.3d 1158, 1165 (9th Cir. 2011). Unlike its predecessor, the TDRA expressly provides for relief based on a likelihood of dilution. Compare FTDA, 15 U.S.C. § 1125(c)(1) (2005) ("The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use . . . causes dilution of the distinctive quality of the mark . . . ." (emphasis added)) with TDRA, 15 U.S.C. § 1125(c) (1) (2012) ("Subject to the principles of equity, the owner of a famous mark . . . shall be entitled to an injunction against another person who . . . commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark . . . ." (emphasis added)).
First, a mark is considered famous if it is "widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark's owner." 15 U.S.C. § 1125(c)(2)(A). Rolex Watch has pled sufficient facts to establish that its mark is famous. Second, a mark is inherently distinctive if "its intrinsic nature serves to identify a particular source." Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc., No. 11-3303-CV, 2012 WL 3832285, at *5 (2d Cir. Sept. 5, 2012) (internal quotes and alterations omitted). The ROLEX mark is a "coined fanciful term" without meaning outside of its use as a trademark and is therefore distinctive. (Mot. for. Default J., Ex. D ¶ 9.); cf. Rolex Watch U.S.A., Inc. v. Canner, 645 F. Supp. 484, 488 (S.D. Fla. 1986) ("Rolex is properly classified as an 'arbitrary' or 'fanciful' trademark . . . ."). Rolex Watch has thus pled sufficient facts to establish that its mark is inherently distinctive. Since there is no dispute that the junior use is commercial and began after the senior mark became famous, the crucial question is whether Rolex Deli's use of the ROLEX mark is likely to dilute the mark's distinctive quality.
Courts may consider all relevant factors when determining whether a mark is sufficiently recognizable, but the statute particularly mentions (1) the "duration, extent, and geographic reach of advertising and publicity" related to the mark; (2) the "amount, volume, and geographic extent of sales of goods or services" offered in conjunction with the mark; (3) actual recognition of the mark; and (4) whether the mark is registered. 15 U.S.C. § 1125(c)(2)(A)(i)-(iv). Each of these factors weighs in Rolex Watch's favor. Cf. Rolex Watch U.S.A., Inc., 101 U.S.P.Q.2d 1188, 2011 WL 6780738, at *4 (T.T.A.B. 2011) ("Taking into account the non-exhaustive factors enumerated [in the statute] as well as other considerations, we find that opposer has established that its trademark ROLEX is famous for dilution purposes.").
Prior to the passage of the TDRA, the Second Circuit had held that a famous mark must nevertheless be inherently distinctive to qualify for protection against dilution. See TCPIP Holding Co., Inc. v. Haar Communications, Inc., 244 F.3d 88, 98 (2d Cir. 2001); Savin, 391 F.3d at 449. The TDRA amended the statute to protect any "famous mark that is distinctive, inherently or through acquired distinctiveness." 15 U.S.C § 1125(c) (2012) (emphasis added). A mark that is not inherently distinctive may acquire distinctiveness if it has developed secondary meaning in the minds of the public. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 211 (2000). Because the Court concludes that the ROLEX mark is inherently distinctive, however, it need not address the issue of secondary meaning.
Simple or commonplace identifiers such as "[b]asic geometric shapes, basic letters, and single colors are not protectable as inherently distinctive." Louis Vuitton Malletier v. Dooney & Bourke, Inc., 454 F.3d 108, 116 (2d Cir. 2006). However, "words invented solely for their use as trademarks' are protectable as fanciful marks. Genesee Brewing Co., Inc. v. Stroh Brewing Co., 124 F.3d 137, 143 (2d Cir. 1997) (quoting Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 11 n.12 (2d Cir. 1976)). Fanciful marks are inherently distinctive. Paddington Corp. v. Attiki Importers & Distributors, Inc., 996 F.2d 577, 583 (2d Cir. 1993).
Given the facts of this case, the Court is satisfied that Rolex Watch has met its burden as to this factor. A claim of dilution "permits the owner of a qualified, famous mark to enjoin junior uses throughout commerce, regardless of the absence of competition or confusion." TCPIP Holding Co., Inc. v. Haar Communications, Inc., 244 F.3d 88, 95 (2d Cir. 2001); see also 15 U.S.C. § 1127. Courts must tread carefully, however, as overenforcement would grant owners of famous marks an unassailable right to exclude all uses of similar marks, regardless of differences in products or services. See Nabisco, 191 F.3d at 227 ("[T]he antidilution statutes do not 'prohibit all uses of a distinctive mark that the owner prefers not be made.'").
The Court considers all relevant factors when evaluating a claim for dilution by blurring. See 15 U.S.C. § 1125(c)(2)(B). Specifically, however, the statute lists six that include (1) the degree of similarity between the famous mark and the junior mark; (2) the inherent or acquired distinctiveness of the famous mark; (3) whether the owner of the famous mark is engaged in substantially exclusive use of the mark; (4) the degree of recognition of the famous mark; (5) the intent of the junior user to create an association with the famous mark; and (6) any actual association with the famous mark. See id. at § 1125(c)(2)(B)(i)-(vi); Starbucks, 588 F.3d at 105-06.
First, the marks in this case are identical. Moreover, as indicated above, the ROLEX mark is a fanciful term bereft of meaning outside its use as a trademark. It is therefore distinctive. Rolex Watch also enjoys substantially exclusive use of the mark in commerce and advertises extensively with the ROLEX mark, ensuring that its recognition as a source identifier. (Compl. ¶ 44, 14, 18-19; Mot. for. Default J., Ex. D ¶¶ 10-11.) Thus, Rolex Watch makes a strong showing under the first four factors.
With respect to intent of the junior user to create an association with the famous mark, the Complaint does not establish that Rolex Deli intended to create an association with the famous mark. Because the Court finds that Rolex Deli has satisfied the other factors, however, this does not render relief unavailable.
Finally, a likelihood of dilution is shown in this case by Rolex Deli's conspicuous use of an exact reproduction of the ROLEX mark. While Rolex Watch has offered no evidence that consumers have actually associated Rolex Deli with ROLEX, courts have viewed commercial use of an identical mark by a junior user as circumstantial evidence of dilution. See Moseley, 537 U.S. at 434 ("[D]irect evidence of dilution . . . will not be necessary if actual dilution can reliably be proved through circumstantial evidence - the obvious case is one where the junior and senior marks are identical."); Savin, 391 F.3d at 452.
The prominence and exact similarity of the mark in this case are especially persuasive because, in the context of dilution, the Court's focus is narrowed to perception of the mark vel non rather than consumer confusion, if any, related to that perception. This focus is derivative of the different theory underlying dilution claims that recognizes a limited right in the mark itself. See, e.g., Nabisco, 191 F.3d at 225 (discussing dilution in terms of a limited property right).
"It cannot be overstated, however, that for th[is] presumption of dilution to apply, the marks must be identical." Savin, 391 F.3d at 453 (emphasis added). Clearly any such presumption would be wholly inapplicable where the replication is not exact, for such a doctrine would improperly collapse the factors specified in the TDRA. See 15 U.S.C. § 1125(c)(2)(B)(i)-(vi).
Consequently, the Court finds that the conceded factual allegations in the Complaint are sufficient to establish Rolex Deli's liability under 15 U.S.C. § 1125(c), Rolex Watch is therefore entitled to a default judgment as to its claim for trademark dilution.
III. Injunctive Relief
Traditionally, in order to obtain a permanent injunction in a trademark action the moving party was required to establish (1) success on the merits; (2) that no adequate remedy at law existed; and (3) that irreparable harm would result if an injunction did not issue. See Roach v. Morse, 440 F.3d 53, 56 (2d Cir.2006); U.S. Polo Ass'n, Inc. v. PRL USA Holdings, Inc., 800 F. Supp. 2d 515, 539 (S.D.N.Y. 2011). In light of eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), however, courts now require an additional a showing that (4) the balance of hardships favors the movant and (5) the public interest would not be disserved by the injunction. See Coach, Inc. v. O'Brien, No. 10-CV-6071, 2012 WL 1255276, at *17 (S.D.N.Y. Apr. 13, 2012).
After the Supreme Court's decision in eBay, courts in this Circuit were split as to whether the new standard should be applied in trademark cases. See Gayle Martz, Inc. v. Sherpa Pet Group, LLC, 651 F. Supp.2d 72, 84 (S.D.N.Y. 2009) (recognizing a split among the district courts as to the applicability of the eBay standard); Microsoft Corp. v. AGA Solutions, Inc., 589 F. Supp.2d 195, 204 (E.D.N.Y. 2008) (applying eBay); Patsy's Italian Restaurant, Inc. v. Banas, 575 F.Supp.2d 427, 464 & n.25 (E.D.N.Y. 2008) (declining to apply eBay). Following the application of the eBay standard to copyright actions in Salinger v. Colting, 607 F.3d 68, 77 (2d Cir. 2010), however, its relevance in trademark cases appears to stand on firmer ground. See, e.g., Coach, 2012 WL 1255276, at *17 (applying eBay in a trademark action); N.Y.C. Triathlon, LLC v. N.Y.C. Triathlon Club, Inc., 704 F.Supp.2d 305, 328 (S.D.N.Y. 2010) (same); Pretty Girl, Inc. v. Pretty Girl Fashions, Inc., 778 F. Supp.2d 261, 265 (E.D.N.Y. 2011) (same); U.S. Polo Ass'n, 800 F.Supp.2d at 539 (same).
As explained above, Rolex Watch is entitled to a default judgment with respect to its claim for trademark dilution. Thus, Rolex Watch has demonstrated actual success on the merits of this claim. Additionally, Rolex Watch has no other adequate remedy at law to protect its mark and, in the absence of relief, dilution of the mark will continue. This is a cognizable irreparable injury. New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F. Supp.2d 305, 343 (S.D.N.Y. 2010) ("Irreparable harm 'exists in a trademark case when the party seeking the injunction shows that it will lose control over the reputation of its trademark pending trial,' because loss of control over one's reputation is neither 'calculable nor precisely compensable.'") (quoting Power Test Petroleum Distribs., Inc. v. Calcu Gas, Inc., 754 F.2d 91, 95 (2d Cir. 1985)).
Finally, the balance of hardships favors Rolex Watch because the unauthorized use continues to dilute the distinctiveness of its famous mark. Moreover, the public interest will best be served by an injunction ensuring compliance with the Lanham Act and protecting Rolex Watch's legal ownership of the ROLEX mark. For these reasons, the Court concludes that Rolex Watch is entitled to a permanent injunction enjoining Rolex Deli from further use of the ROLEX mark.
Due to Defendants' utter failure to participate in this action after receiving proper notice, the Court was not presented with any argument that an injunction would impose any significant hardship on Rolex Deli. In the absence of contrary evidence, the Court must conclude that the balance of hardships tips decidedly in favor of Rolex Watch.
IV. Costs and Attorney's Pees
Pursuant to 15 U.S.C. § 1117(a), the Court may award reasonable attorney fees to the prevailing party in exceptional cases. Additionally, section 1117(b) allows recovery of reasonable attorneys' for willful violations of the statute. Id. at § 1117(b)(1). Rolex Watch seeks recovery under both provisions. Awards of attorneys' fees for trademark violations under § 1117(a) and (b) "overlap significantly because the finding of willfulness determines the right to attorneys' fees." Sara Lee Corp. v. Bags of New York, Inc., 36 P. Supp. 2d 161, 170 (S.D.N.Y. 1999) (quoting Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995)) (internal citation omitted).
In this Circuit, an "exceptional case" under the Lanham Act typically requires a finding of fraud, bad faith, or willful infringement. See Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996); Gidatex, S.r.L. v. Campaniello Imports, Ltd., 82 F. Supp. 2d 136, 147 (S.D.N.Y. 2000). Since the Court finds none of these conditions in this case, it concludes that Rolex Watch is not entitled to costs and attorneys' fees under 15 U.S.C. § 1117(a) and (b).
"Even with a finding of bad faith, the decision to award attorney's fees remains within the sound discretion of the district court." Prot. One Alarm Monitoring, Inc. v. Exec. Prot. One Sec. Serv., LLC., 553 F. Supp. 2d 201, 208 (E.D.N.Y. 2008); see also Gidatex, 82 F. Supp.2d at 147. --------
CONCLUSION
For the foregoing reasons, Plaintiff's request for an entry of a default judgment is DENIED as to the claim for trademark infringement under to 15 U.S.C. §§ 1114 and 1125(a). Plaintiff's request for costs and attorneys' fees pursuant to 15 U.S.C. §§ 1117(a) and (b) is likewise DENIED.
Plaintiff's requests for an entry of a default judgment and for a permanent injunction are GRANTED as to the claim for trademark dilution under 15 U.S.C. § 1125(c). Accordingly, Defendants are hereby enjoined from further use of the ROLEX trademark in connection with their business.
SO ORDERED:
/s/ _________
BARBARA S. JONES
UNITED STATES DISTRICT JUDGE Dated: New York, New York
October 17, 2012