City of New York v. Blue Rage, Inc.

James E. Johnson, Esq., Corporation Counsel of the City of New York

Gerald E. Singleton, Esq. and Brian T. Horan, Esq., Of Counsel

Attorneys for Plaintiff

Gerard F. Dunne, Esq.

Attorney for Defendants

MEMORANDUM & ORDER

JOAN M. AZRACK, UNITED STATES DISTRICT JUDGE.

Plaintiff the City of New York (“Plaintiff” or the “City”) commenced this action against defendants Blue Rage, Inc. d/b/a The Cop Shop (“Cop Shop”), Salvatore Piccolo (“Piccolo”), and Susan Piccolo (collectively “Defendants”) alleging, inter alia, violations of the Lanham Act, 15 U.S.C. §1051, et seq., and of state law. Currently before the Court is the City's motion for summary judgment, its second such motion in this matter. See Motion, ECF No. 80. For the reasons set forth below, the motion is granted.

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I. BACKGROUND

A. Prior Memorandum and Order

By Memorandum and Order dated January 27, 2020 (the "M&O"), District Judge Sandra J. Feuerstein^[1] resolved cross-motions for summary judgment in this case, granting partial summary judgment to Plaintiff and denying Defendants' motion. See City of New York v. Blue Rage, Inc., ("BlueRagel"), 435 F.Supp.3d 472 (E.D.N.Y.2020). Familiarity with the M&O and the factual history as set forth in that prior order is assumed and is repeated here to the extent necessary to provide context for the instant motion. The following facts are taken from the M&O.

The City holds various trademarks registered with the United States Patent and Trademark Office including the abbreviation "NYPD" (the "NYPD Mark"), a design consisting of the words "POLICE DEPARTMENT CITY OF NEW YORK around a shield design (the "NYPD Shield," below), the abbreviation "FDNY" (the "FDNY Mark"), and a distinctive shield with the words FIRE DEPARTMENT CITY OF NEW YORK, the colors red, white, and blue, and a stylized Maltese cross with flames inside over a representation of the New York City skyline (the "FDNY Shield," below):

(Image Omitted)

The City holds numerous federal trademark registrations for these marks in various classes of souvenir merchandise.^[2] The City operates an extensive merchandise licensing program

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administered by an exclusive agent selling officially licensed souvenir merchandise with the NYPD and FDNY trademarks to the general public. Through the City's trademark licensing program, merchandise is sold in the United States, Europe, Australia, China, and Japan, and generates annual retail sales of tens of millions of dollars, the vast majority attributable to the sale of officially licensed NYPD and FDNY souvenir merchandise.

Defendant Salvatore Piccolo owns, and is the Chief Executive Officer of, defendant Blue Rage, which does business as the Cop Shop, and his wife, Defendant Susan Piccolo, is a manager at the store. The Cop Shop operates a retail store open to the public located at 560 Broadway, Massapequa, New York, and in addition, Defendants operate a website. Defendants do not dispute that in addition to selling licensed merchandise, they make and sell unlicensed merchandise bearing the NYPD and FDNY trademarks.

The City commenced this suit asserting six (6) causes of action against Defendants: Count I for trademark infringement under Section 32 (1)(a) of the Lanham Act, 15 U.S.C. § 1114 (1)(a); Count II for false designation of origin and/or false description or representation in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); Count III for trademark dilution in violation of 15 U.S.C. § 1125(c); Count IV for common law unfair competition; Count V for trademark infringement in violation of New York General Business Law § 360-k; and Count VI for deceptive trade practices and false advertising under New York General Business Law §§ 349, 350, and 350-e. The City's first motion for summary judgment sought determination of the Lanham Act claims only.

As to the claims of trademark infringement and false designation of origin, the M&O analyzed those claims under a two-prong test to determine (1) whether the plaintiff's mark is entitled to protection and (2) whether use of the mark by the defendant is likely to cause consumer

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confusion regarding the origin or sponsorship of the defendant's goods. Blue Rage I, 435 F.Supp.3d at 485-86 (citing Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 102 (2d Cir. 2010)). While the registration of a mark entitles the owner to a presumption of validity, the presumption “may be overcome where a party has established trademark rights through prior use.” Blue Rage I, 435 F.Supp.3d at 486.

Defendants asserted, without contradiction from the City, that they had been “selling essentially the same products since 1995.” Id. at 487. Based on the “first use in commerce” dates designated by the City in the trademark registrations, the Court determined that the NYPD Mark, NYPD Shield, and FDNY Shield were all used on clothing prior to 1995 and thus the City was the senior user as to those marks on that category of merchandise. Id. The Court further noted that “[t]he City's priority of use of these marks on clothing, however, does not automatically create trademark rights for their use on other classes of merchandise.” Id.

As to the FDNY Mark on clothing and all the marks on the non-clothing categories of merchandise, the first “use in commerce” dates indicated on the registrations were all after 1995. Crediting Defendants' assertion regarding their sale of their products since 1995 and noting that this assertion “barely satisfies their burden of prior use for the purpose of this motion, ” id., the Court concluded that since “the City's entitlement to the statutory presumption as to any mark first used since 1995 is at issue, ” summary judgment as to those marks and classes of merchandise was precluded. Id.

In conclusion, the M&O, inter alia, granted the City's motion for summary judgment on the trademark infringement and false designation of origin claims “as to the NYPD Shield, NYPD Mark, and FDNY Shield as used on merchandise from Class 025/Clothing, ” denied the trademark infringement and false designation of origin claims as to all other merchandise categories, and

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denied the Lanham Act dilution claim.^[3] Id. at 494. Defendants failed to oppose the City's motion for summary judgment on Defendants' counterclaim for cancellation of the trademarks or their defenses. As a result, the counterclaim and defenses were deemed abandoned and dismissed. Id. at 493. A determination of damages was held in abeyance pending resolution of the remaining claims. Id. at 494.

B. Post-M&O Procedural Activity

Judge Feuerstein set a trial for March 9, 2020. By letter dated March 5, 2020, the City withdrew its Lanham Act claim for dilution (Count III) as well as its three causes of action under New York law (Counts IV, V, and VI). (See ECF No. 64.) All four counts were dismissed by electronic order dated March 25, 2021.

The City further indicated its belief that withdrawal of the dilution claim eliminated the need for a trial. (See ECF No. 64.) Defendants responded, noting that notwithstanding the withdrawal of four claims, factual issues remained regarding whether Defendants were using the marks on items other than clothing prior to the City's use of the marks on such items. (See ECF No. 69.)

At a conference held before Judge Feuerstein on March 9, 2020, Plaintiff requested permission to file a new motion limited to when the marks were first used, and further requested entry of an injunction barring Defendants from selling unlicensed goods during the pendency of the case. The Court set a briefing schedule on the motion and granted the injunction request. (See Minute Entry, ECF No. 71.) The injunction was entered by order dated March 12, 2020. (See Injunction, ECF No. 73.)

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C. The Current Motion

The City's motion seeks resolution of the issue of whether the presumption of validity of its marks may be overcome by a “prior use” defense. It argues, inter alia, that: (1) Defendants have offered no “hard evidence” to support the defense (Plaintiff's Memorandum of Law in Support (“Pl. Mem.”), at 1, ECF No. 83); (2) the City used the marks long before Defendants (id. at 12); and (3) Defendants cannot establish that they acquired trademark rights to the marks and have raised arguments and defenses legally inconsistent with a prior use defense. (Id. at 14-15.) In addition, the City contends that it had the “exclusive and superior right” to expand its use of the marks into “related classes of souvenir goods” (Id. at 2.) The City seeks an award of statutory damages in the total amount of $3, 500, 000.

Defendants raise the following issues in opposition: (1) the M&O did not specifically find that the Defendants used the marks “as trademarks, ” and the City admits they were not used as such by Defendants, thus precluding a finding of infringement (Memorandum in Opposition (“Defs' Opp.”), at 2, 5, ECF No. 87); (2) Defendants' use of the marks is “functional” (id. at 4-5; (3) Defendants' have a “fair use” defense under 15 U.S.C. § 1115(b)(4) (id. at 6-7); (4) Defendants are not counterfeiters because the City failed to establish that the marks were used “in a manner likely to deceive the public as to origin, ” and at a minimum, Plaintiff should have provided a survey (id. at 6-7). As to damages, Defendants contend that statutory damages are inappropriate in light of evidence provided by Defendants of business records and the declarations they submitted, (id. at 8-9), and there is no proof of willfulness on Defendants' part. (Id. at 9.)

II. LEGAL STANDARD

Summary judgment is warranted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled...