Denimafia Inc. v. New Balance Athletic Shoe, Inc.

DENIMAFIA INC., Plaintiff, v. NEW BALANCE ATHLETIC SHOE, INC., FOOT LOCKER, INC.,THE SPORTS AUTHORITY, INC. and FAMOUS HORSE, INC. d/b/a V.I.M., Defendants.

NEW BALANCE ATHLETIC SHOE, INC., Counterclaim-Plaintiff, v. DENIMAFIA INC., Counterclaim-Defendant.

12 Civ. 4112 (AJP)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Dated: March 3, 2014

OPINION & ORDER

ANDREW J. PECK, United States Magistrate Judge:

Denimafia brings this action against New Balance and retailers Foot Locker, Sports Authority and Famous Horse (collectively, "New Balance") seeking damages for trademark infringement (Count I), trademark counterfeiting (Count II) and federal unfair competition (Count III) under the Lanham Act, 15 U.S.C. §§ 1114(a), 1125(a), as well as common law unfair competition and misappropriation of intellectual property rights (Count IV), common law trademark infringement (Count V) and deceptive trade practices (Count VI) under New York law. (Dkt. No. 33: Am. Compl. ¶¶ 40-75.) New Balance counterclaimed for cancellation of Denimafia's trademarkregistration alleging fraud (Counterclaim I) and nonuse (Counterclaim II) under the Lanham Act, 15 U.S.C. §§ 1064, 1068, 1119. (Dkt. No. 37: Ans. & Counterclaims ¶¶ 54-77.)¹'

The parties have cross-moved for summary judgment. (Dkt. No. 87: New Balance Notice of Motion; Dkt. No. 91: Denimafia Notice of Motion.) The parties have consented to my decision of this case pursuant to 28 U.S.C. § 636(c). (Dkt. No. 28: Consent to Magistrate Judge Jurisdiction.) For the reasons set forth below, New Balance's motion is GRANTED.²

FACTS

The Parties

Denimafia

Denimafia is a New York-based company founded in 2001 by Christine Rucci, a thirty-year veteran of the fashion industry with an expertise in denim. (Dkt. No. 89: Defs. Rule 56.1Stmt. ¶¶ 1-3;³ Dkt. No. 106: Rucci Aff. ¶¶ 1-4.) In 2003, Denimafia began its "5EP" denim and clothing line with the goal of reaching eleven million dollars in annual sales by 2010. (Defs. Rule 56.1 Stmt. ¶¶ 2-3; Rucci Aff. ¶ 5.) Rucci's February 12, 2003 applications for federal registrations for the "5EP" word mark and the "<=>" design mark were granted on June 1, 2004. (Defs. Rule 56.1 Stmt. ¶ 4; Rucci Aff. ¶ 14; Dkt. No. 90: Edelman Aff. Ex. 7: USPTO Status Report for Reg. No. 2,849,712; Edelman Aff. Ex. 8: USPTO Status Report for Reg. No. 2,849,714.) In 2006, along with other joint venturers, Denimafia formed 5EP Studio Inc., the entity through which Denimafia's 5EP clothing line would be sold, and Rucci transferred the 5EP and <=> marks to 5EP Studio. (Defs. Rule 56.1 Stmt. ¶¶ 6-7; Edelman Aff. Ex. 9: 1/1/06 Letter Agmt.; Edelman Aff. Ex. 12: 10/30/06 Trademark Assignment.)

From 2004 through 2007, Rucci operated Denimafia and 5EP Studio out of her home and/or another company's office. (Defs. Rule 56.1 Stmt. ¶¶ 5, 8; Denimafia Rule 56.1 Counter-Stmt. ¶ 8; Rucci Aff. ¶¶ 2, 36.) In 2007, Rucci and the other 5EP Studio investors disagreed about advertising and promotional spending and Rucci's employment contract was not renewed. (Defs. Rule 56.1 Stmt. & Denimafia Counter-Stmt. ¶ 9; Rucci Aff. ¶¶ 40-42.) After 2008, neither Denimafia nor 5EP Studio manufactured any new products bearing the <=> mark. (Defs. Rule 56.1 Stmt. ¶ 10.)⁴ As of August 3, 2010, the remaining 5EP Studio inventory "consisted of fragmentedsizes (not enough quantity in each size), making it impossible to sell to retailers." (Denimafia Rule 56.1 Counter-Stmt. ¶ 13; Rucci Aff. ¶ 48; Dkt. No. 109: Benjamin Aff. Ex. 37: 8/3/10 Rucci Email.)

The 5EP Studio joint venture formally dissolved in December 2010. (Defs. Rule 56.1 Stmt. & Denimafia Counter-Stmt. ¶ 11; Rucci Aff. ¶ 49; Benjamin Aff. Ex. 36: 7/12/10 Dissolution Notice.) Under the dissolution agreement, 5EP Studio granted Denimafia a perpetual license "to manufacture, use and distribute any products in the field of high quality jeans, outerwear, knits, pants and shirts under 5EP's trademark, namely '5EP' and all its derivatives." (Edelman Aff. Ex. 10: Joint Venture Termination Agmt. § 5; see Defs. Rule 56.1 Stmt. & Denimafia Counter-Stmt. ¶ 15; Rucci Aff. ¶ 50.) 5EP Studio assigned the 5EP and <=> marks to Parotex, Inc., a company owned by one of the other 5EP Studio joint venturers. (Defs. Rule 56.1 Stmt. & Denimafia Counter-Stmt. ¶ 14; Edelman Aff. Ex. 17: 1/12/11 Assignment of Assets.)

New Balance

New Balance was founded in 1906 and is one of the world's largest manufacturers and distributers of athletic footwear and athletic apparel. (Dkt. No. 89: Defs. Rule 56.1 Stmt. ¶¶ 87-88.) In 2009, New Balance began work on a performance shoe designed "to provide a closer-to-barefoot experience than that delivered by ordinary athletic shoes" and "to encourage a more natural foot position and foot-strike, while also reducing the weight of the shoe." (Defs. Rule 56.1 Stmt. ¶¶ 89-91.) In 2010, New Balance labeled the performance footwear its "Minimus" collection, named for the minimalist shoe design. (Defs. Rule 56.1 Stmt. ¶ 90.) The Minimus collection is New Balance's most technical product line. (Defs. Rule 56.1 Stmt. ¶¶ 91-92, 108; Dkt. No. 108:Denimafia Rule 56.1 Counter-Stmt. ¶¶ 92, 108; Dkt. No. 109: Benjamin Aff. Ex. 3: Kligerman Dep. at 19-26.)⁵

The <=> Mark

The Trademark Registration

On January 7, 2011, the original registrations for the 5EP and <=> marks were cancelled for failure to file a statement of continuing use.⁶ Parotex applied for new trademark registrations in February 2011, which were granted on August 30, 2011.⁷ In May 2012, Parotex assigned the 5EP and <=> marks to Denimafia in exchange for $5,001.⁸ Denimafia owns the current trademark registration for the <=> design mark, Registration Number 4,019,180. (Defs. Rule 56.1 Stmt. ¶ 19; Edelman Aff. Ex. 18: USPTO Status Report for Reg. No. 4,019,180.)

The <=> mark registration describes the design as follows: "The mark consists of two horizontal parallel lines in the middle space between a right pointing arrowhead with curved sidesand a left pointing arrow head with curved sides." (Benjamin Aff. Ex. 44: Reg. No. 4,019,180; see Defs. Rule 56.1 Stmt. ¶ 20; Edelman Aff. Ex. 18: USPTO Status Report for Reg. No. 4,019,180.)

The <=> mark was registered for: "Clothing, namely, t-shirts, jeans, jackets, sports jackets, parkas, ponchos, shirts, pants, underwear, skirts, dresses, shorts, trousers, socks, shoes, footwear, hosiery, scarves and hats." (Benjamin Aff. Ex. 44: Reg. No. 4,019,180; Edelman Aff. Ex. 18: USPTO Status Report for Reg. No. 4,019,180; Defs. Rule 56.1 Stmt. ¶ 21.) The list of goods in the registration was based solely on the information in the first, cancelled <=> trademark registration.⁹ The <=> mark was never used on many of the goods listed in the registration including, inter alia, socks, shoes and footwear.¹⁰ On November 15, 2013, Denimafia filed a request to amend Registration Number 4,019,180 "by deleting the following: 'parkas, ponchos, underwear, shorts, socks, shoes, footwear, hosiery, scarves and hats.'"¹¹

Strength of the <=> Mark

Denimafia sells its clothing under the brand name 5EP, based on the phrase "'5 easy pieces,'" which represents "an underlying concept that informs the 5EP collection, namely, the ideathat everyone needs 5 really good pieces in their wardrobe."¹² Denimafia's 5EP brand uses the <=> design, which reflects the brand's "'less is more' approach and design aesthetic."¹³

The "'less is more'" concept is used widely with consumer products and the concept "is ubiquitous in fashion, and design more generally."¹⁴ Both the <=> design and the "'less is more'" phrase also are used by third parties.¹⁵ The regular use of the <=> symbol without explanation as to its meaning "suggest[s] consumers understand [its] meaning as 'less is more'; otherwise [its] usewould be nonsensical." (Defs. Rule 56.1 Stmt. ¶ 40; see Edelman Aff. Ex. 31: Handley Aff. Ex. 1: Handley Report ¶¶ 36-38; Edelman Aff. Ex. 33: Third-Party Website Screen Shots.)

Denimafia's Use of the <=> Mark

The style of Denimafia's mark reflects the vintage themes that influenced the brand's products each season.¹⁶ Denimafia's design uses a bold typeface with curved arms in the greater-than and less-than symbols, giving the mark "an antique feel" that "makes the symbols appear to be a stamp." (Defs. Rule 56.1 Stmt. ¶¶ 42-43.)

On its website, promotional materials, invoices and business plans, Denimafia always uses the mark in conjunction with the Denimafia and/or 5EP brand names, which are displayed in larger font than the <=> mark.¹⁷ On the products themselves, however, Denimafia uses the <=> mark both alone and in conjunction with the brand names. (Defs. Rule 56.1 Stmt. & Denimafia Counter-Stmt. ¶ 44; Rucci Aff. ¶ 12.) On the labels sewn into the products, the <=> mark always is used in conjunction with the Denimafia and/or 5EP brand names, which are displayed in larger font than the <=> mark. (Defs. Rule 56.1 Stmt. ¶ 44; Am. Compl. Ex. 3: Denimafia Product Photos.)¹⁸ On hangtags pinned to the products, the mark always is used in conjunction with the 5EPbrand name, which appears on the top of the tag in a comparatively much smaller font. (Defs. Rule 56.1 Stmt. ¶ 44; Am. Compl. Ex. 3: Denimafia Product Photos.) The mark sometimes is used alone on t-shirt designs, on the buttons on some pants and jackets, and in the stitching on the back pockets of jeans. (Rucci Aff. ¶ 12; Am. Compl. Ex. 3: Denimafia Product Photos; Am. Compl. Exs. 4 & 5: Denimafia Product Display Photos.) In its product displays, Denimafia uses the mark alone on its clothing hangers and in conjunction with the brand names on its signage. (Defs. Rule 56.1 Stmt. & Denimafia Counter-Stmt. ¶ 44; Rucci Aff. ¶ 12; Am. Compl. Ex. 3: Denimafia Product Photos; Am. Compl. Exs. 4 & 5: Denimafia Product Display Photos.)

New Balance's Use of the <=> Design

In March 2010, New Balance commissioned advertising agency StrawberryFrog to assist with the launch of the Minimus collection. (Dkt. No. 89: Defs. Rule 56.1 Stmt. ¶ 99.) StrawberryFrog...