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Archived updates for Monday, March 03, 2008

Second Circuit Requires Use of Famous Marks for Dilution Claim under NY Common Law

In ITC Ltd v. Punchgini (February 26, 2008), the U.S. Court of Appeals for the Second Circuit held that New York common law did not permit the owner of a federal mark or trade dress to assert property rights therein by virtue of the owner’s prior use of the mark or dress in a foreign country:

In [an earlier] decision, this court affirmed the grant of summary judgment on ITC’s trademark infringement claims under section 32(1)(a) of the Lanham Act and New York common law, concluding that ITC had abandoned its Bukhara mark for restaurant services in the United States. See ITC Ltd. v. Punchgini, Inc., 482 F.3d at 142. We further affirmed summary judgment on ITC’s federal unfair competition claim because it depended on the “famous marks” doctrine, which Congress has not yet incorporated into federal trademark law. See id. at 172.

. . . To explain our [latest] decision, we first summarize the Court of Appeals’ answers to our certified questions. The Court of Appeals responded to our first question in the affirmative, see ITC Ltd. v. Punchgini, Inc., 2007 N.Y. Slip Op. 09813 at *13-14, but, in doing so, specifically stated that it did not recognize the famous marks doctrine as an independent theory of liability under state law. Rather, the court explained that its affirmative response was intended only to reaffirm established state law prohibiting unfair competition, specifically, the principle that “when a business, through renown in New York, possesses goodwill constituting property or commercial advantage in this state, that goodwill is protected from misappropriation under New York unfair competition law. This is so whether the business is domestic or foreign.” Id. at *13-14.

. . . Although the court cautioned that the relevant inquiry would necessarily vary with the facts of each case, it identified the following factors as potentially relevant: (1) evidence that “the defendant intentionally associated goods with those of the foreign plaintiff in the minds of the public, such as public statements or advertising stating or implying a connection with the foreign plaintiff”; (2) “direct evidence, such as consumer surveys, indicating that consumers of defendant’s goods or services believe them to be associated with the plaintiff”; and (3) “evidence of actual overlap between customers of the New York defendant and the foreign plaintiff.” Id. at *15.

The Court of Appeals concluded its response to our certified inquiry by observing

to prevail against defendants on an unfair competition theory, under New
York law, ITC would have to show first, as an independent prerequisite, that defendants appropriated (i.e., deliberately copied), ITC’s Bukhara mark or dress for their New York restaurants. If they make that showing, [ITC] would then have to establish that the relevant consumer market for New York’s Bukhara restaurant primarily associates the Bukhara mark or dress with those Bukhara restaurants owned and operated by ITC.

Id. at *15-16. In short, to pursue an unfair competition claim, ITC must adduce proof of both deliberate copying and “secondary meaning.” See ITC Ltd. v. Punchgini, Inc., 482 F.3d at 167 (observing that “‘[s]econdary meaning’ is a term of art referencing a trademark’s ability to ‘identify the source of the product rather than the product itself’” (quoting Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 766 n.4 (1992)).

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