IP Law Daily, TRADEMARK—N.D.N.Y.: Spaghetti chain’s trademark infringement lawsuit against New York restaurant survives motion to dismiss, (Oct 11, 2023)

By Patricia K. Ruiz, J.D.

The defendant’s use of THE SPAGHETTI FACTORY allegedly infringes on the chain’s registered trademark for THE OLD SPAGHETTI FACTORY®.

The U.S. District Court for the Northern District of New York granted in part and denied in part a motion to dismiss claims of false designation of origin, false descriptions, unfair competition, and trademark dilution under federal and New York State law. The court denied the motion as to the trademark owner’s false designation of origin, false descriptions, and trademark dilution claims but dismissed the trademark owner’s federal unfair competition claim as duplicative of its federal trademark infringement claim (OSF International, Inc. v. Spellicy, October 10, 2023, D'Agostino, M.).

Allegations. OSF International, Inc., states in its amended complaint that it has exclusive trademark rights to the mark and name THE OLD SPAGHETTI FACTORY® for use in connection with restaurant services and related goods and services. It owns U.S. Trademark Registration No. 942108 for use of the mark for restaurant services, which registration was issued August 29, 1972. OSF first opened a restaurant in Oregon and has a history of expansion throughout the western U.S. and across the country, currently operating more than 40 restaurants in 13 states.

OSF alleged JACS Grateful Pasta, LLC, adopted the mark and name THE SPAGHETTI FACTORY for use in connection with its own restaurant in interstate commerce in the U.S. and that JACS began using THE SPAGHETTI FACTORY as a trademark for its restaurant in Verona Beach, New York in 2019. OSF further alleged Estimated Profits, LLC, owns the real estate and restaurant building. OSF filed suit against JACS and Estimated Profits, setting forth eight causes of action: (1) trademark infringement in violation of 15 U.S.C. §1114(1)(a); (2) false designation of origin, false descriptions, and unfair competition under §1125(a); (3) trademark dilution under §1125(c); (4) cyberpiracy under §1125(d); (5) “unfair competition”; (6) deceiving or misleading the public in violation of N.Y. Gen. Bus. L. §133; (7) false advertising under New York law under N.Y. Gen. Bus. L. §§349 and 350; and (8) violation of NY Gen. Bus. L. §360-1. OSF sought an injunction against the defendants from using THE SPAGHETTI FACTORY or any similar term that is likely to violate its common law rights or statutory rights, as well as monetary damages. JACS and Estimated Profits sought dismissal of the second, third, fifth, seventh, and eight causes of action.

False designation of origin, false descriptions, and unfair competition. JACS and Estimated Profits argued the second cause of action is wholly duplicative of OSF’s trademark infringement claim. However, the court found OSF adequately alleged claims under both theories, as it plausibly demonstrated that it has a valid mark entitled to protection and that JACS’ and Estimated Profits’ use of the mark is likely to cause confusion. The court further found that OSF plausibly alleged facts that JACS’ and Estimated Profits’ business advertisements, while not literally false, have the likelihood to mislead or confuse consumers into believing that the New York restaurant has some connection with OSF’s nationwide chain of restaurants. However, to the extent the amended complaint asserts a standalone cause of action for unfair competition under the Lanham Act, such a claim must be dismissed as duplicative of the federal trademark infringement claim, the court held, granting in part and denying in part the motion to dismiss the second cause of action.

Trademark dilution. JACS and Estimated Profits argued that OSF’s trademark dilution claim fails because the trademark is neither famous nor distinctive, arguing that, of the 40 restaurants, the 27 are located on the west coast, with the remaining 13 spread across 10 states, which only have one or two locations each. The closest restaurant to New York is on the far southwestern border of Ohio, about 600 miles away form the New York restaurant. The court found that the amended complaint plausibly alleges the mark is famous and predates the defendants’ commercial use, which allegedly risks diluting the Mark’s quality and distinction in connection with SOF’s goods and services. Whether the mark is sufficiently famous for purposes of protection under §1125(c) and whether JACS and Estimated Profits are in fact diluting and/or diminishing the quality of the mark are issues that require a more fully developed record to resolve, the court found, denying the motion to dismiss.

Unfair competition. Despite JACS’ and Estimated Profits’ arguments that the amended complaint contains no citation for the unfair competition claim, the court, drawing inferences most favorable to OSF as the non-moving party, construed the amended complaint as attempting to allege unfair competition under New York common law. However, the court found OSF failed to adequately allege the state’s required bad faith element and granted the motion to dismiss.

N.Y. Gen. Bus. Law §§349 and 350. To state a claim under N.Y. Gen. Bus. Law §§349 or 350, a plaintiff must allege that a defendant engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice. The court found OSF failed to state a cause of action under the statutes, as it was unpersuaded by OSF’s argument that the state’s public health and safety interest in regulating and controlling alcoholic beverages warrants relief in the context of the alleged confusion caused by JACS and Estimated Profits. The allegations in the amended complaint are too attenuated relative to any public health and welfare interests, as there are no allegations that consumers have been physically or otherwise harmed by JACS’ and Estimated Profits’ sale of liquor, the court found, granting the motion to dismiss.

N.Y. Gen. Bus. Law §360-1. Section 360-1 provides a cause of action for trademark dilution as to the source of goods and services; unlike federal law, the state statute protects “extremely strong marks,” which may not necessarily be considered “famous,” as required by the federal statute. The court found the amended complaint sufficiently alleges a plausible trademark dilution claim under New York law and denied the motion to dismiss.

The Case is No. 6:23-cv-00013-MAD-TWD.

Attorneys: Lee Palmateer (Lee Palmateer Law Office, LLC) for OSF International, Inc. James P. Youngs (Hancock Estabrook, LLP) for Jason Spellicy.

Companies: OSF International, Inc.

Cases: Trademark NewYorkNews