IP Law Daily, TRADEMARK—S.D.N.Y.: Dueling summary judgment motions denied in trademark infringement case because triable issues remained on mark strength, (Sep 14, 2022)

By Robert B. Barnett Jr., J.D.

Two claims involving bad faith or deceit were dismissed in the absence of any evidence of bad faith or deceit, but the jury will decide whether trademark infringement occurred.

In a case involving efforts by Enchante Accessories to stop Turko Textile from adopting the mark “Enchante Home” for the same products that Enchante Accessories sells, dueling motions for summary judgment on trademark infringement under the Lanham Act and trademark dilution under New York Law were denied because triable issues remained on the strength of Enchante Accessories’ mark and the competitive proximity of the parties’ products, a New York federal district court judge has ruled, in accepting the magistrate’s recommendations. The court did, however, grant summary judgment to Turko Textile on any of Enchante’s state law claims that involved bad faith or deceit because no evidence of bad faith or deceit on Turko’s part existed (Enchante Accessories, Inc. v. Turko Textile, LLC, September 12, 2022, Woods, G.).

Background. Enchante Accessories, Inc., sells household products, including pillows, towels, and bathrobes, under the trade name “Enchante Accessories.” Enchante has been selling those products for decades. In 2014, Turko Textile, LLC, adopted the mark “Enchante Home” for its line of products, including pillows, towels, and bathrobes.

Enchante sued Turko in New York federal court, alleging trademark infringement in violation of the Lanham Act, as well as violations of several New York laws. Both parties moved for summary judgment. To resolve those motions, the magistrate judge issued a Report and Recommendation that recommended that the two motions as they applied to trademark infringement be denied because triable issues remained. The Report also recommended that the court grant Turko’s motion for summary judgment to the extent that it sought dismissal of claims involving bad faith or deceit because no evidence of bad faith or deceit had been developed during discovery. And, finally, the Report recommended that the court grant summary judgment to Turko on Enchante’s claim for injury to business reputation under New York law because no evidence existed that Turko’s products were so shoddy that Enchante’s mark would be diluted.

Both parties objected to the Report and Recommendation. Turko argued that the Report failed to give proper weight to the absence of actual confusion and to the fact that the product buyers were sophisticated professional buyers rather than ordinary consumers. Turko also asserted that the magistrate should have found as a matter of law that Enchante’s mark was “exceptionally commercially weak.” Enchante, on the other hand, argued that the magistrate failed to consider that its buyers were retailers rather than consumers. Enchante also disagreed with the magistrate’s conclusion that no bad faith existed. According to Enchante, bad faith should have been presumed from Turko’s president’s cursory look for existing marks before concluding that “Enchante Home” would not infringe anyone’s mark. Enchante then argued that the magistrate erred in his analysis of whether blurring occurred under the injury-to-business-reputation claim.

Trademark infringement. If nothing else, the court concluded, the contradictory arguments raised in the two parties’ objections to the magistrate’s Report established that a reasonable jury might reach different results. On this fact alone, summary judgment was improper at this time. As a result, the court affirmed the magistrate’s recommendation that the two motions for summary judgment on trademark infringement both be denied.

Bad faith. The court also agreed with the magistrate’s conclusion that no evidence of bad faith had been found during discovery. Turko’s president testified in deposition that, without legal assistance, he concluded that no problems existed with trademark infringement after searching for the term “Enchante Home” and finding nothing. Enchante argued that a reasonable search would have entailed a broader effort that would have included a search for the term “Enchante,” which would have revealed “Enchante Accessories.” Bad faith, however, would require that Turko knew about Enchante’s mark and deliberately adopted a similar mark to capitalize on Enchante’s reputation. However sloppy the trademark search, no evidence existed that Turko knew about Enchante’s mark and deliberately set about to capitalize on it.

Furthermore, Enchante’s argument that bad faith could be demonstrated by evidence that the scope of the search was unreasonable was not supported by any authority setting forth that rule. This argument, the court said, “relies on conclusory allegations or unsubstantiated speculation, which are insufficient to meet its burden.” The court, therefore, agreed with the magistrate’s Report that the two claims involving proof of bad faith or deceit—unfair competition and use of a name with intent to deceive (N.Y. Gen. Bus. Law §133)—should be dismissed.

Business reputation. Turning to the claim involving damage to business reputation (N.Y. Gen. Bus. §360-1), the court disagreed with the magistrate’s finding for the only time. The claim requires proof that (1) the plaintiff has a strong mark that has acquired a secondary meaning and (2) a likelihood of dilution by either blurring or tarnishment. The magistrate had recommended granting summary judgment to Turko after concluding that Enchante had failed to satisfy the second element involving dilution because no evidence existed that the Turko’s products were shoddy.

The court, however, agreed with Enchante that the magistrate had failed to balance all of the factors. A likelihood of blurring (whether the unique identifier of the senior owner’s mark had been diminished by the junior owner’s actions) involved an analysis of six factors, five of which are the same factors as those used to consider whether trademark infringement had occurred. As a result, the court concluded, triable issues remained for the damage-to-business-reputation claim for the same reasons that triable issues remained for the trademark infringement claim. Whether dilution by blurring occurred, therefore, and thus whether damage to business reputation occurred, will be determined by the jury.

The court thus made the following rulings: (1) Enchante’s motion for summary judgment was denied, (2) Turko’s motion for summary judgment was granted for both the unfair competition claim and the claim for use of a name with intent to deceive, and (3) Turko’s motion for summary judgment is denied for all other claims, including damage to business reputation.

The Case is No. 1:19-cv-00581-GHW-SN.

Attorneys: Brian Joseph Doyle (Notaro, Michalos & Zaccaria PC) for Enchante Accessories, Inc. Robert Axenfeld (Axenfeld Law Group, LLC) for Turko Textile, LLC d/b/a Enchante Home.

Companies: Enchante Accessories, Inc.; Turko Textile, LLC d/b/a Enchante Home

Cases: Trademark NewYorkNews