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Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp.

Fendi Adele S.R.L. v. Burlington Coat Factory Warehouse Corp.
689 F.Supp.2d 585 (S.D.N.Y 2010).

Facts: Fendi Adele S.R.L. (“Fendi”) owns five registered Fendi trademarks “and is
the exclusive designer of handbags, shoulder bags, purses, wallets and key holders bearing this trademark.” Each of Fendi’s products, and product components, are individually designed through a complex process. Fendi inspects all finished products; “if a product has not been assembled correctly and cannot be repaired, Fendi destroys the product.” In 1987, Fendi successfully petitioned for an injunction to prevent Burlington Coat Factory Warehouse Corp. (“Burlington”) from selling counterfeit goods bearing the Fendi trademark in the absence of written permission from Fendi. Burlington failed to implement quality control mechanisms to ensure compliance with the injunction and violated the injunction as early as September 1993. In April 2004, legal counsel for Burlington and legal counsel for Louis Vuitton Malletier (“Louis Vuitton”), a company sharing ultimate ownership with Fendi, met to settle claims of trademark infringement leveled against Burlington. Louis Vuitton’s legal counsel displayed a counterfeit Fendi-branded handbag purchased from Burlington and advised Burlington’s legal counsel of the product’s counterfeit nature. In late April 2004, Burlington’s legal counsel received a letter on behalf of Fendi, formally notifying Burlington of its sale of counterfeit goods, and ordering Burlington to cease and desist its sale of said goods. In subsequent months, Burlington supplier Colton International (“Colton”), the source of the counterfeit handbag, produced an unsigned letter alleging the authenticity of the handbag; Fendi challenged the authenticity of the letter. In December 2005, Fendi issued a second cease and desist letter to Burlington; the letter alleged the counterfeit nature of all Fendi-branded products sold by Burlington, and asserted Burlington’s violation of the 1987 injunction.

Procedure: In October 2007, the U.S. District Court for the Southern District of New York granted Fendi’s motion for partial summary judgment against Burlington. The court found Burlington violated the 1987 Injunction restricting Burlington’s sale of Fendi-branded products. In the present case, Fendi sought summary judgment on remaining claims of trademark infringement, false designation of origin, and trademark dilution under the Lanham Act, and claims of trademark dilution and unfair competition under New York state law. Fendi also moved to enhance the 1987 Injunction.

Issue:
1)Whether summary judgment is appropriate for Fendi’s claims?
2)Whether the original 1987 Injunction warranted “enhancement”?

Holding: Yes; Yes. The court granted Fendi summary judgment on all claims and awarded Fendi enhanced injunctive relief.

Analysis:

1) At the outset, the court set forth the standard for summary judgment; “a
court may only grant a motion for summary judgment if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.”

2) Before assessing Fendi’s claim, the court determined the admissibility of the testimony of Leonardo Minerva; Fendi’s industrial director of leather goods and director of logistics (in charge of the manufacture of Fendi goods from September 2002 – March 2008). Miranda’s assistant prepared “authenticity reports” (regarding Fendi merchandise) which Minerva reviewed (establishing requisite personal knowledge of the contents of the reports); the court found that Minerva demonstrated an independent recollection by going beyond the scope of the reports. The court found that Miranda’s testimony met the standard for admissibility.

3) The court subsequently considered Fendi’s federal claims of trademark infringement and false designation of origin. The court evaluated both claims under a single Second Circuit standard; “Fendi must establish that: (1) it had a valid mark entitled to protection under the Lanham Act; and (2) Burlington used a similar mark in commerce in a way that would likely cause confusion among the relevant consuming public.” The five Fendi trademarks used in the counterfeit products are registered trademarks; the court noted that, under the Lanham Act, registered trademarks are granted a presumption of validity, subject to contrary evidence. The court acknowledged the validity of Fendi’s registered trademarks; Burlington submitted no evidence directly challenging the validity of Fendi’s registered trademarks, and the court dismissed Burlington’s “naked license” theory for insufficient proof. Next, the court affirmatively determined a likelihood of confusion, negating the necessity of the eight-factor test employed by the Second Circuit, because “counterfeit marks are inherently confusing.” The court found “Minerva’s testimony establishes a “prima facie” case that the goods at issue are counterfeit and “Burlington failed to provide any evidence to defeat Fendi’s prima face case and establish the existence of a genuine issue as to the authenticity of the goods.” As such, the court held that Fendi successfully established Burlington’s liability as to trademark infringement and false designation of origin.

4) Then the court examined Fendi’s allegations of trademark dilution under federal and New York state law. The court utilized the Second Circuit’s four-part test; a plaintiff must establish that (1) its mark is famous; (2) the defendant is making commercial use of the mark in commerce; (3) the defendant’s use began after the mark became famous; and (4) the defendant’s use of the mark dilutes the quality of the mark to indentify and distinguish goods and services. Regarding the first, second and third inquiries, the court established “that Fendi marks are famous and distinctive and that Burlington began selling counterfeit Fendi goods after Fendi made it marks famous.” Regarding the fourth requirement, the court held “if a plaintiff who owns a famous senior mark can show the commercial use of an identical junior mark, there is a presumption of actual dilution.” The marks on the counterfeit goods sold by Burlington are identical to those found on legitimate Fendi merchandise, creating a presumption of actual dilution; as Burlington provided no evidence to rebut the presumption, the court found actual dilution. Subsequently, the court examined trademark dilution under New York state law. The Second Circuit requires “ownership of a distinctive mark and likelihood of dilution of that mark through blurring or tarnishment”; as the court previously established the more stringent federal requirement of actual dilution, the court found the state law requirement of likelihood of dilution similarly satisfied.

5) Then the court considered Fendi’s claim of unfair competition under New York state law. The court determined the common law requirement of bad faith or intent (necessary to prove unfair competition) was met; “use of a counterfeit mark creates a presumption of bad faith.” The court inferred bad faith from Burlington’s sale of counterfeit Fendi goods, and consequently found summary judgment appropriate regarding Fendi’s common law claims of unfair competition.

6) Subsequently, the court considered injunctive relief. Fendi petitioned the court to supplement the existing 1987 Injunction against Burlington due to Burlington’s significant and continuous violation of the injunction. The court noted that Burlington began to violate the 1987 Injunction by receiving Fendi-branded goods into its inventory as early as 1993. Under Second Circuit precedent, injunctive relief must be narrowly structured to the applicable legal violation so as to avoid burdening lawful conduct, but may also aim to deter future violation. In view of Burlington’s history of disregarding the 1987 Injunction, the court granted Fendi’s request for injunctive relief. The court instructed Burlington to submit a plan detailing Burlington’s intended method of future compliance with the 1987 injunction, and subsequently submit periodic reports illustrating such compliance. The court also imposed a “$1,000 forward-looking sanction . . . per each item sold in violation of the injunction.”


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