Before Timbers, Van Graafeiland, and Newman, Circuit Judges.
This cause came on to be heard on the transcript of record from the United States District Court for the Southern District of New York, and was argued by counsel.
On consideration whereof, it is now hereby ordered, adjudged, and decreed that the judgment of said District Court be and it hereby is affirmed substantially for the reasons set forth in Judge Goettel's opinion of May 2, 1979 and reported at 469 F.Supp. 674, 202 USPQ 452.
On this appeal from a permanent injuction entered in a trademark action under the Lanham Act, appellant contends that unfair competition claims for the use of marks not subject to trademark protection are limited to violations of property rights.We disagree. Unfair competition may stem from activity "which deceives the public or violates the plaintiff's property rights." Fashion Two Twenty Inc. v. Steinberg, 339 F.Supp. 836, 848, 172 USPQ 102, 110 (E.D.N.Y. 1971) (emphasis added). Injunctive relief is particularly appropriate in cases where "the defendant's conduct involved a clear attempt to profit at the expense of the plaintiff." Flexitized, Inc. v. National Flexitized Corp., 335 F.2d 774, 782, 142 USPQ 334, 339-340 (2 Cir. 1964).
In the instant case appellant's conduct involved an attempt to "deceive the public" and "to profit at the expense of the plaintiff." Appellant agreed to respect Finker's mark and to acknowledge the diamonds as being Finker's products. He nevertheless proceeded to advertise that the goods were his own and that he was the exclusive source. In so doing, appellant mislead both his customers and the diamond industry. As the district court correctly held, "[he] attempted to trade upon the goodwill and promotional efforts of the plaintiff. Such conduct constitutes unfair competition and may be enjoined." See American Footwear Corp. v. General Footwear Co., No. 78-7362, slip op. at 5376-77 (2 Cir. Nov. 9, 1979).
Appellant also argues that the arbitration decision requiring Finker to pay appellant for the advertising implies that the advertising was done legally by appellant. Thus he asserts that the propriety of the advertising was settled in arbitration and that issue before the district court therefore was moot. The arbitration panel, however, refused to involve itself in "the claims regarding trademark infringement, rights to use other alleged similar names and damages arising therefrom." (emphasis added). The arbitration decision related to Finker's reimbursement of appellant for advertising expenses in promoting the sale of Finker's diamonds. The fairness or unfairness of appellant's advertising was never considered. We hold that the issue of unfair competition was not the subject of arbitration.