The opinion of the court was delivered by: HAIGHT
MEMORANDUM OPINION AND ORDER
Plaintiffs bring this action for injunctive relief against defendants alleging trademark infringement, 15 U.S.C. § 1141(1), false designation of origin, 15 U.S.C. § 1125(a), unfair competition based on infringement of common law trademark rights, and violation of the New York Anti-Dilution statute, N.Y. Gen. Bus. L. § 368-d (McKinney 1969). Plaintiff Tavaro S.A. is a Swiss corporation, and the designer, manufacturer and distributor of ELNA sewing machines in Switzerland and throughout the world. ELNA brand sewing machines have been distributed in the United States since at least 1937. Tavaro owns U.S. Registration No. 785,555 of the trademark ELNA for sewing machines.
The plaintiff White Consolidated Industries, Inc. ("White") has since 1963 been Tavaro's exclusive United States distributor of ELNA sewing machines.
Defendant Leon Jolson, a United States citizen and resident, has at the pertinent times been a distributor of sewing machines in this country, and is the president of defendants Nelco Sewing Machine Co., Inc. and Leon Trading Corporation. Mr. Jolson has testified, and I find, that the fourth named defendant, "Nelco Corp.," does not exist.
I shall upon occasion refer to the defendants collectively as "Nelco."
Nelco is currently marketing in the United States a sewing machine known as the "Nelco Prima Vera." Plaintiffs are marketing in the United States a sewing machine known as the "Elna Primula." Both machines are manufactured in Japan by Hosei Sewing Machine Manufacturing Co., Ltd. ("Hosei"). The basic machines are identical, although there are cosmetic differences. The mechanical similarity of the machines does not give rise to plaintiffs' claims. Although Tavaro designed the original, basic machine, it has permitted Hosei to manufacture and sell the machine to Tavaro's competitors in the United States, such as Nelco.
Plaintiffs' complaints arise instead from Nelco's marketing techniques in respect of the sewing machines being manufactured for it by Hosei. Plaintiffs allege that Nelco's name "Prima Vera" infringes ELNA's name "Primula." In addition, plaintiffs contend that the use made by Jolson and Nelco of the "ELNA" name in advertising brochures and on labels affixed to the machines constitute trademark infringements and unfair competition. Finally, plaintiffs charge defendants with false advertising.
Plaintiffs now seek a preliminary injunction restraining defendants from:
"(1) Utilizing the trademark ELNA on or in connection with their sewing machines or advertising or publicity materials for such sewing machines;
"(2) Utilizing the model name "Prima Vera" or any other colorable imitation of "Primula" for any of their sewing machines; and
"(3) falsely stating that their "Prima Vera" model sewing machine (i) was inspired or designed in Switzerland, (ii) was engineered or designed by NELCO, (iii) was distributed by Elna in Switzerland, or (iv) in design, quality or appearance is exactly like a European-made machine; . . ."
Affidavits and briefs have been exchanged, an evidentiary hearing held, and certain testimony taken by deposition. Against that record, this opinion constitutes the Court's findings of fact and conclusions of law.
Defendant Leon Jolson arrived in the United States as a refugee from Poland in 1947. In Poland, the Jolson family business had been the importation and distribution of Italian-built sewing machines bearing the trade name "Necchi". upon his arrival in the United States, Jolson raised some capital and began importing Necchi sewing machines into this country. The business prospered. In 1952, Jolson began importing ELNA sewing machines under a distribution agreement with Tavaro. Jolson's business became known as the "Necchi-Elna Sewing Machine Company." The business did well because these sewing machines had "zig-zag" features which were advanced for the time.
In 1963 Tavaro terminated its distributorship agreement with Jolson and the latter's companies. It is unnecessary to recite the asserted reasons for this parting of the ways. But the parting was not amicable; and Jolson (then operating under the corporate name "J. & K. Importing Corporation") initiated arbitration proceedings against Tavaro before the International Chamber of Commerce in Paris.
the arbitrators ruled initially in Jolson's favor. Tavaro noted an appeal. Ultimately the proceedings were withdrawn and a settlement agreement entered into. It was reduced to writing. The written settlement agreement dated at Geneva on October 2, 1964 is in evidence as PX 3. It was negotiated by Jolson and the then managing director of Tavaro, one Mr. Anliker, now deceased. The settlement agreement recites the resolution of various claims and counterclaims which are not germane to the present motion. But P6 is pertinent. It reads:
"6. Tavaro S.A. will withdraw its opposition against the trade-mark NELCO and accept that NELCO Sewing Machine Co. Inc. continues to use its firm and trade-mark NELCO, provided NELCO Sewing Machine Co. Inc. writes a letter, of which Tavaro S.A. will receive a copy, to all its distributors and dealers informing them:
"a) that Tavaro S.A. and ELNA have no connection whatsoever with NELCO Sewing Machine Co. Inc. and NELCO and JOLSON machines, and
"b) that the distributors and dealers selling NELCO and/or JOLSON machines are therefore not entitled to use, in any manner whatsoever, the word "ELNA", and/or the words "NECCHI-ELNA", and/or the monogram "N / E", and/or the logo "NECCHI-ELNA Sewing Circle", and/or the logo "NECCHI-ELNA-NELCO-JOLSON Sewing Circle", in connection with the sale of such machines.
"J. & K. Importing Corporation and its affiliated companies and/or persons will not, without Tavaro S.A.'s written consent, and with the sole exception of the word and trade-mark NELCO, make any use whatsoever of the name ELNA or other similar names or any symbol derived therefrom and/or the symbol N / E." (emphasis added).
The written settlement agreement was then introduced during plaintiffs' case or Jolson's direct examination by defendants' counsel. In that direct testimony, Jolson said that after the arbitration proceedings had been terminated, he met with Anliker in Geneva and Anliker agreed, within the context of an overall settlement, that Jolson was entitled to "use our association to start a new business again in the future." Tr. 58. That is to say (according to Jolson's direct testimony): Anliker gave his blessing to Jolson's continued use of the name "ELNA" for the purpose of Jolson's description of his experience in the sewing machine field, although he was no longer an ELNA distributor.
On cross-examination, counsel for plaintiffs confronted Jolson with the written settlement agreement. Jolson acknowledged the agreement, but said that he signed it out of sympathy with Anliker's physical condition, and that at a subsequent date Anliker gave Jolson permission, at least implicitly, to continue to "refer to my past as a Necchi-ELNA distributor." Jolson's testimony was it was developed on cross-examination is set cut in the margin.
I cannot accept that account as credible. Tavaro, in its precise Swiss fashion, had agreements and even company letters signed by not one but two corporate officers. Thus the settlement agreement, PX 3, contains a second signature on behalf of the company beside that of Anliker. Tavaro's practice of double signatures on business letters is acknowledged in the testimony of Jolson himself. In the settlement agreement, Tavaro went to the effort of providing that Jolson and his companies would not "without Tavaro S.A.'s written consent and with the sole exception of the word and trade-mark NELCO, make any use whatsoever of the name ELNA. . . ." Having insisted upon so specific a prohibition, and having provided further that consent to nonconforming use must be in writing, it is unlikely in the extreme that shortly thereafter, Anliker would violate his company's practice (not to mention the specific terms of the document in question) by agreeing to an oral modification on a clearly sensitive issue.
It is common ground that Tavaro has never given written consent to any use of the name ELNA or its derivatives apart from that specified in P6 of the settlement agreement. But defendants contend that corroboration of the alleged oral modification of the settlement agreement is found in Tavaro's acquiescence in Jolson's conduct subsequent to 1964. Because that conduct lies at the heart of the case, I will consider it in some detail.
Jolson was justifiably proud of his success as the American distributor for Necchi and Elna sewing machines. Indeed, that success had been the subject of a number of laudatory articles in the financial and trade press. In 1963, those distributorships were lost to Jolson (Necchi had also terminated its relationship with him). Jolson wished the sewing machine world to continue to be aware of the relationship.
Jolson and his corporations continued to distribute and market sewing machines under the trade name "Nelco." As the 1964 settlement agreement with Elna makes entirely clear, that trade name was derived from a combination of "Necchi" and "Elna." Continuing use of the name "Nelco" was the one liberty permitted Jolson by paragraph 6 of the settlement agreement in respect of Elna derivatives.
Subsequent to 1963, Jolson followed a practice of identifying himself as a former distributor of Necchi and Elna machines. He did this by affixing labels to Nelco machines; by including material in printed "hang tags" which were tied on to Nelco machines; and by referring to the former relationship in printed advertising matter.
Examples of labels utilized by Jolson and Nelco over the years are reproduced as Appendix A to this opinion. An example of the biographical material appearing on hang tags appears as Appendix B. This printed material serves to identify Jolson as the man who introduced the Necchi and Elna machines ...