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J. ATKINS HOLDINGS LTD. v. ENGLISH DISCNTS

January 17, 1990

J. ATKINS HOLDINGS LIMITED, PLAINTIFF,
v.
ENGLISH DISCOUNTS, INC., UNCLE STEVE'S INC., 6TH AVENUE ELECTRONICS CITY, INC., AND JOHN DOES 1-10, DEFENDANTS.



The opinion of the court was delivered by: Leval, District Judge.

OPINION AND ORDER

INTRODUCTION

This is an action for trademark infringement dealing with the importation and sale in the United States of trademarked goods produced abroad. Such "parallel imports" or so-called "grey-market" goods have been the subject of frequent litigation in recent years.

The complaint seeks declaratory, injunctive and monetary relief for trademark infringement. The plaintiff is J. Atkins Holdings Limited ("Atkins"), a Massachusetts corporation. The sole remaining defendant is Sixth Avenue Electronics City ("Sixth Avenue"), a New York corporation, which owns and operates a retail stereo and electronics store at 1024 Avenue of the Americas in New York City.*fn1 Sixth Avenue has filed counterclaims.

Plaintiff J. Atkins Holdings, Ltd. moves pursuant to Fed.R.Civ.P. Rule 56 for summary judgment. Defendant Sixth Avenue cross-moves (1) to dismiss the complaint pursuant to F.R.Civ.P. Rule 12(b)(6) on the grounds that the plaintiff Atkins is not the real party in interest and lacks standing to bring this action; (2) for partial summary judgment dismissing Atkins' claim for trademark infringement and related state law violations insofar as it seeks relief for infringements prior to July 2, 1987; and (3) for summary judgment that Atkins has no right to invoke the authority of the United States Customs Service to bar importation of "B & W" trademarked goods under the Tariff Act, 19 U.S.C. § 1526.

BACKGROUND

The amended complaint alleges that Atkins, a Massachusetts Corporation, is the owner by assignment of the distinctive trademarks "B & W" and "B & W DM" used in connection with the sale of stereo loudspeakers in the United States. The "B & W" mark was registered on the Principal Register as Trademark Registration No. 1,419,023 on December 2, 1986. The "B & W DM" mark was registered on July 27, 1976 under Trademark Registration No. 1,044,689.

The history of the B & W marks is as follows: Until March 31, 1987, the English manufacturer of the loudspeakers, B & W Loudspeakers, Ltd. ("B & W-UK") owned the marks and licensed them to Misobanke International, Inc. ("Misobanke"). Misobanke distributed loudspeakers bearing the B & W marks in the United States under a 1975 licensing agreement through its unincorporated United States division, doing business under the name of B & W Loudspeakers of America ("B & W-America"). Misobanke had been the exclusive distributor of B & W trademarked goods in the United States since November 1975. It is undisputed that Misobanke's only relationship with B & W-UK is defined by the 1975 distributorship agreement.

On April 1, 1987, a Canadian company named Equity Investments Corp. ("Equity Investments") purchased (for significant consideration) the exclusive rights to the United States distributorship of B & W trademark goods. This was effected by Misobanke's assignment of its distribution agreement with B & W-UK to Equity Investments and by Misobanke's assignment of its U.S. division — B & W-America — to Equity International, Inc. ("Equity International"), a Canadian corporation under common control with Equity Investments. Equity Investments sublicensed its American rights to Equity International. Thereafter the day-to-day business operations relating to the sale, promotion and distribution of B & W loudspeakers and goods in the United States were handled exclusively by the B & W-America division of Equity International. It is undisputed that B & W-America's employees and trade practices remained under Equity International exactly as they had been when it had been a division of Misobanke. Like Misobanke, the Equity group of companies is related to B & W-UK only through the distributorship agreement.

Plaintiff J. Atkins Holding, Ltd. ("Atkins") was formed as a Massachusetts Corporation in or about March 1987. It is related to Equity Investments and Equity International through Joseph Atkins, who is the sole shareholder of Atkins, and is also the President and director of Equity International, and 50% owner of Equity Investments.

On July 2, 1987, B & W-UK assigned the United States-registered trademarks to Atkins pursuant to an assignment agreement (the "Assignment Agreement") also signed by Equity International and Equity Investments. The Assignment Agreement reflects that Misobanke's right to distribute goods bearing the B & W marks had been assigned to Equity Investments which in turn assigned its rights to Equity International. The Assignment Agreement assigns the United States federal registrations for B & W marks to Atkins together with the good-will of the business in the United States. The Assignment Agreement also obligates Atkins to enter into a license agreement with B & W-America, subject to approval by B & W-UK, for the use of the marks in the United States. It provides that in the event the distributorship agreement is terminated so that B & W-America is no longer the exclusive distributor of B & W products in the United States, then the marks shall revert to B & W-UK. Thereafter, by a license agreement dated October 7, 1987, Atkins granted B & W-America exclusive responsibility for the sale and distribution of B & W trademark goods in the United States and exclusive control over advertising, quality control, and the administration of warranty and service programs.

Atkins is the registered owner of the two "B & W" marks, as certified by the United States Patent Office. Atkins has registered the marks with the United States Customs Service (the "Customs Service"). It petitioned the Customs Service and received an exclusion order on January 4, 1988 under 19 U.S.C. § 1526, that bars the importation of all goods bearing the B & W trademarks without the consent of Atkins.*fn2

The amended complaint alleges that Atkins' licensee, B & W-America, and its predecessors have been since 1976 the exclusive United States distributors of loudspeakers manufactured by B & W-UK. Amended Complaint ¶ 5. In that regard, B & W-America has used and widely promoted goods under the B & W marks, advertising through promotional brochures, dealer and consumer trade shows, seminars and training sessions, investing several million dollars for such purposes. Amended Complaint ¶ 6, 8. B & W-America has also caused instruction booklets and warranty cards to be placed into cartons for its B & W-brand loudspeakers sold in the United States. Amended Complaint ¶ 9. Atkins and B & W-America have also established an extensive network of dealers authorized to distribute and sell "B & W" products. The dealers are carefully selected for the quality of their salespeople and sales space and their geographical location.

Atkins alleges in its complaint that defendant Sixth Avenue, which is not an authorized B & W dealer, has imported, advertised, dealt in, and sold loudspeakers bearing the B & W trademarks through its retail stores in the United States since January 1986. Atkins further alleges that the defendant, Sixth Avenue, with full knowledge of Atkins' ownership of the trademarks, has continued to promote and advertise its products to the public with and through the use of plaintiff's B & W marks so as to confuse and deceive purchasers and obtain the acceptance of goods based on the reputation and good-will of Atkins and B & W-America.

  Atkins claims that Sixth Avenue's importation and sale of
loudspeakers in the United States bearing the B & W trademarks
constitutes federal trademark infringement, 15 U.S.C. § 1114,
unfair competition, 15 U.S.C. § 1125(a), as well as unfair
competition and trademark dilution under the law of New York
State. The complaint also contends that the importation of B &
W goods constitutes a violation of the Tariff Act, 19 U.S.C. § 1526.
  Page 949

It is undisputed that the goods sold by Sixth Avenue under the B & W marks were manufactured and lawfully trademarked by B & W-UK. Sixth Avenue provides its own service and warranty for its sale of such loudspeakers. The parties apparently agree that Sixth Avenue used the B & W marks on its invoices as early as November of 1986, and as late as September of 1987. Sixth Avenue advertises the fact that it sells B & W loudspeakers in the New York Times and the Village Voice.

THE MOTIONS

Atkins moves for summary judgment establishing Sixth Avenue's liability for trademark infringement, 15 U.S.C. ยง 1114(1)(a). It argues that there is no genuine issue of fact as to any of the essential elements of the cause of action for trademark infringement: that Atkins owns the U.S. trademarks for the B & W marks for loudspeakers and parts thereof, that the registrations are valid and subsisting and uncancelled, that Sixth Avenue has used the marks in ...


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