The opinion of the court was delivered by: FRED I. PARKER
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
Plaintiff, Fratelli Lozza (USA) Inc., is a New York corporation with a principal place of business at Mount Vernon, New York, which is in the business of importing and distributing optical spectacle frames, principally of Italian manufacture. Defendant Lozza SpA is an Italian corporation located in the Province of Belluno, Italy which designs and manufactures eyeglass frames which are distributed worldwide. Defendant Lozza (USA) was a California partnership which was formed in 1986 and as of January 1989 was owned fifty-percent by the defendant Lozza SpA. During the period of May 31, 1986, when Lozza (USA) was formed, until April of 1991, when Lozza (USA) was dissolved as a partnership, Lozza (USA) operated under an exclusive distribution agreement whereby it was the sole and exclusive distributor for the sale of Lozza SpA eyewear products within the United States and the Caribbean.
As a result of the April 1991 dissolution of Lozza (USA), Lozza SpA has not shipped any products to the United States from that time until the present.
Plaintiff's claims in this action arise from an agreement between the plaintiff, the defendants and others dated March 31, 1987, which agreement settled prior litigation between these parties and others and purported to define the usage of various trademarks, tradenames and the use of promotional materials by the parties. Plaintiff's Second Amended Complaint sets forth four causes of action, which allege:
1. That the defendant Lozza (USA) breached the March 31, 1987 agreement by offering eyeglass frames for sale in the United States which were not marked in accordance with the agreement.
2. That the plaintiff owns the trademark "LINEA BY LOZZA" which the defendants have infringed by selling optical frames under the mark "Lozza".
3. Defendants have engaged in unfair competition and infringement of the plaintiff's common law rights in: (a) "LINEA BY LOZZA"; (b) Fratelli Lozza; (c) "ITALIAN DESIGN"; and (d) "FAMILY TRADITION IN FRAME MAKING" by using the name "Lozza" standing alone and "LOZZA OCCHIALI" (literally "Lozza spectacles") in promotional brochures and in a letter dated June 23, 1989 which plaintiff claims was distributed "to the trade" which disparages plaintiff and violates the March 31, 1987 settlement agreement.
4. A requested review by this court of April 16, 1990 and July 11, 1990 decisions of the Trademark Trial and Appeal Board which canceled plaintiff's United States trademark registration of the mark "LINEA BY LOZZA".
By way of relief plaintiff seeks a rescission of the March 31, 1987 agreement and requests injunctive relief which would include orders (1) prohibiting defendants from using the term "Lozza" or other marks or names similar to plaintiff's name which would likely create confusion in the marketplace, (2) ordering defendants to deliver up and destroy materials bearing the "Lozza" mark, and (3) to distribute to customers a publication acknowledging past misuses of the "Lozza" name as well as distribution of a retraction of the June 23, 1989 letter. Plaintiff also seeks reversal of the Trademark Trial and Appeal Board decision, costs and attorneys fees.
In the course of trial plaintiff withdrew the second and fourth causes of action, acknowledging it had no claim to the mark "LINEA BY LOZZA". Accordingly plaintiff's second cause of action alleging infringement of the "LINEA BY LOZZA" mark is dismissed and plaintiff's fourth cause of action requesting review of the April 16, 1990 and July 11, 1990 decisions of the Trademark Trial and Appeal Board in Lozza USA v. Fratelli Lozza (USA), Inc., Cancellation No. 18,188 is dismissed.
Both defendants respond by denying various allegations set forth in the Complaint and by identical counterclaims which allege that the plaintiff breached the March 31, 1987 agreement (Exhibit 9) by continuing to use the mark "LINEA BY LOZZA" after January 31, 1991 and by failing to amend its use of "LINEA BY LOZZA" by including the expression "Fratelli Lozza" Defendants also urge this court to impose sanctions against plaintiff pursuant to Fed. R. Civ. P. 11.
Plaintiff and defendants stipulated to the following findings of fact in a joint pre-trial order, which facts are adopted as findings of this court, as follows.
1. Plaintiff, Fratelli Lozza (USA) Inc., is a New York corporation incorporated February 9, 1978 under the name Fratelli Lozza SpA, Inc. One of its officers and shareholders was Mario Lozza. Fratelli Lozza SpA, Inc. changed its name to Fratelli Lozza (USA) Inc. (hereinafter "Fratelli Lozza") on June 29, 1987. Fratelli Lozza is located at Mt. Vernon, New York, and is in the business of importing and distributing high quality optical spectacle frames, principally of Italian manufacture. The President and major shareholder of Fratelli Lozza is Mario Lozza. Opti-Fashion Inc., a New York corporation, is the United States distributor for Fratelli Lozza, the latter owning a majority of the outstanding shares of Opti-Fashion. (Joint Trial Exhibit 37, Certificate of Incorporation of Fratelli Lozza).
2. Defendant Lozza SpA is an Italian corporation located in the Province of Belluno. It is a leading designer and manufacturer of high quality, innovative eyeglass frames which are distributed worldwide. It was founded in the 1870's by Giovanni Lozza, the grandfather of Mario Lozza. Before 1984, the Lozza family owned the majority of shares and controlled the day-to-day operations of Lozza SpA. At various times before 1984, Mario Lozza was a major shareholder and member of the Board of Directors of Lozza SpA, and held the position of President and/or Managing Director. At various times before 1984, Roberto Lozza, another shareholder and member of the Board of Directors, held the position of President and/or Managing Director in Lozza SpA. Roberto Lozza and Lozza are cousins. (Joint Pre-Trial Exhibits 2, 5a, 5b, 6, 59, 60, 61, 62, 63, 64e, 71, 72, 78, 79, 80, 81, 82, 90).
3. At its inception on May 31, 1986, defendant Lozza USA was a California partnership formed among Lozza SpA, holding a 40% interest, Omtae Optics, Inc., a California corporation holding a 30% interest, and Maxwell Enterprises, Inc., a California corporation holding a 30% interest. (Joint Trial Exhibit 58, Agreement of Partnership of Lozza USA).
4. Lozza SpA has used the "LOZZA" mark and the "L" design mark on eyeglass frames in the United States since the 1950's. Lozza SpA also manufactured eyeglass frames with the "LINEA BY LOZZA" trademark and exported them to Mya Originals for distribution in the United States. The following United States distributors also received and sold "LOZZA" product:
a. Trans World Eyewear, 14 Foster Street, Bergenfield, New Jersey (1950's to 1980's);
b. Starline Optical Corp., 2 Gardner Road, Fairfield, New Jersey 07006 (1980-1981);
c. Avant Garde, Berdel Division, 44 Harbor Park Drive, Port Washington, New York 11050 (1982-1986);
d. International Eyewear Trading Inc., Dobbs Ferry, New York 10522 (1970's to 1980's); and
e. Mya Originals, Inc., Dobbs Ferry, New York 10522 (1970's to 1980's).
(Joint Trial Exhibits 25, 43 and 44a).
5. Before 1984, Mario Lozza established several companies in the United States which distributed eyeglass frames manufactured by Lozza SpA. These included International Eyewear Trading Corp., I/O Optics Limited (USA), and Mya Originals, Inc. as well as Fratelli Lozza, the plaintiff in this action. (Joint Trial Exhibits 35, 36, 37 and 38).
6. International Eyewear Trading Corp. was a New York corporation established by Mario Lozza, who was a majority shareholder. (Joint Trial Exhibit 38, Certificate of Incorporation of International Eyewear Trading Corp.).
7. On March 3, 1976, a company named I/O Optics Limited (USA) was incorporated in New York by Mario Lozza, its major shareholder. The purpose of the business was to manufacture, import and distribute optical products, including eyeglass frames. (Joint Trial Exhibit 36, Certificate of Incorporation of I/O Optics).
8. On March 17, 1977, while Mario Lozza was President of Lozza SpA, Lozza SpA purchased 30% of the outstanding shares of I/O Optics for $ 30,000 pursuant to a Subscription Agreement. (Joint Trial Exhibit 20, Subscription Agreement).
9. On March 6, 1978, the Board of Directors of I/O Optics voted to amend the Certificate of Incorporation to issue 200 shares at $ 1,000 par value. (Joint Trial Exhibit 22, Certificate of Amendment of I/O Optics). That same day, the Board of Directors of Lozza SpA, including Mario Lozza as President and Roberto Lozza as Managing Director, voted to purchase all of the outstanding shares of I/O Optics for $ 70,000. These shares were owned by Mr. Desiderio DiSisto. (Joint Trial Exhibit 22, Memorandum of Minutes of Lozza SpA's Board meeting).
10. On March 20, 1978, Lozza SpA directed its bank, the Banco di Roma, to pay for the shares and to maintain the shares in the Banco di Roma office in New York on Lozza SpA's behalf. (Joint Trial Exhibit 23, Letter from Lozza SpA to Banco di Roma dated March 20, 1978).
11. On November 16, 1976, Mario Lozza established a New York corporation named Mya Originals, Inc. (Joint Trial Exhibit 35, Certificate of Incorporation of Mya Originals, Inc.). On or about July of 1977, Mya Originals obtained a loan for $ 100,000 from the State Street Bank and Trust Co. This loan was guaranteed by Lozza SpA. (Joint Trial Exhibit 21, July 7, 1977 letter from Banco S. Paolo Branch to State Street Bank, and July 3, 1978 Agreement between Mario Lozza and Dimitri J. Tripodi 25).
12. As of July 3, 1978, I/O Optics held 50% of the outstanding shares of Mya Originals, Inc. At that point, I/O Optics was wholly owned by Lozza SpA. Mario Lozza was an officer, director and major shareholder of Lozza SpA during this time period. The remaining 50% of the shares of Mya Originals, Inc. were owned by Dimitri J. Tripodi, who was the administrator of the business of Mya Originals, Inc. (Joint Trial Exhibit 25).
14. On October 19, 1978, an acquisition agreement was entered into between Mario Lozza, Dimitri J. Tripodi, Lozza SpA, I/O Optics and Mya Originals, Inc. A Distribution Agreement and a License and Know-How Agreement were also entered into between Lozza SpA and Mya Originals, Inc. A Sales Agency Agreement was entered into on that same date between Lozza SpA and Dimic Associates, Inc. These agreements substantially incorporated the representations made in the earlier July 3, 1978 agreement between Mario Lozza and Mr. Tripodi.
15. On December 19, 1978, Mya Originals, Inc. officially changed its name to Tripodi Eyewear International, Inc. (Joint Trial Exhibit 27).
16. On August 29, 1979, the Distribution Agreement, License and Know-How Agreement and Sales Agency Agreement were mutually terminated by the signatories to those agreements. (Joint Trial Exhibit 27, August 29, 1979 Termination Agreement).
17. On March 9, 1978, an application to register the trademark "LINEA BY LOZZA" was filed in the United States Patent and Trademark Office in the name of Mya Originals, Inc. of Dobbs Ferry, New York. The date of first use was stated to be January 9, 1978. (Joint Trial Exhibit 88a).
18. On January 6, 1979, the pending application for "LINEA BY LOZZA" was assigned by Mya Originals to I/O Optics. I/O Optics was wholly owned by Lozza SpA. (Joint Trials Exhibits 22, 23, 28-30, 34 and 88c).
19. The Patent and Trademark Office approved the application for "LINEA BY LOZZA" on June 12, 1979 and it was registered under No. 1,119,957. The registered owner, by assignment, was I/O Optics, wholly owned by Lozza SpA. (Joint Trial Exhibits 22, 23, 28-30, 34 and 88e).
20. On January 8, 1982, International Eyewear Trading Corp., one of Mario Lozza's United States companies, offered to purchase all of the outstanding shares of I/O Optics from Lozza SpA. The proposed purchase price was $ 100,000. (Joint Trial Exhibit ...