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EASTMAN KODAK CO. v. PHOTAZ IMPORTS

August 4, 1993

EASTMAN KODAK COMPANY, Plaintiff,
v.
PHOTAZ IMPORTS LTD., INC., d/b/a FILMART, Defendant.



The opinion of the court was delivered by: MICHAEL A. TELESCA

 INTRODUCTION

 This action arises from sales of film and disposable cameras by defendant Photaz Imports Ltd. d/b/a/ Filmart ("Photaz") which plaintiff Eastman Kodak Company ("Kodak") alleges are violative of the Trade-Mark Act of 1946 (the "Lanham Act"), 15 U.S.C. § 1051 et seq., and related state law, and of the Copyright Act, 17 U.S.C. § 101 et seq. Kodak alleges that Photaz packages its film and cameras so as to (i) infringe certain trademarks registered by Kodak (First Claim), in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114, (ii) infringe Kodak's established trade dress (Second Claim), in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), (iii) falsely represent the expiration date on repackaged Kodak film (Second Claim), in violation of Section 43(a) of the Lanham Act, (iv) unfairly compete with Kodak in the sale of film and cameras (Third Claim), (v) violate Section 349 of New York's General Business Law (Fourth Claim), and (vi) infringe copyrights in Kodak's pictorial and textual directions for its single-use camera (the "FunSaver") (Fifth Claim), in violation of 17 U.S.C. § 504(c)(2).

 Pending before the Court are Kodak's motion for a preliminary injunction and Photaz's cross-motion to transfer venue to the Southern District of New York, where both parties do significant business. The parties have briefed both motions and have had oral argument on the application for injunctive relief. For the reasons discussed below, plaintiff's motion for a preliminary injunction is granted and the cross-motion to transfer is denied.

 FACTS

 Kodak has engaged in the sale of photographic film and camera supplies for over 100 years. Its markets are worldwide. Photaz has engaged in the business of distributing film and related photographic products since 1980. It distributes films manufactured by Kodak, Polaroid, Agfa, Fuji, and others. It began distributing Kodak film in 1986, and considers itself one of the major distributors of Kodak film in the greater New York City area. Photaz's business, however, is not limited to New York City; it sends its catalogs and fills telephone orders beyond the Metropolitan area, both within New York State, including the Western District of New York, and to other states.

 A. Photaz's Sale of Repackaged Film Multipacks

 When Photaz purchases film manufactured by Kodak, Fugi, or others, it sometimes repackages *fn1" the film for resale in "Value Packs," multiple packs of the brand film at an enhanced price. When Photaz repackages Kodak film into Value Packs, it removes the film from its original factory box, which bears the film's expiration ("process-before") date. An expiration date is then affixed to the outside of the Value Pack package. The Value Packs are bright yellow, with block print lettering in other strong colors, including red, blue, black, or gold. In smaller print, they state that they are "Repackaged in The USA From Kodak Multipacks". In similarly small print, they bear the legend that "KODAK is a Registered Trademark of Eastman Kodak Company Rochester NY". In its Winter 92/93 catalog, Photaz advertised both the Value Packs of Kodak film and individual and factory packs of Kodak film.

 Kodak's laboratory examination by a company film quality engineer of various sample rolls of Kodak film sold by Photaz in its Value Packs revealed that the expiration dates had been altered, extended a number of months in most cases. Kodak prints the expiration date on its individual film packages, which Photaz does not use in its repackaged Value Packs. The affidavit of the film engineer who examined the film states that use of stale film may affect negatively the quality of pictures taken with it.

 B. Photaz's Sale of Single-use Cameras

 In the fall of 1992, Photaz began selling recycled single-use cameras under the trademark "Snap Shot". As advertised in its Winter 92/93 catalog, the Snap Shot package bore the brand name "Filmart". The photocopies of Snap Shot sample packages annexed to the complaint, however, use the name Snap Shot without the use of the brand name "Filmart". The packages are uniformly bright blue with accents in bright yellow and red. Both the package and the enclosed camera bear the legend that "KODAK is a Registered Trademark of Eastman Kodak Company Rochester NY". That statement is printed on a yellow background in red and black letters. The package bears a picture of the lens from the enclosed camera, which is marked "Kodak Lens". The "Limitations of Liability" statement printed in small letters on the bottom of the outside package states in its final sentence, "This is an original camera manufactured by Kodak, recycled, reloaded with quality film, and repackaged by FGI." While the package states that Kodak is located in Rochester, New York, nowhere does it indicate the identity/location of FGI.

 The Snap Shot camera--essentially another box within the outer packaging--has pictorial and textual directions on the back consisting of four simple drawings and accompanying text, which are virtually identical to the directions printed on Kodak's single-use camera, the FunSaver.

 C. Kodak's Response to the Infringement

 Although Kodak learned of the marketing of used single-use cameras from recycled Kodak FunSaver components in September 1992, Kodak argues that it did not learn of the breadth of the infringement involved until it received Photaz's Winter 1992/93 catalog. Indeed, when Kodak first learned of the Snap Shots, it thought their source was a company called "Rising Eagle", associated with another company called "Film Art". Kodak subsequently learned of the association of Filmart with Photaz, and of the extent of the infringement which is obvious from Photaz's Winter 92/93 calendar. Kodak thereupon consulted counsel concerning Photaz's advertising and packaging early this year and, in February, Kodak's counsel wrote to Photaz, demanding that it cease its trademark violations and suggesting non-infringing trade dress and textual revisions. Responses from Photaz's counsel, who has since been replaced, indicated that Photaz was willing to accede to Kodak's demands, without acknowledging that their use of (i) certain packaging colors, (ii) the word Kodak, and (iii) the copyright legend, had constituted any wrong doing under either state or federal law. When, however, further independent investigation by Kodak indicated that Photaz continued to offer the offending Value Packs and Snap Shots for sale, and that Snap Shots had been represented at a major industry trade show as "customized Kodak" disposable cameras, Kodak commenced this action and sought a preliminary injunction.

 D. The Relief Kodak Seeks

 Kodak seeks an order (A) requiring Photaz to (i) stop using any Kodak trademark, (ii) star selling film or camera products with substituted, changed expiration dates, (iii) deliver all infringing inventory for destruction, (iv) recall all infringing products shipped after the date of Kodak's first demand letter in February 1993, (v) stop using Kodak's pictorial and textual instructions for its Snap Shot; (B) impounding all Snap Shots using instructions which copy those for the Kodak FunSaver; and (C) requiring Photaz to file a statement of compliance with the order's other provisions.

 In support of its application for preliminary injunctive relief, Kodak argues that its trademarks and trade dress are among the strongest in the world and are accordingly entitled to provisional protection; that the nature and extent of Photaz's infringements thereon (i) are sure to confuse consumers as to the source of the Photaz products and (ii) indicate that Photaz intended to effect such confusion in the marketplace; and that the quality of at least some of the products which Photaz sells as Kodak products is questionable, if not poor, and likely to damage Kodak's good name and good will in the marketplace.

 In this regard, Photaz is selling Value Packs of Kodak film with altered expiration dates that have been extended, which may result in consumers using stale film. Moreover, Photaz's Snap Shot, which is manufactured using parts recycled from the Kodak FunSaver, incorporates a used Kodak lens bearing the legend "Kodak Lens". While other single-use parts may be recycled successfully (and, indeed, are recycled by Kodak and other camera manufacturers) a lens may be scratched or otherwise damaged, and affect photographic quality. Thus the very component of a Snap Shot which bears the name "Kodak" may result in poor photo quality. The gist of Kodak's argument is not merely that Photaz is trading on Kodak's name, but that it is trading on that name in products of questionable quality.

 D. Photaz's Opposition

 At oral argument of Kodak's motion, Photaz's counsel confirmed that Photaz had discontinued the sale of repackaged Kodak film, i.e., discontinued packaging and selling Kodak Value Packs. Counsel also introduced yet another version of the Snap Shot package which defendant had devised in an attempt to meet Kodak's demands. The background color of that package is aqua and, while it bears the legend concerning Kodak's trademark, it is no longer printed on a yellow-gold background with red and black print. Although welcoming Photaz's representations with respect to discontinuing Sale of the Value Packs and changing the Snap Shot trade dress, Kodak's counsel indicated to the Court that Kodak employees had very recently ordered and received from Photaz both a Value Pack and Snap Shots in ...


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