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MICHAEL NASO, FRANK NASO & ZETA PRODS. v. KI PARK

April 26, 1994

MICHAEL NASO, FRANK NASO and ZETA PRODUCTS, INC., Plaintiffs,
v.
KI PARK, CELICO INTERNATIONAL, EQUITY LEASING, HERBERT MOELIS and MICROFILM PRODUCTS COMPANY, Defendants.



The opinion of the court was delivered by: WILLIAM C. CONNER

 CONNER, D.J.:

 Plaintiffs Michael Naso, Frank Naso, and Zeta Products, Inc. ("Zeta") bring this action against defendants Ki Park, Celico International ("Celico"), Equity Leasing Corporation ("Equity"), Herbert Moelis, and Microfilm Products Company ("M.P.C.") asserting claims based on violations of the federal patent laws, the federal antitrust laws, the Lanham Act, 15 U.S.C. § 1051 et seq., and the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., in connection with the defendants' manufacture and sale of certain microfilm reels alleged to infringe plaintiffs' patents. The action is currently before the Court on defendants' motion to dismiss pursuant to Rules 12(b)(2), 12(b)(5), and 12(b)(6), Fed. R. Civ. P. *fn1" Specifically, all defendants move to dismiss the antitrust, RICO, and Lanham Act claims for failure to state a claim upon which relief can be granted, and defendants Ki Park and Celico move to dismiss the entire Complaint for insufficient service of process and lack of personal jurisdiction. Plaintiff's cross-motion for a default judgment against Ki Park and Celico is also before the Court.

 BACKGROUND

 Plaintiff Zeta, a New Jersey corporation with its principal place of business in New Jersey, is in the business of manufacturing and selling microfilm reels. Plaintiffs Michael and Frank Naso, New Jersey residents, are President and Vice-President of Zeta, respectively.

 Defendant Equity is a New York Corporation with an office in New York City. Defendant M.P.C. is a division of Equity. Defendant Herbert Moelis is President of Equity. Defendant Celico is a South Korean company located in South Korea. Defendant Ki Park is the managing director of Celico and a resident of South Korea.

 Plaintiffs allege in their Complaint that Michael and Frank Naso jointly obtained two United States utility patents, numbered 4,798,352 and 4,863,111, for the invention of a microfilm-mounting reel. They claim this microfilm reel "exhibits enhanced retension [sic] of microfilm mounted ends . . . effective . . . against heretofore notorious undesired pulling out of mounted microfilm . . ." Compl. P 7. Plaintiffs allege that at some time in the past, M.P.C. purchased these reels from Zeta and resold them, but discontinued such purchases and began acquiring similar reels from a Korean manufacturer, Celico. Plaintiffs allege that the sale by M.P.C. in the United States of these reels obtained from Celico infringes the patents in suit. Plaintiffs further contend that Celico sells the reels to M.P.C. at "conspired unfair-competition low prices," compl. P 11, and that M.P.C. in turn sells the reels to American customers at "unfair price-cutting undercutting prices," compl. P 13, in violation of the federal antitrust laws. Plaintiffs also allege that defendants have misrepresented the origin of the reels by making them appear to be plaintiffs' product, in violation of the Lanham Act, §§ 43(a), 15 U.S.C. 1125(a). Lastly, plaintiffs claim defendants committed various RICO violations by engaging in a "scheme to fraudulently make and/or fraudulently sell counterfeit goods in violation of Plaintiff(s)'s United States patent . . . through a pattern . . . of racketeering activity(ies). . . ." Compl. P 57.

 DISCUSSION

 Defendants have moved this Court pursuant to Rule 12(b)(6) to dismiss the antitrust, RICO, and Lanham Act claims for failure to state a claim upon which relief can be granted. Defendants Ki Park and Celico have moved this Court to dismiss the entire Complaint pursuant to Rules 12(b)(2) and (5) for lack of personal jurisdiction and insufficiency of service of process, respectively. Plaintiffs have moved this Court for a default judgment against Ki Park and Celico. For the reasons stated below, defendants' Rule 12(b)(6) motion is granted in part and denied in part, defendants' Rules 12(b)(2) and 12(b)(5) motions are referred to a magistrate judge for further proceedings, and plaintiffs' motion for a default judgment is denied.

 A. Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6)

 A motion pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted tests only the sufficiency of the complaint, Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974), and should not be granted "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Anderson v. Coughlin, 700 F.2d 37, 40 (2d Cir. 1983). A court must accept as true the allegations of the complaint and draw all reasonable inferences in favor of the plaintiff. Scheur, 416 U.S. at 236.

 1. The Lanham Act Claims

 Although difficult to discern from plaintiffs' marginally intelligible Complaint, it appears that plaintiffs have alleged a violation of the Lanham Act § 43(a), 15 U.S.C. § 1125(a), *fn2" based on defendants' alleged false designation of origin due to continuing patent infringement. Specifically, plaintiffs claim that because defendants sold and continue to sell to former customers of plaintiffs microfilm reels which are identical or substantially similar to plaintiffs' reels and which infringe plaintiffs' patents, defendants have blatantly misrepresented the origin of those reels by leading the customers to believe the reels are produced by plaintiffs rather than defendants. Compl. P 24. Plaintiffs do not allege that defendants mislabelled the reels or otherwise represented to customers that the reels were manufactured by plaintiffs. Rather, the alleged false designation of origin is based solely on the similarity in appearance between the reels sold by both. Although quite inartfully pleaded, it appears that plaintiffs are claiming that the design of their reels has become, in the minds of purchasers, so associated with plaintiffs that defendants' sale of reels of the same or similar appearance is likely to cause confusion as to the source of the reels in violation of § 43(a).

 Defendants interpret plaintiffs' allegations to be in the nature of a claim of § 43(a) trade dress infringement. Plaintiffs respond, however, they are not relying on trade dress, but rather on the "overall identical appearance and shape and same public and same relevant market . . . [and] the total impression of the package, size, shape, color, design. . . ." Plaintiffs' Brief in Reply at 1-2. Notwithstanding plaintiffs' assertion that trade dress infringement is not at issue here, we fail to see the distinction plaintiffs are attempting to make, or any reason for such attempt. We therefore treat the allegations as sounding in § 43(a) trade dress infringement.

 Section 43(a) of the Lanham Act prohibits the marketing in interstate commerce of a product which conveys a false designation of origin. In essence, § 43(a) grants to the first manufacturer of a product, in certain circumstances, an unregistered trademark in the trade dress of the product. Stormy Clime Ltd. v. Progroup, Inc., 809 F.2d 971, 974 (2d Cir. 1987). Trade dress "involves the total image of a product and may include features such as size, shape, color or color combinations, texture, or graphics." LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 75 (2d Cir. 1985).

 To obtain § 43(a) protection, plaintiff must first prove that the trade dress of the product is either inherently distinctive or has acquired secondary meaning in the marketplace. Two Pesos, Inc. v. Taco Cabana, Inc., 120 L. Ed. 2d 615, 112 S. Ct. 2753, 2761 (1992). Trade dress that is not inherently distinctive and therefore not immediately eligible for protection under the Lanham Act may nevertheless warrant protection if the dress has acquired secondary meaning, i.e., if "the purchasing public associates [the product's] design with a single producer or source rather than simply with the product itself." Coach Leatherware Co., Inc. v. AnnTaylor, Inc., 933 F.2d 162, 168 (2d Cir. 1991). The issues of inherent distinctiveness and secondary meaning are questions of fact. LeSportsac, 754 F.2d at 78.

 Second, plaintiff must show that there is indeed a false designation of origin. This can be established by proving that the design or trade dress of the allegedly infringing product is so similar to that of the protected product that the public will likely be confused as to the product's source. LeSportsac, 754 F.2d at 75; Universal City Studios, Inc. v. Nintendo Co., Ltd., 746 F.2d 112, 115 (2d Cir. 1984) ("The crucial issue . . . is whether there is any likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question."). Likelihood of confusion is also a question of fact. LeSportsac, 754 F.2d at 79.

 If plaintiff shows secondary meaning and likelihood of confusion, defendant may nonetheless prevail if it bears its burden of showing that the design at issue is functional, as functional features are not protected under § 43(a). Warner Bros., Inc. v. Gay Toys, Inc., 724 F.2d 327, 330 (2d Cir. 1983). A functional feature is one that "is essential to the use or purpose of the article" or one that "affects the cost or quality of the article." LeSportsac, 754 F.2d at 76 (citing Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 850 n.10, 72 L. Ed. 2d 606, 102 S. Ct. 2182 (1982) and Warner Bros., 724 F.2d at 331). Functionality is also a question of fact. LeSportsac, 754 F.2d at 78.

 Although we seriously doubt plaintiffs' ability to prove a violation of § 43(a), it would be improper at this time to dismiss those claims because the Complaint seems to state a claim upon which relief can be granted. Specifically, plaintiffs have alleged that goods that affect interstate commerce are involved. Furthermore, they have alleged that because defendants' reels look essentially identical to theirs, and because defendant M.P.C. now sells reels made by defendant Celico to the same customers to whom it previously sold reels made by plaintiff Zeta, it is likely that these customers believe the reels they are getting from defendants are likewise manufactured by Zeta, thereby causing a likelihood of confusion as to source. The foregoing is sufficient to put defendants on notice of the nature of the claims asserted and, if proved, could support a claim of trade dress infringement under § 43(a). See Hicks v. Casablanca Records, 464 F. Supp. 426, 433 (S.D.N.Y. 1978); CBS Inc. v. Springboard Int'l Records, 429 F. Supp. 563, 567 (S.D.N.Y. 1976); Institute for Scientific Information, Inc. v. Gordon & Breach, Science Publishers, Inc., 931 F.2d 1002, 1007 (3d Cir. 1991). However, there appears to be substantial doubt as to plaintiffs' ability ...


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