754 F.2d at 75. Trade dress is functional if it is essential to the use or purpose of the article or affects its cost or quality. L.A. Gear, 988 F.2d at 1129. The concept of functionality can also apply -- on a limited basis -- to strictly ornamental features. Wallace, 916 F.2d at 79-80. A particular "design is functional because of its aesthetic value only if it confers significant benefit that cannot practically be duplicated by the use of alternative designs." Restatement (Third) of Unfair Competition § 17 cmt. c (Tentative Draft No. 2, 1990) (quoted in Villeroy & Boch, 999 F.2d at 621).
PSI's functionality claim has two aspects. First, PSI claims that some of the elements featured in Kompan's trade dress, e.g. the flat panels and the safety caps, are functional because they reduce the cost of the product or are essential to the safe use of the product. Second, PSI claims that each of the elements of Kompan's trade dress is aesthetically functional, i.e. necessary to compete in the market place.
Both of PSI's functionality claims fail because they rely on a disaggregation of the design elements in Kompan's total "look." See Def. Mem. at 9-13. PSI argues that because all of the individual design elements in Kompan's look are functional, Kompan cannot combine these elements to make a non-functional overall look. Id. at 9 "Breaking [Kompan's] trade dress into its individual elements and then attacking certain of those elements as functional...misconceives the scope of the appropriate inquiry." LeSportsac, 754 F.2d at 76. Although Kompan's complaint can be read to seek protection for both its design elements and the particular combinations of those elements it has used, Am. Compl. at PP 17-19, Kompan concedes that it is entitled to protection only for the combinations it has chosen, not for design elements such as colors or animal shapes, Pl.'s Reply Mem. at 5. PSI must therefore show that it needed to copy Kompan's overall design in order to compete in the market. Villeroy & Boch, 999 F.2d at 621. The functionality test must focus "upon hindrances to legitimate competition [in order to] accommodate consumers' somewhat conflicting interests in being assured enough product differentiation to avoid confusion as to source and in being afforded the benefits of competition...." Stormy Clime, 809 F.2d at 978.
PSI has made no attempt to show that it must replicate Kompan's combinations of design elements in order to compete in the market. PSI relies, instead, on its claim that the individual elements of Kompan's trade dress are functional. To show that individual elements of Kompan's trade dress are functional, PSI has offered pictures of products made by some of Kompan's competitors that use some of these elements. See Def. Ex. A-G, I, L-M. Because the competitors use the elements in ways that differ from Kompan's usage, PSI's own exhibits tend to show that it is not necessary to copy Kompan's overall "look" in order to compete in the market place. PSI has therefore failed to counteract Kompan's showing on distinctiveness and likelihood of confusion by showing that Kompan's trade dress is functional. As noted above, a showing of likelihood of success also creates a presumption of irreparable harm. PSI has done nothing to rebut this presumption, so Kompan is entitled to injunctive relief on its trade dress claim.
III. False Advertising Claim
Kompan also claims that PSI violates the Lanham Act by false advertising. Section 43(a) of the Lanham Act protects against two distinct wrongs: false designation of origin and false description or representation (false advertising). 15 U.S.C. § 1125(a)(1)(A) and (B)
; Agee v. Paramount Communications, 853 F. Supp. 778, 790 (S.D.N.Y. 1994), aff'd in part, rev'd in part on other grounds, 59 F.3d 317, 1995 WL 377379 (2d Cir. 1995); cf Forschner Group, v. Arrow Trading Co., 30 F.3d 348, 357, 360 (2d Cir. 1994) (holding that defendant's use of the phrase "Swiss Army knife" did not constitute false advertising under section 43(a) of the Lanham Act but remanding to consider whether, among other things, use of the same phrase constituted false designation of origin). Kompan blurs the line between these two distinct causes of action by premising its false advertising claim, in part, on the appearance of PSI's products as they appear in its catalog and on the use of color, typeface and layout in the catalog. See Pl.'s Mem. at 17-18. Kompan claims that PSI's similar product depictions and similar color, typeface and layout make an implicit claim that the Karavan line is similar to or superior in quality to Kompan's line. This claim is more properly seen as a false designation of origin claim, and I have addressed it as such in Part II of this opinion. Cf. Forschner Group, 30 F.3d at 357, 360.
Kompan also claims, however, that PSI engaged in false advertising by literal claims that its Karavan Line was superior to Kompan's line. Kompan finds these claims in a letter written by PSI to a dealer. See Compl. Ex. C. The letter states, "Karavan is intended to compete directly with Kompan in the early childhood market with a superior product line and lower prices." Id. Kompan has failed to show a likelihood of success on this aspect of its false advertising claim. When a defendant's advertisement claims that its product is superior to the plaintiff's, the plaintiff must affirmatively prove that the defendant's product is equal or inferior to the plaintiff's product. Castrol, 977 F.2d at 63.
Kompan's claims of PSI's inferior quality rest on alleged safety defects. See Olson Decl. I P 27; Olson Decl. III PP 8-10. PSI responds by denying Kompan's claims of safety defects, pointing out alleged safety problems with Kompan's products, and arguing that its claim of superiority is justified because its line is more wear resistant and safer than Kompan's. Bayman Decl.I PP 3, 5, 21-22; Bogan Decl. I PP 9-13; Fedele Decl. P 4, Roehrig Decl. P 4 and Ex. AA; Bayman Decl. III P 4. The claims made on both sides lack independent substantive documentation and tend to cancel each other out. At this juncture, Kompan has not established a likelihood of success or serious issues going to the merits on its false advertising claim.
IV. New York State Common Law and Statutory Claims
Kompan also seeks injunctive relief under New York's common law and a variety of New York State statutes.
In its third cause of action, Kompan alleges unfair competition. Under New York's common law of unfair competition, a producer's trade dress is protected against practices "imbued with an odor of bad faith" including palming off and deliberate copying. Laureyssens v. Idea Group, 964 F.2d 131, 138 (2d Cir. 1992). To support a claim of unfair competition, plaintiff must also establish likelihood of confusion. Stern's Miracle-Gro Products v. Shark Products, 823 F. Supp. 1077, 1093 (S.D.N.Y. 1993). As explained earlier, Kompan has made a strong showing on both likelihood of confusion and bad faith and therefore is alternatively entitled to preliminary injunctive relief on its common law claim.
Plaintiffs fourth and seventh causes of action alleges deceptive acts and practices and false advertising in violation of sections 349 and 350 of New York's General Business Law. Most trademark and trade dress claims fall outside the ambit of sections 349 and 350. Jaret Int'l v. Promotion in Motion, 826 F. Supp. 69, 78 ((E.D.N.Y. 1993) (citing R. Givens, Practice Commentaries on N.Y. Gen. Bus. Law § 349 at 567 (McKinney 1988)..., quoted in Bristol-Myers Squibb Co. v. McNeil-P.P.C., 786 F. Supp. 182, 215 (E.D.N.Y.), affd in part, vacated in part on other grounds, 973 F.2d 1033 (2d Cir. 1992)). In order to state a claim under section 349 or section 350, a competitor must allege the sort of harm to the public interest that would trigger FTC intervention under 15 U.S.C.A. § 45. Cf. Bristol-Myers, 786 F. Supp. at 215-216 (showing of intentional copying insufficient for a section 349 violation where there was no showing of substantially different ingredients or any risk to public health in the sense contemplated by the statute). Although plaintiff argues that defendant's product is unsafe, it has not, as detailed above, made a sufficiently strong showing on this point. To the extent that plaintiff's claims of violation of Gen. Bus. L. § 349 or § 350 rest on allegations of false advertising, plaintiff has failed to show a likelihood of success for the same reason that it has failed to show a likelihood of success on its Lanham Act false advertising claim. Cf. Towers Financial Corp. v. Dun & Bradstreet, 803 F. Supp. 820, 823 (S.D.N.Y. 1992) (holding that both Lanham Act false advertising claim and a false advertising claim made under section 349 or section 350 require a showing that the advertisement was false or misleading).
In its fifth cause of action, Kompan alleges violation of New York's anti-dilution statute. N.Y. Gen. Bus. Law § 368-d. This statute requires that plaintiff show that it has an exceptionally strong mark. Sally Gee, Inc. v. Myra Hogan, Inc., 699 F.2d 621, 625 (2d Cir. 1983) (citing Allied Maintenance Corp. v. Allied Mechanical Trades, 42 N.Y.2d 538, 545-46, 399 N.Y.S.2d 628, 369 N.E.2d 1162 (1977)). A determination under the Lanham Act that a mark is distinctive does not mean that it should be considered exceptionally strong for purposes of section 368-d. Id. At this early point in the litigation, I do not believe Kompan has shown a likelihood that it can prove an "exceptionally strong" trade dress.
Kompan's sixth cause of action alleges violation of N.Y. Gen. Bus. L. § 133. Section 133 governs the use of names or addresses in trade. Because Kompan has not sought to enjoin PSI's use of a trade name or address, section 133 has no apparent relevance to this request for injunctive relief.
Finally, in its eighth cause of action, Kompan seeks recovery for unjust enrichment. Kompan alleges that PSI will be unjustly enriched by its trade dress infringement and false advertising. To prevail on a claim of unjust enrichment in the trade dress area, Kompan must show that PSI has received a benefit at plaintiffs' expense "under such circumstances that in equity and good conscience he ought not retain." Yankee Publishing v. News America Publishing, 809 F. Supp. 267, 282 (S.D.N.Y. 1992) (quoting Miller v. Schloss, 218 N.Y. 400, 113 N.E. 337 (1916). Except as a measure of damages, plaintiff's unjust enrichment claim adds little to its trade dress infringement claim. The injunction entered on the trade dress infringement claim will address any harm plaintiff might suffer on its unjust enrichment claim.
V. Scope of the Injunction
Kompan has requested broad-based injunctive relief including a recall order and an order directing the defendants not to fill pending orders for infringing materials.
Recall is a drastic remedy that may impose a substantial burden on defendants. Nevertheless, it can be an appropriate remedy within the discretion of the district court at least in the context of a permanent injunction. See Nikon Inc. v. Ikon Corp., 987 F.2d 91, 97 (2d Cir. 1993) (citing Perfect Fit Indus. v. Acme Quilting Co., 646 F.2d 800, 805 (2d Cir. 1981), cert. denied. 459 U.S. 832, 74 L. Ed. 2d 71, 103 S. Ct. 73 (1982). Some authority also supports the use of a recall provision in a preliminary injunction. See Hukafit Sportswear v. Banff, Ltd., Copy. L. Rep. (CCH) P25,868, 1985 WL 5943 at *3-*7 (S.D.N.Y. 1985) (and cases collected). Here, Kompan -- perhaps due to the early stage of this litigation -- has given no real sense of the harm that will ensue if a recall order is not granted. In addition, although PSI has offered no proof on the subject, the very size of the playground equipment at issue in this case suggests that PSI could not recall products without significant expense. A court ordering recall must first weigh the likely burden and expense of a recall. Perfect Fit, 646 F.2d at 807; see also Bausch & Lomb v. Nevitt Sales Corp., 810 F. Supp. 466, 478 (W.D.N.Y. 1993) (declining to order recall based on incomplete record and conflicting evidence concerning the number of infringing products in the marketplace).
I therefore deny Kompan's request for recall without prejudice to reapplication based on a more complete record.
Kompan is, however, entitled to an injunction against filling currently unfilled orders. This provision merely preserves the status quo. The injunctive relief ordered below includes products that the defendants have in their possession and would otherwise use to fill orders.
Kompan has also requested that defendants be required to file a report detailing their compliance with the injunction and identifying with specificity all new trade dress and advertising proposed for use in lieu of the offending materials. This request is granted.
Finally, Federal Rule of Civil Procedure 65(c) requires the court to condition the granting of an injunction upon the posting of security adequate to protect against damages incurred by reason of a wrongful injunction. Fed. R. Civ. P. 65(c). The parties' submissions on the size of a potential bond have been singularly unhelpful. Although specifically invited to submit additional material on this issue, neither party has made a submission in evidentiary form. Kompan urges that no bond or a minimal bond be set based on the action of other district courts in trademark cases which may or may not have involved a similar risk of loss to the defendant. Pl.'s Letter Br. 6/12/95 at 4. PSI estimates, without supporting detail, that it will lose between $ 500,000 and $ 2,000,000 primarily in the form of goodwill if an injunction is entered. Roehrig letter 6/12/95. Because PSI has not supported its estimate of loss, I direct Kompan to post a bond in the amount of $ 50,000 without prejudice to an application for modification from either party based on a competent showing.
Park Structures, Inc., Karavan, Kay and Alan Bayman and Baughman Bros. Inc., their officers, agents, sales representatives, distributors, employees, subsidiaries, divisions, successors and assigns, and all persons in active concert, participation, and combination with defendants are therefore enjoined from manufacturing, producing, distributing, circulating, selling, offering for sale, advertising, promoting or displaying any of the following products: Model #1100-1 (Locomotive), Model #1100-2 (Passenger Car), Model #1100-3 (Flat Car), Model #1200-1 (Car), Model #1200-2 (Camper), Model #1300 (Sand Ship), Model #2100 (Sand Factory), Model #2200 (Sand House), Model #2300 (Pirate Ship, Model #2500 (Slide House), Model #2600 (Magician's House), Model #2700 (Elephant Slide), Model #2800 (Wide Tot Slide), Model #4010 (4-Seat Bouncer), Model #4020 (Goose Bouncer), Model #4030 (Elephant Bouncer), Model #4040 (Turtle Bouncer), Model #4050 (Hen Bouncer), Model #4060 (Panda Bear Bouncer), Model #4070 (Dinosaur Bouncer), Model #4080 (Bunny Bouncer), Model #4110 (Motorcycle with Side Car Bouncer), Model #4120 (Seal Bouncer), Model #4500 (Group SeeSaw), Model #5300 (Round Table), and Model #5400 (Picnic Table).
In addition, Park Structures, Inc. is directed to file with the court within 30 days a report detailing its compliance with this injunction and, if it wishes to issue some or all of the same products with a different trade dress, identifying with specificity that trade dress.
Finally, Kompan is directed to post a bond in the amount of $ 50,000.
IT IS SO ORDERED.
July 14, 1995
Rosemary S. Pooler
US District Judge