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NEW YORK RACING ASS'N, INC. v. STROUP NEWS AGENCY

March 9, 1996

NEW YORK RACING ASSOCIATION, INC., Plaintiff,
v.
STROUP NEWS AGENCY CORPORATION, Defendant.



The opinion of the court was delivered by: MCAVOY

 Plaintiff New York Racing Association ("NYRA") brought suit against defendant Stroup News Agency Corporation ("Stroup"), alleging violations of federal trademark law and state trademark and unfair competition laws, and seeking damages, an accounting, costs, and attorneys' fees. After oral argument on June 23, 1995, the Court granted NYRA's motion for summary judgment on the issue of whether Stroup's T-shirt, bearing the legend "SARATOGA," accompanied by a picture of racing thoroughbreds, infringed upon NYRA's trade and service marks and constituted unfair competition. Having determined Stroup's liability, the Court held a bench trial on September 7, 1995, to determine damages.

 Findings of Fact

 1. NYRA operates Saratoga Race Course, which opened in Saratoga Springs in 1863. It holds two registered service marks: a) "SARATOGA" and b) a logo consisting of "SARATOGA" with an umbrella over the letters "O" and "G" and a race horse across those letters. NYRA also holds a trademark in the phrase "SARATOGA RACECOURSE."

 2. NYRA licenses others to manufacture and sell various souvenir items--such as clothing, hats, and glasses--bearing these marks. Licensees sell this merchandise at the Race Course and elsewhere.

 3. Since 1992, NYRA's master licensee has been David D. Barker, Inc. ("Barker"). (Tr. at 20.) With NYRA's approval, Barker grants various sublicenses to companies who desire to sell Saratoga souvenir merchandise outside the track.

 4. NYRA requires authorized licensees to affix a sticker to their products identifying them as official, NYRA-approved merchandise.

 5. Between 1990 and 1994, NYRA allegedly grossed $ 2,700,000 from its licensing program. (Lieberman Aff. P 8.)

 6. On July 13, 1992, Barker granted Stroup a sublicense to make and sell products imprinted with the "SARATOGA" and "SARATOGA RACECOURSE" marks at Stroup's stand outside the track and at Stroup's Mainstreet News Store in Saratoga Springs. (Tr. at 21.)

 7. The sublicense agreement required Stroup to affix the official NYRA sticker to its merchandise. (Id.)

 8. As part of this agreement, Stroup acknowledged NYRA's rights in the marks, agreed to refrain from using NYRA's marks after the expiration of the license, and agreed to injunctive relief as a remedy for any such use. (P's Ex. 8, PP 8, 13.)

 9. The agreement also provided for a ninety-day post-expiration period during which Stroup could dispose of on-hand products without incurring liability. (P's Ex. 8, P 12.) The provision reads, in its entirety, as follows:

 
Disposal of Stock. After expiration or termination of this Sublicense, Sublicensee shall have no further right to manufacture, advertise, distribute, sell or otherwise deal in any Licensed Products or other products which utilize the NYRA Marks except as hereinafter provided. Sublicensee may dispose of Licensed Products which are on hand or in process at the time of such expiration or termination for a period of ninety (90) days thereafter, provided all statements and payment then due are first made.

 10. Pursuant to the Sublicense agreement, Stroup offered for sale a T-shirt displaying the word "SARATOGA" together with a picture of thoroughbred horses ["'SARATOGA' T-shirts"]. (Barker Aff. P 12.) Stroup sold the shirts for $ 12.99 each. (Tr. at 36.)

 11. Stroup paid Barker an "up-front" royalty of fifteen per cent. (P's Ex. 8, P 4(B); Tr. at 23.) The sublicense agreement also provided that Stroup would pay a royalty of fifteen per cent on all net sales of licensed products sold during the contract period. (P's Ex. 8, P 4(A).)

 12. The sublicense agreement between Barker and Stroup expired on December 31, 1992. (Tr. at 22.) Barker denied Stroup's request for a new license in 1993. Stroup did not seek a license in 1994.

 13. From March, 1993, through June, 1995, Deborah Lee managed two Stroup stores in Saratoga Springs New York. One store was located at 382 Broadway an the other was located at 517 Broadway. (Tr. at 33-34.) As the manager of these stores, Ms. Lee was in charge of ordering, basic accounting, billings, and weekly reconciliations, inter alia. (Tr. at 33.)

 14. In March, 1993, each of Stroup's Broadway stores offered for sale approximately two dozen "SARATOGA" T-shirts at the price of $ 12.99 each. (Tr. at 35-36. In addition, the 382 Broadway store had a case of 72 "SARATOGA" T-shirts in its basement. (Tr. at 36-37.)

 15. The 382 Broadway store received another case of 72 "SARATOGA" T-shirts before the commencement of 1993 racing season. (Id. at 36-37.) These shirts arrived without the official NYRA sticker on them. (Tr. at 40.) The packing slip in the box indicated that a company called Broadway Marketing had shipped the shirts. (Id. at 39.)

 16. In July, 1994, each of Stroup's Broadway stores received one box of 60 "SARATOGA" T-shirts. These shirts also arrived without the official NYRA stoker on them. (Tr. at 40.) The packing slips in these boxes did not indicate who had shipped the shirts. (Id. at 39-40.)

 17. In Stroup's response to NYRA's statement of undisputed material facts, Stroup admitted that in 1994, more than a year after the expiration of the sublicense agreement, it sold "left over" T-shirts that were identical to those it had sold pursuant to the sublicense agreement. (Dkt. #16, PP 13, 17.)

 18. Robert Rubin is one of Stroup's principals. (Tr. at 27-28.)

 19. At some time during her employment, Ms. Lee heard Mr. Rubin order certain stickers over the telephone. (Tr. at 40-41.)

 20. These stickers differed from the official sticker that NYRA used to designate its licensed products in 1992. (Tr. at 41.) Whereas the 1992 sticker indicated "Broadway Marketing" along the bottom, the stickers Ms. Lee received in 1993 and 1994, although nearly identical to the 1992 stickers, indicated "Mainstreet News" along the bottom. (Tr. at 41; P's Ex. 10.)

 21. Mr. Rubin instructed Ms. Lee to affix the "Mainstreet News" stickers to the sticker-less T-shirts that the Broadway stores received in 1993 and 1994. (Tr. at 40-41.)

 22. In the Spring of 1994, master-licensee Barker discovered that Stroup had begun operating gift shops in the rest stops along the New York State Thruway and at the Albany Airport. (Tr. at 23-24.)

 23. Barker later observed unauthorized "SARATOGA" T-shirts offered for sale at Stroup's Mainstreet New Store, a Thruway shop, and the Albany ...


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