The opinion of the court was delivered by: KOELTL
JOHN G. KOELTL, District Judge:
The plaintiff "Les Ballets Trockadero de Monte Carlo, Inc." is an all male satirical ballet troupe. It seeks a preliminary injunction enjoining the defendants from directly or indirectly using the name "Les Ballets Torokka de Russia," or the words "Trocks," "Trock," "Trockettes," "Trockadero," "Torokka," "Torokkadero," or "Trocadero" (or similar variations of any such word) in conjunction with the words "Ballet," "Ballets," or any other words identifying a dance company or dance troupe, or using any other mark, words, or names confusingly similar to the plaintiff's, including the use thereof in any advertising or promotional material, whether printed, verbal, broadcast, electronically or otherwise. The plaintiff alleges that the defendants have been unlawfully infringing its registered service marks and promoting their dance troupe in a way that is confusingly similar to the plaintiff's, all in violation of the Lanham Act. The plaintiff argues that the defendants are likely to continue their infringing activities unless enjoined and that the plaintiff will be irreparably injured.
For the reasons stated below, the motion for a preliminary injunction is granted.
After reviewing the parties' submissions including the affidavits submitted by both sides, the Court held a hearing and heard oral argument. The Court now makes the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52(a).
The plaintiff, Les Ballets Trockadero de Monte Carlo, Inc. (the "Trocks"), is an all male satirical ballet troupe founded in 1974 in New York as a not-for-profit corporation. The Trocks have performed for more than twenty years in the United States and abroad. The plaintiff has obtained federal service mark protection from the United States Patent and Trademark Office for the names "Les Ballets Trockadero de Monte Carlo," "Trocks," and "Trockadero." (Skolnik Decl. Ex. U.) Japan represents the Trocks' largest market from which it derives approximately eighty percent of its annual revenues. (Amended Verified Complaint "Am. V. Compl." P 28.) The Trocks stage approximately forty performances every summer in Japan. For many years, ZAK Corporation, a Japanese company owned and operated by Kyoichi Miyazaki ("Zak"), has produced the Trocks' tours in Japan. (Am. V. Compl. P 29.) In return for payments of approximately $ 660,000 per year, Zak has the exclusive right to promote the Trocks in Japan, and the Trocks can only perform in Japan through engagements obtained for it by Zak. Zak also established and derives income from the Trocks' official Japanese fan club, Club Trockadero, which has over one thousand members. On January 25, 1994, ZAK Corporation filed an application in Japan to register the mark "Trockadero de Monte Carlo Ballets Dan." (Matsuo Decl. P 11; Miyazaki Decl. P 28.)
In May, 1995, Zak formed defendant International Promotion for Music ("IPM") as a New York corporation with Zak as the President, sole director, and sole shareholder. (Skolnik Decl. Ex. S at DE1-9; Saito Dep. (Skolnick Decl. Ex. B) at 12; Miyazaki Decl. P 1.) According to Suguru Saito, the Vice President of IPM, Zak established IPM in order to extend his business operations and to create a New York presence. (Saito Dep. (Skolnik Decl. Ex. B) at 12, 14.) In late 1995, IPM retained defendant Victor Trevino, a former Trocks ballet dancer, to help organize an all male satirical ballet company that would compete with the Trocks and to be IPM's artistic director for all its ventures. (Trevino Dep. (Skolnik Decl. Ex. A) at 11-13, 18-20; Saito Dep. (Skolnik Decl. Ex. B) at 15-16.) Trevino recruited the individual defendant dancers, negotiated their contracts, organized music for the performances, retained a photographer, ordered the costumes and sets, and selected the ballets to be performed. (Trevino Dep. (Skolnik Decl. Ex. A) at 20-21.) During early 1996, Zak, Trevino, and Saito considered names for the new ballet company and ultimately selected Les Ballets Torokka de Russia (the "Torokka"). (Skolnik Decl. Ex. P at L21-23, L29, L34-37; Trevino Dep. (Skolnik Decl. Ex. A) at 84-85, 92, 94-96; Saito Dep. (Skolnik Decl. Ex. B) at 117-119.) According to Zak, IPM is the sole owner of defendant Torokka, which was created in order to provide an additional source of income through the scheduling of a winter tour. (Miyazaki Decl. PP 17, 21.) Although the defendants contend that in April, 1996, Zak applied to register the mark "Les Ballet Torokka de Russia" in Japan, (Miyazaki Decl. P 23), the plaintiff maintains that Zak instead applied for the mark "Torokkadero Sia Ballets Dan" or Torokkadero (Trockadero) Theater Ballet Company. (Matsuo Decl. P 14; Mizenko Decl. PP 3-4.)
The defendants made plans for a Torokka winter 1996-1997 tour in Japan. (Am. V. Compl. P 34a.) During the Trocks' Japanese tour in July and August 1996, flyers were distributed at the Trocks' performances and inserts were placed in the Trocks' programs that promoted the defendants' planned tour as a "Trockadero Winter Version" and "Trockadero's Winter Company." (Skolnick Decl. Ex. Q at DJ2-3, DJ98; Miyazaki Decl. P 26.) In letters to the Trocks during that period, Zak disclaimed responsibility for these actions and informed the Trocks that he was having trouble obtaining bookings for them in 1997. (Am. V. Compl. Ex. G, H.) On August 19, 1996, the plaintiff's counsel sent the defendants a cease and desist letter, (Am. V. Compl. Ex. I; McDougle Decl. P 6), and on August 30, 1996, the plaintiff commenced this action.
To prevail on a motion for a preliminary injunction, the party requesting relief must show: "(1) the likelihood of irreparable injury, and (2) either (a) likelihood of success on the merits, or (b) sufficiently serious questions going to the merits and a balance of hardships tipping decidedly in the movant's favor." Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d 964, 967 (2d Cir. 1995); see also Fisher-Price, Inc. v. Well-Made Toy Mfg. Corp., 25 F.3d 119, 122 (2d Cir. 1994); Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979). For the reasons stated below, the Court finds that the plaintiff has shown a likelihood of success on the merits, irreparable harm, and that the balance of the hardships tips decidedly in its favor.
As a threshold issue, the defendants argue that this action should be dismissed because the proceeding should take place in Japan under Japanese law. However, "Congress in prescribing standards of conduct for American citizens may project the impact of its laws beyond the territorial boundaries of the United States." Steele v. Bulova Watch Co., 344 U.S. 280, 282, 97 L. Ed. 319, 73 S. Ct. 252 (1952). The Lanham Act may be applied to activities outside the United States. See id. at 285-87 (applying the Lanham Act to conduct in Mexico). In Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633, 633, 641-42 (2d Cir.), cert. denied, 352 U.S. 871, 1 L. Ed. 2d 76, 77 S. Ct. 96 (1956), the Court of Appeals for the Second Circuit articulated the factors to be considered in determining the extraterritorial application of the Lanham Act: (1) whether the defendant's conduct has a substantial effect on United States commerce; (2) whether the defendant is a United States citizen; and (3) whether there is no conflict with trademark rights established under foreign law. See id. at 642. "None of these three criteria is dispositive of the analysis concerning the Lanham Act's extraterritorial effect, and a court must employ a balancing test of all three factors to determine whether the statute is properly implicated." Warnaco Inc. v. VF Corp., 844 F. Supp. 940, 950 (S.D.N.Y. 1994). However, the Court of Appeals also instructed that the absence of one of the factors may be fatal, and the absence of two factors was fatal in the Vanity Fair case. See Vanity Fair, 234 F.2d at 643.
As to the first factor, the plaintiff has demonstrated that the defendants' conduct has a substantial effect on United States commerce. A substantial effect on United States commerce may arise from a defendant's activities that are supported by or related to conduct in United States commerce, see Calvin Klein Indus., Inc. v. BFK Hong Kong, Ltd., 714 F. Supp. 78, 80 (S.D.N.Y. 1989); harm to a plaintiff's reputation, see King v. Allied Vision, Ltd., 807 F. Supp. 300, 307 (S.D.N.Y.), aff'd in part and rev'd in part on other grounds, 976 F.2d 824 (2d Cir. 1992); diversion of sales, see American Rice, Inc. v. Arkansas Rice Growers Coop. Ass'n, 701 F.2d 408, 414-15 (5th Cir. 1983); or adverse impact on foreign licensees, see Playboy Enters. v. Chuckleberry Publishing, Inc., 511 F. Supp. 486, 495 (S.D.N.Y. 1981), aff'd, 687 F.2d 563 (1982); see also Warnaco, 844 F. Supp. at 951-52 (reviewing the various grounds for determining that conduct has a substantial effect on United States commerce).
The defendants have engaged in conduct in the United States designed to further their infringing activities: Zak has formed defendant IPM, a New York corporation, in order to extend his business operations, to create a New York presence, and to organize the Torokka in the United States, and those activities have been assisted by the individual defendants, (Skolnik Decl. Ex. S at DE 1-19; Saito Dep. (Skolnik Decl. Ex. B) at 14; Miyazaki Decl. P 17); defendant Trevino used "Les Ballet Torokka de Russia" letterhead to correspond with dancers across the United States, (Trevino Dep. (Skolnik Decl. Ex. A) at 63); and defendant Trevino recruited the defendant dancers, negotiated their contracts, organized music for the performances, retained a photographer, ordered the costumes and sets, selected the ballets to be performed, and reserved rehearsal space in the United States, (Trevino Dep. (Skolnik Decl. Ex. A) at 21-22, 82-83).
Moreover, as a result of the defendants' infringing activities, the effects on United States commerce include dilution and damage to the plaintiff's U.S. registered marks and reputation, as well as damage to the Trocks' prospective business and licensing negotiations in a market from which it derives eighty percent of its income. See Philip Morris Inc. v. MidWest Tobacco, Inc., 1988 U.S. Dist. LEXIS 16787, CIV. A. No. 88-1292- A, 1988 WL 150693, at *3 (E.D. Va. Nov. 4, 1988).
The second Vanity Fair factor, the existence of an American defendant, is also satisfied. The individual defendants are all citizens of the United States, and defendant IPM is incorporated in New York state.
The third Vanity Fair factor, no conflict with the trademark rights under foreign law, also supports the exercise of extraterritorial application of the Lanham Act in this case. Protecting the plaintiff's rights in its marks by preventing the defendants from infringing those rights by using confusingly similar marks in Japan would not conflict with Japanese law. The plaintiff has persuasively demonstrated the likelihood that, under Japanese law, the defendants, as well as Zak and ZAK Corporation, do not have protectable rights under Japanese law to any of the marks at issue in this case.
The plaintiff's expert on Japanese trademark law, Kazuko Matsuo, explains without contradiction that, under Japanese trademark law, registration of marks provides protection. But before registration is granted and recorded in the Patent Office in Japan, an applicant has no legal rights in the mark other than rights it may have in an unregistered mark, and none are created by filing an application. (Matsuo Decl. P 9.) Although Zak and/or ZAK Corporation has filed applications for the registration of various marks in Japan, those applications are being contested, and it is undisputed that neither Zak nor ZAK Corporation holds a registration on any of the marks at issue in this case. Indeed, the plaintiff has persuasively shown that it is likely to be able to prevent Zak and/or ZAK Corporation from obtaining a valid registration on any of the marks at issue because the plaintiff's mark is a well-known mark in Japan and, under Japanese law, would take precedence over any application filed by Zak or ZAK Corporation for similar marks. Mr. Matsuo explains that unregistered trademarks and service marks are protected under Japanese Unfair Competition Prevention Law where there is proof of (1) the well-known nature of the mark; (2) the similarity of the defendant's mark; and (3) the likelihood of confusion. (Matsuo Decl. P 7.) The owner of a well-known mark can institute invalidation proceedings against the owner of a registered mark if it can demonstrate that it was the first to use and continue to use the mark. Although Japan has adopted the "first to file" rule for competing applications, a party cannot successfully register its mark if it is similar to another party's registered mark or well-known unregistered mark. (Matsuo Decl. P 9.)
The plaintiff's uncontradicted evidence supports the conclusion that the plaintiff's marks are well known in Japan and therefore that ZAK Corporation holds no protectable rights in any relevant marks.
Mr. Matsuo testifies that, based on his review of performances, promotional materials, and newspaper and magazine articles, the plaintiff's marks "Les Ballets Trockadero de Monte Carlo," "Trockadero," and "Trocks" have become so well-known in Japan that the plaintiff is entitled to protection under Japanese Unfair Competition Prevention Law and can prevent others from using confusingly similar marks. (Matsuo Decl. P 8; Matsuo Reply Decl. PP 1-2.) His testimony is also supported by evidence that the Trocks' largest following is in Japan, (Am. V. Compl. P 28 ...