The opinion of the court was delivered by: KAPLAN
LEWIS A. KAPLAN, District Judge.
The prize for which these actions contend is the United States and worldwide rights in the TOPICLEAR trademark, a mark used on skin cream, lotions and soaps sold primarily to African American, Caribbean and African communities both here and abroad. The contenders are the French successors of Odette Anne-Marie Saffroy, the widow Triquet ("Triquet"), who was the first user of the mark and originator of TOPICLEAR products, and the Aini family.
In briefest summary, the genesis of the dispute is as follows:
Triquet invented a cleansing cream in the late 1970's, began selling it in France under the name TOPICLEAR, and registered the TOPICLEAR mark in France in 1980. In 1989, Charles Aini, whose family previously had purchased TOPICLEAR product from the Triquet interests, applied to register the mark in the United States. Triquet and later her successors in interest opposed the registration. In 1992, the parties resolved their dispute by (a) Triquet's successors withdrawing their opposition, (b) the formation of Topiclear Beauty Products, Inc. ("TBPI"), jointly owned by the Ainis and the Triquet successors, to exploit the mark, (c) an agreement by Jacob Aini, Charles' son, to contribute $ 100,000 to TBPI, and (d) an agreement by both sides to transfer all of their respective trademark rights to TBPI. Charles Aini subsequently obtained the U.S. registration for TOPICLEAR. Later in 1992, the parties considered and, allegedly, entered into a loan agreement that contemplated a $ 300,000 loan by Jacob Aini to certain of the Triquet successors, secured by a pledge of the borrowers' rights in the mark.
The Aini interests now claim that Charles Aini is the rightful owner of the U.S. registration which, they claim, is valid and enforceable, and that TBPI and/or Jacob Aini own all other worldwide rights in the mark by virtue of the 1992 agreement and an alleged default by and foreclosure of the interests of the Triquet successors under the loan agreement. They claim that the Triquet successors' use of TOPICLEAR infringes the Aini's mark.
The Triquet successors take a fundamentally different view. They begin from the premise that the Ainis are, in their words, "trademark pirates." They contend that the Ainis regularly appropriate in the United States marks used abroad by others and then apply those "pirated" marks to counterfeit goods the Ainis obtain from brokers. In this case, they assert, the Ainis adopted the TOPICLEAR mark in furtherance of just such a scheme and sought to register it here, fraudulently claiming priority of use. When the Triquet successors opposed the registration application, the Ainis first offered perjurious evidence in support of the application and then procured the withdrawal of the opposition -- and thus procured the U.S. registration itself -- by tricking them into signing the 1992 agreement. They contend that the 1992 agreement never came into force or was abandoned and therefore transferred no rights either to the Ainis or to TBPI. And they assert that no loan ever was made pursuant to the loan agreement and that no default therefore occurred. The Ainis' use of the TOPICLEAR mark, they maintain, infringes their rights. They seek cancellation of the U.S. registration and other relief.
The case was tried without a jury. This opinion contains the Court's findings of fact and conclusions of law pursuant to FED. R. CIV. P. 52(a).
The Parties and Their Initial Involvements With TOPICLEAR
Following Triquet's invention of the cleansing cream and the adoption of the TOPICLEAR mark, TOPICLEAR cream was promoted and distributed throughout the early and mid-1980's by Aqua Bella International ("ABI"), a company owned and controlled by Triquet. In 1984, she began distributing as well through Afro Stars Distributors ("ASD"), a company owned by Ismael Jedouane. The line was expanded in 1987 to include soaps and lotions and, in 1988, Office Central D'Achats ("OCA"), another company owned and controlled by Triquet, became an additional TOPICLEAR distributor.
In 1991, Triquet sold the TOPICLEAR business and mark to Creation Cosmetique International ("CCI"), a company of which Jedouane then was the president or general manager. Jedouane's associates in CCI included Emile Garau and, during part of the relevant period, Simone Mamane. This trio was associated also in a number of related companies including Laboratoire REC ("REC"), which had manufactured TOPICLEAR products for Triquet. In 1992, REC and other companies in which Jedouane and Garau held interests merged to form GMJ, which became a licensee of CCI for the manufacture and distribution of TOPICLEAR product.
In 1993, GMJ sought protection from the French bankruptcy courts. Two years later, Marcel Cohen invested in the reorganization plan of GMJ. Societe Internationale Cosmetique ("SIC"), owned 64 percent by Cohen and 12 percent each by Jedouane, Garau and Mamane. It was formed in furtherance of the reorganization and purported to acquire the TOPICLEAR business and mark from CCI in January 1996. (DX YG, P 20; DX UO)
The members of the Aini family relevant to this dispute are Charles Aini, his sons Jacob (Jack), Michael, and Howard, and Jack's wife, Raquel or Rachel Aini.
Jack Aini began working part-time at Cheila's at about the time it opened and had a full-time role in the business by the time he reached age 13 in 1975, ultimately becoming the manager of the cosmetics section. He was expansion minded. In 1981, he opened his own retail store, Parkside Discount. In 1983, he opened the first of a number of Homeboys Discount Stores in Brooklyn. In the late 1980's, he decided to reach beyond his retail operations to manufacturing, importing and distributing products in the United States. He has been involved in doing so since the 1980's through a dizzying array of companies that have appeared and disappeared with some frequency. All have been little more than names used by Aini as a matter of convenience.
The first of these enterprises appears to have been A.B.C.E. Wholesale, Inc. ("ABCE"), which was formed in 1987 or 1988. In 1992 or 1993, ABCE was replaced by Zuri International, Inc. ("Zuri International"), which in turn was succeeded by Aya Products, Inc. ("Aya Products"). Jack Aini has been the eminence behind a number of other companies including Roldan Corporation ("Roldan"), which is discussed in greater detail below, RNM and King Cosmetics Co. His wife has been involved in all of the businesses, usually as a partner, and she frequently is the record holder of the Ainis' stock in them.
In the fall of 1995, Jack and his wife moved to Paris. They sold their interests in the U.S. retail and wholesale businesses to his brothers, Harry and Michael Aini, the latter of whom then left the family supermarket and became president of I.C.E. Marketing Co. ("ICE"), also an Aini company.
Since the fall of 1995, Jack has been involved in real estate and other businesses and owns interests in companies which have opened Homeboys stores in Paris. He continues to be involved with Topiclear products.
In view of the claims asserted in this case, the adoption of the names of certain of Jack Aini's companies is of more than passing interest. Prior to the formation of Zuri International, Jack was aware that the word "Zuri" was the name of a brand of cosmetics well known in the African community. He nonetheless took the name for his new company, discontinuing its use only after the owner of the "Zuri" mark sued on trademark grounds.
Similarly, "Aya" was the name of a brand of cosmetics manufactured by Otentika in the 1980's which was known to Jack because he was a distributor of Aya products. Claiming that Otentika had abandoned the mark, Jack adopted "Aya" as the name of the company he formed to succeed Zuri International, promptly drawing litigation from Otentika which Jack won.
Following the Aya controversy, Jack formed Roldan, an episode which has been the subject of a reported decision by the United States District Court for the Southern District of Florida. According to the findings in that case, which were not seriously disputed at trial, Laboratorios Roldan, C. por A., is a long established Dominican company, the owner of the Dominican registration for the "Roldan" trademark, and the manufacturer of a very successful soap marketed in the Dominican Republic, the United States and elsewhere under that mark. In the late 1980's, Jack and Rachel bought and sold the "Roldan" product in the United States. In 1991, they sought a distributorship agreement for the product from Laboratorios Roldan. After being rebuffed, they formed an entity they named Roldan Corporation to produce products under the "Roldan" mark notwithstanding that they lacked any shred of authority from the trademark owner to use the name.
In 1993, they sought to register the Roldan mark here, claiming that the Ainis were the first users of the mark in the United States. Laboratorios Roldan obtained a preliminary injunction against them, the court specifically rejecting the Ainis' claim that they were the first U.S. users of the "Roldan" mark. Laboratorios Roldan, C. por A. v. Tex International, Inc., 902 F. Supp. 1555 (S.D. Fla. 1995).
The Introduction of TOPICLEAR in the United States
Given the perceived importance to both sides of establishing first use of the TOPICLEAR mark in the United States, it is not surprising that the evidence is in sharp conflict.
Triquet and ASD began to advertise and promote TOPICLEAR in a French publication called Amina, which had extremely limited distribution in the United States (PX 89, at 38-43), as early as 1982. The Court finds that Triquet and/or ASD sold TOPICLEAR products to customers in the United States at least as early as October 1984. (DX BX; DX YG, PP 12, 24, 29-32, 36) In October 1985, ABI entered into an agreement making Sapdem Ltd., a company run by Felix Poblah, its exclusive U.S. distributor of TOPICLEAR product. (DX YB, at 3; DX YG, P36)
Jack Aini claimed that he first became aware of TOPICLEAR cream while on a trip to Nigeria in 1982 or 1983. He subsequently decided to make a line of soaps and lotions and chose the TOPICLEAR name for his products because, he said, he liked the name and was unaware of any such products in the U.S. market. (PX 56, at 3-4) He had the products made for him, he claimed, by his wife's cousin, a Mr. Chaiou. (Id. at 4) He began U.S. sales, he suggested, in mid-1984 and began purchasing TOPICLEAR cream from ABI for resale commencing in 1986 or 1987. (Id. at 5-6)
The Court does not accept Mr. Aini's account. There is no credible evidence that the Ainis had anything to do with TOPICLEAR products, whether originating from the French or their own efforts, before Jack Aini began buying TOPICLEAR cream from Sapdem in 1986 or somewhat later. (See DX YB, at 5-6; PX 79, at 6-7) Aini subsequently imported TOPICLEAR product directly from ABI and OCA. Indeed, in 1990, he wrote OCA to express his pleasure at OCA's willingness "to let us handle your products . . ." (DX AG, at W02488) (emphasis added) His claim that he had soaps and lotions, which he sold under the TOPICLEAR name, manufactured for him before he began distributing TOPICLEAR products purchased from Sapdem, ABI and OCA is unsubstantiated and unpersuasive.
On April 10, 1989, Jack Aini prepared, and Charles Aini signed, an application for federal registration of the mark "Topiclear Number One" for use on soaps, creams and lotions on April 10, 1989. Charles Aini there declared that he believed himself to be the owner of the mark, that to the best of his knowledge no one else had the right to use the mark, and that the dates of first use and of first use in commerce were January 16, 1989 and March 30, 1989, respectively.
(DX D) The application did not disclose Triquet's prior use of the mark or the fact that Jack Aini had been buying TOPICLEAR product from ABI, OCA and Sapdem for some time.
Triquet opposed the application. In answers to interrogatories, Charles Aini swore that it was he who decided to adopt the TOPICLEAR mark; placed the alleged date of his first use on June 23, 1985, almost four years earlier than the date claimed in the application; asserted that he did business as Topiclear Products; said that his TOPICLEAR products had been manufactured by Regent Traders of Geneva, Switzerland, from at least as early as May 1985 to the date of the answers; denied having filed any state trademark registrations for TOPICLEAR; said that Charles Aini first learned of Triquet's use of the mark in 1987 or 1988 from Jack Aini; denied the existence of any business relationship relating to TOPICLEAR with ABI and OCA; and stated that the only person who had provided information used in the preparation of the answers to interrogatories was Charles Aini. (DX G) In response to the request that the applicant identify the two persons having the best knowledge of his marketing of products under the TOPICLEAR name, Aini listed only himself. He did not mention Jack Aini.
Each and every one of the foregoing answers was false. Jack Aini, who prepared them, knew of their falsity. To the extent that Charles Aini had any information concerning the matters inquired of, he too knew that the answers were false.
Thus, the interrogatory response filed in the name and over the signature of Charles Aini was a fraudulent document contrived by Jack Aini in an effort to secure the U.S. registration to the TOPICLEAR mark. Indeed, the advancement of the alleged date of first use to June 1985, a backdating of nearly four years prior to the date claimed in the initial registration, manifestly was designed to establish priority of use over Triquet.
After Jedouane, Garau and Mamane, through CCI, acquired the TOPICLEAR business from Triquet, Jack Aini approached them in the hope of settling the trademark opposition. Over a period of three or four days in December 1991, Aini held a number of meetings with them in New York, some at the offices of Aini's lawyer, Martin Friedman. The Jedouane group returned to France and then came back to New York in January 1992, at which time the negotiations continued. The discussions were principally between Aini and Jedouane and were conducted in both Arabic and English. Garau and Mamane had some knowledge of English and understood parts of the conversations, with Jedouane translating into French for them as required.
On January 7, 1992, the parties reached an agreement (the "1992 Agreement") to resolve the trademark opposition and establish a framework for the parties to do business with one another. (PX 7) The document provided that the Jedouane group would withdraw its opposition to Charles Aini's registration application, that Charles Aini would assign his interest in the mark to Jack Aini once the registration issued, and that CCI and Jack Aini would transfer all of their patents, trademarks, and manufacturing processes to a new company, later identified as TBPI, to be established under New York law. TBPI was to have two classes of stock, one class to be held 25 percent each by Jack Aini, Jedouane, Garau and Mamane and the other, described as "a voting stock," to be held 50 percent by Jack Aini and 16 2/3 percent each by Jedouane, Garau and Mamane. The board was to consist of four directors, three designated by Jack Aini and the other by Jedouane and his associates. Aini was to serve as president and "make all decisions in the ordinary course of the business." The shareholders were to enter "into a separate shareholders agreement" containing buy out provisions that would operate in the event any of the shareholders died or wished to sell his shares. TBPI was to enter into perpetual distribution agreements for TOPICLEAR products (a) for France with an entity owned by Jedouane, Garau and Mamane, and (b) for the rest of the world with Jack Aini or his designee. Aini was obliged to pay "the company holding the trademark" $ 100,000, $ 10,000 of which was due on signing and the balance six months hence.
The Agreement dealt also with the sources of the TOPICLEAR products -- tubes of cream and gel, body lotion, soap, and jars of cream -- to be sold by Aini's distribution company. All ultimately were to be manufactured by REC. (Id. at 3) At the time the Agreement was executed, however, it appears that REC made only tubes. (Id.) Jedouane, Garau and Mamane therefore agreed that the Ainis were free to continue purchasing body lotion, soap and cream in jars from other manufacturers until REC was in a position to supply those products formulated to Jack Aini's specifications. (Id. at 4-6)
The entire agreement was conditioned expressly upon Jedouane and his associates "producing specific evidence translated into English and certifying that all payments have been made to the widow of JACQUES TRIQUET and that CCI and REC are corporations formed under French law and are in good standing . . ." It recited also that the parties acknowledged that Aini's lawyer had represented Aini and his companies and that Jedouane, Garau and Mamane had been advised to retain their own counsel, but that they had chosen not to do so. (Id. at 7)
The 1992 Agreement was signed by (a) Jacob Aini; (b) Jedouane for himself, as attorney-in-fact for Mamane, and as president of CCI; and (c) Garau for himself and as president of REC. Although a line beneath the words "agreed to" was provided for the signature of Charles Aini, Charles Aini never signed the document, one of the many circumstances giving rise to disputes concerning whether the agreement ever came into force and, if so, its effects.
Subsequent Conduct Referable to the 1992 Agreement
The Triquet successors did not provide Jack Aini, prior to the commencement of litigation, with the "specific evidence" certifying that Triquet had been paid upon which the effectiveness of the 1992 Agreement was conditioned. Nevertheless, after the 1992 Agreement was signed by Jack Aini and the Jedouane group, the parties proceeded in some respects as if the agreement was in force and ignored it in others. Although Charles Aini never signed the agreement, the Triquet successors withdrew their opposition to Charles Aini's trademark application (PX 28), and the registration issued in due course. (PX 9) TBPI was formed, but the separate shareholders agreement referred to in the 1992 Agreement never was discussed, much less agreed upon. TBPI never entered into the distribution agreements referred to in the contract. None of the parties ever transferred any patents, trademarks or manufacturing processes to TBPI save that Charles Aini licensed the TOPICLEAR mark to TBPI for an indefinite term at a royalty of eight percent. (DX NO) Jack Aini never paid the $ 100,000 to TBPI that the agreement required, although the Court finds that Garau, Mamane and Jedouane asked that he pay the money to them or their companies rather than to TBPI and that Aini in fact did so.
Aini purchased TOPICLEAR tubes from REC, although not all of his requirements as the parties had contemplated. (PX 56, at 16; PX 16; PX 84, at 5-6, 38) Jack Aini, with the knowledge of the Jedouane group, also caused a number of infringement actions to be brought in the name of Charles Aini against alleged counterfeiters. (PX 56, at 12-13)
Later in 1992, the parties began discussing the possibility of a $ 300,000 loan by Jack Aini to Jedouane, Garau, Mamane and their associate, Max Benatar, to be secured by the borrowers' interests in TBPI and the TOPICLEAR and other trademarks around the world, among other collateral. Aini's trademark attorney prepared a draft loan agreement, note and assignment on October 8, 1992 which Rachel Aini faxed to Jedouane on the same day with advice that the originals would follow for signature by courier. The draft documents, which were sent both in English and in French translation, proposed that the borrowers acknowledge receipt of the funds by signing the loan agreement. (PX 13, at F002631) With some modifications not relevant here, the borrowers signed the documents, which were dated as of October 21, 1992. (PX 14) The note was due and payable on October 21, 1994. (Id. Ex. A)
The questions whether Aini ever loaned the borrowers the $ 300,000 and whether the signed note and loan agreement ever were delivered to Aini were sharply contested at trial. Both sides contend that there was only one original of the documents, but the stories then diverge. According to Aini, he lent the money and had his lawyer retain the originals for safekeeping. Jedouane, however, asserts that no money ever changed hands, that he held the originals pending receipt of the funds, and that Mamane improperly took the originals and gave them to Aini for use in this dispute.
The resolution of this dispute is far from simple. The Court is unimpressed with the candor and accuracy of both Aini and Jedouane. That Mamane abruptly changed sides is clear. Aini, quite remarkably, failed to produce a shred of documentary evidence to corroborate the assertion that he ever put up the $ 300,000.
In all the circumstances, the Court finds that it was the understanding of the parties that the delivery and effectiveness of the note and security agreement were conditioned upon the $ 300,000 changing hands, an event that never occurred. The putative borrowers ...