The opinion of the court was delivered by: KAHN
MEMORANDUM-DECISION AND ORDER
Plaintiff Harley-Davidson, Inc. ("Harley-Davidson") commenced this action on April 20, 1993 in response to defendants' use of the name "Harley Rendezvous" to refer to their motorcycle-related events. Plaintiff alleged claims for trademark infringement under 15 U.S.C. §§ 1114-1118, false designation of origin or sponsorship under 15 U.S.C. § 1125 and New York common law trademark infringement and unfair competition. The defendants Harley Rendezvous, Inc. ("Harley Rendezvous") and Daniel K. O'Connell ("Kemp O'Connell") (collectively "defendants") answered with affirmative defenses and counterclaims.
J. Daniel O'Connell ("O'Connell") answered separately. Subsequently, both plaintiff and defendants moved for summary judgment. Judge Con. G. Cholakis denied both motions on March 21, 1994. However, after the transferral of the action to this Court, the March 21, 1994 order was vacated on stipulation and the parties were directed to resubmit papers on the propriety of summary judgment. See Stipulation and Order, 93-CV-0506, Dkt. No. 120 (Dec. 24, 1996). Parties were also directed to file stipulations of undisputed fact. Id.
Defendants have now resubmitted their motion for summary judgment. In turn, plaintiff has cross-moved to strike defendants' affirmative defenses and counter-claims. Each side has submitted its statement of undisputed facts (hereinafter referred to respectively as Def. Undisp. Facts and Pl. Undisp. Facts). For the reasons discussed below, defendants' motion is granted in part and denied in part and plaintiff's motion is granted in part and denied in part.
Plaintiff has sold motorcycles under its trademark "Harley-Davidson" since 1903. It also sells motorcycle parts, accessories and clothing. Since at least 1978, it has used the name "Harley" in its advertising and promotional materials as an abbreviated name for Harley-Davidson and the associated motorcycles. Plaintiff has also used the trademark "Harley" in its own publication "Enthusiast" since at least 1978.
Harley Rendezvous was started by O'Connell and his son, Kemp O'Connell, in 1979 as an annual fair for motorcycle enthusiasts in general and Harley-Davidson riders in particular.
O'Connell has stated that he adopted the name "Harley Rendezvous" for their company and the associated event because "we targeted basically for the Harley-Davidson rider and the Indian rider, which was basically the people that were into American motorcycles . . . . I called it the Harley Rendezvous because I rode Harley-Davidson motorcycles myself. And there was a thing at that point called the Indian rally, so this was the thing for Harley riders, which was the Harley Rendezvous." Pl. Undisp. Facts P 12. Harley-Rendezvous filed an application with the Patent and Trademark Office ("PTO") for the mark "Harley Rendezvous" on July 11, 1980, claiming a first use in commerce of September 1, 1979. At this time, Harley-Davidson had not yet filed an application with the PTO for the mark "Harley." Since 1980, the Rendezvous has been held every year on the third weekend in June, and has been held at the same location in Duanesburg, New York every year since 1984. Harley Rendezvous has also expanded the events it holds to include several trade shows. A show in Albany, New York has been held since 1980, a show in New Jersey since 1984, a show in Springfield, Massachussetts since 1988 and a show in Marlboro, Massachussetts since 1989.
In their initial contacts with the defendants, employees of plaintiff Harley-Davidson were cordial and even encouraging. Around February of 1980, O'Connell met with Frank Leiby ("Leiby"), District Manger for Harley-Davidson to explain to him the defendants' plans for the June 1980 fair. In a letter dated February 20, 1980, O'Connell thanked Leiby for his time, announced his intention to build the Rendezvous into a major event and expressed hope that Harley-Davidson would give its active support. Attached to the letter was a Rendezvous advertisement. O'Connell subsequently received a letter dated April 16, 1980 from Wally Peterson ("Peterson"), a Sales Promotion Manager, in which Peterson acknowledged "our subsequent conversations concerning Harley-Davidson factory participation in your Harley Rendezvous, June 20-22, 1980." Def. Ex. B. Peterson informed him that Harley-Davidson could not be involved that year due to other commitments but that they planned "to send someone out to observe your event with an eye to future involvement by Harley-Davidson." Peterson also offered to provide a trophy riding belt for the bike judged "best of show." Def. Ex. B. Subsequently, Harley-Davidson did provide the trophy belt and defendants in turn provided Harley-Davidson with two tickets for the 1980 show. Leiby and Peterson both attended.
Between 1981 and 1983, there does not seem to have been much contact between the parties. In a letter dated May 9, 1983, O'Connell invited Willie G. Davidson ("Davidson"), Vice-President of Design at the Harley-Davidson Motor Company (which is owned by one of plaintiff's wholly-owned subsidiaries) to attend the 1983 Rendezvous. Davidson wrote back to decline the offer, pleading other engagements, but added: "Good luck with the rendezvous-say hello to all my friends. Ride free." Def. Undisp. Facts Ex. D.
Although plaintiff's communications with the defendants thus remained friendly, an internal memorandum from Leiby to David Caruso, Vice-President of Marketing, dated June 14, 1983 suggested that he had formed a very negative opinion of defendants' event. He wrote:
I would like to give you a little background on the Harley Rendezvous and Dan O'Connell and explain why I have not supported this get-together nor have implicated the Motor Company in it in any way. I did attend the Harley Rendezvous in 1980 . . . and after evaluation, it was felt that this was not a get-together that the Motor Company should be associated with on an official basis.
Hoelter Dec. Ex. 3. Leiby further expressed concern over the defendants' use of the "Harley" name:
it is the laymen's opinion because of the name Harley that Harley-Davidson is sponsoring this event. Today I spoke with Carl Strock, reporter for the Schenectady Gazette and informed him that Harley-Davidson was not involved in the Harley Rendezvous whatsoever.
On May 12, 1983, Harley Rendezvous filed an opposition at the PTO to plaintiff's application to register the trademark "Harley" on the grounds that the "opposer owns the service mark 'Harley Rendezvous' . . . ." Def. Undisp. Facts P 20. Despite making this opposition, O'Connell subsequently wrote a letter to Vaughn Beals ("Beals"), Chairman of the Board of Harley-Davidson, Inc., inviting Harley-Davidson to participate in the 1983 Rendezvous with a factory display. Responding to the offer, Timothy K. Hoelter ("Hoelter"), Vice-president and General Counsel for plaintiff, declined, stating that "we simply cannot understand why Harley Rendezvous, Inc. would solicit our support for its independent event on the one hand and, on the other hand, try to oppose our right to use our trademark." Hoelter Dec. Ex. 7.
Vaughn sent a memorandum dated July 5, 1983 to Caruso stating that "since it appears that O'Connell is not an easy guy to relate to, but since 5 to 10,000 Harley riders are involved, I believe we need to make what peace we can with he and his organization so that he doesn't become a bigger problem in the future." Def. Undisp. Facts Ex. F. He noted that O'Connell was "giving us some problems on trademark licensing" and suggested that Caruso invite O'Connell to the factory to see if they could "clear up the problem." Id.
The meeting between Caruso and the O'Connells took place around August of 1983. While the parties agreed to certain terms in principle, they apparently left the meeting with very different perceptions of what they agreed to. Plaintiff believed that the defendants had agreed to drop their opposition to plaintiff's trademark application in exchange for a limited-use two-year license to use the term "Harley" with certain restrictions and sent O'Connell a draft of the agreement on or around September 23, 1983. On September 30, 1983, O'Connell wrote back rejecting the proposed licensing agreement. He asserted that the parties had agreed only that, in exchange for the defendants dropping their opposition to the registration of "Harley," plaintiff would not oppose defendants' use of the word "Harley" so long as it was not used separately from "Rendezvous" or in a style or size which would emphasize it over "Rendezvous." Def. Undisp. Facts Ex. G. O'Connell stated that "We are NOT interested in ANY kind of a 'LICENSING AGREEMENT' from the Harley-Davidson Motor Co., Inc. particularly inasmuch as they do NOT have the right or ownership of the name 'HARLEY.'" Id. He counter-offered with an agreement more in line with his expectations and then concluded that
we would expect an answer to this letter within two weeks and in the event that we do not hear from you, we will consider that you do not feel it is mutually advantageous to not oppose each other in the conduct of our very separate type businesses.
Plaintiff did not respond to this letter, but the concerns of its employees continued through early 1984. In a memorandum from Leiby to Hoelter dated February 10, 1984, Leiby stated:
Mr. O'Connell is still managing to really stir up people in this area and unfortunately is continuing to give Harley-Davidson a lot of adverse publicity along with the negative sentiment for his latest move, trying to incorporate a small village so they will be unable to pass zoning restrictions making his Rendezvous impossible. Are we going to continue to be a party to his adverse publicity by allowing him to use our name or is there nothing we can do to prevent this?
Hoelter Dec. Ex. 22. Hoelter replied in a memorandum dated February 17, 1984 that "once the [PTO] proceedings [are] concluded, we'll turn our attention to Harley Rendezvous directly . . . ." Pl. Undisp. Facts P 30.
Hoelter and O'Connell had a coincidental meeting around May of 1984 at a motorcycle event and Hoelter again raised the possibility of settling their disagreements. Subsequently, Hoelter wrote to O'Connell to say that Harley-Davidson was "mulling over the ideas you and I discussed" and that he would get back to O'Connell in the near future. Pl. Undisp. Facts P 31; Hoelter Dec. Ex. 26. On June 19, 1984, Hoelter wrote to O'Connell about a new proposal for settlement. Without giving the specifics, he stated that
the resolution would include a slight name change that would still enable you to use the name 'Harley' in describing your event. I believe the proposed arrangement should be acceptable to you, and I would appreciate your telephoning me so that we might discuss it further.
Hoelter Dec. Ex. 27. It is not apparent from the record that the defendants ever responded to this letter and there were no further attempts by any of the parties to negotiate an agreement.
On April 11, 1985, the PTO granted Harley-Davidson's motion for judgment on Harley Rendezvous' opposition after Harley Rendezvous failed to take any testimony.
Between 1985 and 1987, various agents of Harley-Davidson noted that the Rendezvous continued to operate but that it was suffering a number of legal and financial difficulties which raised doubts that it would continue. The greatest problem for the event was its difficulties with the Zoning Board of Appeals ("ZBA") of the Town of Duanesburg. In 1985, defendants were enjoined in state court from holding their event on the grounds that they had failed to obtain a necessary special use permit from the ZBA. Defendants subsequently ignored this injunction and held their event anyway. An attempt to hold them in contempt resulted in extended litigation. See Axelrod v. Harley Rendezvous, Inc., 128 A.D.2d 957, 512 N.Y.S.2d 908 (N.Y. App. Div. 1987). However, articles submitted by the defendants suggest that the zoning controversy ended in 1988 when the Town Board superseded the authority of the ZBA over the defendants' case and issued Harley Rendezvous a special use permit for their event. Def. Undisp. Facts Ex. I.
During 1985, Harley Rendezvous also suffered innternal conflicts. After a falling out with his son, O'Connell ceased to play a role in the internal management of the company (although he continued to own a percentage of the company), leaving Kemp O'Connell to run the event alone. O'Connell also held a competing motorcycle event known as "Daniel O'Connell's Harley Enthusiasts Rendezvous Ltd." Pl. Undisp. Facts P 35; Hoelter Dec. Ex. 32.
Hoelter learned of the change in management from a memorandum written by Leiby, dated February 4, 1985, in which Leiby advised him that despite the existence of O'Connell's separate company, the original Harley Rendezvous, Inc. was still operating:
Don't call off the troops yet. . . . It seems that Kemp O'Connell is now president of Harley-Davidson Rendezvous, Inc. . . . At any rate, it is still in existence and I think we should go after our name.
Hoelter Dec. Ex. 21. Harley-Davidson also learned from articles in the Schenectady Daily Gazette, the same source from which Leiby obtained information about defendants' zoning difficulties and internal disputes, that Harley-Rendezvous had been placed in receivership as a result of a suit filed ...