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July 31, 1998


The opinion of the court was delivered by: CHIN



 This Lanham Act dispute stems from the parties' use of the identical trade name and service mark -- "Lane Capital Management" -- in connection with their respective businesses. Both parties offer investment services to individuals and institutions, and both claim exclusive right to use the mark on a nationwide basis.

 Plaintiff Lane Capital Management, Inc. ("plaintiff"), began using the mark first, in December 1993, and its application to register the mark with the United States Patent and Trademark Office ("PTO") was granted after this action was filed.

 Plaintiff now moves for summary judgment on all of its claims and for dismissal of defendant's sole counterclaim, reserving its right to prove damages at a later date but seeking now to enjoin defendant's use of the mark. See Fed. R. Civ. P. 56(a). Plaintiff argues that the mark is inherently distinctive and, hence, that the mark was immediately protected under common law principles when plaintiff began using the mark in December 1993.

 Defendant Lane Capital Management, Inc. ("defendant"), on the other hand, contends that "Lane Capital Management" is merely a descriptive mark that must acquire secondary meaning before it may be protected, and that there are issues of fact as to whether secondary meaning has attached to the mark in the marketplace. Furthermore, although defendant concedes plaintiff adopted the name "Lane Capital Management" first, it contends that plaintiff's limited use of the name does not suffice to establish plaintiff as the senior user.

 Ultimately, a reasonable jury could only conclude that plaintiff has acquired exclusive rights to the contested mark within the field of investment services and that defendant's continued use of the same mark will inevitably lead to consumer confusion and mistake. Plaintiff is therefore entitled to summary judgment on its federal service mark infringement claim and state law dilution claim. It has not, however, satisfied all elements for two of its claims -- dilution of a "famous" mark and common law unfair competition -- and thus summary judgment as to those claims would be premature. Accordingly, plaintiff's motion is granted in part and denied in part, defendant's counterclaim is dismissed, and an injunction will be issued.


 A. Plaintiff

 Plaintiff was incorporated under Delaware law and opened its doors for business under the name, "Lane Capital Management, Inc.," on December 27, 1993. Originally based in Greenwich, Connecticut, but having recently relocated to Rye, New York, the company identifies itself as "an investment manager specializing in fixed-income arbitrage." (Pl. Exh. JJ). Plaintiff utilizes the following financial instruments: mortgage-backed securities, U.S. Government securities, options, swaps, and futures. Its investment strategy, in a nutshell, is to minimize fluctuations in the market through diversification, and the average length of investments it recommends are of short to medium duration, usually two to three years. On a risk scale, Lane Capital's investments are "positioned somewhere between conventional mortgage-backed funds and traditional hedge funds." (Id.).

 At its inception plaintiff managed a single offshore arbitrage fund worth $ 10 million. It currently manages three hedge funds (three separate legal entities contained in one portfolio) that have approximately $ 200 million in equity (Lane Arbitrage Ltd., Lane Arbitrage International Ltd., and Lane Arbitrage II Ltd.), and handles the investments of institutional and wealthy individual clients. The investments advised by plaintiff are made in the United States, and involve the wide use of American-based financial instruments. At first, the majority of the funds' investors were from the United States, but the proportion of investors from offshore sources has since increased. (See Fulenwider Dep. at 144). One of the funds is listed on the Irish Stock Exchange.

 The firm also has managed a few individual accounts since January 1994. In January 1994, two individual accounts opened in New York City banks with approximately $ 3 million. The third account was opened by an individual New York investor on March 3, 1994, in the amount of $ 49 million. (See Fulenwider Decl. P 12; Pl. Confidential Exh. HH).

 Other than its own business accounts, plaintiff did not, prior to July 1994, own or maintain a single brokerage, securities trading or clearing account in the United States. Plaintiff spends no money on advertising (see Fulenwider Dep. at 304), but has been listed under its trade name in Bloomberg L.P.'s online information service ("Bloomberg's") *fn1" since December 1993 and in Offshore Funds Directory, Inc., since March 1994, and is currently listed in over a dozen industry computer databases. Plaintiff has no direct responsibility for marketing or selling participations in the three hedge funds. Instead, investors are solicited by MeesPhierson Fund Services (formerly "Eurodutch"), which also publishes a newsletter that provides monthly updates as to the performance of the funds managed by plaintiff. (See id. at 132-38).

 Today, plaintiff conducts business with more than twenty well known corporations, including Dean Witter Reynolds, Inc., Smith Barney, and Paine Webber. Since the first quarter of 1996, plaintiff has been ranked among the top twenty best performing money managers within its respective peer group in "World's Best Money Managers," which is published by Nelson's Directory of Investment Managers ("Nelson's"). (See Pl. Exh. I). *fn2"

 Paul E. Fulenwider, plaintiff's founder and owner, attests that he selected the trade name "Lane Capital Management, Inc.," based in part on his wife's suggestion of "Lane," which is his son's middle name and is the nickname and middle name of Fulenwider's father. (See Fulenwider Dep. at 325). Fulenwider states that he adopted the term "Lane" not only because it would honor his father, but also because he felt that the word "means a straight and narrow, defined path, which suggests [his] investment philosophy." (Fulenwider Decl. P 6). Prior to adopting the corporate name and service mark, Fulenwider searched Nelson's, Dun & Bradstreet, and other trade publications and related sources.

 B. Defendant

 Defendant was incorporated under New York law on July 6, 1994. It does not manage hedge funds, but instead provides investment advice primarily to individuals who seek to invest personal funds in stocks and bonds for long-term growth, and currently advises approximately 700 investment accounts or portfolios that have a present asset value in excess of $ 700 million. (See Lane Aff. P P 5-6). Its investors are located throughout the country. Defendant began soliciting clients in July 1994 under its corporate name, "Lane Capital Management, Inc."

 Douglas C. Lane, the President and majority shareholder of defendant, states that he did not conduct a trademark search before settling on the name, which he chose, like Fulenwider, at the suggestion of his wife. (See Lane Aff. PP 9, 12).

 On July 15, 1994, defendant applied to register with the U.S. Securities and Exchange Commission ("SEC") as an investment adviser. That application was approved on July 25, 1995. *fn3"

 C. Plaintiff's Registration of the Mark

 Plaintiff applied to register its mark with the PTO on November 12, 1996. On January 30, 1998, the PTO issued a trademark registration, Reg. No. 2,132,180, to plaintiff for the use of the service mark "Lane Capital Management" in connection with "financial services, namely, investment management in the field of securities, commodities and other investment media." (Pl. Exh. II). The PTO did not raise any issues of registrability and issued a certificate of registration to plaintiff without requiring plaintiff to show that the mark had acquired secondary meaning. After learning that a certificate had been issued, defendant petitioned to cancel plaintiff's registration. That petition is still pending.

 D. Prior Proceedings

 On February 14, 1997, plaintiff commenced this action against defendant, alleging federal service mark infringement, dilution of a famous mark, injury to its business reputation or dilution of its mark under New York law, and common law unfair competition. Defendant counterclaimed for false designation of origin pursuant to 15 U.S.C. § 1125(a) and sought injunctive relief.

 This motion ...

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