The opinion of the court was delivered by: Hellerstein, District Judge.
To New Yorkers and transplanted New Yorkers, a bagel*fn1 is
quintessentially New York. The doughnut-shaped bread, boiled in
water and baked to produce a crisp, mellow-brown skin and a
delectable, chewy interior is an American success story. Brought
to the United States by Jewish immigrants from Eastern Europe,
the bagel has emerged from the obscurity of the tenements to
become an American icon as beloved as apple pie. Yet, despite its
far reaching achievements, the bagel remains a product of New
York, judged for its taste and quality according to its degree of
variation from a perceived New York ideal.
Helmer Toro and Hector Hernandez, immigrants from Puerto Rico,
took up the path marked by earlier immigrants to New York City;
they opened a bagel store and developed recipes and formulae, the
reliable quality and taste of which won public acceptance. Their
incorporated name — H & H Bagels, Inc. — became distinctive. This
lawsuit contests the rights to that valuable name for bagels — H
In 1972 after active service in Vietnam, Helmer Toro and his
brother-in-law Hector Hernandez opened a bagel store on Broadway
and 80th Street on the West Side of Manhattan, incorporated as H
& H Bagels, Inc.*fn2 and known as H & H Bagels. Two years later,
Helmer and Hector opened a second bagel store on the East Side,
on Second Avenue and 80th Street. The second store was separately
incorporated as Yorkville Bagels, Inc., and assumed the tradename
"H & H Bagels Midtown East." The bagels sold in both stores were
baked according to the same recipe, and found substantial
acceptance by the consuming public. Compl. ¶ 15.
In 1979, Hector and Helmer, seeking to expand H & H's wholesale
operations, purchased a factory in the Bronx and incorporated it
as North East Bakeries, Inc. The operation failed; loans
cross-guaranteed by H & H Bagels, Inc. and Yorkville Bagels, Inc.
were called, and a consolidated chapter 11 bankruptcy of all
three companies resulted. An Examiner was appointed, and he
determined, with the approval of the creditors and pursuant to an
order of the bankruptcy court, that there should be an auction of
both the West Side and the East Side stores, and that bidders
could make offers on each store separately and on both combined,
whichever would result in greater value to repay creditors.
Plaintiff bid for both stores, but was awarded only the West
Side Store. Another bidder, Gotham Bagels, Inc., presented a
winning, higher bid to acquire the East Side store. The Examiner
issued separate bills of sale, conferring different rights, to
each. In the years that followed, the West Side store and its
original, continuing owners, using their H & H tradename, enjoyed
growing and substantial revenues and profits, and ever greater
renown. The East Side store was less successful, passing through
successive managements which, under the tradename "H & H East,"
primarily sold to customers in their East Side neighborhood. The
current owner of the East Side store, the defendant in this
action, PV Bakery, Inc., initiated a more aggressive marketing
program, seeking to compete in the same markets in a manner that
impermissibly encroached on the H & H mark with the closely
similar "H & H East" tradename. This lawsuit was the result.
The parties dispute their respective claims of right to the
name H & H. The Fourth Toro Family Limited Partnership, the
Plaintiff, claims exclusive right to the name H & H, and sues to
prevent PV Bakery, Inc., the Defendant, from using it and for
damages, invoking the Trademark Act, 15 U.S.C. § 1125(a),
1114(l), section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c),
section 368-d of the New York State Business Law and the common
law of unfair competition.*fn3 PV counterclaims, alleging that
it, not Fourth Toro, has exclusive right to the H & H name, and
that it is entitled to injunctive relief and damages.
Specifically, the parties contest plaintiff's exclusive right
to Trademark Registration No. 1,736,851, issued December 1,
1992 on application of December 24, 1990, for the slogan "H & H
Bagels like no other bagel in the world," with a design including
"H & H" on a stylized shopping bag. Plaintiff filed three
additional applications for "H & H Bagels," and for the design "H
& H" and the slogan "Like No Other Bagel in the World," on
September 16, 1996. Compl. ¶ 25. Defendant filed Notices of
Opposition with the Trademark Office to the three pending
applications, and a Petition for Cancellation of Registration No.
1,736,851. Compl. ¶ 26.
I hold, for the reasons expressed in this opinion, that both
Fourth Toro and PV have rights to the name H & H, but unequally,
with Fourth Toro having the stronger right.
The contest for the right to the H & H name stems from the
stores' consolidated bankruptcy. Hector and Helmer continued to
manage the two retail stores during the chapter 11 proceedings.
In 1995, in anticipation of the Examiner's proposed sale of the
two stores, Hector and Helmer incorporated The Excellent Bagels,
Inc. and bid for both stores: $515,000 for the West Side store,
$110,000 for the East Side store, and $625,000 as a combined bid.
On April 15, 1985, Excellent Bagels was awarded the West Side
store, but its bid was not the high bid for the East side store:
Gotham Bagels, Inc., with a winning bid of $125,000, was awarded
the East side store.
The bills of sale from the Bankruptcy Examiner to the two
buyers defined the parties' respective rights to the H & H name.
Hector and Helmer, through their company Excellent Bagels,
purchased, by bill of sale dated April 23, 1985, not only the
assets to the West Side store but, with those assets, the
"goodwill and any other transferable intangibles of the Debtor .
. . including the tradename H & H Bagels (the business being
sold)."*fn4 Specifically, the West Side store's bill of sale
The Debtor has sold, assigned and transferred by
these presents, and does sell, assign and transfer
unto The Excellent Bagels, Inc. its successors and
assigns, any and all of its right, title and interest
in and to [certain physical assets]. . . . Included
in the sale are goodwill and any other transferable
intangibles of the Debtor . . . including the
tradename H & H Bagels (the business being sold).
The bill of sale to Gotham for the assets of the East Side store,
dated two days later, April 25, 1985, conveyed the Debtor's
"right, title and interest in and to the tradename Yorkville
Bagels, Inc., d/b/a H & H Midtown Bagels East . . .," but not the
Debtor's "goodwill" or "transferable intangibles." The bill of
sale for the East Side store provides:
JOHN S. PEREIRA, as Examiner in Bankruptcy of H & H
BAGELS, INC., and YORKVILLE BAGELS, INC., d/b/a H & H
BAGELS EAST, Debtors, in a proceeding Under Chapter
11 . . . has sold, assigned and transferred by these
presents, and does sell, assign and transfer unto
Gotham Bagels, Inc., its successors and assigns, any
and all of its right, title and interest in and to
the tradename Yorkville Bagels, Inc., d/b/a H & H
Midtown Bagels East, the furniture, fixtures,
inventory, machinery and equipment, and all of other
physical assets of the Debtor contained in the former
premises of the Debtor located at 1551 Second Avenue,
New York, New York . . .
The distinction made in the two bills of sale is crucial:
Excellent (Hector and Helmer's company) acquired the "H & H
Bagels" name and its attendant "goodwill"; Gotham (the East Side