which is defined by the
Federal Communications Commission ("FCC") as "an activity in which one
entity (the reseller) subscribes to the communications services or
facilities of a facilities-based provider and then reoffers
communications services to the public (with or without `adding value')
for profit." In the Matter of Interconnection and Resale Obligations
Pertaining to Commercial Mobile Radio Svces., 11 FCC Rcd 18455, 18457,
1996 WL 391284 (F.C.C. July 12, 1996). VoiceStream urges the Court to
find that because VoiceStream's authorized dealers do not seek to
subscribe to the services and then reoffer them to the public,
VoiceStream's dealer contract does not prevent VoiceStream's dealers from
"reselling" and thus does not constitute a restriction upon resale.
However, the FCC has set forth that while the resale rule "does not
require providers to structure their operations or offerings in any
particular way, such as to promote resale, or adopt wholesale/retail
business structures . . . no provider may directly or indirectly restrict
resale in a manner that is unreasonable in light of the policies stated
here . . . an explicit ban on resale is unlawful, as are practices that
effectively (i.e., indirectly) restrict resale, unless they are justified
as reasonable" Id., 11 FCC Rcd at 18465 (emphasis added). Pursuant to the
Matter of Interconnection definition of resale, All U.S., not
VoiceStream's authorized dealers, can be seen as the "reseller," as All
U.S. seeks to subscribe to VoiceStream's communications services and then
reoffer them to the public for profit. Therefore, there are serious
questions regarding whether VoiceStream's dealer contracts constitute
practices which effectively restrict resale by All U.S. or any other
entity which seeks to resell VoiceStream's services.
Any restriction upon resale must be reasonable in light of FCC
policies. See Digital Communications Network Inc. v. AT&T Wireless
Svces., 63 F. Supp.2d 1194, 1201 (C.D. Cal. 1999). VoiceStream asserts
that its restriction is reasonable because by wholly controlling its
distribution network it can best maximize the value of its product to the
consumer. All U.S. contends that VoiceStream's absolute prohibition on
resale is unreasonable. At this juncture, the Court will defer from
determining the issue of whether VoiceStream's dealer agreement
restriction is reasonable or not because this issue may eventually be
referred to the FCC for resolution.
The doctrine of primary jurisdiction urges the referral of "cases
raising issues of fact not within the conventional experience of judges
or cases requiring the exercise of administrative discretion [to those]
agencies created by Congress for regulating the subject matter." Far East
Conference v. United States, 342 U.S. 570, 574 (1952). Primary
jurisdiction is designed to minimize potential conflicts between a court
and an administrative agency which may arise because of "the court's lack
of expertise with the subject matter of the agency's regulation or from
contradictory rulings by the agency and the court." MCI Communications
Corp. v. AT&T Co., 496 F.2d 214, 220 (3d Cir. 1974). Referral is
appropriate "even though the facts after they have been appraised by such
specialized competence [will] serve as a premise for legal consequences to
be judicially defined." Far East Conference, 342 U.S. at 574. By
referring to administrative agencies matters that involve "technical or
policy considerations which are beyond the court's ordinary competence and
within the agency's particular field of expertise," preliminary referral
secures "[u]niformity and consistency in the regulation of business." MCI
Communications, 496 F.2d at 220; Far East Conference,
342 U.S. at
574-75; see also Digital Communications Network, 63 F. Supp. 2d at 1201
(citing Nader v. Allegheny Airlines Inc., 426 U.S. 290, 304 (1976));
Richman Bros. Records v. U.S. Sprint, 953 F.2d 1431, 1435 n.3 (3d Cir.
The issue of reasonableness is properly referred to the FCC where "the
determinations presented require the FCC's expertise, skill, and ability
to resolve the dispute." See Digital Communications Network, 63 F. Supp.2d
at 1202. The FCC is the administrative agency charged with expert
skill and knowledge within the telecommunications industry. "Referral
. . . to the FCC would thus secure `uniformity and consistency in the
regulation of business entrusted to the FCC' and would promote `a uniform
and expert administration of the regulatory scheme laid down by the
Act.'" AT&T Corp. v. Ameritech Corp., No. 98 Civ. 2993, 1998 WL 325242,
at *3 (N.D. Ill. June 10, 1998) (quoting United States v. Western Pac.
R.R. Co., 352 U.S. 59, 64-65 (1956)) (internal brackets omitted); Digital
Communications Network. Inc. v. AB Cellular Holding LLC, No. 99 Civ.
5418, 1999 WL 1044234 (C.D. Cal. Aug. 19, 1999) (where the plaintiffs
purchased and resold defendants' cellular telephone equipment and
services, the reasonableness of the defendant's refusal to offer
plaintiffs certain service plans was properly referred to the FCC); see
also, e.g., In the Matter of AT&T v. Ameritech and Qwest Communications,
13 FCC Rcd. 14508, 1998 WL 347210 (F.C.C. June 30, 1998); Unimat v. MCI,
No. 92 Civ. 5941, 1992 WL 391421 (E.D. Pa. Dec. 16, 1992); AT&T v. The
People's Network, 1993 WL 248165 (D.N.J. 1993). "[R]endering a decision
without the benefit of the FCC's interpretation of the term `reasonable'
would be counterproductive and ultimately disservice those who have an
interest (or a potential interest) in this dispute." Digital
Communications Network, 63 F. Supp. 2d at 1202 (citing AT&T, 1998 WL
325242, at *3).
Accordingly, the parties are hereby requested to address the issue of
whether the reasonableness of VoiceStream's restriction should be
referred the FCC. At this juncture, the Court cannot conclude that
VoiceStream is likely to succeed on the merits of its tortious
interference with contract claim, and the Court finds solely that
sufficiently serious questions exist regarding whether All U.S.
intentionally induced a breach of VoiceStream's contract with its
Regarding damages, the fourth element of a tortious interference
claim, VoiceStream has only raised sufficiently serious questions and has
not shown a likelihood of success. VoiceStream alleges that it suffered
damages because its relationship with its dealers has been strained, it
lost control of its distribution network and its ability to protect its
goodwill, and it has incurred greater costs in policing the dealers.
VoiceStream also claims that customers who buy All U.S. telephones are
less likely to purchase additional VoiceStream air time due to their
disappointment with their air time expiring before All U.S. advised them
In response, All U.S. brands VoiceStream's damage claims as
speculative, and urges that far from being damaged by All U.S.'s actions,
VoiceStream is selling additional telephones and air time due to All
U.S.'s purchases and resales. Neither side substantiates its damages
claims at all. The Court is reluctant to infer pecuniary injury upon
VoiceStream's initial minimal showing, see, e.g., H.L. Hayden Co. v.
Siemens Med. Sys., 879 F.2d 1005, 1024 (2d Cir. 1989), but finds at this
juncture that VoiceStream has presented facts raising
serious questions regarding damage.
B. VoiceStream Has Not Established a Likelihood of Success or
Sufficiently Serious Questions Going to the Merits of Its Lanham Act
VoiceStream alleges that All U.S. "repackages and markets the phones in
a manner that causes confusion as to the origin of the phones and that
misleads consumers." (Compl. ¶ 7.) Section 43(a) of the Lanham Act,
15 U.S.C. § 1125(a), creates a federal private cause of action for
injunctive relief and damages against a manufacturer who "uses in
commerce any word, term, name, symbol, or device" or "any false
designation of origin" that is "likely to cause confusion" or mistake or
deception "as to the origin" of its product. An action for trademark
infringement pursuant to Section 32(1) arises where "[a]ny person . . .
without the consent of the registrant use[s] in commerce any
reproduction, counterfeit, copy, or colorable imitation of a registered
mark in connection with the sale, offering for sale, distribution, or
advertising of any goods [and] such use is likely to cause confusion."
15 U.S.C. § 1114(1); see also Warner-Lambert, 86 F.3d 3.
VoiceStream contends that All U.S. sells an inferior product to
VoiceStream's telephones. The sale of goods bearing the owner's mark but
that do not meet the trademark owner's quality control standards
constitutes trademark infringement. See Polymer Tech. Corp. v. Mimran,
37 F.3d 74, 78 (2d Cir. 1994). VoiceStream states that because All U.S.
removes VoiceStream documents that are contained in the package with the
telephone and are crucial to a customer's use and enjoyment of the
telephone, the repackaged VoiceStream telephones do not meet
VoiceStream's quality control standards. Additionally, the complaint
alleges that the telephones sold by All U.S. are inferior because All
U.S. places erroneous expiration dates on the repackaged telephones'
packaging, resulting in customers' air time expiring before the promised
expiration date. (Compl. ¶ 36; Hayes Decl. ¶¶ 2-4; Hayes Supp.
Decl. ¶¶ 3-4 & Exh. C.) The evidence has shown that although All U.S.
sells the exact same physical product as VoiceStream, the absence of
VoiceStream's packaging material and the product's reduced initial period
of use has the potential to result in a product of lesser quality.
However, VoiceStream has not shown that there is a likelihood of
confusion resulting from All U.S.'s proposed packaging.*fn1 As a
prerequisite to a finding of trademark infringement, the inferior goods
sold must bear the owner's mark. See Polymer, 37 F.3d at 78; El Greco
Leather Prods. Co. v. Shoe World Inc., 806 F.2d 392, 395 (2d Cir. 1986)
(the Lanham Act protects the right to control the quality of the goods
sold "under the holder's trademark"). While All U.S. supplies telephones
that state on their face that they employ VoiceStream wireless service,
All U.S. has agreed to obliterate the VoiceStream
logo from the telephone
itself. (Bienenfeld Aff. ¶ 39.) Moreover, All U.S. has agreed to
modify the packaging to reduce any possibility of confusion, and has
proposed a revised label stating "[t]his is a repackaged [manufacturer's
name] mobile phone. All U.S. Communications is the repacker. Service is
provided exclusively by VoiceStream Wireless. All U.S. Communications is
wholly unrelated to the original mobile phone manufacturer or VoiceStream
Wireless." (Bienenfeld Aff. Exh. 7.) VoiceStream's argument that there is
no possible packaging change which could remedy any risk of customer
confusion is unavailing. VoiceStream has not shown that the removal of
its logo, along with packaging modifications including specific
disclaimers regarding the source of the product, would nonetheless result
in a likelihood of confusion. All U.S.'s proposed repackaging and removal
of the VoiceStream mark — if that is what plaintiff prefers
— sufficiently reduce the likelihood of customer confusion. See,
e.g., Prestonettes Inc. v. Coty, 264 U.S. 359, 368 (1924).
VoiceStream's argument that All U.S. is "passing off" VoiceStream's
service as its own pursuant to 15 U.S.C. § 1125(1) is also
unpersuasive. See id. All U.S.'s proposed label explicitly states that
"[t]his is a repackaged [manufacturer's name] mobile phone. All U.S.
Communications is the repacker. Service is provided exclusively by
VoiceStream Wireless [and] All U.S. Communications is wholly unrelated to
. . . VoiceStream Wireless." (Bienenfeld Aff. Exh. 7.) These statements
truthfully describe the product sold and the parties' relationship.
Accordingly, VoiceStream has failed to establish a likelihood of success
or sufficiently serious questions going to the merits of its Lanham Act
II. VoiceStream Has Not Established That Irreparable Harm Will Result in
the Absence of the Injunction.
VoiceStream claims that All U.S.'s sale of an inferior, non-genuine
product bearing the VoiceStream trademark will lead to a loss of customer
goodwill that cannot be measured or remedied by money damages and
therefore constitutes irreparable harm. See John Paul Mitchell Sys. v.
Quality King Distribs., Inc. 106 F. Supp.2d 462, 473 (S.D.N.Y. 2000).
VoiceStream also correctly notes that in the trademark infringement
context, a showing of likelihood of confusion establishes irreparable
harm. See Hasbro Inc. v. Lanard Toys Ltd.,