Act, §§ 43(a)(1)(A) & (B); and New York common law of
unfair competition, against defendants Home Shopping Network, Inc.
("HSN") and Port Carling Corporation ("Carling") ("defendants").
Defendants move to dismiss the action pursuant to Rule 12(b)(6), F.R.
Civ. P., for failure to state a claim upon which relief can be granted.
Plaintiff is a New York corporation with its principal place of
business in New York City. Plaintiff is the exclusive domestic
distributor of "Gilson-Created" opal gem stones, which are authentic
laboratory-created opals with the same optical, physical and chemical
properties as real opals. Plaintiff supplies 85%-90% of synthetic opals
nationwide. Plaintiff has used the terms "laboratory-created,"
"synthetic" and "Gilson-Created" to identify and distinguish its goods
continuously since June 1, 1990. None of these terms are registered
HSN is a Delaware corporation with its principal place of business in
St. Petersburg, Florida. HSN advertises and sells "Technibond Created
Opal" products. Carling is a Nevada corporation with its principal place
of business in Beverly Hills, California. Carling is the owner of the
"Suzanne Sommers Collection" trademark, and engages in the advertising
and sale of "Suzanne Somers' Created Opal" products. Defendants' opal
products are allegedly cheap plastic imitations made out of polymer or
resin filled silica lattice.
Plaintiff filed this complaint on January 4, 2001, seeking injunctive
relief and damages based on defendants' marketing their plastic imitation
opals as "laboratory-created," "synthetic" and "[manufacture name]
-created" in interstate commercial advertisements, including via
television and the internet. Plaintiff alleges that the use of these
designations is intended to reflect the superior quality of plaintiff's
authentic synthetic opals.*fn1
The court may dismiss plaintiff's complaint pursuant to Rule 12(b)(6)
only if it "`appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to relief.'" Cooper
v. Parkay, 140 F.3d 433, 440 (2d Cir. 1998) (quoting Conley v. Gibson,
355 U.S. 41, 45-46(1957)). In ruling on defendants' motion; the court
must accept as true all factual allegations in the complaint and draw all
reasonable inferences in favor of plaintiff. See Bernheim v. Litt,
79 F.3d 318, 321 (2d Cir. 1996).
Counts I and III allege false designation of origin in violation of
§ 43(a)(1)(A) of the Lanham Act*fn2 and unfair competition under New
law, respectively.*fn3 Defendants assert that these
allegations fail to state a claim upon which relief can be granted
because the terms "laboratory-created," "synthetic" and "[manufacture
name] -created" are generic, and therefore not entitled to trademark
Defendants are correct that generic terms, that is, terms that refer to
a class of product rather than a particular product, are not entitled to
trademark protection. See Abercombie & Fitch Co. v. Hunting World. Inc.,
537 F.2d 4, 9 (2d Cir. 1976). However, whether a term is generic or
descriptive is a question of fact. See Textile Deliveries. Inc. v.
Stagno, 1990 WL 155709, at *5 (S.D.N.Y. Oct. 9, 1990) (Keenan, J.),
aff'd, 52 F.3d 46 (2d Cir. 1995). At this early stage, when plaintiff has
not had an opportunity to submit supportive proof, such a factual
analysis is inappropriate.
Moreover, even assuming, arguendo, that the terms in question are
generic, "such a finding does not close all avenues of relief." Forschner
Group. Inc. v. Arrow Trading Co., Inc., 30 F.3d 348, 357 (2d Cir. 1994).
Plaintiff may seek protection under § 43(a)(1)(A) if (1) goods or
services are involved, (2) interstate commerce is affected, (3) "an
association of origin by the consumer" between the generic term and the
first user exists (i.e. secondary meaning), and (4) there is "a
likelihood of consumer confusion" as to the goods' or services' source
when the generic term is applied to the second user's goods or services.
*fn5 See Genesee Brewing Co., Inc. v. Stroh Brewing Co., 124 F.3d 137,
150 (2d Cir. 1997) (citations omitted),; Sun Trading Distrib. Co. v.
Evidence Music, 980 F. Supp. 722, 727 (S.D.N.Y. 1997) (Chin, J.). The
same claim may be made under New York common law of unfair competition,
except that the state law action requires an additional element of bad
faith or intent. See Genesee, 124 F.3d at 149.
Here, plaintiff asserts that by virtue of its dominance of the domestic
synthetic opal market, the terms "synthetic," "laboratory-created" and
"[manufacture name] -created" have acquired a secondary meaning, becoming
synonymous with its own high-quality "Gilson-Created" opals.*fn6
Plaintiff alleges that defendants'
use of these terms when marketing and
selling their inferior opals in interstate commerce are literally false
representations of fact that have caused and are likely to continue to
"cause confusion" as to the association of plaintiff with defendants'
products.*fn7 (Cmplt. ¶ 34.) Plaintiff further alleges that
defendants intended to deceive consumers into thinking that their cheap,
plastic, imitation opals originate with plaintiff. These allegations
adequately assert a cause of action under both § 43(a)(1)(A) and New
York common law of unfair competition.
Count II alleges false advertising in violation of § 43(a)(1)(B) of
the Lanham Act. Plaintiff contends that defendants have marketed their
opals under the terms "synthetic," "laboratory-created" and "[manufacture
name] -created" even though their opals do not meet the FTC guidelines
for these terms. See 16 C.F.R. § 23.23(c) (stating that these terms
may only be used to describe industry products with "essentially the same
optical, physical, and chemical properties as the stone named.").
Defendants argue that absent the definitions provided by the FTC
guidelines, plaintiff would have "no basis for challenging Defendants'
use of those terms to describe their simulated opals." (Defs. Mem. at 9.)
Defendants therefore assert that plaintiff's complaint states an unfair
trade practice claim under the Federal Trade Commission Act ("FTCA")
alone. However, private parties do not have standing to sue under the
FTCA. See Alfred Dunhill Ltd. v. Interstate Cigar Co., Inc., 499 F.2d 232,
237 (2d Cir. 1974).
Neither the FTCA nor judicial precedent indicate that the FTCA provides
the exclusive remedy for mislabeling a gemstone product. "[A]ny person
who believes that he or she is likely to be damaged" by the use of a
"false or misleading description of fact" may sue for violation of the
Lanham Act. 15 U.S.C. § 1125(a). Moreover, plaintiff may and should
rely on FTC guidelines as a basis for asserting false advertising under
the Lanham Act. "[A]s the administrative agency charged with preventing
unfair trade practices, the Commission's assessment of what constitutes
deceptive advertising commands deference from the judiciary." B.
Sanfield. Inc. v. Finlay Fine Jewelry Corp., 168 F.3d 967, 973 (7th Cir.
Consequently, plaintiff may proceed under § 43(a)(1)(B) of the
Lanham Act if it has properly alleged that (1) goods or services are
involved, (2) interstate commerce is affected, and (3) the defendants
used a false or misleading description or representation of fact with
to an inherent quality or characteristic of those goods or
services. See Sun Trading, 980 F. Supp. at 727. "The key under this
theory is not confusion of source, but confusion as to the attributes of
a competing product. Plaintiff must show that the allegedly false
description provides a competitor with an inappropriate advantage."
Warren Corp. v. Goldwert Textile Sales. Inc., 581 F. Supp. 897, 900
(S.D.N.Y. 1984) (Carter, J.).
Here, plaintiff alleges that defendants' description of their opals as
"synthetic," "laboratory-created" and "[manufacture name] -created" in
interstate commercial advertisements and promotions is both literally
false and misleading. Plaintiff further alleges that defendants' false
and misleading advertising makes consumers assume that defendants' opals
are identical in quality to plaintiff's own, thus concealing the reason
for the cost difference between the products. (Cplt. ¶ 53.)
Plaintiff in effect charges defendants with gaining an unfair competitive
advantage by using the false description. This claim adequately states a
cause of action for false advertising under § 43(a)(1)(B).
For the reasons set forth above, the court denies defendants' motion to
IT IS SO ORDERED.