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NEW SENSOR CORPORATION v. CE DISTRIBUTION LLC

February 3, 2004.

NEW SENSOR CORPORATION, Plaintiff -against- CE DISTRIBUTION LLC, Defendant


The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge

MEMORANDUM & ORDER

This motion arises out of an action for trademark infringement and unfair competition brought by Plaintiff New Sensor Corporation ("New Sensor" or "Plaintiff") against Defendant CE Distribution LLC ("CE" or "Defendant") regarding CE's use of the word SVETLANA on its website, http://www.cedist.com. Before the Court is the motion of CE to dismiss with prejudice or, in the alternative, for summary judgment. For the reasons that follow, CE's motion for summary judgment is granted.

FACTUAL BACKGROUND

  Plaintiff and Defendant are competing U.S. distributors of electron or vacuum tubes ("tubes" or "vacuum tubes") used in electronic equipment such as guitar amplifiers. (Def. Mem. at 5; Matthew Decl. ¶ 12.) J.S.C. Svetlana ("JSC") is a Russian corporation located in St. Petersburg that manufactures electron devices, including vacuum tubes. (Compl. at 6; Ferrari Page 2 Decl. Ex. G-A ¶ 7; hereinafter "Rafiee and Gray Decl.")*fn1

  In 1992, JSC entered into a joint venture agreement with Svetlana Electron Distributors ("SED"), an Alabama corporation "formed to bring Russian power grid tube technology to the West." (Rafiee and Gray Decl. ¶ 9, Exs. A, B; Kozinets Decl. Ex. F.) Pursuant to this joint venture agreement, JSC manufactured vacuum tubes while SED had the exclusive right to distribute them in every country but those of the former Soviet Union. (Rafiee and Gray Decl. ¶ 10.) In order to develop a market for these tubes in the U.S., SED invested significant sums in research, development, and marketing. (Rafiee and Gray Decl. ¶ 13.) The joint venture adopted the name "SED-SPb" (Rafiee and Gray Decl. ¶ 9), which, according to Defendant, stands for "Svetlana Electron Devices — St. Petersburg" (Def. Supp. Rule 56.1 Statement).

  The tubes manufactured by the joint venture were marked with a stylized "S" and the words SVETLANA ELECTRON DEVICES. (Compl. ¶ 7; Rafiee and Gray Decl. Ex. F.) In 1997, SED registered these marks with the United States Patent and Trademark Office. (Compl. ¶ 7; Rafiee and Gray Decl. Ex. F.)

  According to promotional materials distributed by SED, JSC was founded in 1889 and became the largest power tube manufacturer in Russia. (Kozinets Decl. Ex. F.) In 1913, when it began manufacturing light bulbs, the factory adopted the name SVETLANA from the Russian word "Svet," meaning "light." (Kozinets Decl. Exs. D, F.) As SED's website explained, "light bulb manufacturing naturally evolved into vacuum tube manufacturing in 1929." (Kozinets Decl. Page 3 Ex. D.)

  In 2000, when the joint venture between JSC and SED dissolved, JSC entered into a agreement with PM of America, Inc. ("PMA") to distribute its tubes in the United States. (Compl. ¶ 9; Def. Mem. at 6.) In July 2001, SED sold certain assets to New Sensor, including its trademark rights and goodwill in the SVETLANA mark and the stylized "S." (Compl. ¶ 8; Matthews Decl. ¶ 3.) The tubes that New Sensor currently distributes under the SVETLANA mark are manufactured at Xpo-pul, a factory in Saratov, Russia. (Matthew Decl. ¶ 5.) New Sensor does not sell tubes manufactured by JSC. (Matthews Decl. ¶ 5.) The tubes sold by New Sensor and those manufactured by JSC have equivalent technical specifications. (Ferrari Decl. Ex. I, Letter from Pavane to Cravener, August 13, 2003 at 2.)

  In 2001, JSC and PMA filed an infringement action against SED and New Sensor in the United States District Court of Alabama claiming that New Sensor did not have rights in the SVETLANA mark. In 2003, the parties signed a settlement agreement ("Settlement Agreement") with the following terms inter alia: (1) New Sensor has the exclusive right to use the SVETLANA mark in the United States and Canada; (2) JSC has the exclusive right to use the Winged-C logo; (3) New Sensor releases CE and other customers of JSC and PMA from any claims arising out of the use of the SVETLANA mark in connection with the sale of inventory manufactured by JSC and purchased by CE and other customers before March 4, 2003. (Matthews Decl. Ex. B.) Following this Settlement Agreement, PMA sent a letter to its customers, approved by New Sensor, which informed them that tubes formerly branded SVETLANA would now be sold under the Winged-C logo:

  PM of America, Inc. is announcing that the tubes it has been supplying in the Page 4

 
United States and Canada under the name "Svetlana" will now be marketed under a new brand name, "SED St. Petersburg, Russia" and will display the following logo: [Winged-C].
In the early 1990s, J.S.C. Svetlana of St. Petersburg, Russia, and R&G, Inc. of Huntsville, Alabama, formed a joint venture for the purpose of manufacturing and distributing vacuum tubes, resulting in the formation of two new companies. SED/SPb of St. Petersburg, Russia, was formed to manufacture the tubes, and it took over the factory and certain other assets of J.S.C. Svetlana related to vacuum tube production. SED International, Inc., later renamed Svetlana Electron Devices, Inc., of Hunstville, Alabama, was formed to handle worldwide marketing, sales, engineering support, and customer support for Svetlana-branded tubes.
In the year 2001, Svetlana Electron Devices, Inc. transferred its assets, including the name and trademark rights to the Svetlana name, to New Sensor Corporation. J.S.C. Svetlana maintained control of SED/SPb. Also that year, J.S.C. Svetlana appointed a new exclusive worldwide distributor, PM Components, Ltd., of the United Kingdom, which in turn appointed PM of America, Inc. as its exclusive distributor in the United States and Canada. Litigation subsequently ensued between New Sensor, J.S.C. Svetlana, PM Components, and PM of America as to the rights to the Svetlana name. That litigation has recently been settled and resolves the issues between the parties in the United States and Canada.
PM of America will continue to sell vacuum tubes manufactured by SED/SPb of St. Petersburg, which produced the tubes PM of America previously marketed as "Svetlana" and which is still controlled by J.S.C. Svetlana. These tubes will be marked in the United States and Canada with the logo shown above [Winged-C logo].
(Matthews Decl. Ex. C.)

  CE maintains a website, http://www.cedist.com, which sets forth a menu of products sold by CE. including vacuum tubes. (See Ferrari Decl. Ex. H; Def. Mem. at 7.) By selecting "tubes" from the list of products, the user is brought to a page that lists several brands of tubes, including SVETLANA and Winged-C. Choosing SVETLANA brings the user to a list of tubes manufactured by JSC that were purchased by CE before January 15, 2003. (Cravener Reply Page 5

  Decl. ¶ 3; Magee Decl. ¶ 2.) Clicking on "Winged-C tubes" brings the user to a list of Winged-C brand tubes for purchase, as well as the following text, interspersed with the Winged-C logo:
How can you be sure you are getting the tubes made in JSC Svetlana's St. Petersburg's [sic] factory? Look for the "Winged-C" logo.
As the tube world gets more and more complicated, it is important to make sure that you know what you are buying and how to identify the tubes you want to buy. Here's the story:
JSC Svetlana is a Russian company that owns and operates the Svetlana factory in St. Petersburg, Russia, which has been making vacuum tubes for almost a century. These tubes have been known in the United States as Svetlana brand tubes and have had the "S" logo and/or the [Winged-C] logo (a Cyrillic S) on them.
Because of a change in ownership of the former American distributor, JSC Svetlana recently lost its ability to sell vacuum tubes bearing the "Svetlana" name, while maintaining the ability to sell the tubes bearing the [Winged-C] logo in the United States and Canada.
The Xpo-pul factory, otherwise known as Reflector, in Saratov, Russia is an entirely different Russian company that makes vacuum tubes for an American corporation that controls the Sovtek and Electro-Harmonix brand names. This same American corporation now also owns and controls the Svetlana brand name in the United States and Canada and recently introduced (last Fall) a new line of Svetlana branded vacuum tubes produced in the Xpo-pul factory. The Xpo-pul factory "Svetlana" tubes are not the same Svetlana tubes that you have been accustomed to over the years!
Rest assured that the Svetlana factory in St. Petersburg, Russia is still producing vacuum tubes and has no plans to stop. These tubes are available to you through CE Distribution under the "Winged C" name.
All current production St. Petersburg factory tubes — and only those tubes — do bear the [Winged-C] mark, while in the past some did not.
In today's world if you want the tubes that you've come to know in the past as "Svetlana", the only way to be sure you're getting that tube is to look for the [Winged-C] mark.
(Ferrari Decl. Ex. H) (emphasis in original). According to the website, because CE is a Page 6 wholesale company, only dealers and distributors may purchase tubes from the website. See http://www.cedist.com. To ensure this restriction, a customer must enter a customer code and password in order to make a purchase.

  In August 2003, New Sensor filed this lawsuit against CE for trademark infringement and unfair competition under the Lanham Act, 15 U.S.C. § 1051 et seq., and N.Y. Gen. Bus. Law §§ 360-k, 360-1, based on CE's use of SVETLANA on its website. CE now moves to dismiss with prejudice, or in the alternative, for summary judgment. Because both parties have submitted affidavits and other evidence outside the pleadings, pursuant to Fed.R.Civ.P. 12(b) the Court will treat the motion as one for summary judgment. Kopec v. Coughlin, 922 F.2d 152, 154-55 (2d Cir. 1991) (where materials outside the pleadings were presented, Rule 12(b) requires the court to treat the motion to dismiss as one for summary judgment). Although Rule 12(b) requires that parties be given an opportunity to provide supporting material when the court converts a motion to dismiss to one for summary judgment, the Plaintiff here had sufficient notice and opportunity because the original motion sought summary judgment as an alternate form of relief. Groden v. Random House, Inc., 61 F.3d 1045, 1053 (2d Cir. 1995).

  DISCUSSION

 I. Summary Judgement Standard

  Summary Judgment under Fed.R.Civ.P. 56(c) is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law," Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "Only Page 7 disputes over facts that might affect the outcome of the suit under the governing law" will preclude summary judgment. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986).

  When evaluating a motion for summary judgment, "the court must view the evidence in the light most favorable to the party against whom summary judgment is sought and must draw all reasonable inferences in his favor." L.B. Foster Co. v. Am. Piles, Inc., 138 F.3d 81, 87 (2d Cir. 1998) (citing Matsushita Elec. Indus. Co., Ltd, v. Zenith Radio Corp., 475 U.S. 574 (1986)). The party opposing summary judgment "may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). Instead, the opposing party "must designate specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at ...


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