The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge
OPINION, ORDER, & JUDGMENT
On January 11, 2005, Ronit Menashe ("Menashe") and Audrey Quock ("Quock") (together "Plaintiffs"), filed this declaratory judgment action for non-infringement of the trademark "SEXY LITTLE THINGS" (the "Mark") under the Lanham Act, 15 U.S.C. § 1051 et. seq., and at common law against Defendants V Secret Catalogue, Inc., Victoria's Secret Stores, Inc., Intimate Beauty Corporation, and Victoria's Secret Direct, LLC (collectively "Victoria's Secret"). Plaintiffs also sought a declaratory judgment of non-cybersquatting under the Anticybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d), a judgment of tortious/fraudulent misrepresentation, punitive damages, and reasonable attorney's fees.
On July 7, 2005, this Court denied Victoria's Secret's motion to dismiss the Complaint pursuant to Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, or in the alternative for summary judgment. Menashe v. V Secret Catalogue, Inc., No. 05 Civ. 239, 2005 WL 1580799 (S.D.N.Y. July 7, 2005). Trial was held on December 13-14, 2005.
A. Plaintiffs' Adoption of the Mark
On or about June 1, 2004, Menashe, a publicist, and Quock, a fashion model and actress, embarked on a joint business venture to produce and launch a line of women's underwear. Trial Declaration of Ronit Menashe ("Menashe Decl.") (undated) ¶¶ 4, 6; Trial Declaration of Audrey Quock ("Quock Decl.") (undated) ¶¶ 3, 5. Sometime in July 2004, they decided to name their line "SEXY LITTLE THINGS." Menashe Decl. ¶ 7; Quock Decl. ¶ 11. Also in July 2004, Quock purchased 400 sample pieces of plain stock underwear from a manufacturer in China and in late July or early August 2004, heat pressed her designs consisting of words and logos onto the stock underwear. Quock Decl. ¶¶ 7, 13. She also heat pressed the Mark onto the back of the underwear where a label would normally be attached. Id.
In late July or early August 2004, Menashe and Quock came up with the phrase "SEXY LITTLE THING, SEXY LITTLE THINGS," a variation of their chosen name that they believed yielded many creative possibilities for design and advertising. Menashe Decl. ¶ 8; Quock Decl. ¶ 12. On August 31, 2004, Quock registered the domain name www.sexylittlethings.com in preparation for building a website to sell the underwear line over the Internet. Quock Decl. ¶ 18. Subsequently, on September 13, 2004, after searching the website of the United States Patent and Trademark Office ("USPTO") and finding that the Mark was available, Menashe and Quock filed an intent-to-use ("ITU") application with the USPTO for "SEXY LITTLE THING, SEXY LITTLE THINGS" for lingerie. Menashe Decl. ¶ 9-10; Quock Decl. ¶ 20. About ten days later, Quock hired a website designer to create the www.sexylittlethings.com site. Quock Decl. ¶ 21.
By early September 2004, Quock initiated negotiations with her manufacturer in China to silkscreen print her designs on bulk shipments of underwear. Id. ¶ 24. In October 2004, she sent the manufacturer eight designs to make prototype prints, and started negotiations for an order of 6,000 pieces of underwear. Id. ¶ 24, 26. The manufacturer sent Quock the eight prototypes on November 13, 2004. Id. ¶ 28. By then, she had also sent the manufacturer diagrams for the production of labels carrying the mark "SEXY LITTLE THINGS." Id.
Meanwhile, Plaintiffs had also set about publicizing their line. Sometime in September or October 2004, Quock did an interview with www.ediets.com, and an article that mentioned the name of Plaintiffs' line and the www.sexylittlethings.com website appeared online at the ediets.com website in the week of November 19, 2004. Id. ¶ 34. On August 19, 2004, Quock did a photo shoot for Stuff Magazine in which she modeled a pair of "SEXY LITTLE THINGS" underwear. Id. ¶ 31. The photographs were published in Stuff Magazine in March of 2005 with an accompanying article that featured Quock's venture into women's lingerie, but did not mention the name of the line. Id. ¶¶ 32, 47. In late September or early October 2004, Quock did an interview with Beyond Fitness magazine in which she promoted her underwear line, but was unaware whether the article was ever published. Id. ¶ 38; 12/13/2005 Trial Transcript ("Tr.") at 48-49. In mid-November, she flew to Milan for a photo shoot featuring "SEXY LITTLE THINGS" underwear. Quock Decl. ¶ 40. The photographs were never published. Tr. at 51-53.
On October 14, 2004, Quock e-mailed Menashe an outline of a business plan for the underwear line and indicated that they were ready to seek buyers. Quock Decl. ¶ 37; 10/14/2004 e-mail from Quock to Menashe, Plaintiffs Trial Exhibit ("Pls. Ex.") 14. Sometime in November 2004, Quock contacted a friend who was a buyer for Fred Segal stores about selling the underwear line in boutiques in Los Angeles, California. Quock Decl. ¶ 39; Tr. at 44. As noted below, this effort too was never consummated.
On November 16, 2004, Menashe received a letter from Victoria's Secret's outside counsel informing her that Victoria's Secret had been using "SEXY LITTLE THINGS" as a trademark for lingerie since prior to the filing date of Plaintiffs' ITU application. Menashe Decl. ¶ 12; see 11/15/2004 Cease and Desist Letter, Ex. A to 03/14/2005 Am. Compl., at 1. The letter warned that "SEXY LITTLE THING, SEXY LITTLE THINGS," the subject of Plaintiffs' ITU application, was confusingly similar to Victoria's Secret's mark and, if used, would constitute trademark infringement. See id. at 2. Further, the letter demanded that Plaintiffs cease and desist all plans to use "SEXY LITTLE THING, SEXY LITTLE THINGS," abandon their ITU application, and transfer the domain name www.sexylittlethings.com to Victoria's Secret. See id. Finally, the letter requested a response by November 19, 2004. See id.
Victoria's Secret's letter caused Plaintiffs to halt production of their underwear project, instruct Stuff Magazine not to mention the name of their underwear line, discontinue other publicity efforts, stop development of their website, and cease their attempts to find retail outlets for their product. Quock Decl. ¶¶ 44, 46, 50. Plaintiffs also ordered two trademark investigations into Victoria's Secret's claims to the Mark. Id. ¶ 52. They were informed that no one had used the Mark prior to the filing of their ITU application. Id. One investigation reported that Victoria's Secret's Resort 2005 catalogue, which had been sent with the cease and desist letter as proof of Victoria's Secret's use of the Mark, was not mailed out until December 28, 2004. Id. ¶ 53. At trial-while it stretches credulity-Menashe testified that since the time she received the cease and desist letter, she has not been in a Victoria's Secret store or looked at a Victoria's Secret catalogue to see whether Victoria's Secret was selling merchandise under the name "SEXY LITTLE THINGS." Tr. at 64-65. Quock testified that she did not visit a Victoria's Secret store nor look at a Victoria's Secret catalogue until some time after receipt of the cease and desist letter, when she walked into a Victoria's Secret store and saw a display for "SEXY LITTLE THINGS." Tr. at 54-55.
B. Victoria's Secret's Adoption and Use of the Mark
As early as Fall 2002, Victoria's Secret began to develop the concept and marketing for a panty collection. Tr. at 207. Victoria's Secret's decision to expand its panty business stemmed from a desire to capitalize on a major fashion trend that appeared to herald "decorated bottoms"-seen in the popularity of low rise pants and the vogue among young women for wearing lingerie style items as outerwear. Tr. at 206. Sometime between March 30 and June 1, 2004, Victoria's Secret's marketing department settled on the name "SEXY LITTLE THINGS" for its panty collection. Tr. at 181, 185. The collection, characterized as "fun, flirty, and playfully sexy," was designed to appeal to women in their twenties and early thirties, and was comprised of over eighty items that included panties, camisoles, and other underwear. Tr. at 184, 196; Sexy Little Things Brand Strategy, Defendants Trial Exhibit ("Defs. Ex.") K. Some of these items were already being sold in Victoria Secret stores as general merchandise prior to the introduction of the "SEXY LITTLE THINGS" collection (the "Collection"), but the majority of the items were placed in stores for the first time when the Collection was rolled out in July 2004. Tr. at 186-87.
On or around July 28, 2004, the Collection was scheduled to make its first appearance in five Victoria's Secret stores in Ohio, Michigan, and California. 12/01/2005 Trial Declaration of Pamela K. Rice, Director of Merchandising for Sexy Little Things for Victoria's Secret Stores, Inc. ("Rice Decl.") ¶ 7. On that date, the mark "SEXY LITTLE THINGS" was displayed with the Collection in four of the five stores in the form of hangtags, store signage, permanent fixtures, or in window exposures. Id. ¶ 8. For example, in one of the Ohio stores, denominated Easton #1300, the Mark appeared as a large illuminated sign on a "focal wall," a specially constructed vertical unit of nine compartments, each compartment containing a plastic "buttock" on which a pair of panties was displayed. See Defs. Ex. D, VS 732. In that store, the Mark also appeared prominently on hangtags attached to hangers that displayed panties, on labels adhered to pull-out compartments of something called a "panty bar"-a horizontal case that displayed merchandise in each compartment-and with window displays of the same merchandise. Id., VS 728-29, 738, 745-46, 749-50. Further, on July 28, 2004, the testimony recites that the "selling environments" for "SEXY LITTLE THINGS" merchandise, comprising the various described displays, opened to consumers in the Ohio roll-out stores. Rice Decl. ¶ 9; 11/30/2005 Trial Declaration of Polly Jean Sinesi, Director of Prototype Design for Limited Store Planning, Inc. ("Sinesi Decl.") ¶ 13.
The roll-out at the Briarwood, Michigan store was delayed owing to technical difficulties related to signage. Tr. at 177-78. Maria Thurston, a co-manager of the Briarwood store from October 2001 until November 27, 2004, testified that while construction for a "panty boutique" was completed on July 28, 2004, no "SEXY LITTLE THINGS" signs appeared in the store until the second week of September 2004. Trial Declaration of Maria E. Thurston, Former Co-Manager of Victoria's Secret Briarwood Store #105 ("Thurston Decl.") (undated), ¶¶ 6-9. Ms. Thurston also testified that through September 2004, she never received brand guides from corporate headquarters with instructions for displaying "SEXY LITTLE THINGS" merchandise in the store. Tr. at 80-81.
The "SEXY LITTLE THINGS" collection was rolled out to more Victoria's Secret stores in September and October 2004, and by October 19, 2004, the Collection was available to consumers in all nine hundred and twenty-three Victoria's Secret retail lingerie stores nationwide. Rice Decl. ¶¶ 11-13. In each of the stores, there was some form of focal wall or table signage that displayed the "SEXY LITTLE THINGS" mark together with garments from the Collection. Tr. at 178, 196. No labels displaying the Mark were sewn on the merchandise, however, until June 2005. Tr. at 195-96, 199. Moreover, when the Collection was rolled out, store receipts did not indicate that the consumer had bought a "SEXY LITTLE THINGS" item. Tr. at 211.
The Collection was also available to consumers through catalogues and online. The Collection, according to the uncontradicted testimony and exhibits, first appeared in the Major Fall 2 edition of the Victoria's Secret catalogue that was mailed out to approximately 2.9 million consumers nationwide between September 4, 2004 and September 9, 2004. 11/30/2005 Trial Declaration of James J. Pozy, Controller of Victoria's Secret Direct, LLC ("Pozy Decl.") ¶¶ 6, 9. Because Victoria's Secret Direct simultaneously makes most of its catalogues available online through its website, the Major Fall 2 catalogue became available online on or about September 9, 2004. Id. ¶ 7. Beginning with the Major Fall 2 edition, the Collection has appeared in approximately twenty-two editions of the Victoria's Secret catalogue. Id. ¶ 14.
Typically, the catalogues contained several pages dedicated to the display of "SEXY LITTLE THINGS" merchandise. Copies from Victoria's Secret Catalogues, Defs. Ex. BB. The Mark was prominently displayed on these pages together with "SEXY LITTLE THINGS" items. Occasionally, together with "SEXY LITTLE THINGS" merchandise, these pages also displayed a few items from Victoria's Secret's other trademarked collections, sub-brands such as Angels by Victoria, Body by Victoria, and Very Sexy, so as to suggest to the consumer various looks that could be created using pieces from different collections. Tr. at 242-43, 245-46, 248, 250. When this happened, the catalogue copy stated the name of the collection to which the item belonged. Tr. at 260. In addition, a few items advertised as part of the "SEXY LITTLE ...