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United States District Court, S.D. New York

July 6, 2005.

BANGKOK CRAFTS CORPORATION, Plaintiff/Counterclaim Defendant,
CAPITOLO DI SAN PIETRO IN VATICANO, Defendant/Counterclaimant. CAPITOLO DI SAN PIETRO IN VATICANO, Defendant/Counterclaimant, v. TREASURES OF ST. PETER'S IN THE VATICAN LTD., et al., Additional Counterclaim Defendants.

The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge


Defendant/Counterclaimant Capitolo di San Pietro in Vaticano ("Capitolo") has moved under Rule 56, Fed.R.Civ.P., for summary judgment on certain of its counterclaims asserted against counterclaim defendants New Renaissance Art, Inc. ("NewRen"), E-21 Global, Inc. ("E-21"), Maxx International, Inc. ("Maxx"), and Craig Franco ("Franco") (collectively, the "Sublicensees").

As set forth below, the motion is granted. Capitolo is entitled to a judgment (1) declaring TSV's sublicense with NewRen terminated and/or expired by its own terms as of February 7, 2001 (Count Two of the Answer and Counterclaims) and (2) finding NewRen liable for false advertising in violation of Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) (Count Five of the Answer and Counterclaims).

  Prior Proceedings

  Bangkok Crafts Corporation ("BCC") initiated this action against Capitolo in the Supreme Court of the State of New York, County of New York, and it was removed by Capitolo to this Court on January 2, 2003.

  Capitolo moved for partial summary judgment against BCC which was granted by opinion and order of June 23, 2004 declaring a purported August 2000 renewal agreement void and the license between Capitolo and BCC terminated as of February 7, 2001. See Bangkok Crafts Corp. v. Capitolo di San Pietro in Vaticano, No. 03 Civ. 0015 (RWS), 2004 WL 1406076 (S.D.N.Y. June 23, 2004) (the "June 23 Opinion").

  Third-party defendants Gerald P. Colapinto ("Colapinto") and Second Renaissance, LLC ("SRLLC") moved to dismiss the fraud, unfair competition, and unjust enrichment claims of third-party plaintiffs E-21, Franco, NewRen and Maxx, which motion was granted in part by the order and opinion of August 18, 2004. See Bangkok Crafts Corp. v. Capitolo Di San Pietro in Vaticano, 331 F. Supp. 2d 247 (S.D.N.Y. 2004) (the "August 18 Opinion").

  Capitolo also moved to dismiss Count Six of the counterclaims/third party complaint (the "Counterclaim") asserted by additional counterclaim defendants/third party plaintiffs E-21, Franco, NewRen, and Maxx, as amended by third party plaintiffs' first amendment to Count Six of the counterclaim (the "Amendment"). This motion was granted by the order and opinion of September 7, 2004. See Bangkok Crafts Corp. v. Capitolo di San Pietro in Vaticano, No. 03 Civ. 0015 (RWS), 2004 U.S. Dist. LEXIS 25235 (S.D.N.Y. Sep. 7, 2004) (the "September 7 Opinion"). Familiarity with the June 23, August 18 and September 7 Opinions is assumed, and those opinions describe the underlying dispute between Capitolo, BCC and its sub-licensees.

  On February 8, 2005, the parties resolved the present motion with respect to E-21, Franco, and Maxx by way of a stipulation endorsed by the Court. This motion, which was opposed only by NewRen, was heard and marked fully submitted on February 9, 2005.

  The Facts

  The facts are set forth in Capitolo's Local Civil Rule 56.1 statement and are not controverted by NewRen except as noted below.

  On or about May 8, 1996, representatives for BCC and Capitolo executed a license agreement under which Capitolo granted to BCC an exclusive right and license, effective as of February 8, 1996, to manufacture and sell reproductions of Capitolo's works of art (the "Reproductions"). (See Declaration of David Dunn dated January 24, 2005 ("Dunn Decl."), at Ex. A) (the "1996 License"). The territory of the 1996 license was defined as the continents of North America, South America, Australia and Asia. The 1996 License permitted BCC to enter into sublicenses with unaffiliated parties, provided that any sublicense did not conflict with the terms or conditions of the license, and obligated BCC to pay royalties to Capitolo equal to five percent of the fees BCC received from its sublicensees.

  BCC conducted its licensing activities under the 1996 License through its affiliate Treasures Of St. Peter's In The Vatican, Ltd. ("TSV"), a legal entity owned by John Loata ("Loata"), to which BCC is purported to have assigned certain rights under the 1996 License. The 1996 License terminated on February 7, 2001 as determined by the June 23 Opinion. Bangkok Crafts Corp., 2004 WL 1406076, at *6.

  BCC had contended that on August 28, 2000 it obtained Capitolo's agreement to a new, vastly expanded license agreement with a term renewable at BCC's election for up to 45 years, notwithstanding Capitolo's position that there would be no renewal and expansion of the 1996 License, and prompt repudiation of the agreement upon first learning of its existence. (See Dunn Decl. Ex. A) (the "2000 License"). The 2000 License was determined by the June 23 Opinion to be void ab initio. Bangkok Crafts Corp, 2004 WL 1406076, at *6.

  In November or December 2000, TSV and NewRen entered into a sublicense, effective May 10, 2000, for the manufacture and sale of:

sculptures utilizing one or more of the Reproductions which are (i) made of metal or alloys, or made of porcelain or marble but only if first produced and marketed in metal or alloy as an approved Product.
(Dunn Decl. Ex. F.)

  David Newren ("Newren") signed the sublicense on behalf of NewRen, and Colapinto signed the agreement on behalf of TSV. Although the license is dated May 2000, Newren did not sign the agreement until the end of that year, and only after learning from Maxx's representative of the dispute surrounding the validity of BCC's supposed license extension in August 2000. NewRen's sublicense recited that TSV's grant of the rights thereunder was based on TSV's authority to operate under "an exclusive right and license" with Capitolo. (Id.) TSV's sublicense with NewRen that provided that "[f]ollowing termination or expiration of this Agreement, (including, as a result of the termination of TSV's [1996] License) Sublicensee shall return copies of all Reproductions of the Works of Art. . . ." (Id.)

  In February 2001, NewRen entered into an agreement with New Renaissance Art Inc. Nevada ("NewRen Nevada") to manufacture and distribute the products created under the purported authority of NewRen's sublicense with TSV, namely reproductions (in bronze, silver or gold) of the bust of the Virgin Mary from Michelangelo's Pieta (the "Madonna busts"). The agreement between NewRen and NewRen Nevada requires NewRen Nevada to sell and market these products "under the name and logo of The Vatican Treasury Collection." (Id.) The term "Vatican Treasury Collection" is defined to include "all items within the Treasures of St. Peter's Museum located in the Basicila of St. Peters in the Vatican." (Id.)

  NewRen and/or NewRen Nevada have been and are marketing and selling the Madonna busts through a variety of channels, including through sales representatives and art dealers/galleries (i.e, on consignment).

  The NewRen website, (the "website"), relates primarily to the sale of the Madonna busts. On the website, NewRen identifies itself as the "Exclusive Worldwide Sculpture Licensee of the Capitolo di San Pietro in Vaticano." (Dunn Decl. Ex. G.)

  NewRen's licensing arrangement is premised on its sublicense with TSV, a sublicense that is based on the purported authority of the 1996 License. According to NewRen's website:

New Renaissance Art feature sculptures of the artwork conserved in The Treasury of St. Peter's Museum in Rome. These sculptures have been faithfully reproduced from the original masterpieces in limited editions and carry a guarantee of authenticity bearing the official logo of the Vatican Treasury Collection.
(Id.) The website also contains a representation that "a portion of the proceeds from the sale of the sculptures by New Renaissance Art will help support the conservation efforts of the Treasury of Saint Peter's Museum." (Id.)

  The website states that each bust is sold with a "Certificate of Authenticity" bearing "the official seal of The Vatican Treasury Collection." (Id.) It is through this certificate that NewRen purportedly "certifies and guarantees the authenticity of each sculpture within the edition authorized under license from the Treasury of St. Peter's Museum in the Vatican." (Id.)

  NewRen sold 139 bronze busts and 29 silver busts from June 28, 2001 to November 25, 2002, and made related royalty payments to TSV (through SRLLC) in the amount of $145,000. (See id.)

  As of May 7, 2004, NewRen continued to sell the Madonna busts in connection with the Vatican Treasury Collection seal. NewRen's sales to date included approximately 205 bronze Madonna busts and 40 silver Madonna busts. (See id. (May 7, 2004 Deposition of David Newren ("Newren Dep."), at 13.) NewRen's inventory of such items as of May 2004 included approximately 60 Madonna busts on consignment with art dealers and galleries. (See id.) NewRen has stated that at least 10-20% of the value of the Madonna bust is derived from the ability to market the sculpture in connection with NewRen's sublicense with TSV. (See id. (Newren Dep. at 73-74).)


  A. The Summary Judgment Standard

  Pursuant to Rule 56, summary judgment may be granted only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); SCS Communications, Inc. v. Herrick Co., Inc., 360 F.3d 329, 338 (2d Cir. 2004). The court will not try issues of fact on a motion for summary judgment, but, rather, will determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

  Summary judgment is appropriate where the moving party has shown that "little or no evidence may be found in support of the nonmoving party's case. When no rational jury could find in favor of the nonmoving party because the evidence to support its case is so slight, there is no genuine issue of material fact and a grant of summary judgment is proper." Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1223-24 (2d Cir. 1994) (internal citations omitted). If, however, "`as to the issue on which summary judgment is sought, there is any evidence in the record from which a reasonable inference could be drawn in favor of the opposing party, summary judgment is improper.'" Security Ins. Co. of Hartford v. Old Dominion Freight Line Inc., 391 F.3d 77, 83 (2d Cir. 2004) (quoting Gummo v. Village of Depew, 75 F.3d 98, 107 (2d Cir. 1996)).

  B. Summary Judgment Is Granted On Capitolo's Claim For Declaratory Relief (Count Two Of The Answer And Counterclaims)

  Count Two of the Answer and Counterclaims sought a declaration that sublicenses that exceed the scope of the 1996 License are invalid. NewRen does not dispute the invalidity of its sublicense with TSV and concedes that pursuant to this Court's previous ruling regarding the 1996 License, its sublicense with TSV terminated on February 7, 2001. Thus, Capitolo is entitled to a judicial declaration to this effect and to dismissal with prejudice of NewRen's related declaratory judgment claim asserted against Capitolo. C. Summary Judgment Is Granted On Capitolo's False Advertising Claim (Count Five Of The Answer And Counterclaims)

  Count Five of the Answer and Counterclaims asserted that NewRen engaged in false advertising in violation of Section 43(a) of the Lanham Act, which provides in pertinent part as follows:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which —
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
15 U.S.C. § 1125(a).*fn1 "Section 43(a) . . . broadly proscribes the use of false descriptions and false designations of origin in the advertising and sale of goods or services in commerce." Rosenfeld v. W.B. Saunders, 728 F. Supp. 236, 241 (S.D.N.Y.), aff'd, 923 F.3d 845 (2d Cir. 1990). "In this circuit, to constitute `commercial advertising or promotion' under the Lanham Act, a statement must be: (1) `commercial speech,' (2) made `for the purpose of influencing consumers to buy defendant's goods or services,' and (3) `although representations less formal than those made as part of a classic advertising campaign may suffice, they must be disseminated sufficiently to the relevant purchasing public.'" Gmurzynska v. Hutton, 355 F.3d 206, 210 (2d Cir. 2004) (quoting Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 56, 57-58 (2d Cir. 2002)). "Commercial speech is `speech which does no more than propose a commercial transaction.'" Id. (quoting City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 422 (1993) (internal quotation omitted)).

  1. Capitolo Has Standing To Assert A False Advertising Claim Pursuant To Section 43(a) Of The Lanham Act

  NewRen does not dispute that it has made false statements concerning its association with Capitolo and whether Capitolo authorized it to market the Madonna busts. Nor does it dispute that such false statements were made in connection with the promotion and sale of the Madonna bust. NewRen has sought to avoid an injunction on the grounds that Capitolo lacks standing to assert its false advertising claim pursuant to Section 43(a) of the Lanham Act. The Second Circuit has stated that

[i]n order to establish standing to sue under [Section 43(a)], a plaintiff must demonstrate a "reasonable interest to be protected" against the advertiser's false or misleading claims, PPX Enters., Inc. v. Audiofidelity, Inc., 746 F.2d 120, 125 (2d Cir. 1984), and a "reasonable basis" for believing that this interest is likely to be damaged by the false or misleading advertising, Coca-Cola Co. v. Tropicana Prods., Inc., 690 F.2d 312, 316 (2d Cir. 1982). See also Johnson & Johnson v. Carter-Wallace, Inc., 631 F.2d 186, 190 (2d Cir. 1980). The "reasonable basis" prong embodies a requirement that the plaintiff show both likely injury and a causal nexus to the false advertising.
Ortho Pharmaceutical Corp. v. Cosprophar, Inc., 32 F.3d 690, 694 (2d Cir. 1994).

  As NewRen has noted, "[c]ourts [of this circuit] have restricted standing [pursuant to Section 43(a)] to commercial parties, excluding mere consumers[.]" PPX Enterprises, Inc. v. Audiofidelity, Inc., 746 F.2d 120, 125 (2d Cir. 1984) (citing Colligan v. Activities Club of New York, Ltd., 442 F.2d 686, 692 (2d Cir. 1971)). However, it is also well established in this circuit that "`a [S]ection 43 plaintiff need not be [defendant's] direct competitor. . . .'" Havana Club Holding, S.A. v. Galleon S.A., 203 F.3d 116, 130 (2d Cir. 2000) (quoting Berni v. International Gourmet Restaurants of America, Inc., 838 F.2d 642, 648 (2d Cir. 1988)); see also PPX Enterprises, 746 F.2d at 125 (stating that "a plaintiff has standing [under Section 43] whether he or she is in direct or indirect competition with the alleged violator."). "`[A]t a minimum, standing to bring a section 43 claim requires the potential for a commercial or competitive injury.'" Id. NewRen has cited no precedent that supports the proposition that Capitolo must itself be actually engaged in the distribution of religious-themed products in order to assert a Section 43(a) claim, and there is ample authority to support the contrary position. The reasoning of the PPX Enterprises court is instructive. In that case, the plaintiffs were in the business of acquiring royalty interests in the sale of record albums, and the defendants were in the business of distributing records. Holding that the plaintiffs had standing to assert a Section 43 claim, the PPX Enterprises court stated:

In the present case plaintiffs claim to have straight-forward commercial interests that could reasonably be affected by [defendants'] misleadingly packaged Jimi Hendrix recordings. Plaintiffs are in the business of making money by acquiring royalty interests in the sale of record albums and singles. Their interests in promoting sales are direct, and hardly less immediate than the interests of those who actually distribute the records. Every time a record in which they have a royalty interest is sold, they earn money; every time a sale is lost to a competitor, they lose a potential profit. Moreover, if consumers buy defendants' Jimi Hendrix albums and find that they have, in fact, been misled, then it is not unlikely that they will be reluctant to buy other Hendrix recordings, including those in which plaintiffs have their interests. Because of their royalty interests, plaintiffs have a pecuniary stake in sales of Hendrix recordings that makes them genuine business competitors of the defendants.

  Similar to the plaintiffs in PPX Enterprises, Capitolo's royalty interests can be characterized as a pecuniary stake in the sale of religious-themed products such as those distributed by NewRen, and thus a reasonable interest to be protected under the Lanham Act. See id. at 124-25. Although the licensing arrangement between Capitolo and BCC has since terminated, Capitolo has engaged in commercial exploitation of its name and association with it. No evidence has been adduced to suggest that Capitolo is somehow precluded from entering, or has abandoned the intent to pursue, another licensing arrangement for the manufacture and sale of products that are properly authorized by Capitolo and legitimately bear Capitolo's name and seal.

  Based on the foregoing, it is determined that Capitolo has established an indirect competitive relationship between the parties sufficient to confer Section 43(a) standing.

  2. Injunctive Relief Is Warranted

  To establish entitlement to injunctive relief pursuant to Section 43(a) of the Lanham Act, a plaintiffs "must demonstrate a likelihood of deception or confusion on the part of the buying public caused by [a] false description or representation [by the defendant]." PPX Enterprises, 818 F.2d at 271 (citing Burndy Corp. v. Teledyne Indus., 748 F.2d 767, 772 (2d Cir. 1984); Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 316 (2d Cir. 1982)). With respect to the requirement that the plaintiff establish the falsity of the defendant's representation, the Second Circuit has stated that:

"[f]alsity may be established by proving that (1) the [representation] is literally false as a factual matter, or (2) although the [representation] is literally true, it is likely to deceive or confuse customers." Lipton v. Nature Co., 71 F.3d 464, 474 (2d Cir. 1995). However, in addition to proving falsity, the plaintiff must also show that the defendants "misrepresented an `inherent quality or characteristic'" of the product. National Assoc. of Pharmaceutical Mfrs. v. Ayerst Lab., 850 F.2d 904, 917 (2d Cir. 1988) (quoting Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272, 278 (2d Cir. 1981)). This requirement is essentially one of materiality, a term explicitly used in other circuits.
National Basketball Ass'n v. Motorola, Inc., 105 F.3d 841, 855 (2d Cir. 1997).

  Newren has admitted that his company's manufacture and distribution of the Madonna bust is premised solely on its sublicense with TSV, and that this sublicense was, in turn, premised on the 1996 License. (See NewRen's Response to Capitolo's 56.1 Statement ("NewRen Resp."), at ¶¶ 27-28, 30, 35.) With respect to the Madonna bust, NewRen does not, and cannot, dispute that it has continued to make representations of association with, and authorization by, Capitolo in its efforts to market and sell the product. Notably, NewRen has affixed to the bust an imprint of Capitolo's seal. (See Supplemental Declaration of Melissa Henke dated February 8, 2005 ("Supp. Henke Decl."), at ¶¶ 4-6). Moreover, NewRen does not dispute that it still today identifies itself as the "Exclusive Worldwide Sculpture Licensee of the Capitolo di San Pietro in Vaticano," or that it still sells each Madonna accompanied by a false "Certificate of Authenticity" that bears Capitolo's seal, and which purports to certify and guarantee that each bust is authorized by a license with the "Treasury of St. Peter's Museum." (NewRen Resp. ¶¶ 34, 38.) Since NewRen concedes that (1) it has never had a direct licensing arrangement with Capitolo or with any other Vatican entity, and (2) its sublicense with TSV terminated in February 2001 (and with that terminated any right to use Capitolo's name and mark, or to claim any association whatsoever with Capitolo), there can be no dispute that such representations are false.

  Furthermore, the facts described above establish that NewRen's representations about Capitolo's sponsorship and authorization go to the quality/character of the product offered by NewRen. Here, the representations concerned whether NewRen's Madonna bust (a reproduction of the head of Mary from Michelangelo's Pieta, one of the Vatican's best known works of art) was licensed or otherwise authorized by Capitolo, the Vatican entity that owns the Pieta and other works of art of the Vatican Treasury collection. In light of this fact, it is beyond dispute that NewRen's false representation that the Madonna bust bore Capitolo's imprimatur concerned an inherent quality or characteristic of the product. Therefore, it has been established that the representations at issue were false and material pursuant to Section 43(a) of the Lanham Act.

  NewRen has argued that Capitolo has failed to adduce any evidence or otherwise establish that NewRen's false representations about the Capitolo have a tendency to influence consumers to purchase the Madonna bust. These arguments notwithstanding, Capitolo has established that it is entitled to the injunctive relief that it seeks. See PPX Enterprises, 818 F.2d at 272 (2d Cir. 1987) (stating that "`[i]f a statement is actually false, relief can be granted on the court's own findings without reference to the reaction of the buyer or consumer of the product.'") (quoting American Home Products Corp. v. Johnson & Johnson, 577 F.2d 160, 165 (2d Cir. 1978)); Tripledge Products, Inc. v. Whitney Resources, Ltd., 735 F. Supp. 1154, 1164 (E.D.N.Y. 1990) (stating that "[w]hen an advertising or merchandising statement is literally or explicitly false in the context in which it is made, . . . the court may grant relief without reference to the advertisement's impact on the buying public") (citing Avis Rent A Car System, Inc. v. Hertz Corp., 782 F.2d 381, 386 (2d Cir. 1986) and Coca-Cola, 690 F.2d at 317); Tambrands, Inc. v. Warner-Lambert Co. 673 F. Supp. 1190, 1195 (S.D.N.Y. 1987) (stating that "[i]n order to justify the issuance of a permanent injunction, plaintiff must show irreparable injury. Proof that defendants' advertising is false will sustain a finding of irreparable injury.") (citing Coca-Cola Co. v. Tropicana Products, 690 F.2d 312 (2d Cir. 1982)). Accordingly, it is appropriate at the summary judgment stage for the Court to enter an order permanently enjoining NewRen from (1) making any further claim of association with, or authorization by Capitolo, and (2) using Capitolo's name or mark on the Madonna busts or in future sales and marketing activities or elsewhere.*fn2


  For the foregoing reasons, and in light of the entire record in this matter, Capitolo's motion for partial summary judgment is granted. Capitolo is directed to submit judgment in accordance with the terms stated herein within ten (10) days of the entry of this opinion and order.

  It is so ordered.

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