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New York State Electric & Gas Corp. v. U.S. Gas & Electric

March 19, 2010

NEW YORK STATE ELECTRIC & GAS CORPORATION, PLAINTIFF,
v.
U.S. GAS & ELECTRIC, INC. ET AL., DEFENDANTS.



The opinion of the court was delivered by: David G. Larimer United States District Judge

DECISION AND ORDER

This is a trademark action. The principal issue is whether U.S. Gas & Electric's recent use of the acronym "NYG&E" and "New York Gas & Electric" in connection with its supply of natural gas and electricity in New York State infringes on the "NYSEG" mark, long-used by plaintiff, New York State Electric & Gas Corporation. While the ultimate determination of that question cannot be made at this time and must await further proceedings, I find that plaintiff has demonstrated enough of a likelihood of success on that issue to warrant preliminary injunctive relief, and I therefore enjoin defendant from its use of the offending marks, pending further order of this Court.

Plaintiff, New York State Electric & Gas Corporation ("NYSEG"), brings this action under §§ 43(a) and 32(1) of the Lanham Act (15 U.S.C. §§ 1125(a) and 1114(1), respectively), and N.Y. Gen. Bus. L. §§ 349 and 360-l, against U.S. Gas & Electric, Inc. ("USG&E"), seeking legal and equitable relief based on USG&E's use of the name "New York Gas & Electric" and the abbreviation "NYG&E" in connection with the sale or supply of natural gas and electricity within New York State.

Several motions have been filed by the parties in this action. NYSEG has filed a motion for a preliminary injunction, seeking to enjoin USG&E from continuing to use the "New York Gas & Electric" and "NYG&E" marks. USG&E has moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and to strike plaintiff's motion for a preliminary injunction.

BACKGROUND*fn1

NYSEG, a New York corporation, is a regulated utility company that currently serves about 873,000 electricity customers and 259,000 natural gas customers in various areas of upstate New York. Plaintiff has used the trade name "New York State Electric & Gas" since 1929, and the "NYSEG" mark since 1980. Amended Complaint (Dkt. #10) ¶¶ 9, 10. Plaintiff is also the owner of two federally registered trademarks, one (No. 2,238,079) for the mark "NYSEG," and one (No. 3,656,846) for a stylized form of that same mark, which were registered in April 1999 and July 2009 respectively. Amended Complaint Ex. A (Dkt. #10-2). Plaintiff's full trade name, "New York State Electric & Gas," is not registered.

USG&E, a Delaware corporation with its principal place of business in Florida, is an energy service company ("ESCO"). In New York, electricity and natural gas are physically delivered through infrastructure (such as pipes and power lines) owned by regulated utility companies like NYSEG. Consumers, however, have the option of purchasing energy either directly from the regulated utility company servicing their area, or from an independent ESCO. Thus, if a consumer within NYSEG's regulated service area selects an ESCO as his energy supplier, the energy will be delivered to the consumer through NYSEG's infrastructure, but his account will be serviced by, and the consumer will directly deal with, the ESCO. The consumer's bill will typically reflect both the ESCO's supply charges and NYSEG's delivery charges.

USG&E has been operating in NYSEG's regulated service area since around March 2007. According to plaintiff, defendant initially operated in New York under the "U.S. Gas & Electric" trade name. In October 2009, however, USG&E informed NYSEG of its intent to begin using the name "New York Gas & Electric" in New York. Amended Complaint ¶ 21.*fn2 On October 23, 2009, NYSEG, through its counsel, sent USG&E a cease-and-desist letter objecting to defendant's rebranding and planned use of that name. Id. ¶ 22; Dkt. #8-2 at 2.

USG&E did not respond to that letter. NYSEG sent another cease-and-desist letter on October 30, 2009. USG&E's counsel acknowledged receipt of that letter, but USG&E never substantively responded to that letter either. Around December 1, 2009, USG&E began marketing its natural gas and electricity services to New York consumers under the name New York Gas & Electric. USG&E also began using the NYG&E mark at around that time.

NYSEG filed the complaint in this action a few days later on December 4, 2009. The amended complaint asserts four claims for relief. The first is a claim under § 43(a) of the Lanham Act, which provides a private right of action against any person "who, on or in connection with any goods or services, ... uses in commerce any word, term, name, symbol, or device" that "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 ... ." 15 U.S.C. § 1125(a). NYSEG alleges that defendant's use of "New York Gas & Electric" and "NYG&E" in connection with the marketing of natural gas and electricity to consumers in New York is likely to cause such confusion as to whether there is some connection or shared identity between plaintiff and defendant.

The second cause of action asserts a claim under § 32(1) of the Lanham Act, which provides a right of action against any person who, 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 or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ... ." 15 U.S.C. § 1114(1)(a). This cause of action relates to plaintiff's "NYSEG" mark, which, as stated, is registered with the United States Patent and Trademark Office.

Plaintiff's third claim for relief sets forth a claim under N.Y. Gen. Bus. L. § 349, which makes unlawful "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state ... ." The fourth claim is asserted under Gen. Bus. L. § 360-l, which provides that "[l]ikelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name shall be a ground for injunctive relief in cases of infringement of a mark registered or not registered or in cases of unfair competition, notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services."

Plaintiff's demand for relief seeks a permanent injunction prohibiting USG&E from using "New York Gas & Electric" or "NYG&E" in connection with the marketing of natural gas or energy, and from engaging in any acts that are likely to lead consumers to believe that defendant is affiliated or associated with, or sponsored by, NYSEG. Plaintiff also seeks compensatory damages, an order directing USG&E to disgorge all of its profits attributable to its allegedly unlawful activities, treble damages under § 35(a) of the Lanham Act (15 U.S.C. § 1117(a)), punitive damages, and attorney's fees.

DISCUSSION

I. General Principles

A. Preliminary Injunctions

To obtain a preliminary injunction, a party ... must demonstrate (1) the likelihood of irreparable injury in the absence of such an injunction, and (2) either (a) likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation plus a balance of hardships tipping decidedly toward the party requesting the preliminary relief. 1-800 Contacts, Inc. v. WhenU.Com, Inc., 414 F.3d 400, 406 (2d Cir.) (quoting Federal Express Corp. v. Federal Espresso, Inc., 201 F.3d 168, 173 (2d Cir. 2000)), cert. denied, 546 U.S. 1033 (2005). Whether to grant or deny a preliminary injunction under these standards lies within the sound discretion of the district court. S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 237 (2d Cir. 2001); P&G v. Ultreo, Inc., 574 F. Supp. 2d 339 (S.D.N.Y. 2008).

B. Motions to Dismiss under Rule 12(b)(6)

When deciding a motion to dismiss pursuant to Rule 12(b)(6), a court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. See Shomo v. City of New York, 579 F.3d 176, 183 (2d Cir. 2009). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to meet that standard. Id.

"When there are well-pleaded factual allegations a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. "Determining whether a complaint states a plausible claim for relief [is] ... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.. at 1950. Elaborating on those principles, the Supreme Court has explained that

[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'"

Id. at 1949 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556-57 (2007) (internal citations omitted). In short, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged--but it has not 'show[n]'--that the pleader is entitled to relief," which is not enough to survive a motion to dismiss. Id. at 1950.

C. Lanham Act

Since both NYSEG's motion for a preliminary injunction and USG&E's motion to dismiss thus require the Court to consider the merits of plaintiff's claims, some familiarity with the standards applicable to Lanham Act claims is necessary before considering either motion.

As stated, NYSEG asserts claims under two sections of the Lanham Act, § 43(a) (15 U.S.C. § 1125(a)), and § 32(1) (15 U.S.C. § 1114(1)), which apply to unregistered and registered marks, respectively. The protections offered by these two sections, and the standards for applying them, are largely quite similar, however. See Louis Vuitton Malletier v. Dooney & Bourke, Inc. ("Dooney"), 454 F.3d 108, 114 (2d Cir. 2006) ("the same analysis applies to claims of trademark infringement under § 32" as to claims under § 43(a) of the Lanham Act); Chambers v. Time Warner, Inc., 282 F.3d 147, 155 (2d Cir. 2002) ("Section 43(a) is a broad federal unfair competition provision which protects unregistered trademarks similar to the way that section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), protects registered marks").

In 1-800 Contacts, Inc. v. WhenU.Com, Inc., 414 F.3d 400 (2d Cir. 2005), the Second Circuit succinctly set forth the standards for relief under both sections:

In order to prevail on a trademark infringement claim for registered trademarks, pursuant to 15 U.S.C. § 1114, or unregistered trademarks, pursuant to 15 U.S.C. § 1125(a)(1), a plaintiff must establish that (1) it has a valid mark that is entitled to protection under the Lanham Act; and that (2) the defendant used the mark, (3) in commerce, (4) "in connection with the sale ... or advertising of goods or services," 15 U.S.C. § 1114(1)(a), (5), without the plaintiff's consent. In addition, the plaintiff must show that defendant's use of that mark "is likely to cause confusion ... as to the affiliation, connection, or association of [defendant] with [plaintiff], or as to the origin, sponsorship, or approval of [the defendant's] goods, services, or commercial activities by [plaintiff]." 15 U.S.C. § 1125(a)(1)(A).

Id. at 406-07 (footnote and citations omitted).

The first thing the plaintiff must show, then, is that its mark is entitled to protection. A registered trademark, such as "NYSEG," that has been in continuous use for at least five years, is presumptively valid and entitled to protection. 15 U.S.C. § 1065; Malletier v. Burlington Coat Factory Warehouse Corp. ("Burlington"), 426 F.3d 532, 534-35 (2d Cir. 2005).*fn3 See also Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 871 (2d Cir. 1986) ("registered trademarks are presumed to be distinctive and should be afforded the utmost protection").

"[T]he general principles qualifying a mark for registration under § 2 of the Lanham Act are for the most part applicable in determining whether an unregistered mark is entitled to protection under § 43(a)." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992). In other words, "an unregistered mark is entitled to protection under the Lanham Act if it would qualify for registration as a trademark." Star Indus., Inc. v. Bacardi & Co., 412 F.3d 373, 381 (2d Cir.), cert. denied, 547 U.S. 1019 (2005).

In determining whether an unregistered mark is entitled to protection, the Court considers "Judge Friendly's classic formulation in Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4 (2d Cir. 1976)." Banff, Ltd. v. Federated Dep't Stores, Inc., 841 F.2d 486, 489 (2d Cir. 1988). That formulation "set[s] forth four categories of terms, each one conferring a differing degree of eligibility for trademark protection. 'Arrayed in an ascending order which roughly reflects their eligibility to trademark status and the degree of protection accorded, these classes are (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful.'" Kensington Pub. Corp. v. Gutierrez, No. 05 Civ. 10529, 2009 WL 4277080, at *2 (S.D.N.Y. Nov. 10, 2009) (quoting Abercrombie & Fitch, 537 F.2d at 9) (additional internal quotation marks omitted).

Generic marks, which "consist[] of words identifying the relevant category of goods or services[,] ... are not at all distinctive and thus are not protectable under any circumstances." Star Indus., 412 F.3d at 384-85. Descriptive marks "consist of words identifying qualities of the product. They are not inherently distinctive, but are protectable provided they have acquired secondary meaning ... ." Id.

Both suggestive marks and arbitrary or fanciful marks are "inherently distinctive." Id. "Suggestive marks are those that are not directly descriptive, but do suggest a quality or qualities of the product through the use of 'imagination, thought and perception.'" Id. (quoting Time, Inc. v. Petersen Publ'g Co., 173 F.3d 113, 118 (2d Cir. 1999)) (additional internal quote and citation omitted). Arbitrary or ...


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