The opinion of the court was delivered by: Ross, United States District Judge
NOT FOR PRINT OR ELECTRONIC PUBLICATION OPINION & ORDER
On September 22, 2010, Magistrate Judge Cheryl L. Pollak issued a Report and Recommendation (the "R&R") in this trademark infringement action, recommending that summary judgment be denied on the issue of fraud. On October 6, 2009, defendants timely filed objections to the R&R pursuant to Rule 72(b)(2) of the Federal Rules of Civil Procedure. Having reviewed de novo those parts of the R&R to which defendants have objected, this court now accepts Judge Pollak's recommendations and denies summary judgment.
Plaintiff Haggar International Corporation d/b/a MONTANA Food Industries ("Haggar"), a California corporation in the business of selling or distributing packaged Middle-Eastern vegetables bearing the trademark "MONTANA," commenced this action in November 2003. It alleges that an Egyptian food exporter, United Company for Food Industry Corporation ("United"), its U.S. subsidiary United Company for Food Industry, (USA) Corp., and a Brooklyn-based importer, Trans Mid-East Shipping and Trading Agency, Inc. (collectively, "defendants") have violated the Lanham Act and New York State law by using Haggar's MONTANA mark on their own vegetables. Defendants counterclaimed, alleging that United- not Haggar-is the owner of the trademark at issue, having created the mark in Egypt and used the mark on its exports throughout the world, including the United States.
In December 2006, Haggar moved for summary judgment on defendants' counterclaims, arguing that United had unreasonably delayed enforcing whatever rights it had in the MONTANA mark and that defendants' counterclaims were therefore barred by the equitable doctrines of laches and acquiescence. On referral from this court, Judge Pollak issued a Report and Recommendation dated March 11, 2008, recommending denial of Haggar's motion for summary judgment on defendants' counterclaims because there was a genuine issue of fact with respect to whether Haggar had fraudulently procured registration of the MONTANA marks, since a party asserting the equitable defenses of laches and acquiescence must come into court with clean hands. In an opinion and order dated June 4, 2008, this court adopted Judge Pollak's March 2008 Report and Recommendation and denied summary judgment for Haggar on defendants' counterclaims.
B. The Current R&R on the Issue of Fraud
In April 2009, defendants moved for summary judgment that Haggar had fraudulently procured registration of the MONTANA marks. In relevant part and as set forth more fully in Judge Pollak's R&R on this motion, familiarity with which is presumed, defendants claimed that Haggar committed fraud on the United States Patent and Trademark Office ("PTO") by asserting that it owned the MONTANA trademark when it knew that United was the true owner of the mark.
Key to defendants' argument is their claim that Haggar was United's exclusive distributor in the United States. "[A]s between a foreign manufacturer and its exclusive United States distributor, the foreign manufacturer is presumed to be the owner of the mark unless an agreement between them provides otherwise." Ushodaya Enters., Ltd. v. V.R.S. Int'l, Inc., 63 F. Supp. 2d 329, 336 (S.D.N.Y. 1999). "A distributor . . . does not acquire a right of ownership in the manufacturer's or producer's mark merely because it moves the goods in trade." Patent and Trademark Office, Trademark Manual of Examining Procedure (TMEP), § 1201.06(a) (5th ed. 2007); but cf. Tactica Int'l, Inc. v. Atlantic Horizon Int'l, Inc., 154 F. Supp. 2d 586, 600 (S.D.N.Y. 2001) (presumption of trademark ownership in foreign manufacturer may be rebutted where distributor "gives them the benefit" of its name or business style).
Defendants claim that United registered trademarks featuring the word "MONTANA" in Egypt in 1986. During that same year it allegedly granted distribution rights for its MONTANA products to Mr. Alfi al Masri and began shipping directly to Mr. Sherif Boulos, Mr. al Masri's son-in-law in the United States, and the incorporator and president of Haggar. According to defendants, Mr. Boulos entered into an oral agreement with United for Haggar to become the exclusive United States distributor for United foods bearing the MONTANA mark. They further allege that the agreement did not include the right to use the mark, and that the goods shipped to Haggar were not specially manufactured for Haggar.
Haggar disagrees with defendants' account of its business relationship with United. According to Haggar, no distributorship agreement was ever formed. Rather, Haggar contends that Mr. al Masri placed specific orders for goods from United and, upon paying for them, handled all details of exporting the goods to customers of his choice. In Haggar's version of events, Mr. Boulos worked only with Mr. al Masri, never directly with United, and sold only products purchased by him in full.
All parties agree that whatever business relationship Haggar had with Mr. al Masri or United was terminated in the summer of 1989. It is also undisputed that, also in 1989, Haggar filed an application with the United States Patent and Trademark Office ("PTO"), its second such application, which resulted in the successful registration of the MONTANA trademark. As part of that application, Mr. Boulos signed an oath asserting that he believed Haggar to be the owner of the MONTANA trademark and that, to the best of his knowledge, no other entity had the right to use the mark in commerce.
On referral from this court, Judge Pollak recommended that summary judgment on the issue of fraud be denied because she found, in relevant part, that a reasonable trier of fact could conclude that Mr. Boulos did not knowingly make a false statement to the PTO in his 1989 oath. First, while there was "much evidence" to support an inference that there was an oral agreement between United and Boulos which resulted in an exclusive distributorship, evidence to the contrary was also presented, including the testimony of Ms. Hala Boulos, widow of the late Mr. Boulos. R&R at 24. Second, Judge Pollak noted Haggar's contention that United's export license contained the word "MOON TANA," not "MONTANA," and observed, "If a jury believes that the mark used by United was actually "MOON TANA," there were significant differences between the word marks and the pictorial marks used by United and Haggar, such that an inference could be drawn that Mr. Boulos made the representations to the PTO with the honest belief that they were true." Id. at 25. Third, Judge Pollak found that a jury might reasonably question why United, if it was the rightful owner, never registered its mark in the United States and indeed withdrew an application in 1990 and chose not to challenge Haggar's registration. Id. at 26.
Finally, Judge Pollak noted that, even if it were clearly established that Haggar was United's distributor, a jury might still find that it had not committed fraud on the PTO because an applicant is not required "to disclose those persons whom he may have heard are using the mark if he feels that the rights of such others are not superior to his. Thus, an applicant who has at least "color of title" to the mark is not guilty of fraud . . . ." Id. (quoting Yocum v. Covington, 216 U.S.P.Q. 210, 216-27 (T.T.A.B. 1982)). Haggar would have had color of title if it "reasonably believed that it could rebut the presumption that the foreign manufacturer was the trademark owner if it ...