The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.
MEMORANDUM OPINION & ORDER
In a Memorandum Opinion and Order dated January 18, 2011 (Dkt. No. 38), this Court granted Tecnimed SRL's motion for a preliminary injunction (Dkt. No. 3) based on its claim that Defendant Kidz-Med's packaging for its non-contact thermometer infringed the trade dress of Tecnimed's "Thermofocus" non-contact thermometer.*fn1 The Court's Order requires Kidz-Med to change its packaging to eliminate the risk of customer confusion. (Memorandum Opinion & Order at 32)
The Court also granted Tecnimed's application for a recall of Kidz-Med units that are packaged in the infringing trade dress. In making this determination, the Court considered and addressed "'the defendant's good faith or bad faith, the likelihood of diversion of customers from plaintiff to defendant, the extent of the burden entailed in a recall, including the breadth of distribution and the shipping costs, and the probability that the plaintiff would benefit from such an order.'" (Opinion & Order at 27 (quoting Cherry River Music Co. v. Simitar Entm't, Inc., 38 F. Supp. 2d 310, 322 (S.D.N.Y. 1999) (citing Perfect Fit Indus., Inc. v. Acme Quilting Co., 646 F.2d 800, 807 (2d Cir. 1981))). As discussed in the Opinion and Order (at 25-30), all of these factors support a recall. Pursuant to Federal Rule of Civil Procedure 62(c), Kidz-Med now seeks a stay of the recall order pending appeal. For the reasons stated below, Kidz-Med's application for a stay will be DENIED.
I.STANDARD FOR ISSUING A STAY PENDING APPEAL "The four factors to be considered in issuing a stay pending appeal are well
known: '(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.'" In re World Trade Center Disaster Site Litig., 503 F.3d 167, 170 (2d Cir. 2007) (quoting Hilton v. Braunskill, 481 U.S. 770, 776 (1987)). In considering these factors, "the degree to which a factor must be present varies with the strength of the other factors, meaning that '"more of one [factor] excuses less of the other.'"" Id. (quoting Thapa v. Gonzales, 460 F.3d 323, 334 (2d Cir. 2006) (quoting Mohammed v. Reno, 309 F.3d 95, 101 (2d Cir. 2002)). "The application for a stay is not meant as a tool to reargue the merits of the underlying case." Silverstein v. Penguin Putnam, Inc., 2003 WL 21361734, at *1 (S.D.N.Y. June 12, 2003).
A.LIKELIHOOD OF SUCCESS ON APPEAL
A party seeking a stay pending appeal "[must demonstrate] a 'substantial possibility' of success [on appeal]," Mohammed v. Reno, 309 F.3d 95, 101 (2d Cir. 2002) (quoting Dubose v. Pierce, 761 F.2d 913, 920 (2d Cir. 1985)), although "'[t]he necessary "level" or "degree" of possibility of success will vary according to the court's assessment of the other [stay] factors.'" Mohammed, 309 F.3d at 101 (quoting Washington Metropolitan Area Transit Commission v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977)).
The Second Circuit will "review [this Court's] grant of a preliminary injunction for abuse of discretion." Metropolitan Taxicab Bd. Of Trade v. City of New York, 615 F.3d 152, 156 (2d Cir. 2010). "'A district court abuses its discretion when it rests its decision on a clearly erroneous finding of fact or makes an error of law.'" Id. (quoting Almontaser v. N.Y. City Dep't of Educ., 519 F.3d 505, 508 (2d Cir. 2008)).
Kidz-Med argues that it will prevail on appeal because there is no evidence that the Thermofocus and Kidz-Med thermometers are being sold side by side, and thus there is no proof that consumers will be confused by contemporaneous displays of Thermofocus packaging and the packaging of Kidz-Med's competing product. (See Def. Br. in Support of Stay at 6-12) Kidz-Med argues that given (1) the absence of such evidence, and (2) the fact that "[b]oth Tecnimed's claim and its proof of irreparable harm with respect to consumer confusion was expressly limited to circumstances in which consumers were contemporaneously exposed to both of the similar packages," this Court erred in granting a preliminary injunction. (Def. Stay. Br. at 6 (emphasis in original))
Throughout this litigation, however, Tecnimed has made clear that its claim is based not only on contemporaneous exposure to both products, but also on the fact that -- because of Kidz-Med's infringing trade dress and misleading press releases and advertising -- consumers and retailers are likely to believe "that Defendants' new product [is] affiliated with the Thermofocus" and that the Kidz-Med product is a successor to the Thermofocus. (Bellifemine Decl. ¶ 48) Tecnimed introduced evidence demonstrating that Kidz-Med has deliberately sought to create this impression. For example, in a press release Kidz-Med issued shortly before it released its own product, Kidz-Med sought to benefit from favorable media attention concerning the Thermofocus and to link that goodwill to its own product: "We are excited to see that the media A-list are featuring our non-contact, hygienic thermometer as a must-have during the flu season. Our new non-contact thermometer will be launching this year, and we hope for similar attention to be drawn to it too." (Bellifemine Decl., Ex. 24)*fn2 Tecnimed also submitted evidence of consumer confusion of this nature, including the following review on Amazon.com: "I bought the original 5and1 when we recently had a baby last year. When they came out with [their] new one, I had to try it. I just got it and WOW it's even better!" (Bellifemine Decl., Ex. 31; see also Opinion & Order at 3, 15) In sum, while Tecnimed introduced evidence concerning the risk of confusion arising from contemporaneous exposure (see Bellifemine Decl., Ex. 17), neither its proof nor its irreparable harm argument was limited to that context.
Kidz-Med's claim that "[t]he recall order is directed solely to the potential loss of sales to consumers, and not to Tecnimed's separate allegations of potential confusion among professional retailer buyers" (Def. Stay Br. at 6), is likewise false. In its January 18 Opinion and Order, the Court found a reasonable probability that retailers would "'consider the new product distributed by Kidz-Med to be an affiliate or second generation version of the Thermofocus'" (see Opinion & Order at 21-22 (quoting Bellifemine Supp. Decl. ¶ 10)), and concluded that "[b]ecause Kidz-Med's highly confusing packaging creates a risk that Tecnimed will lose sales to Kidz-Med . . . a recall of Kidz-Med's product will afford tangible benefit to Tecnimed." (Opinion & Order at 30 n.7) The recall order thus addresses confusion at both the retailer and consumer levels, recognizing that Kidz-Med has improperly aligned itself with the Thermofocus in order to facilitate relationships with retail customers, as well as sales to consumers, all to Tecnimed's detriment.
Because this Court found that there is a significant risk that retailers and consumers would -- because of Kidz-Med's misconduct -- incorrectly perceive a "successor" relationship between the Thermofocus and Kidz-Med's new product, its decision does not depend on the contemporaneous placement of the Kidz-Med packaging alongside the similar blue and purple Thermofocus packaging. Indeed, the January 18 Opinion and Order states that while "the packaging for the [Thermofocus units distributed by non-Kidz-Med distributors] does not at all resemble the packaging at issue in this lawsuit . . . [t]his is not the proper point of comparison." (Opinion & Order at 14 n.1) The Court's opinion emphasizes that "[t]he concern is that [the] ...