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Cj Products LLC and Ontel Products Corporation v. Snuggly Plushez LLC and Berkant Keiskbas

August 22, 2011

CJ PRODUCTS LLC AND ONTEL PRODUCTS CORPORATION, PLAINTIFFS,
v.
SNUGGLY PLUSHEZ LLC AND BERKANT KEISKBAS, DEFENDANTS.



The opinion of the court was delivered by: Roslynn R. Mauskopf, United States District Judge:

MEMORANDUM AND ORDER

Plaintiffs CJ Products LLC ("CJ") and Ontel Products Corporation ("Ontel") (collectively, "plaintiffs") brought this action on February 14, 2011against defendants Snuggly Plushez, LLC ("Snuggly") and Berkant Keiskbas ("Keiskbas") (collectively, "defendants") alleging copyright infringement, trademark infringement, and related claims as to one of their products. (See Compl. (Doc. No. 1).) In May 2011, plaintiffs moved for a preliminary injunction. (Doc. Nos. 7-12.) The Court held an extensive preliminary injunction hearing on June 24, 2011. For the reasons stated below, plaintiff's request for a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure is GRANTED. This Memorandum and Order constitutes the Court's findings of fact and conclusions of law.

BACKGROUND

CJ is a company that develops, produces, sells, and distributes toys. The subject of this motion is one of its most popular products -- a plush toy in the shape of an animal that unfolds into a flat pillow known as a "Pillow Pet." This product was introduced in 2003 and branded with several different registered trademarks, including MY PILLOW PETS®, MY PILLOW PETS® (with logo), and IT'S A PILLOW, IT'S A PET, IT'S A PET . . . IT'S A PILLOW PET®. (Pl.'s Reply in Supp. of Mot. for Prelim. Inj. (Doc. No. 21) at 6.) CJ is in the midst of registering the trademark PILLOW PETSTM; at the time of this action the process had passed through the United States Patent and Trademark Office ("USPTO") registration period and stalled in the opposition period. CJ granted to Ontel the exclusive license to manufacture, market, advertise, promote, sell, offer to sell, and distribute the pillow pet line of products, and an exclusive license to all related intellectual property. (Compl. ¶¶ 23-25.)

Defendant Snuggly Plushez ("Plushez") is also a corporation that develops, produces, sells, and distributes toys, including selling toys by website. (Id. ¶¶ 31-33.) Plaintiffs allege that "Defendant Snuggly [Plushez] was under the de facto and sole control and served as the alter egos of Defendant Keiskbas, who is an officer, director, or board member of this entity." (Id. ¶ 6.) Plaintiffs learned that defendants were selling merchandise quite similar to their "Pillow Pet" product line. Likewise, when plaintiffs investigated these sales, they found that defendants were using marks resembling those they had registered, and that they purchased and used Google AdWords*fn1 to direct potential customers to their sites using these marks.

Plaintiffs now seek a preliminary injunction, enjoining and restraining defendants and their agents from: (1) manufacturing, copying, distributing, or selling any plush toy substantially similar to CJ's designs for Lady Bug, VA-1-665-418; Panda, VA 1-679-223; Bumble Bee, VA 1-665-417; Penguin, VA-674-371; Bear, VA 1-715-257; Dolphin, VA 1-674-379: Frog, VA 1-674-372; Monkey, VA 1-674-374; Duck, VA 1-715-275; and Cow, VA 1-715-272, pending further order of this Court or a determination of the action; (2) using PILLOW PETSTM, MY PILLOW PETS®, IT'S A PILLOW, IT'S A PET, IT'S A PILLOW PET®, pillowpets.co, "authentic pillow pets" or any confusingly similar mark, or any colorable imitations thereof, as a trademark, service mark, trade name, domain name and website, Google AdWord or otherwise on tags, labels or packaging, in connection with the wholesale, retail and/or Internet sale of plush toys; (3) using PILLOW PETSTM, MY PILLOW PETS®, IT'S A PILLOW, IT'S A PET, IT'S A PILLOW PET®, or any confusingly similar mark, or any colorable imitations thereof, in any advertising, promotions, solicitations or Internet use (including, but not limited to, website, domain name, coupon, and/or social networks) for such wholesale, retail and/or Internet sale; (4) using the terms "authentic," "original," "official," "As Seen On TV" or other similar confusing terms in connection with the wholesale, resale and/or Internet sale of Plushez or Napies plush toys; (5) making any other false associations with Plaintiff or plaintiffs PILLOW PETSTM, MY PILLOW PETS®, IT'S A PILLOW, IT'S A PET, IT'S A PILLOW PET®, products in connection with the wholesale, resale and/or Internet sale of Plushez or Napies plush toys; (6) using third party reviews of PILLOW PETSTM, MY PILLOW PETS®, IT'S A PILLOW, IT'S A PET, IT'S A PILLOW PET® products; and (7) destroying, mutilating, concealing altering, transferring, or otherwise disposing of, in any manner, any books, records, documents, emails, correspondence, brochures, manuals, or other documents of any kind relating to defendants' sale of plush toys in the possession custody or control of any of the defendants until further order of this Court.

For the reasons stated below, the motion for preliminary injunction is GRANTED in its entirety.

STANDARD

Whether to grant or deny a preliminary injunction 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, 344 (S.D.N.Y. 2008). A "party seeking a preliminary injunction must demonstrate (1) irreparable harm in the absence of the injunction, and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor." MyWebGrocer, LLC v. Hometown Info, Inc., 375 F.3d 190, 192 (2d Cir. 2004) (internal quotation marks and citation omitted).

Moreover, if a party seeks a "mandatory" preliminary injunction, which alters the status quo by requiring a positive act, or if a party seeks an injunction that will provide the moving party with "substantially all the relief sought and that relief cannot be undone even if the defendant prevails at a trial on the merits," then the moving party "must satisfy a higher standard, by showing a clear or substantial likelihood of success." Bose Corp. v. Silonsonnic Corp., 413 F. Supp. 2d 339, 341 (S.D.N.Y. 2006) (internal quotation marks and citation omitted). In all cases, a preliminary injunction is an "extraordinary remedy" that should not be routinely granted. JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 79, 80 (2d Cir. 1990). The party seeking the injunction carries the burden of persuasion to demonstrate, "by a clear showing," that the necessary elements are satisfied. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997).

The Second Circuit, in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), held that the "longstanding standard" for preliminary injunctive relief in the copyright context had been "abrogated" by the Supreme Court. Id. at 391. The Court held that, in addition to demonstrating (1) "either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the [plaintiff]'s favor," plaintiffs also must demonstrate (2) a likelihood of irreparable harm; (3) that "remedies available at law . . . are inadequate"; (4) that the balance of hardships tip in his favor; and (5) that the "public interest would not be disserved" by issuing preliminary relief. Salinger v. Colting, 607 F.3d 68, 80 (2d Cir. 2010) (quoting eBay, 547 U.S. at 391).

The Salinger court further clarified these requirements. First, with respect to the probability of success on the merits, the Salinger court cautioned district courts of "the difficulty of predicting the merits of a copyright claim at a preliminary injunction hearing." Id. at 80. Second, the court altered the burden of proof with respect to irreparable harm. Formerly, irreparable harm was presumed if a plaintiff successfully made out a prima facie case of infringement, due to the threat of market confusion. See Pem-America, Inc. v. Sunham Home Fashions, LLC, 83 F. App'x 369, 372 (2d Cir. 2003). The Salinger court warned that courts, in analyzing the irreparable harm prong, must not adopt a "categorical" or "general" rule or presume that the plaintiff will suffer irreparable harm . . . . The court must actually consider the injury the plaintiff will suffer if he or she loses on the preliminary injunction but ultimately prevails on the merits, paying particular attention to whether the remedies available at law, such as monetary damages, are inadequate to compensate for that injury

Salinger, 607 F.3d at 80. Thus, in the wake of eBay and Salinger, "courts must not simply presume irreparable harm . . . [instead, a plaintiff must show that] the failure to issue a[ ] [preliminary] injunction would actually cause irreparable harm." Id. at 82 (citing eBay, 547 U.S. at 393). Irreparable harm comprises "the harm that (a) occurs to the parties' legal interests and (b) cannot be remedied after a final adjudication, whether by damages or a permanent injunction." Id. at 81. In the copyright context, the plaintiff's interest in the copyrighted work at issue must be balanced against the defendant's interest in his own material -- to the extent that it is not superseded by plaintiff's copyright. Id. at 81. Irreparable injury must be "likely in the absence of an injunction," not merely possible, given the fact that a preliminary injunction is an "extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22-23 (2008).

Notably, though the Salinger court limited its holding to copyright cases, it noted that there was "no reason" that the reasoning for abrogating the preliminary injunction standard "would not apply with equal force to an injunction in any type of case." Id. at 78 n.7. While the Second Circuit has yet to decide whether the applicability of Salinger and eBay to trademark cases, several courts in our Circuit have applied the Salinger standard in the trademark context, and the Court will do so here. See U.S. Polo Ass'n, Inc. v. PRL USA Holdings, Inc.,No. 09 Civ. 9476,2011 WL 1842980, at *20 (S.D.N.Y. May 13, 2011); Pretty Girl, Inc. v. Pretty Girl Fashions, Inc., No. 11 Civ. 0662 (NGG), 2011 WL 887993, at *2 (E.D.N.Y. Mar. 14, 2011).

DISCUSSION

I.COPYRIGHT

A.Likelihood of Success on the Merits

To prevail on their claim of copyright infringement, plaintiffs must establish (1) ownership in a valid copyright, and (2) infringement of the copyright by defendant. Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). Defendants here contest both prongs.

1. Copyright Ownership

Plaintiffs have submitted evidence that CJ owns various copyrights related to the pillow pet line of products, including certificates of registration for designs including Lady Bug, Panda, Bumble Bee, Penguin, Bear, Dolphin, Frog, and Monkey. (Decl. of Brian Wright in Supp. of Pl.'s Mot. ("Wright Decl. I") (Doc. No. 8) at Ex. C; Compl. ¶ 21.) The Copyright Act provides that a "certificate of a [copyright] registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright." 17 U.S.C. § 410(c). Absent a certificate of registration within that timeframe, the "evidentiary weight to be accorded the certificate . . . shall be within the discretion of the court." Id. Of the works in dispute here, eight of the ten certificates of copyright registration were obtained within five years of first publication and are thus entitled to the statutory presumption of validity.*fn2 Two -- duck and cow -- were obtained more than five years after first publication, and are not automatically entitled to a presumption of validity.*fn3

CJ's eight certificates of registration issued within five years of first publication of the work constitute prima facie evidence of copyright validity. Thus, the burden to prove otherwise shifts to the defendants. See Hasbro Bradley, Inc. v. Sparkle Toys, Inc., 780 F.2d 189, 192 (2d Cir. 1985) (citation omitted). Defendants have proffered evidence purporting to show that CJ's copyrights in the works at issue are invalid because they lack originality. The main thrust of defendants' arguments, both in their submissions to the Court and in the lengthy hearing held before the Court, is that the greater part of the plaintiff's design is based on function and is not a legitimate subject for copyright, and that the rest is not original, as myriad other products look similar to CJ's product.

First, the Court notes that much of the design is not solely based on function as alleged by defendants. For example, at the preliminary injunction hearing, defendants attempted to assert that the shape was simply a "pillow shape" and was determined by function. This contention is belied both by common sense and by the many examples offered by plaintiffs showing different sized plush pillow toys that did not bear a striking resemblance to the plaintiffs' product. The purely functional aspects of the product -- for example, the Velcro straps that effect the toy's transformation from pillow to sculpture -- are concededly not copyrightable and are not at issue here.

As to the originality argument, Judge Eric Vitaliano pointed out in a similar context: "the mere presence of other similar products does not undercut the legitimacy of plaintiffs' copyrights. It certainly does not rebut the presumption of validity. To rebut the presumption that plaintiffs' copyrights are indeed valid, defendants are required to make a showing that the certificates of registrations are somehow invalid or that CJ does not in fact own the copyrights." CJ Prods. LLC v. Concord Toys Int'l, Inc., No. 10 Civ. 5712 (ENV), 2011 WL 178610, at *3 (E.D.N.Y. Jan. 19, 2011). Second, at the hearing held before this Court, defendants pointed to a number of other products that they claimed were identical to plaintiffs' as proof that plaintiffs' products lacked originality. However, these products, as plaintiff has shown, these products are actually of plaintiffs' own design and are reproduced and sold in different formats with plaintiffs' express permission. Given this set of facts, the defendants have failed to carry their burden with respect to the works entitled to the presumption of validity.

The two registrations issued to CJ more than five years after first publication are not entitled to the statutory presumption of validity; rather, the "evidentiary weight to be accorded the certificate[s] . . . [is] within the discretion of the court." 17 U.S.C. § 410(c). The Court in its discretion concludes that these two certificates will also be considered as prima facie evidence of a valid copyright, "[i]n light of the totality of admissible evidence presented on this motion for preliminary injunction." CJ Prods., 2011 WL 178610, at *4 (citing Michael Grecco Photography, Inc. v. Everett Collection, Inc., 589 F. Supp. 2d 375, 382 (S.D.N.Y. 2008) (certificates of registration issued more than five years after publication are prima facie evidence of valid copyrights because defendants did not offer any evidence suggesting that the copyrights were invalid); Yurman Design, Inc. v. Golden Treasure Imps., Inc., 275 F. Supp. 2d 506, 515-16 (S.D.N.Y. 2003) (same); Telerate Sys., Inc. v. Caro, 689 F. Supp. 221, 227 n.7 (S.D.N.Y. 1988) ("Even if the certificate were . . . issued more than five years after the actual date of first publication, the court would be inclined to give the certificate the weight of prima facie evidence, as permitted under Section 410(c).")). As Judge Vitaliano found:

Given that the overwhelming majority of the designs within this product line are clearly entitled to the statutory presumption of validity, the Court finds that it is especially appropriate to exercise the discretion accorded it by statute and afford the same weight to the five certificates registered outside the protected harbor timeline. Plaintiffs currently market and sell 33 versions of the pillow pet product line that are all functionally the same-they are a combination of a stuffed animal and a pillow. That the "Buzzy Bumble Bee" design, for example, was registered within the five-year period and the "Puffy Duck" design was not, is substantively insignificant. Both products are made and marketed as part of the identical product line. All in all, the Court treats the certificates of registration for the . . . stale registration products as prima facie evidence of their validity, despite the fact that they were registered outside the five-year period.

This Court agrees with its sister court. Apart from asking this Court to visually examine products bearing a similarity to plaintiffs' -- which we now know from the hearing are products of plaintiffs' own intellectual property -- defendants have submitted no evidence undermining the validity of any of the copyrights at issue.

Since there is no basis to rebut the presumption of validity here, plaintiffs have sufficiently demonstrated, for the purposes of this motion, the validity of the copyrights at issue here.

2. Infringement

To establish infringement, the owner of a valid copyright must demonstrate that "(1) the defendant has actually copied the plaintiff's work; and (2) the copying is illegal because a substantial similarity exists between the defendant's work and the protectable elements of plaintiff's." Yurman Design, 262 F.3d at 110 (internal quotation marks and citation omitted). The unauthorized copying may be shown by direct or indirect evidence. A plaintiff relying on indirect evidence must show that the defendant had access to the work in question, and that there exists substantial similarity between the works, such that copying "the ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard their aesthetic appeal as the same." Boisson v. Banian, Ltd., 273 F.3d 262, 272 (2d Cir. 2001).

The defendant may rebut a prima facie case of infringement through the affirmative defense of independent creation, though even "subconscious" copying constitutes infringement. Procter & Gamble Co. v. Colgate--Palmolive Co., 199 F.3d 74, 77 (2d Cir. 1999) (per curiam) (internal quotation marks and citations omitted); see also Yurman Design, 262 F.3d at 110 (citing Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345 (1991) ("Originality does not signify novelty; a work may be original even though it closely resembles other works so long as the similarity is fortuitous, not the result of copying.")).

For the purposes of this motion, plaintiffs have sufficiently demonstrated the likelihood of infringement. A visual examination of the products at issue in this case reveals that they are virtually identical. At the preliminary injunction hearing, defendants were utterly unable to articulate any substantial differences between the products, apart from a difference in eye design and, in some instances, minor variations in color. Defendants placed great emphasis on the fact that some of plaintiffs' products have three small black dots on their noses, while defendants lack those dots. On the other hand, the size, pillow shape, animal shape, overall facial look, and manner in which the pillow folds into a three-dimensional sculpture virtually identical, and quite distinguishable from other plush foldable pillow toys available for purchase. (Decl. in Supp. of Mot. for Prelim. Inj. Order ("Wright Decl. II") (Doc. No. 23) ¶ 41, Exs. 16-19.) The differences between the products are simply dwarfed by the commonalities, such that an ordinary observer would likely be unable to distinguish them. Thus, the Court finds that plaintiffs have demonstrated a substantial likelihood of success as to copyright infringement

B.Irreparable Harm and the Inadequacy of Remedies at Law

"A showing of irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction." Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110, 118 (2d Cir. 2009) (internal quotation marks and citations omitted). A party can establish irreparable harm "if it shows that there is a continuing harm which cannot be adequately redressed by final relief on the merits and for which money damages cannot provide adequate compensation." Rex Med. L.P. v. Angiotech Pharms. (US), Inc., 10 Civ. 8746, 2010 WL 4977775, at *9-10 (S.D.N.Y. Dec. 1, 2010) (internal quotations and citation omitted). Due to the requirement that the movant show "evidence of damage that cannot be rectified by financial compensation," pecuniary damages, without more, are usually insufficient. Id. (citation omitted); see also Tom Doherty Assocs., Inc. v. Saban Entm't, Inc., 60 F.3d 27, 37 (2d Cir. 1995).

Plaintiffs have satisfied their burden of establishing that they will suffer irreparable harm in the event that defendants continue to sell the products at issue. The Salinger standard for irreparable harm to plaintiff's property interest in the copyright context was based largely on the possibility of market confusion and the fact that proving "the loss of sales due to infringement is . . . notoriously difficult." Salinger, 607 F.3d at 81 (citation omitted). While irreparable harm is no longer presumed from these factors, plaintiffs have carried their burden here.

As articulated above, the products at issue in this case are extraordinarily similar in appearance. It is uncontested that plaintiff has spent large quantities of time, money, and effort to develop goodwill among customers, and to create an instantly recognizable toy that is highly popular among children. It is uncontroverted that plaintiffs expend approximately $1 million a month for advertising and the promotion of their product. (Prelim. Inj. Hr'g Tr. at 68-69.) The products sold by defendants, which look remarkably similar to plaintiffs' product line, have resulted and will likely result in confusion among customers, as well as lost sales and loss of goodwill for plaintiffs. See Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1362 (Fed. Cir. 2008) (citation omitted) (loss of market position is evidence of irreparable harm). Plaintiff has put forth evidence of confusion -- for example, customer reviews from Amazon.com showing that at least some consumers purchased defendants' product believing them to be plaintiffs' product. (Wright Decl. I at 12-13 & Ex. J; Prelim. Inj. Hr'g Tr. at 15.) Moreover, as this Court will discuss below, the similarity in the design of the products, coupled with the defendants' use of the "Pillow Pets" mark in their labeling and domain name, renders the likelihood of confusion extraordinarily high. Injecting the market with counterfeit products will not only result in lost sales, but will impair plaintiffs' reputation achieved through considerable time and effort. This type of harm cannot be redressed by monetary damages available at law.

C.Balance of Hardships Including the Public Interest "A court must consider the balance of hardships between the plaintiff and defendant and issue [an] injunction only if the balance of hardships tips in the plaintiff's favor." Salinger, 607 F.3d at 80 (citation omitted); eBay, 547 U.S. at 391. Here an injunction is necessary to stop the infringement on plaintiff's products. By benefiting from the use of designs created by another author, defendants are profiting unjustly: "[o]ne who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected." Mint, Inc. v. Amad, No. 10 Civ. 9395(SAS),2011 WL 1792570, at *3 (S.D.N.Y. May 9, 2011). Defendants' business will not be severely impacted, as they have an extensive array of non-infringing products that they may continue selling. Finally, it is uncontested that there exists a strong policy in favor of defending copyrights. See Mint, Inc. v. Amad, 2011 WL 1792570, at *3 (citing Motown Record Co., L.P. v. iMesh.Com, Inc., No. 03 Civ. 7339, 2004 WL 503720, at *7 (S.D.N.Y. Mar. 12, 2004) ("Importantly, plaintiffs assert an action to enforce their U.S. copyrights, an area in which the U.S. has a strong public interest.")). The balance of equities and public interest favors granting an injunction.

Since plaintiffs have established a substantial likelihood of success on the merits as well as satisfied the four-part test required by Salinger, the Court GRANTS the motion for preliminary injunction with respect to the copyright claims.

II.FALSE ADVERTISING: § 43(a)

A.Standard

While the Second Circuit explicitly limited Salinger to preliminary injunctions in copyright infringement actions, the court noted that eBay could "apply with equal force to an injunction in any type of case." Salinger, 607 F.3d at 78 n.7 (emphasis in original). While the Second Circuit has yet to decide whether the applicability of Salinger and eBay to trademark cases, several courts in our Circuit have applied the Salinger standard in the trademark context, and the Court will do so here. See U.S. Polo Ass'n, Inc. v. PRL USA Holdings, Inc.,No. 09 Civ. 9476,2011 WL 1842980, at *20 (S.D.N.Y. May 13, 2011); Pretty Girl, Inc. v. Pretty Girl Fashions, Inc., No. 11 Civ. 0662 (NGG), 2011 WL 887993, at *2 (E.D.N.Y. Mar. 14, 2011).

The Lanham Act proscribes false or misleading descriptions or representations of fact concerning "the nature, characteristics, qualities, or geographic origin of . . . goods, services, or commercial activities." 15 U.S.C. § 1125(a)(1)(B). The Act does not regulate "all commercial speech," but it does "encompass[ ] more than the traditional advertising campaign." Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 57 (2d Cir. 2002). A "plaintiff must demonstrate that the statement in the challenged advertisement is false." S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 238 (2d Cir. 2001). Falsity may "rest on one of two theories: (1) that the challenged advertisement is literally false, i.e., false on its face, or (2) that the advertisement, while not literally false, is nevertheless likely to mislead or confuse customers." Tiffany (NJ) Inc. v. eBay, Inc., No. 04 Civ. 4607 (RJS), 2010 WL 3733894, at *1 (S.D.N.Y. Sept. 13, 2010). Either theory requires that the plaintiff show "that the false or misleading representation involved an inherent or material quality of the product." Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 153 n.3 (2d Cir. 2007).

B.Likelihood of Success on the Merits

As a threshold matter in a trademark case, plaintiffs must establish their ownership of the mark in question. Pan Am. World Airways, Inc. v. Flight 001, Inc., No. 06 Civ. 14442 (CSH), 2007 WL 2040588, at *3-4 (S.D.N.Y. July 13, 2007). Defendants argue that plaintiffs do not own the "Pillow Pets" mark, and therefore have no ground to assert a claim for false advertising. For the purposes of this preliminary injunction, plaintiffs have established a likelihood of success on the merits with respect to false advertising.

A claim based on literal falseness "is best supported by comparing the statement itself with the reality it purports to describe." Schering Corp. v. Pfizer Inc., 189 F.3d 218, 229 (2d Cir. 1999). Under the "false by necessary implication" doctrine, "a district court evaluating whether an advertisement is literally false must analyze the message conveyed in full context" and find literal falsity where "the words or images, considered in context, necessarily imply a false message." Time Warner, 497 F.3d at 158 (internal quotation marks and citation omitted). Thus, even where "no combination of words" on the page is untrue, a message can be "literally false" if the clear meaning of the statement, considered in context, is false. Id. at 154-55. To be literally false, however, the message must be unambiguous; if the representation "is susceptible to more than one reasonable interpretation, the advertisement cannot be literally false" and the advertisement is actionable under the Lanham Act only upon a showing of actual consumer confusion. Id. at 158. When a court finds that an advertisement is literally false, it is unnecessary to rely on extrinsic evidence of consumer deception or confusion. Id. at 153.

1. As Seen On TV

Defendants used the phrase "As Seen On TV" to identify the Snuggly line of plush pillow toys both on its website and on the tags affixed to its products. It is uncontested, however, that defendants have never actually marketed their products on television. There, defendants' use of the phrase was apparently to cause confusion among customers regarding the source of the product, and to reap the benefits of plaintiffs' extensive advertising campaign. Though defendants have since removed the reference to "As Seen On TV" on their website, and claim that the phrase no longer appears on their product tags, an injunction is necessary to preclude future use of any such phrase, in order to eliminate confusion in the market, and to ensure that defendants do not profit from inequitable conduct.

The use of the slogan "As Seen On TV" is a material misrepresentation. Generally, a misrepresentation is material if it would have an effect on a consumer's purchasing decision. Fed. Trade Comm'n v. Colgate-Palmolive Co., 380 U.S. 374 (1965). In the Second Circuit, the alleged misrepresentation must be relevant to an "inherent quality or characteristic" of the product. See Vidal Sassoon, Inc. v. Bristol-Myers Co., 661 F.2d 272 (2d Cir. 1981). Here, "As Seen On TV" does, indeed, pertain to an inherent feature of the product. The phrase signifies a specific product -- the "Pillow Pet" -- with which the consumer is likely familiar by virtue of plantiffs' extensive television advertising and jingle. The misuse of the "As Seen On TV" slogan thus would likely affect on a consumer's purchasing decision, in that the consumer would believe the product to be the "Pillow Pet" it associates with extensive television marketing. Indeed plaintiffs' submissions show that this is the case by putting forth evidence of some cases of actual confusion. (Wright Decl. I at 12-13 & Ex. J; Prelim. Inj. Hr'g Tr. at 15.)

Accordingly, defendants' use of the "As Seen On TV" slogan is a material representation relating to an inherent feature of the product in question. Plaintiffs are likely to prevail on the merits in a ...


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