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Borghese Trademarks Inc., Borghese Inc., and Borghese International v. Francesco Borghese

January 14, 2012

BORGHESE TRADEMARKS INC., BORGHESE INC., AND BORGHESE INTERNATIONAL LIMITED,
PLAINTIFFS,
v.
FRANCESCO BORGHESE, AMANDA BORGHESE, SCIPIONE BORGHESE, LORENZO BORGHESE, KATIE BORGHESE, MULTIMEDIA EXPOSURE INC., GT PARTNERS LIMITED, PERLIER INC., EBPD LLC, ORLANE INC. AND HSN INC.,
DEFENDANTS.



The opinion of the court was delivered by: J. Paul Oetken, District Judge:

MEMORANDUM AND ORDER

This action involves several claims and counterclaims between plaintiffs Borghese Trademarks Inc. ("BTI"), Borghese Inc., and Borghese International Limited ("BIL") (collectively, "Plaintiffs" or "Borghese") and defendants Francesco Borghese, Amanda Borghese, Scipione Borghese, Lorenzo Borghese, Katie Borghese, Multimedia Exposure, Inc. ("MME"), GT Partners Limited, Perlier, Inc., EBPD, LLC, Orlane, Inc., and HSN, Inc. ("HSN") (collectively, "Defendants") under, inter alia, the Lanham Act, codified at 15 U.S.C. §§ 1051 et seq.

Plaintiffs market and sell products including cosmetics, skin, hair, and nail care products, and other consumer goods all sold under the Borghese name trademark (the "Borghese-branded products"). (Dkt. No. 74 ("Pls.' Statement of Undisputed Fact" ("SUF")); see also Pls.' Ex. 120 ("Mosbacher Dep.") at 14:24-15:4.) Plaintiffs brought this action as a result of Defendants' alleged use of Plaintiffs' trademarks in connection with Defendants' sale, advertising, marketing, and promotion of home fragrances and bath, body, and skin care products for humans and pets. (Dkt. No. 1 ("Compl.") at ¶ 25.) Also at the center of this action is a 1993 agreement between the parties (Id. at Ex. A ("the 1993 Agreement")), which each side claims has been breached by the other.

Plaintiffs and Defendants have both moved for partial summary judgment. In their motion, Plaintiffs argue (1) that Francesco Borghese is liable for breach of contract as a matter of law, and (2) that Defendants' counterclaims for false advertising, breach of contract, and unjust enrichment all fail as a matter of law. Defendants argue in their motion (1) that Plaintiffs' claims for trademark infringement are barred by the doctrine of laches, (2) that Plaintiffs have no intellectual property right in the Borghese family history, and (3) that Plaintiffs cannot make out prima facie breach of contract claims against either MME or Francesco Borghese. For the reasons that follow, both motions are granted in part and denied in part.

I.Background

This litigation concerns the value of the intellectual property of the Borghese family name. Indeed, Plaintiffs claim that the Borgheses' rich family history "gives allure and cache" to the "Borghese" Brand. (Compl. at ¶ 35.) The Borghese family lineage is replete with prominent figures, including Pope Paul V, Cardinal Scipione Borghese, Pauline Bonaparte (the sister of Napoleon) and numerous princes and princesses. (Dkt. No. 83 ("Defs.' SUF") at ¶¶ 13-14.) In the modern era, the Borghese family is perhaps best known for one such princess, Princess Marcella Borghese ("the Princess"), who began the family legacy in the beauty industry. (Id. at ¶ 20; Pls.' SUF at ¶ 4.)

A.Origin and Growth of the Borghese Brand

In 1937, and after marrying Prince Paolo Borghese, the Princess began having her cosmetics specially made for her. (Pls.' SUF at ¶ 7.) As a fashion and beauty icon the world over, in the late 1950s Princess Marcella Borghese attracted the attention of Charles Revson, founder of Revlon Overseas Corporation, C.A. ("Revlon"). (Compl. at Ex. G.) The two entered into a partnership on October 16, 1957, to create a Princess Marcella Borghese line of cosmetics from the secret recipe for cosmetics and skin creams that she had commissioned. (Pls.' Ex. 3 (the "1957 Agreement").) On January 1, 1958, the contract between Revlon and Princess Marcella Borghese took effect and the Borghese cosmetics line was officially born. (Id. at 1.) The contract guaranteed a four-year partnership, ending December 31, 1962. (Id. at 1.)

From 1958 until 1976, Princess Marcella Borghese controlled the Borghese brand, and with help from her partnership with Revlon, advertised, promoted, marketed, distributed, and sold Borghese products in the United States. (1957 Agreement; Pls.' Ex. 121 ("Petrocelli Dep.") at 301:17-24.) On July 1, 1976, Revlon acquired all of Princess Marcella Borghese's right, title, and interest in and to "the words and phrases BORGHESE, MARCELLA BORGHESE, PRINCESS MARCELLA BORGHESE, and all counterparts, renewals, substitutions, simulations and variations thereof, whether used as a personal name, trade name or trademark" and any registrations and applications for the same along with the associated good will. (Pls.' SUF at ¶¶ 13, 16; Pls.' Ex. 4 ("the 1976 Agreement") at ¶¶ 1-2.) Through the execution of the 1976 Agreement, Revlon also gained exclusive license to the Princess' family history and crest. (1976 Agreement at ¶ 6.) Unlike the previous 1957 Agreement, the 1976 Agreement bound the signatories-Prince Paolo Borghese and the Princess-as well as their heirs. (Id. at ¶ 11.)

In 1990, the Princess and Revlon amended the 1976 Agreement, incorporating the same terms as the previous contract. (Pls.' Ex. 6 ("1990 Agreement").) Pursuant to the amended 1990 Agreement, the Princess acknowledged that Revlon was the sole owner of the trademarks "BORGHESE," "MARCELLA BORGHESE," and "PRINCESS MARCELLA BORGHESE" as they applied to "men's and women's fragrances, cosmetics, beauty treatment products, skin and hair care products, sun tan preparations, nail care products, and jewelry, clothing and clothing accessories sold in conjunction with and to promote such products." (1990 Agreement at ¶ 1.)

B.The 1993 Settlement Agreement

On January 17, 1992, Revlon assigned the 1976 Agreement and the 1990 Agreement to Halston Borghese International Limited ("HBIL"). (1993 Agreement at Preamble ¶ 4.) Following HBIL's purchase of the Borghese brand from Revlon, there was "some disagreement between [the Princess and her sons Livio and Francesco Borghese] and HBIL concerning the meaning of the 1990 Agreement and its assignment, with the 1976 Agreement, to HBIL. (Id. at Preamble ¶¶ 5.) To "resolve their differences amicably," the disputing parties executed the 1993 Agreement, which conveyed ownership of certain intellectual property rights to HBIL, now Plaintiff BIL. (Id. at Preamble ¶ 6; id. at § II.A.)

Under the 1993 Agreement, the Princess and Francesco Borghese receive royalty payments in connection with the sale of cosmetic products until one year following the Princess's death, and for the sale of non-cosmetic products for the remainder of Francesco's life. (Id. at § III.B.) In exchange, the Agreement provides that HBIL receives the following rights in the "Borghese Name":

To the extent Princess Marcella Borghese and her Eligible Descendants*fn1 have the authority to do so, the Princess has assigned, transferred and conveyed all the right, title and interest of the Princess in and to the BORGHESE name as applied to any and all consumer products. Notwithstanding the foregoing, the Princess does not represent, warrant or covenant that the Princess has assigned to HBIL the exclusive right, title or interest in or to the BORGHESE name as it is applied to Other Consumer Products. (Id. at §IV.H.) Elsewhere, the Agreement explains that "[t]he Princess [as defined] has no right whatsoever to own, use or license any of the Intellectual Property, except to the extent that such ownership and use would not be inconsistent with the rights of HBIL as set forth herein." (Id. at § II.D.) It also provides that the signatories from the Borghese family must "refrain from being engaged by or interested in any other business, firm or corporation which directly or indirectly is in competition with HBIL in its business of selling . . . consumer products and services related thereto, without the prior written approval of HBIL." (Id. at § IV.G.)

The Agreement also includes the following obligation of the signatory Defendants:

A. Protection of Intellectual Property. The Princess [as defined] shall do whatever HBIL reasonably requests to obtain and protect HBIL's Intellectual Property . . . Further, the Princess [as defined] will, at HBIL's request and expense, assist in the enforcement of Intellectual Property against infringing uses by others as may be deemed reasonably necessary by HBIL. The Princess [as defined] shall promptly inform HBIL of any suspected infringements of which the Princess has actual knowledge. (Id. at § IV.A.)

Finally, the Agreement contains the following provision concerning the duty of HBIL to maintain a certain quality of their products ("the Quality Provision"):

D. Quality: In order to ensure that the Princess is not subjected to public ridicule or contempt, HBIL agrees that the Intellectual Property shall be used only on consumer products, and services related thereto, of a quality customarily sold or provided through stores of high reputation and prestige; provided, however, that neither the foregoing, nor anything else in this Agreement, shall limit or be construed as limiting HBIL's ownership rights in and to the Intellectual Property. (Id. at § III.G.)

C.Modern History of the Borghese Brand

To this day, the Borghese-branded products are available throughout the world. (Petrocelli Dep. at 101:21-23.) In the United States, Borghese-branded products are sold at cosmetics boutiques and department stores, including Bloomingdale's and Lord & Taylor. (Pls.' Ex. 122 ("Palladino Dep.") at 179:11-14.) Certain Borghese products under the "Kirkland Signature, by Borghese" brand ("KS By Borghese") are now available nationwide at Costco stores, and at more than 17,000 pharmacies nationwide, including CVS, Walgreens, Rite Aid, and Duane Reade. (Pls.' SUF at ¶ 33; Compl. at ¶ 56.) Borghese also has a presence in the television shopping world; beginning in 2010, its products were also available for sale on QVC (Pls.' SUF at ¶ 31.) In addition, Borghese products have expanded beyond cosmetics and skin and nail care products to include eyewear products also available throughout the United States and distributed in more than 5,000 stores. (Compl. at ¶ 59.)

D.The Defendants

1.Borghese Family Members

The Princess's oldest son, Francesco, is married to Amanda Borghese. Francesco and Amanda have two sons, Scipione (also referred to as "Skip") and Lorenzo Borghese. Katie Borghese is Scipione's wife and Francesco's daughter-in-law. (Defs.' SUF at ¶¶ 8-12.) These persons are the individual Defendants in this case.

2.Defendant MME

Multimedia Exposure, Inc. ("MME"), a defendant corporation, was founded in 1996 by Francesco, Amanda, and Scipione Borghese. (Pls.' Ex. 116 ("MME Dep.") at 44:4-9.) MME has two different businesses, one involving the sale of its products on television and the other involving consulting work, which includes counseling clients regarding the sale of their products on television, negotiation of contracts, and review of accounts receivable. (Pls.' Ex. 115 ("Francesco Dep.") at 25:2-9.)

In addition, MME owns, manufactures, and markets a range of brands and product lines. Under the "Italian Pet Spa by Lorenzo Borghese" name, Lorenzo and MME sold a variety of high-end pet skin care products to Petco. (Pls.' Ex. 62.) Lorenzo and MME also sold pet skin care products under the name "La Dolce Vita by Prince Lorenzo Borghese" to PetSmart. (Pls.' Ex. 63.) The Casa di Francesca products use a crest to brand the products, but it is not the Borghese crest. (Pls.' Ex. 66.) The Casa di Francesca products, launched on November 7, 2008, are "a collection of home fragrances and accessories inspired by the exotic aromas proprietress Francesca brought home to her Italian family in the 1600s from her adventurous grand tour of old world Europe." (Pls.' Ex. 93 (quoting HSN "Brand Strategy Summary").) Francesco, Amanda, Lorenzo, Scipione, MME, and HSN (collectively, the "Royal Treatment Defendants") advertise, market, promote, distribute, offer to sell, and sell Royal Treatment Products. (Dkt. No. 16 ("Answer") at ¶ 78.)

In or about 2009 or early 2010, Lorenzo became the Executive Vice President of MME. (Pls.' Ex. 18.) Since September 11, 2009, Scipione Borghese has served the President of MME and Lorenzo as the Secretary. (Pls.' Ex. 17.) The two men own all of the outstanding shares of MME stock. (Id.) From September 11, 2009 through at least January 28, 2011, Amanda Borghese served as Vice President of MME, handling sales, marketing, and public relations. (Id.)

3.HSN and MME Partnership

MME is the "vendor of record" for several products to HSN, a company in the business of television and online sales broadcasting live all day, seven days a week, 364 days a year. (MME Dep. at 92: 7-10; Pls.' Ex. 15.) Since 2002, Lorenzo has appeared on HSN as an on-air guest*fn2 for Royal Treatment Products. (MME Dep. at 16:22-25; Countercls., Ex. 2 at ¶30.) Katie and Amanda have appeared as HSN on-air guests on behalf of products for which MME is the vendor as well. (MME Dep. at 16:19-21; Ex. 123 ("Tappan Dep.") at 29:9-19.)

The Borghese family provided to HSN the background information about themselves and their family to be used in connection with their on-air appearances. (Pls.' Ex. 47; Pls.' Ex. 117 ("Scipione Dep.") at 88:22-89:13.)

4.Perlier, Elariia, Orlane, EBPD

Perlier and its affiliated entities own the brands and product lines marketed and sold under the names of Italian Bath & Body, Italian Beauty, Perlier, and Elariia (collectively, "Italian Bath & Body Products"). (Pls.' SUFat ¶ 67.) Orlane is in the business of selling high-end skin care products and services. (Id. at ¶ 68.) EBPD is in the business of distributing Perlier and Elariia products in the United States and is a wholly owned subsidiary of Orlane. (Id. at ¶ 69.) From 1984 to around 1994, Francesco owned La Perfumerie, Inc. ("LPI"), which distributed Perlier products in the United States. (Id. at ¶ 70.)

These companies share many connections. From 1990 to 1995, LPI shared employees and office space with Orlane. (Id. at ¶¶ 72-73.) Francesco Borghese acted as president of Orlane from 1986 to 1994. (Id. at ¶ 74.) He then served as president of Perlier from 1994 to 2001. (Id. at ¶ 75.) Orlane, EBPD, and Perlier share some employees. (Id. at ¶ 80.) From 1995 through the mid-2000s, Perlier, Inc. was the distributor of Perlier products in the United States. (Id. at ¶ 81.) EBPD took over the role of U.S. distributor of Perlier and Elariia products in the mid-2000's. (Id. at ¶ 82.) Currently, EBPD is the "vendor of record" for the sale of Perlier and Elariia products to HSN. (Pls.' Ex. at 119 ("Sandbach Dep.") at 226:15-17.)

Francesco, Amanda, Scipione, Lorenzo, MME, Perlier, EBPD, Orlane, and HSN (collectively, the "Italian Bath & Body Defendants") advertise, market, promote, distribute, and sell the Italian Bath & Body Products. (Pls.' SUF at ¶ 84.) Since 1991, Scipione Borghese has held the responsibility for Perlier's advertising, marketing, branding, and promotion strategy as it related to the Italian Bath & Body Products. (Id. at ¶ 88.)

On December 31, 2001, Scipione individually, and then Borgh, Inc., a company wholly owned by Scipione, executed a consulting agreement with Perlier to represent both Perlier and Elariia as the on-air guest for HSN in connection with the Italian Bath & Body Products. (Id. at ¶ 86.) Similarly, Amanda Borghese entered an agreement individually with Perlier to represent Perlier and Elariia as the on-air guest on HSN in connection with the same products. (Id. at ¶ 87.)

5.Francesco Borghese's Involvement

Francesco is the founder of MME and a current member of its board. (Pls.' SUF. at ¶¶ 120, 128.) To the present day, Francesco is an advisor to MME and since 2004 has been on the company's payroll, earning approximately $75,000 annually. (Id. at ¶¶ 128-30.) Francesco has also served as treasurer of MME, and some evidence indicates that he is still a company officer. (Pls.' Ex. 23.) Since 2003, Francesco has also earned approximately $10,000 per month from Borgh, Inc. for aiding Scipione in negotiating his consulting agreement with defendant Perlier, and it is stipulated that he will continue to earn that amount for "as long as [Scipione is] with Perlier." (Scipione Dep. at 191:10-23.) Francesco was also listed as an MME contact for the pet products sold at PetSmart. (Pls.' SUF at ¶ 132; Pls.' Ex. 24 at D404447.) In September 2009, the ownership structure of MME was changed for "family planning reasons"; Scipione and Lorenzo became the sole shareholders of MME on September 11, 2009, to the exclusion of Francesco Borghese. (Pls.' SUF at ¶¶ 134-36.)

6.Lorenzo Borghese's Television Appearance

Lorenzo's involvement in this lawsuit stems not only from his business ventures, but also from his time as the star of "The Bachelor: Rome," the ninth season of the hit ABC reality television series "The Bachelor."*fn3

In April 2006, Lorenzo spoke with representatives of Borghese about the possibility of Lorenzo promoting the Borghese brand on The Bachelor: Rome. (Pls.' Ex. 118 ("Lorenzo Dep.") at 37:25-38:21.) In connection with these negotiations, ABC shot a segment of Lorenzo in the Borghese offices. (Petrocelli Dep. at 394:4-395:7.) Nonetheless, negotiations broke off, and the parties made no agreement as to how the footage should be used.However, a ten-second promotional segment filmed at Plaintiffs' offices was aired on the talk show Extra on October 2, 2006, in anticipation of the first episode of the season. (Pls.' Ex. 113.) In the clip, Lorenzo walks past the Borghese signage in the Borghese offices. (Id.) However, no Borghese products are featured in the segment. (Id.)

E.Procedural Background

Plaintiffs commenced this lawsuit on July 21, 2010. The underlying action seeks preliminary and permanent injunctive and monetary relief for (a) trademark infringement pursuant to 15 U.S.C. § 1114; (b) trademark infringement, false designation of origin, and unfair competition pursuant to 15 U.S.C. § 1125(a); (c) state trademark infringement and unfair competition; (d) deceptive trade practices under N.Y. Gen. Bus. Law § 349; (e) breach of contract under New York common law; (f) trademark dilution under N.Y. Gen. Bus Law § 360-1; and (g) unjust enrichment under New York state common law. (Compl. at ¶ 31.)

Defendants filed an Answer on September 27, 2010, asserting twenty-one (21) affirmative defenses. (Answer and Countercls.) Defendants also asserted five counter-claims:

(1) unfair competition, false representations, and false advertising pursuant to 15 U.S.C. § 1125(a); (2) breach of contract relating to the 1993 Settlement Agreement between the parties; (3) deceptive acts and practices and false advertising under N.Y. Gen. Bus. Law. §§ 349-50; (4) common ...


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