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Gucci America, Inc. v. Guess"

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK


March 13, 2012

GUCCI AMERICA, INC., PLAINTIFF,
v.
GUESS?, INC., MARC FISHER FOOTWEAR LLC, THE MAX LEATHER GROUP/CIPRIANI ACCESSORIES, INC., SEQUEL AG, J&M ASSOCIATES L.P., VIVA OPTIQUE, INC., SIGNAL PRODUCTS, INC., AND SWANK, INC., DEFENDANTS.

The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.

OPINION AND ORDER

I. INTRODUCTION

Gucci America, Inc. ("Gucci") brings this action against Guess?, Inc., Marc Fisher Footwear LLC ("MFF"), the Max Leather Group/Cipriani Accessories, Inc., Sequel AG, K&M Associates L.P., Viva Optique, Inc., Signal Products, Inc, and Swank, Inc. (collectively, "Guess"), alleging various violations of the Lanham Act and New York state law.*fn1 There are currently two motions before the Court. First, MFF seeks to preclude Gucci from introducing third-party cease-and-desist letters related to various American and European trademark disputes.*fn2 Second, Guess seeks to exclude evidence concerning Gucci's claim for "reasonable royalty" damages.*fn3 For the reasons given below, MFF's motion is denied in part and granted in part, while Guess's motion is denied in its entirety.

II. BACKGROUND

The factual background to these motions is more fully set forth in this Court's recent Summary Judgment Opinion and Order.*fn4 Briefly, Gucci claims that Guess and its licensees use certain designs that infringe and dilute several famous Gucci marks, and that such use constitutes "a sophisticated and elaborate scheme . . . to target Gucci, to create products that are similar in appearance to the most popular and best-known Gucci products, and trade upon the goodwill and reputation associated with Gucci and its high-quality, distinctive product lines."*fn5

A. MFF's Motion

MFF seeks to preclude Gucci from offering evidence related to cease-and-desist letters sent to Guess by other fashion companies -- Jimmy Choo, Adidas, Yves Saint Laurent, Christian Dior, Celine, and Dolce & Gabbana -- regarding footwear designed by MFF. According to MFF, such evidence is irrelevant for either of two reasons: (1) the disputes did not result in a judicial determination of infringement, or (2) they covered allegedly infringing activity that took place outside of the United States.*fn6 MFF also argues that this evidence should be precluded under Federal Rule of Evidence 403 as a waste of time.*fn7

B. Guess's Motion

Gucci seeks "reasonable royalty" damages as part of its remedy in this case. Guess argues that "[a]s a matter of law, lost royalty damages are only recoverable where the parties have previously negotiated or entered into a license agreement involving the trademark(s) at issue."*fn8

III. APPLICABLE LAW

A. Motions in Limine Generally

The purpose of a motion in limine is to allow a court to rule on the admissibility of potential evidence in advance of trial.*fn9 A court will exclude evidence on a motion in limine only if the evidence is "clearly inadmissible on all potential grounds."*fn10

B. Evidence of Third-Party Trademark Disputes

Under Federal Rule of Evidence 404(b)(2), evidence of prior bad acts may be admissible to show "motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or lack of accident." On this basis, courts frequently consider prior judicial resolutions of trademark disputes when discussing the alleged infringer's intent or bad faith.*fn11 Courts also consider the alleged infringer's receipt of and response to cease-and-desist letters for the same purposes.*fn12

C. "Reasonable Royalties" as Damages in Trademark Cases

A plaintiff in a trademark action may recover a "reasonable royalty" under the heading of actual damages.*fn13 However, because they are inherently difficult to calculate in a vacuum, courts often decline to award such damages unless the parties had a prior licensing agreement.*fn14 Even in cases without such agreements, however, courts have awarded or approved of "reasonable royalty" damages if the evidence provides a sufficiently reliable basis from which to calculate them.*fn15

IV. DISCUSSION

A. MFF's Motion

1. The American Disputes

MFF argues that it will be prejudiced as a "first-time trademark defendant" if Gucci is allowed to introduce third-party cease-and-desist letters from other fashion companies to Guess in response to Guess shoes designed and manufactured by MFF for sale in the United States (the "American Disputes").*fn16

Although MFF acknowledges that previous adjudications of infringement are admissible on issues related to an alleged infringer's intent or bad faith, it argues that the mere receipt of cease-and-desist letters is not.*fn17

MFF and Guess did not merely receive cease-and-desist letters.

1375301, at *8 (D. Md. Mar. 30, 2010); Buzz Off Insect Shield, LLC v. S.C. Johnson & Son, Inc., 606 F. Supp. 2d 571, 585 (M.D.N.C. 2009); Adidas Am,. Inc.

Rather, in response to these letters, MFF stopped producing the allegedly infringing shoes in three cases, and twice agreed to pay confidential settlements.*fn18

According to MFF's CEO, the letters involved mere "nuisance-type" claims, and settling them in this manner is "the process people use in this industry" rather than an admission of guilt.*fn19 While evidence regarding the American Disputes may support MFF's argument, it could also support Gucci's argument that MFF's actions -- which Gucci characterizes as "avoid[ing] . . . lawsuits by quickly buying off the accuser and stopping sales of the accused products" -- are indicative of bad faith and lack of respect for trademark protections.*fn20

Because Gucci's claim against MFF for money damages requires proof of bad faith, evidence that supports such a finding is both relevant and material. For this reason, evidence of the American Disputes -- including the cease-and-desist letters -- is presumptively admissible under Federal Rule of Evidence 402. Furthermore, I decline to exclude this evidence under Rule 403, as MFF has not convinced me that its probative value is substantially outweighed by the waste of time it might cause. Accordingly, MFF's motion to preclude testimony regarding the American Disputes is denied.*fn21

2. The European Disputes

Gucci notes that Guess also received at least four cease-and-desist letters regarding MFF products sold in Europe (the "European Disputes"),*fn22 and argues that evidence related to those letters is admissible for the same reasons noted above. MFF argues that its response to the European Disputes is "irrelevant and inadmissible on the issue of intent in this action" because trademark rights are governed by different laws around the world.*fn23

The Second Circuit has made clear that the admissibility of foreign trademark infringement disputes depends on the purposesfor which they are introduced.*fn24 Here, Gucci does not allege that evidence regarding the European Disputes would prove that MFF actually infringed any of the trademarks at issue in those disputes or at issue in this case. Instead, it merely seeks to use such evidence to substantiate its claims about MFF's "knowledge, intent, and the steps [it takes] to avoid future claims . . . ."*fn25

Evidence of the European Disputes could elucidate the policy and behavior of MFF and Guess with respect to trademark enforcement generally, and is therefore arguably relevant. However, such evidence addresses the same issue as the evidence of the American Disputes, and is therefore duplicative. Furthermore, evidence of the European Disputes is likely to lead to time-consuming digressions about the trademark law and enforcement practices in each of the countries at issue. Therefore, I find that the minimal probative value of the European Disputes is outweighed by the need to conserve time and avoid the presentation of cumulative evidence. Accordingly, MFF's motion to preclude evidence related to the European Disputes is granted pursuant to Rule 403.*fn26

B. Guess's Motion

Guess argues that Gucci cannot recover "reasonable royalty" damages as a matter of law because the parties did not engage in previous licensing discussions or have a previous licensing agreement.*fn27 However, as noted above, such damages are available if they can be calculated based on reliable evidence.

Guess argues that the opinions of Basil Imburgia -- Gucci's expert on the "reasonable royalty" issue -- are "utterly speculative" and therefore unreliable for two reasons: (1) there is no "evidence of a previous licensing arrangement between the parties" and (2) Gucci admits that it would not have licensed the designs at issue if Guess approached it.*fn28 While Imburgia's opinions may be subject to attack via "[v]igorous cross-examination [and] presentation of contrary evidence,"*fn29 I am not convinced, after reviewing his report, that his opinions are so flawed as to be inadmissible.*fn30 Accordingly, Guess's motion to exclude his report and any other evidence regarding "reasonably royalty" damages is denied.*fn31

SO ORDERED.


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