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Perfect Pearl Co., Inc. D/B/A Majestic Pearl Co v. Majestic Pearl & Stone

August 14, 2012

PERFECT PEARL CO., INC. D/B/A MAJESTIC PEARL CO., PLAINTIFF,
v.
MAJESTIC PEARL & STONE, INC., DEFENDANT.



The opinion of the court was delivered by: Paul A. Engelmayer, District Judge:

OPINION & ORDER

Plaintiff Perfect Pearl Co. ("Perfect") brings claims of unfair competition and false advertising against defendant Majestic Pearl & Stone, Inc. ("Majestic"), under the Lanham Act, 15 U.S.C. § 1051 et seq., and New York common law. It alleges that Majestic has infringed on its exclusive right to use the trademarks MAJESTIC and MAJESTIC PEARL (the "MAJESTIC marks" or the "marks"). Majestic has counterclaimed, asserting that it is the rightful owner of the MAJESTIC marks and that Perfect has infringed on its trademark rights.

Both parties now move for summary judgment on their respective claims. For the reasons that follow, Perfect's motion is, in substantial part, granted: The Court finds that Perfect, having been the first to use the MAJESTIC marks in the area of pearl jewelry, has the exclusive right to use those marks in connection with pearl jewelry, although not in connection with other products, including pearl beads and loose pearls, which represent the vast majority of Majestic's business. Majestic's motion for summary judgment is denied in its entirety. Perfect also moves to strike that portion of Majestic's reply memorandum of law asserting an affirmative defense of laches. That motion is denied without prejudice as moot.

I.Background*fn1

Perfect Pearl is a manufacturer of pearl jewelry sold under the name "Majestic." Majestic Pearl is a wholesale retailer of pearl beads as well as pearl jewelry, products it also sells under the name "Majestic." Historically, both parties have largely been business-to-business operations: Rather than selling their products directly to consumers, they have sold to retailers and designers, who in turn sell them (often rebranded) to consumers. In recent years, however, Perfect has begun to sell directly to consumers through the television shopping channel QVC and its website, www.QVC.com. This lawsuit ensued when the parties learned of each other's use of the word "majestic" in connection with marketing and selling pearl jewelry. Each party argues that it is entitled to exclusive use of the marks at issue, MAJESTIC and MAJESTIC PEARL, and that the other must be enjoined from using them.

A.Perfect's Use of the Marks

Perfect was established in 1955 by brothers Joseph and Albert Spitzer. Perfect 56.1 ¶ 1. In 1965, Perfect obtained a certificate of "doing business as" Majestic Pearl Company.*fn2 A.

Spitzer Decl. ¶ 7. Since then, Perfect has used the name Majestic Pearl Company as a business name. In January 1993, the company leased a showroom in New York under the name Majestic Pearl Company. Id. Ex. B. Since at least 1986, company employees have identified themselves to customers as representing "Majestic Pearl." Perfect 56.1 ¶ 25. Perfect also uses the name Majestic Pearl on catalogs that it sends to consumers. Id. ¶ 23.

Also in 1965, Perfect began to sell a line of jewelry under the name "majestic."*fn3 Id. ¶ 2. This line of jewelry bears the MAJESTIC marks on the tags which are affixed to the items, id. ¶ 11; Perfect represents that jewelry such as necklaces, bracelets, and earrings have always been sold with hanging tags or on cards that have "Majestic" in stylized lettering on the front, id. ¶¶ 13--19. In support of this claim, Perfect has adduced evidence that on June 21, August 19, and December 14, 1994, Perfect placed orders with the First Card Company for earring cards bearing the MAJESTIC marks. Edelstein Decl. Ex. A. The total number of cards ordered in 1994 was 18,000. Id. Current and former Perfect employees Donna Bova, Angela Grogan, Albert Spitzer, Eli Spitzer, and Mark Wachs, state in their respective declarations that the tags and cards used on the company's jewelry have always looked similar to the ones currently used. See Bova Decl. ¶¶ 5--6; Grogan Decl. ¶¶ 10, 12; A. Spitzer Decl. ¶¶ 11--12; E. Spitzer Decl. ¶¶ 8--9; Wachs Decl. ¶¶ 9--10. Collectively, these statements cover the period from 1965 to 1996. Perfect has submitted photos of the current versions of these jewelry tags and cards which are white with MAJESTIC in black letters. A. Spitzer Decl. Exs. C & D. There is, however, no direct evidence in the record as to what the tags and cards looked like before 1996.

Perfect sells its jewelry primarily to women's clothing and accessory retailers, although it also sells directly to customers through QVC and its website, www.QVC.com. Perfect 56.1 ¶ 3; see also Majestic 56.1 ¶ IV(D)(1)--(6). Certain retailers sell Perfect's jewelry through a "private label"-in this situation, the jewelry is not sold with the MAJESTIC marks and is instead sold with the retail store's own logo or mark. Perfect 56.1 ¶¶ 30--31. There are, however, a number of retailers who sell Perfect's jewelry with the MAJESTIC marks present on the tags and cards.*fn4

One such retailer is the chain store Petite Sophisticate. Id. ¶ 32. Barbara Kraselsky, a buyer for Petite Sophisticate from 1987 to 1992, attested that the store sold Perfect's jewelry and that "[t]he earrings came on MAJESTIC earring cards and the necklaces were featured with MAJESTIC string tags." Kraselsky Decl. ¶ 6. "That," she added, "was the way we displayed them to the customers." Id. Perfect's records show that the Majestic line of jewelry generated more than $1 million in revenue each year between 1988 and 2010. Perfect 56.1 ¶ 51. The sales data does not, however, indicate how much of that revenue is attributable to goods sold with the MAJESTIC marks as opposed to those sold under a private label.

Perfect's business model has remained fundamentally the same up to the present. The company continues to sell its Majestic line of jewelry with the MAJESTIC marks affixed to it by the necklace tags and earring cards. The jewelry is still sold to national women's clothing and accessories retailers as well as directly to consumers through QVC. Accordingly, Perfect's use of the marks before Majestic's entry into the market may fairly be described as limited to (1) selling pearl jewelry; (2) to national clothing and accessories retailers; (3) including tags bearing the MAJESTIC marks; and (4) from a showroom in New York City.

B.Majestic's Use of the Marks

Majestic was established in Hong Kong in 1980 by Chu Sing Wang; it began selling jewelry in the United States in 1996.*fn5 Majestic 56.1 ¶ I(A). It is incorporated in New York and maintains an office in Manhattan. Id. Majestic primarily sells wholesale freshwater pearl beads to bead shops, jewelry manufacturers, and designers. Id. ¶¶ I(P)--(R). The company also sells pearl jewelry, although this accounts for only a small portion of Majestic's business. Connie Wang, Majestic's Chief Financial Officer, testified that jewelry accounted for only about 5% of Majestic's overall business. C. Wang Dep. 40.

Majestic first used the MAJESTIC marks in commerce in 1996 when it began to sell its products in the United States. Majestic 56.1 ¶ IV(A)(1). The company uses the marks in various formats. Majestic's pearl beads are sold to customers in bags that bear the MAJESTIC marks. J. Wang. Dep. 57. The marks also appear on a sticker that is used to seal the bags when the pearls are shipped to customers. C. Wang Dep. 46--47. Additionally, the MAJESTIC marks appear on the tags affixed to all the jewelry sold by Majestic, as well as on the bags or boxes in which the jewelry is packaged. J. Wang Dep. 55.

Majestic advertises its products using the MAJESTIC marks in trade publications, at trade shows, and on its website. Majestic 56.1 ¶ IV(A)(3). According to Majestic's business records, it has spent $2,324,406.47 on advertising in connection with the MAJESTIC marks since 1996. Tufariello Support Aff. Exs. 17--25. A sizable portion of that spending is at the many trade shows which Majestic representatives attend each year, at which the company sells and markets its product to business consumers. Majestic 56.1 ¶¶ IV(A)(5)--(6). At these shows, Majestic distributes promotional "giveaways" such as pens and pearl care guides which bear the MAJESTIC marks. J. Wang Dep. 46--47.

In 2001, Majestic obtained a registration with the Patent and Trademark Office ("PTO") for the trademark MAJESTIC in connection with the sale of pearls. See Section I.C, infra. During the time in which Majestic had a valid registered trademark for MAJESTIC, it designed its promotional materials to include the registration symbol ("®") next to the word "majestic." After Majestic's registration lapsed in 2008, the company continued to use promotional materials with the ®. J. Wang Dep. 62--65. In October 2009, as a result of this litigation, Majestic learned that it no longer had a current registration for the mark and "stopped using [the ®] immediately."

C. Wang Dep. 116.

C.Prior Registrations of the Marks

On June 29, 2000, Majestic initiated proceedings in front of the PTO to register MAJESTIC in connection with the sale of freshwater pearls. Lo Cicero Decl. Ex. A. Majestic filed an "actual use" application, indicating that it was currently using the mark it was seeking to register and was not registering it for future use. Id. On February 28, 2001, the PTO issued a Notice of Publication and demanded that any opposition to the registration be filed by April 13, 2001. Id. On June 5, 2001, with no opposition having been filed, the registration was granted. Id. That registration was given U.S. Trademark Registration No. 2,457,367. Id. On March 8, 2008, Majestic's registration of the MAJESTIC mark lapsed following Majestic's failure to file the requisite paperwork demonstrating continued use of the mark. Majestic 56.1 ¶ II(C)(1)(h).

Majestic has subsequently filed three new applications for the MAJESTIC marks. On July 8, 2009, Majestic applied to register MAJESTIC in connection with the sale of jewelry and pearls. Perfect 56.1 ¶ 57. On August 17, 2010, the PTO issued a Notice of Publication for this mark. Id. ¶ 61. The application was given serial number 77/776,779. Id. ¶ 57. On July 13, 2009, Majestic applied to register MAJESTIC for the sale of pearls. Id. ¶ 64. On September 21, 2010, a Notice of Publication was issued and the application was designated as serial number 77/779,710. Id. ¶¶ 64, 67. On July 22, 2010, Majestic filed an application for the MAJESTIC mark in connection with wholesale distributorships. Id. ¶ 70. On December 28, 2010, the PTO issued a Notice of Publication for this mark which was given the serial number 85/090,958. Id. ¶¶ 70, 73. Perfect has filed objections to all three trademark applications on the ground that they are confusingly similar to Perfect's marks. Id. ¶¶ 62, 68, 74. Each application has been suspended pending the outcome of this lawsuit. Id. ¶¶ 63, 69, 75.

D.Instances of Consumer Confusion

Since 2009, there have been numerous instances of actual confusion in which consumers mistook one company for the other. The genesis of this confusion was Perfect's decision to being marketing its jewelry on the shopping channel QVC. See Majestic 56.1 ¶¶ IV(D)(1)--(16).

Although the record does not make clear exactly when this occurred, it appears that Perfect at some point ceased displaying its jewelry on QVC for a period of time, and that a number of Perfect's customers set out to find the retailer of the jewelry they had previously seen on QVC, and came upon Majestic, not Perfect. See id. Believing Majestic to be the company responsible for the line of "majestic pearl" jewelry shown on QVC, these customers reached out to Majestic to ask how to order Perfect's products. For example, on July 8, 2009, Majestic received an email through its website from a woman located in Michigan asking, "Are you [the] company that sold on QVC? If so, when will you be back on? Your product was wonderful . . . and [I] have not seen them on air for months." Id. ¶ IV(D)(4).

An additional instance of confusion occurred when a party to the Filene's Basement bankruptcy litigation contacted Majestic seeking to purchase "Majestic Pearl Co.'s" (meaning, Perfect's) claim in the bankruptcy. Majestic 56.1 ¶ IV(D)(14). It was, however, Perfect, not Majestic which had done business with Filene's Basement and owned a potential claim on the bankruptcy estate.

E.The Current Lawsuit

As a result of these instances of actual confusion, the parties first became aware of each other's use of the MAJESTIC marks. On May 14, 2010, following that discovery and following unsuccessful discussions between the two entities to resolve the issue, Perfect filed this lawsuit against Majestic. It alleged infringement of its trademark rights under the Lanham Act. Majestic counterclaimed that it possesses the exclusive right to the MAJESTIC marks and that Perfect is, therefore, liable for infringement.

Perfect raises three claims against Majestic: Count One alleges unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a). Count Two alleges false advertising, also in violation of the Lanham Act, 15 U.S.C. § 1125(a). Count Three alleges both unfair competition and false advertising under New York common law.

Majestic makes eight counterclaims against Perfect: (1) unfair competition under the Lanham Act, 15 U.S.C. § 1125(a), specifically, false designation of origin in connection with trademark infringement; (2) unfair competition under the Lanham Act, 15 U.S.C. § 1125(a), specifically, confusion, mistake, or deception in connection with trademark infringement; (3) trademark dilution in violation of the Lanham Act, 15 U.S.C. § 1125(c); (4) trademark infringement in violation of New York General Business Law ("N.Y.G.B.L.") § 133 (Use of Name or Address with Intent to Deceive); (5) deceptive business practices under N.Y.G.B.L § 349 (Deceptive Acts and Practices Unlawful); (6) injury to business reputation in violation of N.Y.G.B.L. § 360-1 (Injury to Business Reputation; Dilution); (7) trademark infringement under New York common law; and (8) unjust enrichment.

Perfect moves for summary judgment in favor of its claims, and against each of Majestic's claims and affirmative defenses. Majestic opposes Perfect's motion; it seeks summary judgment in its favor on its counterclaims. Each party argues that it possesses an exclusive right to use the MAJESTIC marks and that the other must be enjoined from all future use and is liable for damages based on past use of the marks. On July 20, 2012, the Court heard oral argument on this motion.

II.Applicable Legal Standard

To succeed on a motion for summary judgment, the movant must demonstrate "that there is no genuine dispute as to any material fact." Fed. R. Civ. P. 56(a). A court faced with cross-motions for summary judgment "need not grant judgment as a matter of law for one side or the other." Lorterdan Props. at Ramapo I, LLC v. Watchtower Bible & Tract Soc'y of N.Y., Inc., No. 11-cv-3656, 2012 U.S. Dist. LEXIS 95693, at *37 (S.D.N.Y. July 9, 2012) (citing Pfizer, Inc. v. Stryker Corp., 348 F. Supp. 2d 131, 140 (S.D.N.Y. 2004)) (internal quotation marks omitted). Each movant bears the burden of demonstrating the absence of a material factual question; in making this determination, the Court must view all facts "in the light most favorable" to the non-movant. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); see also Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d Cir. 2008). In undertaking this analysis, the Court "must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993) (citing Schwabenbauer v. Bd. of Ed., 667 F.2d 305, 313--14 (2d Cir. 1981) (internal quotation marks omitted)).

To defeat a motion for summary judgment, the opponent must show that "the evidence is such that a reasonable jury could find in the non-movant's favor." Beyer v. Cnty. of Nassau, 524 F.3d 160, 163 (2d Cir. 2008). In so doing, "the non-moving party must do more than simply show that there is some metaphysical doubt as to the material facts, and may not rely on conclusory allegations or unsubstantiated speculation." FDIC v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir. 2010). Finally, only disputes regarding "facts that might determine the outcome of the suit under the governing law" are grounds for a denial of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

III.Discussion

The critical issues in this case are whether Perfect's prior use of the MAJESTIC marks in commerce was sufficient to earn it trademark rights and whether (and if so, to what extent) those rights trump the rights that Majestic later obtained by registering the marks. The Court finds that Perfect used the MAJESTIC marks in commerce before Majestic (in 1996) first used them and (in 2001) registered them, and that Perfect's prior use in commerce is sufficient to give it a right to the marks. The Court next inquires whether Perfect's marks are protectable either through inherent or acquired distinctiveness. The Court finds that the MAJESTIC marks are suggestive and, therefore, inherently distinctive; accordingly, Perfect does not need to demonstrate that the marks acquired secondary meaning before Majestic's use. Because the marks are entitled to protection, Perfect's status as the senior user necessarily entitles it to exclusive use of the marks. See La Societe Anonyme des Parfums Le Galion v. Jean Patou, Inc., 495 F.2d 1265, 1271 (2d Cir. 1974). Finally, the Court examines whether there is a likelihood of confusion. The Court finds such a likelihood, but only in the context of the parties' sale of pearl jewelry, not of loose pearls or pearl beads.

In sum, the Court concludes that Perfect has a right to exclude Majestic from using the marks in the narrow area of pearl jewelry (i.e., Majestic may not continue to sell pearl jewelry with the MAJESTIC marks and must do so using a different mark). The Court does not, however, enjoin Majestic from using its trade name or from using the marks on loose pearls or pearl beads.

A.Perfect's and Majestic's Lanham Act Claims of Trademark Infringement and Unfair Competition Both parties have brought claims under the Lanham Act, 15 U.S.C. § 1051, et seq. *fn6

Because these claims implicate common legal and factual issues, the Court addresses these claims in tandem. To prevail on a claim of trademark infringement under Section 43(a) of the Lanham Act, a "plaintiff must demonstrate that it has a valid mark entitled to protection and that the defendant's use of it is likely to cause confusion." Time, Inc. v. Petersen Pub. Co., 173 F.3d 113, 117 (2d Cir. 1999).

1.Priority of Use

Perfect argues that, although it has never registered its marks with the PTO, it has a common law right to exclusive use of the MAJESTIC marks. This claim hinges on Perfect's ability to establish priority of use: specifically, that Perfect used the marks in commerce before Majestic entered the market in 1996. It is well-settled that rights to a mark derive not from a registration or adoption of a mark but from its use. See United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97 (1918); see also J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 19:3 (4th ed. 2012) (hereinafter "MCCARTHY"). "[T]he user who first appropriates the mark obtains [an] enforceable right to exclude others from using it, as long as the initial appropriation and use are accompanied by an intention to continue exploiting the mark commercially." La Societe Anonyme des Parfums, 495 F.2d at 1271; see also Dial-A-Mattress Operating Corp. v. Mattress Madness Inc., 841 F. Supp. 1339, 1347 (E.D.N.Y. 1994) ("The first user who continuously uses an inherently distinctive mark in the relevant market is the senior user and has priority over any second comers."). A satisfactory showing of priority gives Perfect a significant advantage in proving that it has an exclusive right to use the MAJESTIC marks going forward. See Johanna Farms, Inc. v. Citrus Bowl, Inc., 468 F. Supp. 866, 875 (E.D.N.Y. 1978) ("Where claimants dispute the right to use a particular trademark, the general rule is that priority of appropriation and use determines which litigant will prevail in its use.").

In the Court's assessment, there is overwhelming evidence that Perfect used the MAJESTIC marks in commerce before Majestic entered the market in 1996. Perfect's founder, Albert Spitzer, has averred that the company began selling jewelry with the MAJESTIC marks as early as 1965. A. Spitzer Decl. ¶ 7. Consistent with this, numerous longtime employees have averred that Perfect was selling jewelry with the MAJESTIC marks from the time each joined the company, through to the present day. See Wachs Decl. ¶ 6 (marks in use since 1986); Bova Decl. ¶¶ 3--4 (since 1991); E. Spitzer Decl. ¶ 5 (since 1993); Grogan Decl. ¶¶ 3--4 (since 1993).

In addition, Perfect has submitted declarations from third parties attesting to Perfect's use of the marks in commerce. Barbara Kraselsky, a former buyer for the retail chain Petite Sophisticate between 1987 and 1992, attested that she purchased Perfect's jewelry, with the MAJESTIC marks on the tags affixed to it, and that Petite Sophisticate sold the jewelry, with the tags still affixed, during those years. Kraselsky Decl. ¶¶ 4--8. Barry Edelstein of the First Card Company, in turn, attested that the First Card Company's records indicate that, in 1994, Perfect placed three orders for display cards (used for earrings) with the MAJESTIC mark on them. Edelstein Decl. ¶¶ 6--7 & Ex. A. In 1994, Perfect ordered 18,000 such cards bearing the name MAJESTIC. Id. Ex. A.

Finally, Perfect has submitted evidence of the revenues that it received from sales of its Majestic line of jewelry dating back to 1988. E. Spitzer Decl. Ex. E. Perfect's Majestic division averaged about $2 million in sales each year between 1988 and 1995.*fn7 Perfect's primary sales outlets have been retail stores, a number of which sell the jewelry with the MAJESTIC marks present on the tags. Perfect 56.1 ΒΆ 32. Perfect has submitted evidence listing the retail stores that sold its jewelry with the marks before 1996. These include: CFTC Group, Inc., Colony Shop, Inc., Craig's, Decelle, Filene's Basement, Gabriel Brothers, Fashion Shops of Kentucky, Army/Air Force Exchange Service Mercantile Stores Co., Inc., Modecraft Fashions, Navy Exchange Service Committee, Schweser's, Siefert's ...

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