United States District Court, S.D. New York
LAURA TAYLOR SWAIN, District Judge.
In this trademark infringement and breach of contract action, Plaintiffs, Mister Softee, Inc. ("MSI"), Mister Softee of Queens Inc. ("MSQ"), and Spabo Ice Cream Corp. ("Spabo, " and collectively "Plaintiffs") seek injunctive and monetary relief against Defendant Dimitrios Tsirkos ("Tsirkos" or "Defendant"). Tsirkos, the owner of several ice cream trucks, was until recently a Mister Softee franchisee and licensee.
The case is before the Court on Plaintiffs' application pursuant to Federal Rule of Civil Procedure 65 for preliminary injunctive relief barring Defendant from using MSI's registered trademarks or confusingly similar marks, and from competing with any other MSI franchisees. The Court entered an order to show cause on April 24, 2014, and after an adjournment at the parties' request, held an evidentiary hearing on May 28, 2014. Post-hearing submissions were completed on June 2, 2013.
In accordance with Federal Rule of Civil Procedure 52(a), this Memorandum Opinion constitutes the Court's findings of fact and conclusions of law. To the extent any finding of fact includes conclusions of law it is deemed a conclusion of law, and vice versa. The Court has thoroughly considered the parties submissions and testimony, and, for the following reasons, Plaintiffs' motion for a preliminary injunction is granted.
FINDINGS OF FACT
Plaintiffs operate a franchising business which licenses independent operators of "Mister Softee" branded ice cream businesses ("Mister Softee").
MSI is the owner of certain registered trademarks related to Mister Softee, and licenses these marks to sub-franchisors, including MSQ and Spabo, who in turn license them to franchisees, under written franchise agreements, for use in operating Mister Softee ice cream trucks. (4/17/14 Conway Aff. ¶¶ 3, 9.) Specifically, MSI owns the trademark "Mister Softee" and related logos which are registered on the Principal Register of the United States Patent and Trademark Office at Registration Numbers 2128918, 0667335, and 0663456. (Id. ¶ 3.) MSI also owns a sensory mark which consists of the Mister Softee jingle, which is registered at Registration Number 2218017. (Id. ¶ 3.) Finally, MSI owns a federal trademark registration for the design of the Mister Softee ice cream truck, registered on the Principal Register of the United States Patent and Trademark Office at Number 2906357. (Id. ¶ 3.)
Mister Softee-branded trucks have a distinctive appearance, an example of which is depicted in Exhibit A to the Conway Affidavit. The Court takes judicial notice that Mister Softee's truck design registration, as available on the website of the Patent and Trademark Office, includes the colors blue and white as features of the mark, consisting of a "blue horizontal stripe at the bottom of the white truck with blue wheels and including the word mark Mister Softee, and the design of an ice cream cone head. The mark also includes a sundae container with the Mister Softee word mark and a milkshake container with the Mister Softee ice cream cone head included therein." The registration includes the words "SUNDAES SHAKES CONES DELICIOUS SHAKES" as incorporated in the truck design. The illustration shows those words written in capital letters above the blue horizontal stripe at the bottom of the truck. (PTO Reg. No. 2906357; see Exhibit A to 4/17/14 Conway Aff. at docket entry 12-4, pages 10-13.) Mister Softee trucks are two-axle box trucks with openings for vending of food on the either side. (Id. at Ex. A.) The trucks display an anthropomorphized ice cream cone head with red bow tie and blue jacket on the side of the truck. (Id.) The "Cone head" figure is registered as a Mister Softee trademark. (E.g., PTO Reg. No. 0667335.) The trucks display the slogan "the Very Best" in red script on the hood. (4/17/14 Conway Aff. Ex. A.) The trucks display the words "Delicious Shakes" in red script below a depiction of a milk shake on the door of the truck. (Id.) In addition to their uniform appearance, the Mister Softee trucks play a distinctive jingle that is protected by a sensory mark. (Id. ¶ 3.)
Defendant is a former franchisee of Spabo and MSQ and has operated Mister Softee trucks for almost 30 years. (Tsirkos Dep. 5:21-6:2.) Defendant signed six Franchise Agreements with Spabo and one with MSQ (the "Franchise Agreements"). The Franchise Agreements are substantially similar to each other, and allowed Defendant to operate sixteen Mister Softee franchises in certain specified territories within Bronx, New York, and Queens Counties in New York state. (May 28 Tr. 14:17-24; Deft.'s PI Ex. A.) The Franchise Agreements require Defendant to pay certain royalties and to comply with certain policies and procedures, including parking his Mister Softee trucks in a designated depot for cleaning and storage. They provide that they could be terminated on notice, by Spabo and MSQ, if Defendant abandoned his franchises, and they include the following covenant not to compete:
[f]or a two (2) year period following the expiration or termination of [his] interest in [the relevant Franchise Agreement], neither [Defendant] nor [Defendant's] immediate family members, nor [Defendant's] partners, shareholders or members, nor their immediate family members, as applicable, [would] directly or indirectly, for themselves or through, on behalf of, or in conjunction with any other person, partnership, corporation, limited liability company; or other entity, own, maintain, engage in, be employed by, lend money to, extend credit to, or have any interest in any other business which operates or licenses businesses featuring primarily the sale of ice cream or other frozen confections within the former territory or within any system franchisee's territory.
(Defendant's PI Ex. A ¶ 16.2; Compl. Ex. B.)
Defendant was not given a prospectus at the time he signed the Franchise Agreements. (Tsirkos Aff. ¶ 10; Bouziotis Aff. ¶¶ 1-2.). Peter Bouziotis, Secretary and Treasurer of Spabo, offered Defendant a prospectus, but Defendant refused to review it "because [Defendant] claimed he was a franchisee for almost 30 years, and knew everything he needed to know about the Mister Softee system." (Bouziotis Aff. ¶ 2.)
At some point, Defendant ceased making royalty payments and parking his trucks at the designated depot. (Tsirkos Dep. 58:6-19.) Defendant decided to terminate the Franchise Agreements. (Tsirkos Aff. ¶ 3.) Defendant asserts that he believed that Plaintiffs were in breach of the Franchise Agreements because, inter alia, they failed to ensure the quality of the ice cream sold by franchisees, and they failed to prevent franchisees from competing with each other by operating non-Mister Softee branded trucks. (Tsirkos Aff.) On February 18, 2014, Mister Softee sent a notice of termination to Defendant. (Compl. at ¶ 32, Ex. C; Pl. Answer ¶ 11.) Defendant received the Notice of Termination on February 19, 2014. (Compl. at ¶ 33, Ex. D.; Pl. Answer ¶ 11.) The notice and receipt thereof terminated the Franchise Agreements.
After termination of the Franchise Agreements, Defendant continued to operate in areas for which Mister Softee and its affiliates had granted franchises. Defendant initially labeled his trucks as "Master Softee" trucks and later labeled at least one truck "Soft King" instead of "Master Softee." Defendant no longer uses the Mister Softee jingle. His "Master Softee" trucks are, however, the same two-axle models and remain strikingly similar in appearance to the Mister Softee branded trucks in several respects, including: (1) a white truck with a blue trim on the bottom, (2) the slogan "the World's Best" in red script on the front roof panel, (3) an anthropomorphized waffle cone character with a blue jacket and red bow tie. An example of Defendant's "Master Softee" truck labeling is depicted in Exhibit B to the Conway Affidavit; Defendant's PI Exhibits C and D show the later "Soft King" trade dress.
The "Soft King" truck design is also strikingly similar to the Mister Softee trucks in material respects, including: (1) a white truck with a blue trim on the bottom with the words "SHAKES, " "SUNDAES, " "CONES" written above it, (2) the slogan "the World's Best" in red script on the front roof panel of the truck, (3) an anthropomorphized waffle cone character with a blue jacket and red necktie on the side of the truck, and (4) the words "Delicious Shakes" written in red script below a depiction of a milk shake on the door of the truck. Defendant's "Master Softee" and "Soft King" truck decoration are confusingly similar to Plaintiff's Mister Softee logos and trade dress. The coloring of the trucks and the placement of logos and figures thereon are virtually identical. The differences in words and in the details of the cone head figures are not likely to be perceived from a distance, when the trucks initially attract the attention of passers-by, and are not likely to differentiate Defendant's trucks from those of Plaintiffs' franchisees in the minds of young children and other customers.
Mister Softee has granted franchises for all areas of New York City other than Staten Island, as well as for all of Nassau and Suffolk Counties. Defendant intends to continue to operate his ice cream truck businesses in the same territories in which he operated under the Franchise Agreements, and also seeks to operate his businesses in other Mister Softee franchisee territories.
Defendants' use of similar truck decoration and his operation of those trucks in Mister Softee-franchised territories is likely causing harm, and will likely continue to cause harm to Plaintiffs and their franchisees. Because of the confusingly similar decoration, customers are likely to associate Defendant's trucks with Plaintiffs' trademarks and products. Plaintiffs have no control over the quality of Defendant's products and services, however, so any decrement in quality or failure to maintain sanitary standards would reflect badly on Plaintiffs and their franchisees and devalue Plaintiffs' marks. Furthermore, the use of confusingly similar decoration to attract customers undermines the goodwill and competitive value associated with Mister Softee and its trademarks. Such harms cannot be quantified or addressed adequately with money damages. Plaintiffs have received complaints that customers were confused by Defendant's Master Softee trucks, believing that they were part of the Mister Softee franchise system. (Conway Aff. ¶ 7.)
Mr. Bouziotis acknowledges, however, that a former franchisee operating in a Mister Softee franchise territory with a truck that is "totally different" from the Mister Softeebranded trucks would be not be as damaging to the Mister Softee franchise as a former franchisee operating a truck with a design confusingly similar to that of Mister Softee-branded trucks. (May 28 Tr. 28:23-29:5.) Mr. Bouziotis further testified credibly that, if he attempted to sell franchises in Defendant's former territories, it would be more difficult if Defendant were still selling ice cream in those territories. (May 28 Tr. 29:5-9.) Mr. Bouziotis described the harmful competition as follows "if it is somebody that [sic] was a person that [sic] gained all that knowledge through the hard work of Mister Softee and now he is going to use it to hurt [current franchisees]... I am talking about knowledge of how to run a successful business gained by the ...