United States District Court, E.D. New York
December 3, 2014
BALADY, INC., Plaintiff,
JENIN ELHINDI AND BALADY WA BALADAK FOOD CORP., Defendants
Balady, Inc., Plaintiff: Leo L. Esses, LEAD ATTORNEY, Cohen Tauber Spievack & Wagner, LLP, New York, NY.
Ramon E. Reyes, Jr., United States Magistrate Judge.
TO THE HONORABLE STERLING JOHNSON, JR., SENIOR UNITED STATES DISTRICT JUDGE
Balady Inc. (" Plaintiff") brought this action against defendants Jenin Elhindi (" Elhindi") and Balady Wa Baladak Food Corp. (collectively, " Defendants"), alleging federal and state law claims of trademark infringement and unfair competition, as well as state law claims of trademark dilution and breach of contract. (Dkt. No. 1.) Although Elhindi attended a Show Cause Hearing held in connection with Plaintiff's motion for a preliminary injunction, and spoke on behalf of herself and the corporate defendant, neither defendant has filed an answer. The Clerk of the Court noted Defendants' default pursuant to Federal Rule of Civil Procedure 55(a) (Dkt. No. 14), and Plaintiff subsequently moved for default judgment (Dkt. No. 15). Your Honor referred that motion to me for this Report and Recommendation.
Plaintiff owns Balady Foods, a halal food market that opened in Brooklyn, New York in 2003. (Compl. ¶ 12.) Plaintiff has been operating under the Balady mark continuously in the area since the store's inception. (Id.) The store provides halal services to customers and sells a wide variety of grocery products and imported Middle Eastern foods. (Id. ¶ 14.) Plaintiff also sells private label grocery goods under the Balady mark to both consumers and wholesalers in the New York metropolitan area. (Id. ¶ ¶ 17-18.) In addition to their in store sales, Plaintiff sells their goods across the country through internet and retail catalog orders. (Id. ¶ 17.) Plaintiff states that Balady, which means " my town" or " my place" in English, is a fitting name for a store that has become an " important and supportive part of the community." (Id. ¶ 15.)
Plaintiff contends that their extensive and costly marketing in the New York metropolitan area has helped the Balady mark gain widespread recognition. ( See id. ¶ ¶ 28-30.) This recognition and several instances of unsolicited media coverage of the store has, according to Plaintiff, led customers to recognize the source of goods bearing the Balady mark. (Id. ¶ ¶ 19-20.) Due to these factors, Plaintiff asserts that the Balady mark is " inherently distinctive as applied to its goods and services" ( id. ¶ 19), and a valuable source of good will among customers ( see id. ¶ 30).
Defendants opened Balady Wa Baladak in 2013. (Id. ¶ 31.) Plaintiff alleges that the two stores sell similar goods and services and that they operate in the same channels of trade and serve the same customer market. (Id. ¶ ¶ 34-35, 55) According to Plaintiff, Balady Wa Baladak translates to either " my town and yours" or " my place and yours." (Id. ¶ 33.) Thus, Plaintiff contends that Balady and Balady Wa Baladak " are substantially similar in sound and appearance and substantially identical in meaning and connotation." (Id. ¶ 56.) Because of these similarities in the marks, Plaintiff avers that potential purchasers are likely to be confused and falsely believe that the two stores are related. (Id. ¶ 57.)
Plaintiff owns New York State trademark registrations for the Balady mark covering retail grocery services and wholesale distribution of groceries. (Id. ¶ 27; Compl. Exh. E.) In August 2012, Plaintiff filed a federal trademark application for the Balady mark, and now owns a pending federal trademark application for retail grocery services and other applications. (Id. ¶ 24; Compl. Exh. D.)
Shortly after opening Balady Wa Baladak in May 2013, Elhindi filed a federal trademark application to register a Balady Wa Baladak Food Corp. mark for retail grocery services. (Id. ¶ 40; Compl. Exh. G.) In an official action, the U.S. Patent and Trademark Office noted that there may be a potential bar to Defendants' Balady Wa Baladak Food Corp. registration due to the possibility of confusion with Plaintiff's Balady application. (Id. ¶ 43.) In the federal trademark application, Elhindi stated that she believed herself entitled to use the Balady Wa Baladak mark. (Id. ¶ 41.)
Plaintiff asserts that Defendant had actual knowledge of the Balady mark and of Plaintiff's purported rights in the mark when applying for her federal trademark. (Id. ¶ 36.) Before Defendants' store opened, Plaintiff spoke with Elhindi about the use of the word Balady in connection with the business. ( See id. ¶ 39.) Elhindi reassured the Plaintiff that Balady Wa Baladak would not be competing with the Plaintiff. (Id.) Additionally, Plaintiff contends that prior to opening Balady Wa Baladak, Elhindi posted a question online inquiring about the legality of using the name Balady Wa Baladak given that it so closely resembled the established and nearby Balady store. (Id. ¶ ¶ 37-38; Compl. Exh. F.)
After Balady Wa Baladak opened, Plaintiff's counsel sent a cease and desist letter complaining that the Balady Wa Baladak mark infringes on the Balady mark and demanding Defendants refrain from using the name. (Id. ¶ 45; Compl. Exh. H.) In response, Plaintiff contends that Elhindi agreed, in writing, to refrain from using the " infringing" Balady Wa Baladak mark in exchange for Plaintiff's promise not to sue for trademark infringement (Id. ¶ ¶ 47-49, 82.) Plaintiff alleges that it deferred taking legal action and that Defendants' continued to use their infringing Balady Wa Baladak mark in breach of their promise to refrain from doing so. (Id. ¶ ¶ 51, 82, 84.)
II. PROCEDURAL HISTORY
Plaintiff filed this lawsuit against Defendants and immediately moved for a preliminary injunction. The Court held a Show Cause Hearing on February 11, 2014, at which Elhinidi attended. Elhindi represented to Court--as she had to counsel the day prior--that she no longer owned Balady Wa Baladak. She explained that she ceased being the owner as of September 22. (2/11/14 Tr. at 6:18-25, 7:9-10; see id. at 7:25-8:6.) She confirmed that Defendants " did contact [her] about the sign" and that she had agreed with Plaintiff's prior counsel to remove the sign. (Id. at 7:14-16, 7:24-25) Elhindi indicated that she has documents to show that she is no longer the owner ( id. at 11:18-22), but the record contains no evidence to demonstrate the business transfer. The Court denied Plaintiff's motion for a preliminary injunction.
A defendant's default serves as an admission of all of the well-pleaded allegations of liability in a complaint. Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992). " Nevertheless, it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law." La Barbera v. ASTC Labs., Inc., 752 F.Supp.2d 263, 270 (E.D.N.Y. 2010) (internal quotation marks omitted).
Courts have adjudicated unregistered trademark infringement claims under 15 U.S.C. § 1125(a) on default judgment. See Ortho Sleep Prods. v. Dreamy Mattress Corp., No. 11-CV-6049 (CBA), 2012 WL 6621288, at *1 (E.D.N.Y. Aug. 29, 2012), adopted by, 2012 WL 6589208 (E.D.N.Y. Dec. 17, 2012); HTS, Inc. v. Boley, 954 F.Supp.2d 927, 963 (D. Ari. 2013); Michael Phelps Found. v. Schroeder, No. 10-CV-346-JAW, 2010 WL 4279166, at *1 (D. ME. Oct. 22, 2010). That Plaintiff's federal trademark application for the Balady mark was at one time pending before the United States Patent and Trademark Office is also not an impediment to the Court's ability to decide this case. See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 32:49 (4th ed.); Tuvache, Inc. v. Emilio Pucci Perfumes Int'l, Inc., 263 F.Supp. 104, 105-06 (S.D.N.Y. 1967) (observing that a court may properly adjudicate a trademark infringement claim that does not require any specialized or technical expertise prior to a decision by the United States Patent and Trademark Office).
The well-pleaded allegations set forth in the Complaint establish the requisite elements to state a claim for trademark infringement and unfair competition under 15 U.S.C. § 1125(a)(1)(A) and state law, as well as liability for state law claims of trademark dilution and breach of contract.
A. Trademark Infringement & Unfair Competition
Section 43(a) of the Lanham Act prohibits a person from using " any word, term, name, symbol, or device" that " is likely to cause confusion . . . as to the origin, sponsorship, or approval" of goods or services. 15 U.S.C. § 1125(a). This section protects unregistered trademarks. Louis Vuitton Malletier v. Dooney & Bourke, Inc., 454 F.3d 108, 114 (2d Cir. 2006) (citation omitted). " [C]ourts use matching tests in analyzing claims for false designation of origin, trademark infringement, and unfair competition under the Lanham Act and New York common law." Romeo & Juliette Laser Hair Removal, Inc. v. Assara I LLC, No. 08-CV-0442 (TPG) (FM), 2014 WL 4723299, at *1 (S.D.N.Y. Sept. 23, 2014). See also Van Praagh v. Gratton, 993 F.Supp.2d 293, 301 (E.D.N.Y. 2014) (observing that courts apply " substantially similar standards"). The only deviation is that a common law unfair competition claim requires the plaintiff to establish an additional element of the alleged infringer's bad faith. Erickson Beamon LTD v. CMG Worldwide, Inc., No. 12-CV-5105 (NRB), 2014 WL 3950897, at *9 (E.D.N.Y. Aug. 13, 2014) (citing Empresa Cubana del Tabaco v. Culbro Corp., 399 F.3d 462, 485 (2d Cir. 2005)). Given the similarity in the legal standards, the claims for federal and state law claims for trademark infringement and unfair competition will be analyzed jointly under the Lanham Act standards.
As a threshold matter, Plaintiff must " demonstrate its own right to use the mark or dress in question." ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 154 (2d Cir. 2007) (citation omitted). A plaintiff may demonstrate this right by " asserting that [it] made prior use of the trademark." Dual Groupe, LLC v. Gans-Mex LLC, 932 F.Supp.2d 569, 573 (S.D.N.Y. 2013). " This means that the plaintiff claims to have made the first use of the mark to identify [its] goods or service and continues to use the mark commercially." Id. (citing ITC Ltd. v. Punchgini, Inc., 482 F.3d at 147). Here, Plaintiff operated continuously for nearly ten years under the Balady mark before Defendants entered the market in 2013. ( See Compl. ¶ ¶ 12, 6.) Plaintiff's prior and continuous use demonstrates its initial right to use the Balady mark as to the Defendants, thus satisfying the threshold requirement.
To prevail on a trademark infringement claim, " the plaintiff must prove that its mark is entitled to protection and, even more important, that the defendant's use of its own mark will likely cause confusion with plaintiff's mark." Gruner Jahr USA Pub., 991 F.2d 1072, 1074 (2d Cir. 1993)
1. Entitlement To Protection
" The strength of a trademark in the marketplace and the degree of protection it is entitled to are categorized by the degree of the mark's distinctiveness . . . . " Id. at 1076 (citing Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976)).
A plaintiff may demonstrate that a mark is distinctive by showing that the mark is either " inherently distinctive, i.e., intrinsically capable of identifying its source, or by demonstrating that the mark has acquired secondary meaning." Louis Vuitton Malletier v. Dooney & Bourke, Inc., 454 F.3d at 116 (internal quotations and citations omitted).
Courts examine the mark's distinctiveness by reference to a continuum of four categories: " (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful." Abercrombie, 537 F.2d at 9. At the extremes are generic marks, which are not entitled to protection, and fanciful marks, which are automatically entitled to protection. PaperCutter, Inc. v. Fay's Drug Co., Inc., 900 F.2d 558, 561-62 (2d Cir. 1990) (citation omitted). The Balady mark falls in between these two poles.
A suggestive mark is automatically eligible for trademark protection, and " as might be expected, suggests the product, though it may take imagination to grasp the nature of the product." Gruner, 991 F.2d at 1076. See e.g., Soil Solutions, Inc. v. Soil Solution Indus. Inc., No. 09-CV-2470 (JBW), 2009 WL 3753912 at *4 (E.D.N.Y. Nov. 6, 2009) (determining that " Soil Solutions" is a suggestive mark where the company was involved in soil removal and drilling services); Playtex Prods., Inc. v. Georgia-Pac. Corp., 390 F.3d 158, 163 (2d Cir. 2004), superseded on other grounds by statute as recognized in Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 588 F.3d 97, 108 (2d Cir. 2009) (concluding that " Wet Ones" was suggestive because the name without more does not conjure the image of a towelette).
Conversely, descriptive marks identify qualities or ingredients of the product and are only eligible for trademark protection if the mark has acquired secondary meaning. PaperCutter, Inc., 900 F.2d at 562. See, e.g., Franklin Knitting Mills, Inc. v. Fashionit Sweater Mills, Inc., 297 F. 247 (D.C.N.Y. 1923), aff'd, 4 F.2d 1018 (2d Cir. 1925) (" Fashionknit" for sweaters); W.E. Bassett Co. v. Revlon, Inc., 354 F.2d 868 (2d Cir. 1966) (" Trim" for fingernail clippers). A mark acquires secondary meaning when the " primary significance of the term in the minds of the consuming public is not the product but the producer." 20th Century Wear, Inc. v. Sanmark-Stardust Inc., 815 F.2d 8, 10 (2d Cir. 1987) (citation and quotation marks omitted).
When a mark is a non-English word, the doctrine of foreign equivalents applies, which states, " a trademark which is not in English is first translated into English, and is then classified." French Transit, Ltd. v. Modern Coupon Sys., Inc., 818 F.Supp. 635, 636 (S.D.N.Y. 1993) (citing 1 J. Thomas McCarthy, Trademarks and Unfair Competition, § 11.14 at 464-66 (2d ed. 1984). When the mark at issue is a common term, " [t]he significant factor is not whether the word itself is common, but whether the way the word is used in a particular context is unique enough to warrant trademark protection." Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1190 n.4 (6th Cir. 1988). See Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 479 (3d Cir. 1994) (finding that although the term " Fairway" was a common term, when applied to a company dealing in peat moss, the mark was placed in between the arbitrary and suggestive classifications).
Given its allegation that Balady is " inherently distinctive" (Compl. ¶ ¶ 19-20), Plaintiff appears to argue that its mark falls under the suggestive classification, and is automatically entitled to protection. Indeed, the name " my town" on its own does not conjure the image of a grocery store, seeming to push the mark away from a descriptive and towards a suggestive classification. Further, Plaintiff contends that the name is fitting for a store that is an important part of the local community. (Id. ¶ 15.) The way in which the name is being used--creating a connection between " my town" and the store being an important part of the community--does require some imaginative leap. That leap makes it plausible that the mark may be suggestive as Plaintiff asserts.
Even assuming Balady is descriptive, however, the allegations in the Complaint establish the requisite secondary meaning to entitle the mark to protection. " Among the factors that courts have found relevant to the question of secondary meaning are: (1) advertising expenditures; (2) consumer studies; (3) sales success; (4) unsolicited media coverage; (5) attempts to plagiarize the mark; and (6) length and exclusivity of the mark's use." Jewish Sephardic Yellow Pages, Ltd. v. DAG Media, Inc., 478 F.Supp.2d 340, 344 (E.D.N.Y. 2007) (citing Bristol-Myers Squibb Co., 973 F.2d at 1041).
In this case, Plaintiff alleges that it has made " significant promotional efforts and expenditures" to raise customer awareness of the Balady mark in the last ten years. (Compl. ¶ 20.) See Krevat v. Burgers to Go Inc., No. 13-CV-6258 (JS) (AKT), 2014 WL 4638844, at *10 (E.D.N.Y. 2014) (accepting the plaintiff's allegations, on default judgment, regarding factors contributing to the strength of the mark as stated in the complaint without further evidence). Plaintiff further alleges that Defendants sought to capture some of the Balady mark's goodwill by intentionally copying it. See Jewish Shepardic Yellow Pages, Ltd. V. DAG Media, Inc., 478 F.Supp.2d at 376 (copying of mark, coupled with evidence of bad faith, sufficient to establish secondary meaning). While Plaintiff has not produced any consumer studies regarding the Balady mark, it has provided several instances of unsolicited media coverage. (Id. ¶ 21; Compl. Exh. A.)
Thus, whether the distinctiveness of Balady mark is inherent or acquired through secondary meaning, the Plaintiff has demonstrated that it is entitled to protection, thus satisfying the first prong of the Gruner test.
2. Likelihood of Confusion
To establish likelihood of confusion, a plaintiff must show a probability of confusion among customers. Gruner, 991 F.2d at 1077. " In order to be confused, a consumer need not believe that the owner of the mark actually produced the item and placed it on the market. The public's belief that the mark's owner sponsored or otherwise approved the use of the trademark satisfies the confusion requirement." Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 204-05 (2d Cir. 1979) (citations omitted).
The court makes this determination based on the so-called Polaroid test, which considers " (1) the strength of the mark, (2) the similarity of the two marks, (3) the proximity of the products, (4) actual confusion, (5) the likelihood of plaintiff's bridging the gap, (6) defendant's good faith in adopting its mark, (7) the quality of defendant's products, and (8) the sophistication of the consumers." Louis Vuitton Malletier, 454 F.3d at 116 (citations omitted). See also Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961) (citation omitted) (establishing nonexclusive, multi-factor test).
i. Strength of the Mark
The discussion of a mark's strength is similar to that of an unregistered mark's distinctiveness and eligibility for protection under 15 U.S.C. § 1125(a). See Time, Inc. v. Petersen Pub. Co. L.L.C., 173 F.3d 113, 117 (2d Cir. 1999) (" In somewhat circular fashion, consideration of this [strength] factor includes an evaluation of the same characteristics that initially determined a mark's validity: inherent distinctiveness, descriptiveness, and secondary meaning"). Having already determined that the Balady mark is eligible for protection, the Court finds that this factor weighs in Plaintiff's favor.
ii. Similarity of the Two Marks
When analyzing this factor, " courts look to the overall impression created by the logos and the context in which they are found and consider the totality of the factors that could cause confusion among prospective purchasers." Star Indus., 412 F.3d at 386 (citations omitted). " [T]he crux of the issue is whether the similarity is likely to cause confusion among numerous customers who are ordinarily prudent." Swatch Grp., Inc. v. Movado Corp., No. 01-CV-0286, 2003 WL 1872656, at *3 (S.D.N.Y. Apr. 10, 2003) (citations omitted).
There is a strong indication of similarity when the marks at issue share a word. See Virgin Enters. Ltd. v. Nawab, 335 F.3d 141, 149 (2d Cir. 2003) (finding that where the Plaintiff operated under the name " VIRGIN" and Defendants under the names " VIRGIN [WIRELESS, MOBILE, COMMUNICATIONS and NET], that there was sufficient similarity between the marks to prove likelihood of consumer confusion). Additionally, " [w]here common words have been used in a suggestive as opposed to descriptive manner, courts have readily granted them protection from similar marks." Id. See e.g., Am. Home Prods. v. Johnson Chem. Co., 589 F.2d 103 (2d Cir. 1978) (" Roach Inn" and " Roach Motel"); Masterpiece of PA, Inc. v. Consol. Novelty Co., 368 F.Supp. 550 (S.D.N.Y. 1973) (" Alpine King" and " Mountain King" for artificial Christmas trees).
Plaintiff alleges that the Balady and Balady Wa Baladak marks are " confusingly similar, " being " substantially similar in sound and appearance and substantially identical in meaning and connotation." (Compl. ¶ 56.) The two marks share the same " my town" root and Plaintiff contends that this will cause purchasers to erroneously believe that the stores are affiliated. (Id. ¶ ¶ 57-59.) In addition, the stores present the marks to customers in similar contexts. Both stores hold themselves out as purveyors of halal services and importers of specialty Middle Eastern foods. (Id. ¶ ¶ 12, 34-35.) The similarity of the marks and their presentation to consumers will likely cause confusion. Thus, this factor weighs in favor of Plaintiff.
iii. Proximity of the Products
" The proximity inquiry asks to what extent the two products compete with each other." Brennan's, Inc. v. Brennan's Rest., L.L.C., 360 F.3d 125, 134 (2d Cir. 2004) (citation omitted). The first part of the analysis looks at market proximity, that is, whether the parties are engaged in the same area of commerce. Id. The court next examines geographic proximity, by assessing how close the parties are to one another. Id.
Plaintiff contends that market proximity is satisfied since Defendants' " products and services are promoted and sold through overlapping channels of trade to overlapping classes of purchases." (Compl. ¶ 55.) Plaintiff also states that the two stores are within blocks of one another and that they are geographically close enough to have the same customers. (Id. ¶ 32.) Both aspects of this factor weigh in Plaintiff's favor.
iv. Actual Confusion
This factor asks " whether any consumers had actually been confused" by the two marks. Centaur Commc'ns, Ltd. v. A/S/M Commc'ns, Inc., 830 F.2d 1217, 1227 (2d Cir. 1987), superseded by statute on other grounds as recognized in Paddington Corp. v. Attiki Imps. & Distribs., 996 F.2d 577 (2d Cir. 1993). " Proof of actual confusion may take the form of direct evidence, such as anecdotal evidence by consumers, or market research surveys." Sunenblick v. Harrell, 895 F.Supp. 616, 630 (S.D.N.Y. 1995), aff'd, 101 F.3d 684 (2d Cir. 1996).
While Plaintiff alleges that confusion will result from Defendants' use of the Balady Wa Baladak name, they have not shown any instances of actual confusion. However, this determination is not fatal to Plaintiff's case, as " actual confusion need not be shown . . . since actual confusion is very difficult to prove and the [Lanham] Act requires only a likelihood of confusion as to source." Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 875 (2d Cir. 1986) (citation omitted). Without any direct evidence, this factor weighs in favor of Defendants.
v. Bridging the Gap
" Bridging the gap" refers to the possibility of the senior mark user entering the junior mark user's market, or that consumers will believe that the senior mark user will likely do so. The Sports Auth. Inc. v. Prime Hospitality Corp., 89 F.3d 955, 963 (2d Cir. 1996) (citation omitted). Where the senior and junior user's " products are already in competitive proximity, there is really no gap to bridge, and this factor is irrelevant to the Polaroid analysis in this case." Star Indus., 412 F.3d at 387 (citations omitted).
vi. Defendants' Good Faith
This factor looks at " whether the defendant adopted its mark with the intention of capitalizing on plaintiff's reputation and goodwill and any confusion between his and the senior user's product." Edison Bros. Stores v. Cosmair, Inc., 651 F.Supp. 1547, 1560 (S.D.N.Y. 1987) (citations omitted).
According to Plaintiff, Defendants' continued infringing conduct is done " with the intent to confuse mislead or deceive the public as to the origin of Defendants' services." (Compl. ¶ 61.) Plaintiff alleges that Defendants knew of Balady's goodwill in the area, as is evidenced by the question posted online and the conversation that the parties had prior to the opening of Balady Wa Baladak. (Id. ¶ ¶ 37-39.) Further, Defendants' default indicates that they are " willing to, or may continue [their] infringement." Sexy Hair Concepts, LLC v. Sexy Hair Inc., No. 12-CV-3937 (ARR) (MDG), 2013 WL 5460629, *4 (E.D.N.Y. Sept. 30, 2013) (quotation marks and citations omitted). This factor weighs in favor of the Plaintiff.
vii. Quality of Defendant's Products
Plaintiff has not addressed the quality of Defendants' products.
viii. Sophistication of the Consumers
Plaintiff has not addressed the sophistication of the consumers.
ix. Combining the Factors
" Each Polaroid factor must be considered in the context of the other factors, and no single factor is dispositive of the likelihood of confusion." Strange Music, Inc. v. Strange Music, Inc., 326 F.Supp.2d 481, 486 (S.D.N.Y. 2004) (citation omitted). Based on the aforementioned factors, there is a probability that the ordinary consumer would be confused about the relation between the parties' stores and would wrongly believe that Defendants were affiliated with the Plaintiff's store. Plaintiff has established the necessary elements to prevail on its claims of trademark infringement and unfair competition.
B. New York State Trademark Dilution (N.Y. Gen. Bus. Law § 360-l)
To prevail on a claim of trademark dilution under N.Y. Gen. Bus. Law § 360-1, " first, the plaintiff's trademark must be distinctive and second, the plaintiff must show a likelihood of dilution." Malletier v. Dooney & Bourke, Inc., 561 F.Supp.2d 368, 381 (S.D.N.Y. 2008) (citation omitted). " In examining the 'distinctiveness' of a mark, a court looks to the same factors that are examined when assessing the strength of a mark in the context of a section 1125(a) claim." Strange Music, Inc., 326 F.Supp.2d at 496 (citing Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026, 1030 (2d Cir. 1989)). Thus, the Court finds the distinctiveness prong is satisfied with regards to Plaintiff's trademark dilution claim, for the reasons set forth above.
A claim of dilution may be for either blurring or tarnishment. See Deere & Co. v. MTD Prods., 41 F.3d 39, 43 (2d Cir. 1994) (quoting Mead Data, 875 F.2d at 1036)). Plaintiff alleges blurring, which occurs " where the defendant uses . . . the plaintiff's trademark to identify the defendant's goods and services, raising the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product." Id. (citations omitted). The test for blurring consists of six factors, " (1) similarity of the trademarks; (2) similarity of the products; (3) sophistication of consumers; (4) predatory intent; (5) renown of the senior mark; and (6) renown of the junior mark." Paco Sport, Ltd. v. Paco Rabanne Parfums, 86 F.Supp.2d 305, 329 (S.D.N.Y. 2000) (citing Mead Data, 875 F.2d at 1035), aff'd sub nom., Paco Sport, Ltd. v Paco Rabanne Perfumes, 234 F.3d 1262 (2d Cir. 2000).
The first five factors of the blurring test are similar to the Polaroid factors, which have already been addressed. Plaintiff has not addressed the final factor, the renown of the junior mark. When taken in totality, however, there is sufficient evidence to establish that Defendants' use of the Balady Wa Baladak mark has been at the expense of the Balady mark and its ability to serve as a unique identifier for Plaintiff's goods and services. Therefore, Plaintiff has established the elements necessary to prevail on a claim of trademark dilution.
C. Breach of Contract
" Under New York law, the elements of a cause of action for breach of contract are (1) the existence of a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages suffered as a result of the breach." Transcience Corp. v. Big Time Toys, LLC, F.Supp.3d, No. 13-CV-6647 (ER), 2014 WL 4827878, at *5 (S.D.N.Y. 2014) (citing Beautiful Jewellers Private Ltd. v. Tiffany & Co., 438 F.App'x 20, 21-22 (2d Cir. 2011)). Here, Plaintiff alleges that Elhindi agreed, in writing, to stop using the name Balady Wa Baladak and to change the store awning in exchange for Plaintiff's promise not to sue for trademark infringement. (Compl. ¶ ¶ 47-48, 82.) Plaintiff further alleges that it deferred taking legal action and that Defendants continued to use the infringing name. (Id. ¶ ¶ 82, 84.) Finally, Plaintiff alleges that it has been damaged by Defendants' breach of contract. (Id. ¶ 85.) Thus, Plaintiff has established the requisite elements to state a claim for breach of contract, and is entitled to judgment as to liability on this claim.
IV. PERMANENT INJUNCTION
Plaintiff seeks to enjoin Defendants from using the word " Balady." ( See Dkt. No. 15-1.) As an initial matter, the purported transfer of Balady Wa Baladak does not deprive the Court of its judicial power to enjoin Elhindi from future use of the infringing mark, but it " is an important factor bearing on the question of whether [the] court should exercise its power" to grant injunctive relief against her. I. Appel Corp. v. Munsingwear, Inc., 646 F.Supp. 685, (S.D.N.Y. 1986) (recognizing voluntary cessation as relevant factor to decision to grant injunction) (citing City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289, 102 S.Ct. 1070, 71 L.Ed.2d 152 (1982)). The driving inquiry is whether there exists " 'some cognizable danger of recurrent violation, something more than a mere possibility . . . .'" Robert Stigwood Group, Ltd. v. Hurwitz, 462 F.2d 910 (2d Cir. 1972) (quoting United States v. W. T. Grant Co., 345 U.S. 629, 633, 73 S.Ct. 894, 97 L.Ed. 1303 (1953)). However, " courts have approved injunctions restraining violations of the Lanham Act even when there was no showing that future violations were imminent." Sherrell Perfumers, Inc. v. Revlon, Inc., 483 F.Supp. 188, 195 (S.D.N.Y. 1980) (citation omitted) (granting injunction where defendant had ceased infringing activities for three years but stated intention to recommence).
Here, the purported business transfer does not preclude Elhindi from continuing her infringing conduct at Balady Wa Baladak or at another like business. Elhindi informed the Court that she was no longer the owner of Balady Wa Baladak as of September 22. (2/11/14 Tr. at 7:9-10, 8:8-10.) She stated that her manager arranged for the transfer while she was overseas ( id. at 8:10-17), and indicated that she could provide " proof from the landlord that it was [transferred], " " returned checks . . . for the deposit, " and a notarized letter [from the landlord]" to establish that she was no longer the owner. (Id. at 11:18-22.) The record contains no evidence to substantiate a change in ownership and Elhindi's unsworn assertions are insufficient to show that her conduct has ceased and is not likely to reoccur.
Further, Elhindi's previous infringing conduct, as established by the well-pleaded allegations in the Complaint, tend to favor the grant of injunctive relief against her. Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 405 (2d Cir. 2004) (observing that although defendant's voluntary cessation prior to the suit was a relevant factor, " it did not prevent the court from considering [defendant's] previous infringing behavior as justification for an injunction"). According to the Complaint, Elhindi used the infringing Balady Wa Baladak name since May 2013, and filed a trademark application to register the name. She had not withdrawn her application at the time the lawsuit was filed, (Compl. ¶ 44), although the Balady Wa Baladak mark is now classified as dead or abandoned.
At the Show Cause Hearing, Elhindi acknowledge the she had previously agreed to remove the Balady Wa Baladak sign. (2/11/14 Tr. at 7:14-18.) She added that until just days before the Show Cause Hearing--and months after the purported transfer of ownership of the business--she " never got a chance" to inform the new owners about her prior agreement with Plaintiff to remove the sign. (Id. at 10:19-24, 11:13-18.) Although she claimed no longer to be the owner, and notwitsthanding her previous agreement to remove the sign, Elhindi appeared to defend her use of the Balady Wa Baladak name. (Id. at 10:25-11:8.) Her absence of caution in removing the sign, coupled with her apparent reservations about the unlawfulness of her conduct, give rise to a " cognizable danger of recurrent violation." Thus, the Court is satisfied at the first instance that an injunction against Elhindi is warranted.
" The court may . . . issue an injunction on a motion for default judgment provided that the moving party shows that (1) it is entitled to injunctive relief under the applicable statute, and (2) it meets the prerequisites for the issuance of an injunction." King v. Nelco Indus. Inc., No. 96-CV-4177, 1996 WL 629564, at *1 (E.D.N.Y. Oct. 23, 1996). The first prong is satisfied. See 15 U.S.C. § 1116.
The second prong requires Plaintiff to meet the prerequisites of the Salinger test for the issuance of an injunction, namely: " (1) that it has suffered irreparable injury; (2) that remedies available at law . . . are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." Salinger v. Colting, 607 F.3d 68, 77 (2d Cir. 2010) (quoting eBay, Inc. v MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006)).
While Salinger was originally limited to copyright cases, " [t]his Court agrees with other courts in this Circuit to have considered Salinger's applicability to trademark actions [and] that there appears to be no principled reason not to adopt the newly announced standard in the trademark context." U.S. Polo Ass'n, Inc. v. PRL USA Holdings, Inc., 800 F.Supp.2d 515, 539 (S.D.N.Y. 2011), aff'd, 511 F.App'x 81 (2d Cir. 2013).
A. Irreparable Injury
Plaintiff asserts that a permanent injunction is necessary to prevent further irreparable injury. (Compl. ¶ 64.) Although the law once recognized a presumption of irreparable harm upon a showing of a likelihood of consumer confusion, following Salinger, courts have found that " th[is] presumption of irreparable injury in trademark cases is no longer appropriate." U.S. Po lo Ass'n, Inc., 800 F.Supp.2d at 540. Thus, " the court must actually consider the injury the plaintiff [has] suffered] . .., 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 (quoting eBay, 547 U.S. at 391). " Harm might be irremediable, or irreparable, for many reasons, including that a loss is difficult to replace or difficult to measure, or that it is a loss that one should not be expected to suffer." Id. at 68.
The well-pleaded allegations in the Complaint support an independent finding of irreparable harm. Plaintiff has invested " significant promotional efforts and expenditures" into making the Balady mark a source identifier of its " high quality" and widely-recognized products and services. (Compl. ¶ ¶ 20-21.) As established above, the Court finds a likelihood that customers will mistakenly draw an erroneous connection between the Balady and Balady Wa Baladak names and believe that they are somehow affiliated. Given this likelihood of confusion, the reputation and goodwill that the Balady mark has amassed over the last decade will be out of Plaintiff's control. See, e.g., New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 343 (S.D.N.Y.) (" Prospective loss of this goodwill alone is sufficient to support a finding of irreparable harm.") (citing Tom Doherty Assoc. v. Saban Entm't, Inc., 60 F.3d 27, 37-38 (2d Cir. 1995); Power Test Petroleum Distribs., Inc. v. Calcu Gas, Inc., 754 F.2d 91, 95 (stating that irreparable injury " exists in a trademark case when the party seeking the injunction shows that it will lose control over the reputation of its trademark") (citing McCarthy, Trademarks and Unfair Competition, § 30.15 (2d ed. 1984)). Thus, the irreparable injury is met.
B. Inadequate Remedy at Law
Plaintiff has demonstrated the lack of an adequate remedy at law, both by virtue of Defendants' default and on the merits. " In the absence of assurances in the record against a defendant's continued infringing activity, a remedy at law may be deemed insufficient to compensate plaintiff for [its] injuries." Stark Carpet Corp. v. Stark Carpet & Flooring Installations, Corp., 954 F.Supp.2d 145, 158 (E.D.N.Y. 2013) (citations omitted). Defendants' default gives rise to the inference that they are willing to continue to infringe upon the Balady mark. See Sexy Hair Concepts, LLC, 2013 WL 5460629 at *4 (citations omitted). See also Stark Carpet Corp., 954 F.Supp.2d at 158 (" A defendant's refusal to appear in this action demonstrates the inadequacy of plaintiff's remedies at law.") Moreover, Defendants have ignored their prior commitments to remove the infringing sign as well as Plaintiff's repeated requests that Defendants do so. (Compl. ¶ ¶ 45-51.) Defendants' past actions and their default in this action leads to the conclusion that there is no adequate remedy at law.
C. Balance of Hardships
Without an injunction, Plaintiff will face the likelihood of continuing infringement by Defendants. On the other hand, Plaintiff alleges that Elhindi had previously agreed to change the name of her store, which implies that it would not be a significant harm for Defendants to do so. (Id. ¶ 48.) Thus, Defendants cannot be heard to complain that an injunction prohibiting future infringement imposes significant hardship on them, particularly now that Elhindi contends that she " [has] nothing to do with this anymore." (2/11/14 Tr. at 7:23-24.) See Seed Servs., Inc. v. Winsor Grain, Inc., 868 F.Supp.2d 998, 1005 (E.D. Cal. 2012) (enjoining defendant who disclaims any interest in using infringing mark " should not be much of a burden at all); Chisum LLC. v. Chief Automotive Sys., Inc., No. 01-816 (PAM) (RLE), 2001 WL 1640106, at *3 (D. Minn. Nov. 9, 2001) (finding that since defendant ceased it's challenged acts, it " will not be unduly harmed by the issuance of an injunction"); Rebel Dubtante LLC v. Forsythe Cosmetic Group, Ltd., 799 F.Supp.2d 558, 581 (M.D. N.C. 2011) (" It is hard for Forsythe to contend it will suffer any appreciable harm if it is prohibited from marketing a product it contends it no longer intends to sell."). See also Thomas J. McCarthy, McCarthy on Trademarks and Unfair Competition § 30:11 (4th ed.) (" A classic response to a defendant who argues that it has ceased the actions that plaintiff seeks to enjoin is: 'If you have irreversibly stopped those acts, then how can you be harmed by an injunction to not do what you say you will promise not to do again?'"). Thus, the balance of hardships favors issuance of an injunction.
D. Public Interest
Turning to the final factor, " the public has an interest in not being deceived--in being assured that the mark it associates with a product is not attached to goods of unknown origin and quality." NYC Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d at 344 (citations omitted). Plaintiff alleges that there is and will be significant customer confusion regarding the source of services purchased at Defendants' market. (Compl. ¶ ¶ 57-59.) As stated above, it has been determined that there is a probability of customer confusion, and in furtherance of limiting this, an injunction would be in the public's best interest.
The aforementioned factors lead to the conclusion Plaintiff should be granted a permanent injunction. The injunction should, in substance, incorporate the language suggested by Plaintiff in paragraph D of its proposed judgment. (Dkt. No. 15-1.) Additionally, the terms of the injunction should require Defendants to file a compliance report under oath within 30 days of issuance of an injunction. See Cheesecake Factory Assets Co. LLC v. Philadelphia Cheese Steak Factory Inc., No. 05-CV-3243 (NGG)(RML), 2008 WL 2510601, at *2 (June 20, 2008) (ordering a compliance report within thirty days).
V. DELIVERY AND DESTRUCTION OF INFRINGING MATERIALS
Plaintiff proposes that Defendants be required to deliver up and destroy all material in their possession relating to the infringing mark. (Dkt. No. 15-1 ¶ E.) " Section 36 of the Lanham Act permits courts to order the delivery and destruction of infringing articles upon a violation of 15 U.S.C. § 1125(a)." S & S Brands, Inc. v. Seaford Stop & Shop Inc., No. 13-CV-5383 (JFB) (WDW), 2014 WL 3871396, at *4 (E.D.N.Y. Aug. 5, 2014) (citation omitted). Such a decision is within the court's sound discretion. See id. (citations omitted).
" Where a permanent injunction against any further infringement is ordered, courts are sometimes reluctant to take the additional step of ordering existing infringing merchandise destroyed." Hilton v. Int'l Perfume Palace, Inc., No. 12-CV-5074 (JFB) (GRB), 2013 WL 5676582, at *14 (E.D.N.Y. Oct. 17, 2013) (citations omitted). However, on default judgment, the court cannot adequately determine the extent to which destruction may be necessary, or that the defendant will comply with the injunction. See S& S Brands, Inc., 2014 WL 3871396 at *4 (recommending the destruction of infringing articles where the defendant defaulted). Here, without the ability to assess whether Defendants will comply with the injunction, destruction of the infringing articles is appropriate. However, the Court should order only defendant Balady Wa Baladak to deliver up the infringing materials, as Elhindi's representations that she no longer owns the store casts doubt on her ability to comply with such an order. Additionally, since the proposed judgment does not specify to whom or where this delivery shall be made, Plaintiff should be required to provide these details in a revised proposed order.
Based on the forgoing, I respectfully recommend that the Court grant Plaintiff default judgment on liability and enter a permanent injunction against Defendants. Plaintiff should be required to submit a revised proposed judgment and permanent injunction(s) consistent with the recommendations made herein within fourteen days of the Court's order on this Report.
Should the Court adopt this Report and Recommendation, I further recommend that the Court recommit this matter to me for consideration of Plaintiff's request for post-judgment discovery and inquest.
Plaintiff is directed to serve a copy of this Report on Defendants and to file proof of service of same within 5 business days. Any objections to this Report and Recommendation must be filed with the Clerk of the Court and the Honorable Sterling Johnson, Jr. within fourteen days of receipt hereof. Failure to file timely objections waives the right to appeal the District Court's Order. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72; Small v. Sec'y of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).