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Diageo North America, Inc. v. W.J. Deutsch & Sons Ltd.

United States District Court, S.D. New York

January 23, 2018

DIAGEO NORTH AMERICA, INC., Plaintiff/ Counterclaim-Defendant
v.
W.J. DEUTSCH & SONS LTD. d/b/a DEUTSCH FAMILY WINE & SPIRITS, and BARDSTOWN BARREL SELECTIONS LLC, Defendants/ Counterclaim-Plaintiffs.

          OPINION & ORDER

          LOUIS L. STANTON U.S.D.J.

         Diageo North America, Inc. ("Diageo") moves, pursuant to Federal Rule of Civil Procedure 12(b)(6), for dismissal of the second, third, and fourth counterclaims pleaded by Deutsch Family Wine & Spirits, and Bardstown Barrel Selections LLC (collectively, "Deutsch").

         For the following reasons, the motions are denied.

         BACKGROUND

         The plaintiff/counterclaim-defendant is Diageo, the owner of the Bulleit brand family of whiskeys. Diageo has registered the trade dress of Bulleit bottles, Reg. No. 3, 075, 812. The defendant/counterclaim-plaintiff is Deutsch, a direct competitor of Diageo and owner of the Redemption brand family of whiskeys.

         On June 6, 2017, Diageo filed its first complaint against Deutsch, alleging trademark and trade dress infringement, unfair competition, and trademark dilution by Deutsch's Redemption bottle and label design. The complaint claims that "the Bulleit Design Mark and Trade Dress are inherently distinctive and nonfunctional, and have come to be associated exclusively with Diageo and identifying the source of Diageo's products." (Compl. ¶ 14). It includes a side-by-side picture of a Redemption bottle and a Bulleit bottle, to illustrate Diageo's claim that the overall appearance of the Redemption bottles is strikingly similar to the Bulleit bottles. (Id. ¶ 27).

         (Image Omitted)

         Specifically, Diageo alleges:

Defendants' revised product packaging incorporates the distinctive, non-functional elements of the Bulleit Design Mark and Trade Dress, including: (a) clear canteen-shaped glass bottle with rounded shoulders; (b) embossed brand name above the label; (c) arched text in the top line of the embossed brand name; (d) convex text divider between components of the embossed brand name (e.g. "REDEMPTION" separated from "WHISKEY REVIVAL"); (e) arrow-shaped text divider on the label; (f) border of parallel lines on the label; and (g) cork bottle cap with black top.

(Id. ¶ 26) .

         Deutsch filed an answer and counterclaims. (Doc. No. 19). Diageo moved to dismiss Deutsch's counterclaims. (Doc. No. 27). Deutsch then filed an amended answer and counterclaims, alleging four counterclaims seeking: (i) declaratory judgment of non-infringement and invalidity, (ii) cancellation of Diageo's registration on the ground that its bottle shape is unprotectable as being functional, (iii) cancellation of the same registration on the ground it had been abandoned, and (iv) its cancellation on the ground of fraud. (Doc. No. 34). Diageo moved again to dismiss the second, third, and fourth counterclaims.[1] (Doc. No. 35). Diageo's motions to dismiss are the motions at issue here.

         DISCUSSION

         The Trademark Act sets forth the grounds for cancellation of an otherwise incontestable trademark: "At any time if the registered mark becomes the generic name for the goods or services, or a portion thereof, for which it is registered, or is functional, or has been abandoned, or its registration was obtained fraudulently." 15 U.S.C. § 1064(3). These challenges are equally applicable to each of the original and amended set of counterclaims, and the following analysis applies equally to both.

         A product's trade dress must be assessed under what has been called the anti-dissection rule, which means it must be appraised "as a whole, not from its elements separated and considered in detail." Estate of P.P. Beckwith, Inc. Comm'r of Patents, 252 U.S. 538, 545-46 (1920). The focus must be on the combination of the product's elements, not "dissected" one by one. See Jeffrey Milstein, Inc. v. Greger, Lawlor, Roth, Inc., 58 F.3d 27, 32 (2d Cir. 1995) ("Although each element of a trade dress individually might not be inherently distinctive, it is the combination of elements that should be the focus of the distinctiveness inquiry.").

         Functionality

         A claimed trade dress is "essential" if it is "dictated by the functions to be performed by the article." ChristianLouboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc., 696 F.3d 206, 219 (2d Cir. 2012) (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n.10 (1982)). A feature which affects the cost or quality by permitting "the article to be manufactured at a lower cost" or constituting "an improvement in the operation of the goods" is ...


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