Opinion
96 Civ. 9721 (PKL) (THK), 98 Civ. 0123 (PKL) (THK)
September 3, 2002
Theodore C. Max, Esq., David E. Jacoby, Esq., PHILLIPS, NIZER, BENJAMIN, KRIM BALLON LLP, Attorneys for Plaintiff Gianni Versace, S.p.A.
Bryan J. Holzberg, Esq., Attorney for Defendant Alfredo Versace
OPINION AND ORDER
Plaintiff Gianni Versace, S.p.A. ("Gianni Versace") seeks an order (1) holding defendant Alfredo Versace in further civil contempt for violating a preliminary injunction entered by Honorable Sidney H. Stein, United States District Judge, in No. 98 Civ. 0123 (SHS); and (2) modifying the existing preliminary injunction to bar Alfredo Versace's use of the name "Versace" in connection with the licensing, manufacture, offering for sale, sale, distribution or promotion of goods or services. For the reasons described below, the Court grants both Gianni Versace's motion to hold Alfredo Versace in further civil contempt for violation of the preliminary injunction, and Gianni Versace's motion to modify the preliminary injunction.
BACKGROUND
The facts of this case have been explained in greater detail in a series of decisions, familiarity with which is assumed. See A.V. by Versace. Inc. v. Gianni Versace. S.p.A., 191 F. Supp.2d 404, 404-05 (S.D.N.Y. 2002) (Leisure, J.); A.V. by Versace. Inc. v. Gianni Versace. S.p.A. 126 F. Supp.2d 328 (S.D.N.Y. 2001) (Leisure, J.); A.V. by Versace, Inc. v. Gianni Versace. S.p.A., No. 96 Civ. 9721, 1998 WL 832692, at *1 (S.D.N.Y. Dec. 1, 1998) (Leisure, J.).
Gianni Versace is a world-famous design house founded in the 1970's by the late Italian designer, Mr. Gianni Versace. Gianni Versace owns a number of famous trademarks incorporating the name "Versace," as well as its signature "Medusa" trademarks. Alfredo Versace, an Italian citizen and United States resident, has been accused of marketing clothing and other items worldwide through the use of various marks confusingly similar to trademarks registered by Gianni Versace in the United States.
The parties filed separate lawsuits in December 1996 and January 1998, filed as No. 96 Civ. 9721 and No. 98 Civ. 0123, respectively. In the first action, Gianni Versace claimed Alfredo Versace had licensed infringing trademarks to A.V. by Versace, Inc., for shoes and other products, beginning in 1995 and 1996. In the second filed action, Gianni Versace brought claims against Alfredo Versace and Foldom International (U.S.A.), Ltd., for their alleged efforts, beginning in 1997, to license infringing trademarks worldwide. On December 1, 1998, this Court consolidated the two actions. See A.V., No. 96 Civ. 9721, 1998 WL 832692, at *1-3 (S.D.N.Y. Dec. 1, 1998).
On March 6, 2000, this Court found Alfredo Versace in civil contempt for violating the preliminary injunction. See A.V. by Versace, Inc. v. Gianni Versace. S.p.A., 87 F. Supp.2d 281, 294-95 (S.D.N.Y. 2000) (Leisure, J.). Specifically, this Court held that Alfredo violated the preliminary injunction by using offshore Internet sites to advertise and distribute his products in the United States. See id. at 295. As a result of this violation, the Court ordered Alfredo Versace to pay Gianni Versace the sum of one-third of its costs and attorneys' fees incurred in making the contempt motion. See id. at 296. After reviewing Gianni Versace's affidavits and time records for its motion, the Court ordered that Alfredo remit $31,031.39 to Gianni Versace as a result of his contemptuous conduct. See Gianni Versace v. Alfredo Versace, No. 96 Civ. 9721, 2000 WL 739569, at *3 (S.D.N.Y June 8, 2000) (Leisure, J.).
In an Opinion and Order and Report and Recommendation dated January 9, 2002, United States Magistrate Judge Theodore H. Katz granted plaintiff Gianni Versace's motion for sanctions against defendant Alfredo Versace for his long-term refusal to obey three discovery orders issued by the Court. As a sanction for his misconduct under Rule 37 of the Federal Rules of Civil Procedure, Magistrate Judge Katz ordered Alfredo Versace to pay Gianni Versace's costs and attorneys' fees incurred in attempting to secure compliance with the discovery orders, and recommended that both Alfredo Versace's Answer in No. 98 Civ. 0123, and his Answer and cross-claim in the related action, No. 96 Civ. 9721, be stricken. On March 21, 2002, this Court adopted Judge Katz's Opinion and Order and Report and Recommendation in its entirety, essentially causing a default for Alfredo Versace in the instant consolidated action. See A.V., 191 F. Supp.2d at 404-05.
All other parties in the instant action had either entered default judgments or settled with Gianni Versace by the time this Court adopted Judge Katz's Opinion and Order and Report and Recommendation striking Alfredo Versace's two Answers in this consolidated action.
The Preliminary Injunction
On February 4, 1998, Judge Sidney H. Stein granted Gianni Versace's request for a preliminary injunction against Alfredo Versace, issuing his decision from the bench. See A.V., 87 F. Supp.2d at 284 (noting that Judge Stein issued his decision from the bench, and then issued the preliminary injunction in writing on February 10, 1998). The preliminary injunction enjoins Alfredo Versace from using or licensing the use of "Alfredo Versace" as well as a list of other specifically enumerated "Infringing Marks" previously used by Alfredo Versace, and enjoins the use any other trademarks confusingly similar to those of Gianni Versace. See Preliminary Injunction, 98 Civ. 0123, February 10, 1998 ("Pl"), ¶¶ 6-8. Although the injunction bars Alfredo Versace from using his name as a trademark, the preliminary injunction allows Alfredo Versace to use his name to identify goods that he has designed by use of the phrase "Designed by Alfredo Versace," as long as the goods so identified prominently display the disclaimer: "not affiliated with or authorized by Gianni Versace S.p.A." ("Disclaimer"). Pl ¶¶ 6-10. The Disclaimer must be printed in the same size as the words "Designed by Alfredo Versace." See Pl ¶¶ 9-10.
The parties filed separate lawsuits in December 1996 and January 1998, respectively, the second of which was assigned to Judge Stein. As previously indicated, the two actions were later consolidated by this Court. See A.V. by Versace, Inc. v. Gianni Versace. S.p.A., No. 96 Civ. 9721, 1998 WL 832692, at *1-3 (S.D.N.Y. Dec. 1, 1998).
The Infringing Marks are defined as "Alfredo Versace," "A.V. by Versace," "AV by Versace," "AV by A. Versace," "AV Versace," "Versace by A.V.," "AV Alfredo Versace," "A.V. Alfredo Versace," "A. Versace," "A.V. Versace," "Versace," and "A. Versace Jeans." Pl ¶ 6.
Gianni Versace's trademarks include "Gianni Versace," "Versace," "V2 by Versace," "Versace Gianni Versace," "Versace Red Jeans," and "Versace Blue Jeans." Pl ¶ 2.
The preliminary injunction also prohibits Alfredo Versace from delegating or licensing his rights to a middleman. However, manufacturers and distributors may use the name "Alfredo Versace" in accordance with the preliminary injunction, provided that those manufacturers and distributors first agree in writing to be bound by the preliminary injunction. See Pl ¶ 13. Alfredo Versace was required to withdraw any pending trademark registrations consisting of in part or in whole, any of the Infringing Marks. See Pl ¶ 12. In addition, the preliminary injunction required Alfredo Versace to provide a copy of the preliminary injunction to all past and present licensees and distributors. See Pl ¶ 15.
On January 4, 2001, this Court clarified that the preliminary injunction applies extraterritorially. See A.V., 126 F. Supp.2d at 341.
DISCUSSION
I. Motion for Civil Contempt
Gianni Versace contends that despite the preliminary injunction and this Court's previous contempt citation, Alfredo Versace continues to direct infringing activity, both in the United States and abroad, from his base of operations in New York. See Plaintiffs Memorandum of Law in Support of Motion to Hold Alfredo Versace in Further Civil Contempt and to Amend the Preliminary Injunction ("Pl's Mot."), at 1-6. Gianni Versace's allegations fall into four general categories: (1) that Alfredo Versace is involved in the sale of watches, jeans and handbags that use "Alfredo Versace" in a manner other than to identify himself as the designer of products designed by him, and without the Disclaimer; (2) that Alfredo Versace failed to take actions required by this Court's January 4, 2001 Opinion and Order, and that as a result, at least a dozen websites continued to display use of the "Alfredo Versace" trademark to sell goods, in violation of the preliminary injunction, as recently as January and March of 2001; (3) that Alfredo Versace has started a new enterprise with the company L'Abbligiamento Paolo Vista Ltd. ("L'Abbligiamento") involving goods and advertisements employing the mark "Designed by Alfredo Versace" and "Alfredo Versace" that do not bear the Disclaimer; and (4) that Alfredo Versace has attempted to promote sales by claiming both that he is the late Gianni Versace's first cousin, and that he has litigated and won the right to use his name as a trademark. See id. at 1-7.
Gianni Versace has filed a separate lawsuit, No. 01 Civ. 9645 (PKL), in relation to these allegations. In that lawsuit, Gianni Versace brought action against Alfredo Versace, L'Abbligiamento and Esrim de Sheva Corp. Since the filing of that suit, which is not the subject of the instant motion, Gianni Versace has settled with Esrim ae Sheva Corp. See Stipulation and Order, 01 Civ. 9645, May 28, 2002.
Specifically, Gianni Versace alleges that Alfredo Versace entered into a watch license that includes the United States and uses the trademark "Designed by Alfredo Versace," without any sort of disclaimer, and that these watches are being sold in the United States with advertising that identifies the watches with Gianni Versace. See Affidavit of Theodore C. Max, Esq., sworn to April 13, 2001 ("Max Aff."), ¶¶ 34-36; Affidavit of Eric Berger, sworn to on April 13, 2001 ("Berger Aff."), ¶¶ 28-33; Affidavit of Charles A. LeGrand, Esq., sworn to on April 11, 2001 ("LeGrand Aff."), ¶¶ 6-14. Gianni Versace also asserts that Alfredo Versace did not require the licensee to abide by the preliminary injunction, in violation of paragraph 13 of the preliminary injunction. See Max Aff. ¶¶ 34-36. Gianni Versace claims that the watches are being sold both in a catalogue, and on the website www.GadgetUniverse.com. See Berger Aff. ¶¶ 28-31. Gianni Versace submits a print-out from the GadgetUniverse website from December 17, 2000, displaying a picture of an "Alfredo Versace" ladies' watch offered for sale. See LeGrand Aff. ¶ 9 Exh. D. The text next to the picture reads, "[f]rom Alfredo Versace of the legendary Italian designing family, come two watches that bear the Versace name and its world-renown [sic] sense of styling." LeGrand Aff. ¶ 9 Exh. D.
In December of 2000, one of Gianni Versace's attorneys successfully purchased a "Designed by Alfredo Versace" watch by means of this website. See LeGrand Aff. ¶¶ 6-14. The watch was engraved with "Designed by Alfredo Versace" in three places, and did not include any disclaimer. See id. As further proof of the sale of "Designed by Alfredo Versace" watches that do not bear the Disclaimer, Gianni Versace submits a copy of an agreement between Alfredo Versace Boutique and Venus de Chine Marketing Ltd. ("Venus de Chine"), a Hong Kong company, for the sale and marketing of watches. The agreement is to commence on March 10, 2000, and appears to grant a worldwide license excluding Korea to sell. Designed by Alfredo Versace" watches. See Max Aff. ¶¶ 34-36 Exh. K. The agreement makes no mention of any form of a disclaimer.
Next, Gianni Versace complains that Alfredo Versace is selling jeans with the trademark "AV designed by Alfredo Versace," without the Disclaimer and that these jeans are available via the Internet. See Max Aff. ¶¶ 18-29; LeGrand Aff. ¶¶ 3-5. Gianni Versace asserts that a company called "UFO Young Fashions" based in Germany is selling the jeans, and that the jeans are available at the website www.ufo.here.de. See Max Aff. ¶¶ 18-29; LeGrand Aff. ¶¶ 3-5. In March of 2000, one of Gianni Versace's attorneys successfully purchased a pair of the "AV designed by Alfredo Versace" jeans by means of this website. See LeGrand Aff. ¶¶ 3-5. The jeans did not bear the Disclaimer. See id.
Gianni Versace also alleges that Alfredo Versace is involved in the sale of "Designed by Alfredo Versace" handbags at a store called "Details" located in Nassau County, within some 30 miles of this Court, and that these bags do not bear the Disclaimer. See Affidavit of Tatiana Anderson, sworn to on April 11, 2001 ("Anderson Aff."), ¶¶ 1-6. A secretary working for Gianni Versace's attorneys purchased an orange handbag bearing "Designed by Alfredo Versace" without any disclaimer. See id.
Moreover, Gianni Versace asserts that internet searches in January and March 2001 revealed that over a dozen websites accessible from the United States displayed uses of the "Alfredo Versace" trademark for the sale of various items, in violation of both the preliminary injunction and this Court's March 6, 2000 decision. See Max Aff. ¶¶ 13-16; Berger Aff. ¶ 31; LeGrand Aff. ¶¶ 7-9. Gianni Versace has submitted printouts from these websites from January and March of 2001, as well as May 15, 16 and 20 of 2001. See Max Aff. ¶¶ 13-17 Exhs. D-E; Reply Affidavit of Theodore C. Max, Esq., sworn to on May 21, 2001 ("Max Reply Aff."), ¶ 6 Exh. A. These websites offered "Alfredo Versace" t-shirts, jeans, watches, jeans, and handkerchiefs, and did not display any disclaimer disassociating the products with those of Gianni Versace. See Max Aff. ¶¶ 13-17 Exhs. D-E; Pl's Reply ¶ 6 Exh. A.
The websites displaying such goods were: www.pujaonthnet.com, www.bengalonthenet.com, www.searchindia.com, www.gadgetuniverse.com, www.sj-apparel.co.kr/english/index.htm, www3.wind.ne.jp/mt-house/versace.htm, http://bellnet.de/suchen/wirtschaft/kleidung/jeans.htm, www.letscompare.de/kleid.htm, www.justbeman.de/men/trend/mode/hose 10.html, www.watch.co.kr/skymart/0midd011-1.htm, and http://my.netian.com/~eexit/handkerchief.htm. See Max. Aff. ¶¶ 13-17 Exhs. D-E.
Gianni Versace further claims that Alfredo Versace has embarked on a new clothing venture with Paolo Vista, Paolo Vista Jr., and L'Abbligiamento to sell men's clothing and accessories using the "Designed by Alfredo Versace" mark, sometimes shortened to "Alfredo Versace" or just "Versace," without the Disclaimer. See Berger Aff. ¶¶ 3-21. As evidence, Gianni Versace offers the affidavit of an investigator working on behalf of Gianni Versace. See Berger Aff. ¶¶ 1-2. The investigator claims that he bought "Designed by Alfredo Versace" goods and that these goods did not bear the Disclaimer. See Berger Aff. ¶¶ 3-2 1. Gianni Versace also alleges that an agent for L'Abbligiamento boasted to plaintiffs investigator that L'Abbligiamento had sold $800,000 of goods at a major trade show in Las Vegas. See Berger Aff. ¶¶ 7, 10, 14-21. Gianni Versace argues that these sales must have included the "Designed by Alfredo Versace" products. See Pl's Mot. at 5. Indeed, Gianni Versace alleges that L'Abbligiamento is paying Alfredo Versace royalties for sales in the United States. See Berger Aff. ¶ 7; Max Aff. ¶ 37.
Gianni Versace complains that Alfredo Versace has not produced discovery regarding any such royalties, and thus Gianni Versace is not able to further document this charge. See Pl's Mot. at 5.
Gianni Versace claims that L'Abbligiamento is promoting sales of "Designed by Alfredo Versace" goods in the United States by using the "Alfredo Versace" trademark on signs and in price lists. See Berger Aff. ¶¶ 5-13; Agriros Aff. ¶¶ 5-6. Gianni Versace further complains that the "Designed by Alfredo Versace" goods being sold appear identical to other goods being sold by L'Abbligiamento, raising questions as to whether Alfredo Versace actually designed the "Designed by Alfredo Versace" marked goods. See Berger Aff. ¶¶ 13, 18. In addition, Gianni Versace asserts that L'Abbligiamento and Alfredo Versace are creating further confusion by selling the "Designed by Alfredo Versace" goods alongside Gianni Versace apparel. See Berger Aff. ¶¶ 10, 15, 19.
By the terms of the preliminary injunction, Alfredo Versace is only permitted to identify goods as "Designed by Alfredo Versace" if they are in fact designed by him. See PI ¶ 9.
Finally, Gianni Versace asserts that Alfredo Versace continues to attempt to promote sales by falsely claiming that he is the late Gianni Versace's first cousin, and that he has litigated and won the right to use his name. See Affidavit of Onoufrios Danny Agriros, sworn to on January 25, 2001 ("Agriros Aff."), ¶ 4; Berger Aff. ¶ 8.
In response, Alfredo Versace makes two principal arguments. First, Alfredo Versace asserts that he should not be held in contempt because the there was "no clearly unambiguous order" until this Court's January 4, 2001 decision clarifying that the preliminary injunction applies extraterritorially, and thus before then, he was not aware that he could not do business outside the United States using "Alfredo Versace" as a trademark. Defendant's Memorandum of Law in Opposition to Gianni Versace's Motion to Hold Alfredo Versace in Civil Contempt and to Modify the Preliminary Injunction ("Defs Opp."), at 3; see Affidavit of Alfredo Versace, sworn to on May 7, 2001 ("Alfredo Versace Aff."), ¶¶ 7-9. Thus, Alfredo Versace contends that he should not be held in contempt for entering into the Venus de Chine watch license, because at the time he entered into the agreement, he believed in good faith that he could use the "Alfredo Versace" trademark abroad without violating the preliminary injunction. See Alfredo Versace Aff. ¶¶ 7-9.
Alfredo Versace also claims that since the entry of the preliminary injunction, Gianni Versace has copied some of Alfredo Versace's trademarks and symbols. See Alfredo Versace Aff. ¶ 26. The Court does not address this assertion because it does not pertain to the instant action.
Also apparently addressing the Venus de Chine agreement, Alfredo Versace makes an argument that betrays a blatant misunderstanding of the preliminary injunction — Alfredo Versace's attorney asserts that the preliminary injunction does not "explicitly enjoin [Alfredo Versace] from using his business name, Alfredo Versace Boutique." Defs Opp. at 2. Indeed, as Gianni Versace points out, paragraph 12 of the preliminary injunction explicitly enjoins Alfredo Versace from using the business name "Alfredo Versace Boutique." Paragraph 12 of the preliminary injunction states, in pertinent part: "[D]efendants shall not use, register, license . . . or permit or cause or attempt to be used . . . any trademark, trade name, service mark, corporate name, business name, copyright, logo or other symbol or device consisting of, employing or incorporating as part thereof, any of the Infringing Marks. . . ." (emphasis added). Thus, because the business name "Alfredo Versace Boutique," incorporates one of the Infringing Marks, i.e., "Alfredo Versace," the business name "Alfredo Versace Boutique" is a clear and explicit violation of the preliminary injunction. See Pl ¶¶ 6-8, 12.
Alfredo Versace's second principal argument essentially is that he is not responsible for any of the alleged violations of the preliminary injunction, and that he cannot control the parties that are behind the violations. Specifically, Alfredo Versace claims that he has not authorized any sales of goods bearing his name on the Internet, and that he does not receive any revenue for such sales. See Alfredo Versace Aff ¶¶ 10-13 Exhs. 1-2. He also asserts that he has attempted to shut down the websites that Gianni Versace has complained are selling "Alfredo Versace" goods in violation of the preliminary injunction. See 4 As proof of these efforts, however, Alfredo Versace offers only letters from his attorney sent to Gianni Versace indicating that Alfredo Versace would take action to shut down the offending websites. See Alfredo Versace Aff. ¶¶ 10-13 Exhs. 1-2. Alfredo Versace also submits three letters, apparently sent after Gianni Versace filed the instant motion for contempt, one sent to a person in India, another sent to Karmn Deerburg in Germany, and a third sent to GadgetUniverse, each letter requesting that the respective parties cease any actions in violation of the preliminary injunction. See Alfredo Versace Affidavit in Reply, sworn to on June 12, 2001 ("Alfredo Versace Surreply Aff."), ¶¶ 5-6 Exhs. 2A-4A. The letter sent to India references a conversation of May 26, 2001 and is otherwise undated; the other two letters are undated. See Alfredo Versace Surreply Aff. ¶¶ 5-6 Exhs. 2A-4A.
"The Court notes that all three letters were sent on "Alfredo Versace Boutique" letterhead. As explained in note 10, use of "Alfredo Versace Boutique" as a business name violates the preliminary injunction.
Similarly, Alfredo Versace acknowledges that he was involved in the design of watches with Venus de Chine, but asserts that the licensing agreement only covered territories where Alfredo Versace held the "Alfredo Versace" trademark. See Alfredo Versace Aff. ¶¶ 20-22. The Venus de Chine agreement, however, states that the territory covered by the Agreement includes "anywhere in the world (except Korea)." Max Aff. 34-36 Exh. K ¶ 1.1; see Max Reply Aff. ¶ 8. Further, Alfredo Versace claims that Venus de Chine was directed to follow the requirements of the preliminary injunction, and alleges that he directed that all watches include the Disclaimer. See Alfredo Versace Aff. ¶ 22. Alfredo Versace states that he believes only sample watches were created, that no watches were made for distribution, and that all of the "Gadget" watches were recalled. See Alfredo Versace Aff. ¶ 22.
With regard to handbags, Alfredo Versace claims that a limited number of the handbags complained of by Gianni Versace were manufactured in 2000, but that these handbags included the Disclaimer. See id. ¶ 23.
Alfredo Versace acknowledges that "Alfredo Versace" suits and accessories were sold by a representative for L'Abbligiamento to a private investigator working for Gianni Versace, but asserts that these items were samples. See Affidavit of Paolo Vista Alfredo, sworn to on May 7, 2001 ("Paolo Vista Aff."), ¶¶ 5-8. Versace further claims that the representative for L'Abbligiamento told the private investigator that the goods were only samples, and that the Disclaimer would be added to any goods sold to the public. See Paolo Vista Aff. ¶¶ 5-8; Affidavit of Paolo Vista, Jr., sworn to on May 7, 2001 ("Paolo Vista, Jr., Aff."), ¶¶ 8-15. Alfredo Versace argues that the evidence offered by the private investigator should be rejected because the use of a private investigator represents an unacceptable invasion of Alfredo Versace's privacy. See Alfredo Versace Aff. ¶¶ 16-19. Further, Paolo Vista, Jr., the representative for L'Abbligiamento who Gianni Versace's private investigator spoke to regarding the "Alfredo Versace" items, denies making any comments regarding L'Abbligiamento's sales, and denies making any comments regarding the relationship between L'Abbligiamento and Alfredo Versace. See Paolo Vista, Jr., Aff. ¶¶ 4-5.
Paolo Vista, Jr., also denies making any comment that Alfredo Versace is Gianni Versace's first cousin, and denies claiming that Alfredo Versace had litigated and won the right to use his name. See Paolo Vista, Jr., Aff. ¶ 7. Paolo Vista, Jr., states that he only has commented that Alfredo Versace claims that he was forced to spend "millions of dollars" in defending lawsuits against him and that Gianni Versace's family did not get along with Alfredo Versace. See id.
A. Standard For a Finding of Civil Contempt
Although it is axiomatic that "courts have inherent power to enforce compliance with their lawful orders through civil contempt," a district court's authority to hold a party in contempt is significantly circumscribed. Shillitani v. United States, 384 U.S. 364, 370 (1966). Indeed, "[t]he failure to meet the strict requirements of an order does not necessarily subject a party to a holding of contempt." Dunn v. N.Y.S.tate Dep't of Labor, 47 F.3d 485, 490 (2d Cir. 1995). Thus, "a contempt holding will fail unless the order violated by the contemnor is "clear and unambiguous,' the proof of non-compliance is `clear and convincing,' and the contemnor was not reasonably diligent in attempting to comply." United States v. Local 1804-1. Int'l Longshoremen's Ass'n, 44 F.3d 1091, 1096 (2d Cir. 1995) (quoting EEOC v. Local 580. Int'l Ass'n of Bridge. Structural and Ornamental Ironworkers, 925 F.2d 588, 594 (2d Cir. 1991)).
Alfredo Versace claims that to be held in contempt, Gianni Versace must demonstrate that Alfredo Versace was "acting in concert with violators who arguably had actual notice of that Order." Defs Opp. at 3. Alfredo Versace offers no caselaw to support this contention. See id. Indeed, Alfredo Versace appears to conflate the standard for civil contempt with the standard for aiding and abetting civil contempt. A party that is not bound by a court order may be found guilty of civil contempt if the court concludes that: (1) a party bound by the order committed civil contempt and (2) that the party not bound assisted the enjoined party. See Levin v. Tiber Holding Corp., 277 F.3d 243, 250 (2d Cir. 2002); Alemite Mfg. Corp. v. Staff, 42 F.2d 832, 832-33 (2d Cir. 1930) (L. Hand, J.) ("[N]o court can make a decree which will bind any one but a party. . . . Thus, the only occasion when a person not a party may be punished, is when he has helped to bring about . . . what [the decree] has power to forbid. . . .").
In the instant action, however, Gianni Versace has accused Alfredo Versace, a party enjoined by the preliminary injunction, of civil contempt. Further, Gianni Versace has not accused any parties who are not bound by the preliminary injunction of contempt. Thus the standard for aiding and abetting civil contempt is not relevant — in deciding the instant motion. See Levin, 227 F.3d at 250; Alemite Mfg., 42 F.2d at 832-33.
Only if these three conditions are met may the Court impose contempt sanctions against a party. Even then, constitutional considerations limit the Court's ability to award sanctions that may be deemed punitive in nature. "Judicial sanctions in civil contempt proceedings may, in a proper case, be employed for either or both of two purposes: to coerce the defendant into compliance with the court's order, and to compensate the complainant for losses sustained." United States v. United Mine Workers, 330 U.S. 258, 303-04 (1947). Accordingly, an award may not be arbitrary, and should be reasonably related to the facts. See Perfect Fit Indus. v. Acme Quilting Co., 673 F.2d 53, 57 (2d Cir. 1982).
In addition, a court's power to impose coercive civil contempt sanctions is limited by a party's ability to comply with the court's order. See Badgley v. Santacroce, 800 F.2d 33, 36-37 (2d Cir. 1986). Thus, a party may defend against a finding of contempt by showing that his compliance is "factually impossible." Id. The classic example of the factual impossibility defense arises when a court orders a witness to produce a document that is not in his control. In such a situation, compliance is literally impossible, and any attempt at coercion will be ineffective; therefore, the contempt should be excused. See id.; see also Huber v. Marine Midland Bank, 51 F.3d 5, 10 (2d Cir. 1995) (holding that the alleged contemnor bears the burden of producing evidence of his inability to comply).
A party's objectionable conduct need not be willful, however, for the party to be found in contempt. Rather, "`sanctions for civil contempt can be imposed without a finding of willfulness.'" Manhattan Indus. Inc. v. Sweater Bee by Banif. Ltd., 885 F.2d 1, 5 (2d Cir. 1989) (quoting Canterbury Belts Ltd. v. Lane Walker Rudkin, Ltd., 869 F.2d 34, 39 (2d Cir. 1989)). "The fact that the prohibited act was done inadvertently or in good faith . . . does not preclude a citation for civil contempt, for the sanction is remedial in nature." Vuitton et Fils S.A. v. Carousel Handbags, 592 F.2d 126, 128 n. 2 (2d Cir. 1979).
B. Evidence of Contempt
The Court finds that although there is insufficient evidence to find Alfredo Versace in contempt for claiming that he is the late Gianni Versace's cousin and that he has litigated and won the right to use the Versace name, the record adduced supports the imposition of contempt sanctions against Alfredo Versace for his involvement in the sale of watches, jeans and handbags, his internet activity, and his enterprise with L'Abbligiamento. For the reasons that follow, therefore, the Court finds Alfredo Versace in civil contempt.
1. Sale of watches, jeans and handbags
The Court finds that Alfredo Versace has been involved in the sale of watches, jeans and handbags in violation of the preliminary injunction. Alfredo Versace admits that he entered into a licensing agreement with Venus de Chine to sell watches using his name, and that the plain terms of the agreement indicate that it applies to sales any where in the world, except Korea. See supra, Section 1(A). Because the agreement thus included the sale of "Designed by Alfredo Versace" watches in the United States without any mention of the Disclaimer, this business venture violated the preliminary injunction even before the Court clarified, on January 4. 2001; that the preliminary injunction applies extraterritorially. See Pl ¶¶ 6-9; A.V., 126 F. Supp.2d at 341. Further, the "Designed by Alfredo Versace" watch Gianni Versace's attorneys were able to purchase at the GadgetUniverse website violates the preliminary injunction, because it does not bear the Disclaimer. See supra, Section 1(A).
Alfredo Versace has also been involved in the sale of jeans in violation of the preliminary injunction. Gianni Versace's attorneys were able to purchase a pair of jeans via the Internet that are marked "AV designed by Alfredo Versace" and failed to include the Disclaimer, in violation of paragraph 10 of the preliminary injunction. Finally, the record reflects that Alfredo Versace has been involved in the sale of "Designed by Alfredo Versace" handbags that failed to include the required Disclaimer. See supra, Section 1(A).
Alfredo Versace's involvement in the sale of watches, jeans and handbags meet the three part test for civil contempt because: (1) the preliminary injunction unambiguously prohibits the use of Infringing Marks and requires the Disclaimer whenever a good is indicated as "Designed by Alfredo Versace"; (2) there is clear and convincing evidence that Alfredo Versace violated the preliminary injunction; and (3) Alfredo Versace has not been reasonably diligent in complying with the preliminary injunction with respect to watches, jeans and handbags. See Local 1804-1. Int'l Longshoremen's Ass'n, 44 F.3d at 1096.
2. Internet Activity
The Court finds that Alfredo Versace has marketed various products featuring the Infringing Marks on the world wide web, and that he has failed to take the steps mandated by this Court's March 6, 2000 Opinion and Order to stop these activities within 30 days of that decision. See supra Section I; A.V., 87 F. Supp.2d at 296. The Court rejects Alfredo Versace's apparent "factual impossibility" defense that he is helpless to stop the use of the Infringing Marks on the Internet; Alfredo Versace has offered no credible evidence that these websites are beyond his control. See Huber, 51 F.3d at 10 (placing the burden of demonstrating factual impossibility on the contemnor). Even if Alfredo Versace has not authorized the use of the these Infringing Marks, on the record adduced, there is likewise no credible evidence that Alfredo Versace has attempted to stop the use of the Infringing Marks as the Court ordered in its March 6, 2000 Opinion and Order. See A.V., 87 F. Supp.2d at 296. Indeed, Alfredo Versace never filed an affidavit detailing his efforts to purge the infringing websites, as mandated by the Court's March 6, 2000 Opinion and Order. See id. Further, Alfredo Versace offers no evidence that prior to the filing of the instant action that he actually sent letters to the parties controlling the websites to request that they stop their infringing activities. See supra, Section 1(A). Finally, Alfredo Versace's contumacious internet activity appears to continue to the present day.
See. e.g., www3.wind.ne.jp/mt-house/versace.htm (last visited Aug. 23, 2002), http://bellnet.de/suchen/wirtschaft/kleidung/jeans.htm (last visited Aug. 23, 2002), www.watch.co.kr/skymart10midd011-1.htm (last visited Aug. 23, 2002), and http://my.netian.com/-.-eexit./handkerchief.htm (last visited Aug. 23, 2002). In addition, a simple search with the popular search engine Google reveals that while several of the websites complained about by Gianni Versace no longer directly display "Alfredo Versace" goods, other websites, apparently linked to the original websites complained of, carry such items. See. e.g., http://www.topixonline.com/cgi-bin/sgsc0101.exeSRCCODE=WECJ0507FNM=04GEN0 TW239AID=1508663PID=978793 (displaying an "Alfredo Versace" men's watch being sold by "GadgetUniverse") (last visited Aug. 23 2002); http://www.pujaonthenet.com/php/display.php?sec_id=10sub_sec=4 (displaying "Alfredo Versace" t-shirts being sold by "Puja on the Net") (last visited Aug. 23, 2002).
Thus, the Court finds that the three part test for a finding of civil contempt is satisfied, because: (1) the Court's March 6, 2000 Opinion and Order and the preliminary injunction were clear as to Internet activity that involved the Infringing Marks; (2) the evidence of noncompliance is clear and convincing; and (3) Alfredo Versace has made little, if any effort, to comply with either the March 6, 2000 Opinion and Order or the preliminary injunction as they apply to internet activity. See Local 1804-1, Int'l Longshoremen's Ass'n, 44 F.3d at 1096.
3. Enterprise with L'Abbligiamento
The Court finds that Alfredo Versace has been involved in a clothing venture with L'Abbligiamento using Infringing Marks and failing to use the Disclaimer. The record shows that this enterprise includes signs, catalogues and clothing that violate the preliminary injunction. See supra, Section 1(A). Alfredo Versace does not deny that goods violating the preliminary injunction were sold by L'Abbligiamento to a private investigator, but claims that the goods were samples, and that the Disclaimer would be added to those garments. Regardless of whether these goods were samples, all parties agree they violated the preliminary injunction at the time of sale. See id. Merely calling the goods "samples" does not rectify this violation.
The Court rejects Alfredo Versace's complaint that the use of a private investigator has caused an unfair invasion of his privacy. See supra, Section I. Gianni Versace's investigator used a false name and approached L'Abbligiamento posing as a buyer in the fashion industry. See Berger Aff. ¶¶ 1-27. The investigator's actions conformed with those of a business person in the fashion industry, and Alfredo Versace makes no allegation that the private investigator gained access to any non-public part of L'Abbligiamento. See id. Further, courts in the Southern District of New York have frequently admitted evidence, including secretly recorded conversations, gathered by investigators posing as consumers in trademark disputes See e.g., Gidatex, S.r.L. v. Campaniello Imports, Ltd., 82 F. Supp.2d 119, 123-24 (S.D.N.Y. 1999) (permitting introduction of secretly recorded conversations between private investigators and salespeople for the defendant in a trademark infringement trial); Nikon, Inc. v. Won Corp., 803 F. Supp. 910, 921-922 (S.D.N.Y. 1992), affd, 987 F.2d 91, 95-96 (2d Cir. 1993) (allowing introduction of investigators' interviews with non-party sales clerks to demonstrate "passing off' and actual confusion among consumers between Ikon and Nikon cameras); see also Louis Vuitton S.A. v. Spencer Handbags Corp., 597 F. Supp. 1186, 1188 (E.D.N.Y. 1984), affd, 765 F.2d 966 (2d Cir. 1985) (affirming permanent injunction issued after considering secretly recorded videotape of defendants' principals meeting with undercover investigator hired by plaintiff to discuss counterfeiting scheme).
Thus, the Court finds that Alfredo Versace's enterprise with L'Abbligiamento meets the three part test for a finding of civil contempt because: (1) the preliminary injunction requires that goods bearing "Designed by Alfredo Versace" also bear the Disclaimer; (2) the evidence of noncompliance is clear and convincing; and (3) Alfredo Versace has made little if any effort to comply with the preliminary injunction in this respect. See Local 1804-1, Int'l Longshoremen's Ass'n, 44 F.3d at 1096.
4. Allegations that Alfredo Versace litigated and won the right to use the Versace name
Although the party's submissions make it clear that Alfredo Versace believes he is Gianni Versace's first cousin, the record is not clear whether Alfredo Versace or anyone else has claimed to the public that Alfredo Versace is Gianni Versace's first cousin, or that Alfredo Versace has litigated and won the right to use his name. See Alfredo Versace Surreply Aff. ¶ 8 Exh. 5A; see supra, Section 1(A). Therefore, the Court does not hold Alfredo Versace in contempt on these grounds.
C. Remedy
In a civil contempt proceeding, the Court has broad discretion to fashion an appropriate coercive remedy, taking into account the nature of the harm and the probable effect of alternative sanctions. See Berger v. Heckler, 771 F.2d 1556, 1568 (2d Cir. 1985); N.A. Sales Co. v. Chapman Indus., 736 F.2d 854, 857 (2d Cir. 1984). The sanction imposed on a civil contemnor should be calculated to advance either, or both, of two goals: to coerce future compliance with the court's order, or to compensate the complainant for losses stemming from the contemnor's past noncompliance. See United Mine Workers, 330 U.S. at 303-04 (holding that a court may either order sanctions to coerce compliance or to "compensate the complainant for losses sustained"); Perfect Fit Indus., 673 F.2d at 56-57; Vuitton et Fils S.A., 592 F.2d at 130. In determining whether sanctions are appropriate, the Second Circuit has instructed district courts to weigh "(1) the character and magnitude of the harm threatened by the continued contumacy; (2) the probable effectiveness of any suggested sanction in bringing about compliance; and (3) the contemnor's financial resources and the consequent seriousness of the burden of the sanction upon him." Dole Fresh Fruit Co. v. United Banana Co., 821 F.2d 106, 110 (2d Cir. 1987).
In addition, "[c]ivil contempt proceedings may yield a conditional jail term. . . ." Hutto v. Finney, 437 U.S. 678, 690-91 (1978); Time Warner Cable of New York City v. U.S. Cable T.V., Inc., 920 F. Supp. 321, 328 (E.D.N.Y. 1996). Thus, a district court may imprison a civil contemnor to "compel the contemnor to do what the law made it his duty to do." Penfield Co. of Cal. v. SEC, 330 U.S. 585, 590 (1947).
In the instant action, a severe sanction encompassing both compensatory damages and further monetary penalties if Alfredo Versace does not expeditiously comply with the preliminary injunction will serve to advance both the goals of encouraging compliance with this Court's orders, and compensating Gianni Versace for Alfredo Versace's continued violation of the preliminary injunction. Further, such a sanction is necessary to prevent Alfredo Versace from further infringing upon, and damaging, the world-renowned reputation Gianni Versace has developed. The Court will not impose the sanction of a conditional jail term on Alfredo Versace at this time, although Alfredo Versace should be aware that the Court will consider the efficacy of such a severe sanction if his transgressions continue. See Hutto, 437 U.S. at 690-91.
Therefore, Alfredo Versace is hereby ordered, within thirty days of the date of this Opinion and Order, to take all reasonable steps to ensure that all references on the Internet to "Alfredo Versace" that do not comply with the preliminary injunction, and all references to the Infringing Marks, are removed. Within thirty days, Alfredo Versace shall file an affidavit describing his efforts to delete any infringing references, and noting any references he was unable to remove. See A.V., 87 F. Supp.2d at 296 (ordering Alfredo Versace to disable infringing websites and file an affidavit within thirty days detailing his efforts).
Including, but not limited to, all of the websites complained of by Gianni Versace in the instant motion.
Despite this Court's Order, Alfredo Versace did not file such an affidavit.
The Court awards plaintiffs a compensatory fine equal to any profits made by Alfredo Versace via activities in violation of the preliminary injunction. See Manhattan Indus. v. Sweater Bee by Banff Ltd., 885 F.2d F.2d 1, 6 (2d Cir. 1989) (approving the use of compensatory sanctions based on the defendant's profits under a theory of unjust enrichment); A.V., 87 F. Supp.2d at 296 (same). So that Gianni Versace may properly estimate the profits made by Alfredo Versace via activities in violation of the preliminary injunction, Alfredo Versace is ordered to produce to Gianni Versace and to the Court, within sixty days of this Opinion and Order, a detailed statement of all net profits derived by Alfredo Versace from such licensing and sales throughout the world from February 4, 1998 until the date of this decision. Alfredo Versace shall have an independent certified public accountant prepare this statement.
Further, the Court finds that Alfredo Versace's violations were willful, because Alfredo Versace should have had cause to doubt the legality of his actions, especially in light of this Court's earlier contempt citation for many of the same activities. See A.V., 87 F. Supp.2d at 296; Playboy Enters., Inc. v. Chuckleberry Publ'g. Inc., 939 F. Supp. 1032, 1041, 1045 (S.D.N.Y. 1996). Therefore, Alfredo Versace shall remit to Gianni Versace all of its attorneys' fees and costs for bringing this motion. See New York State Nat. Org. for Women v. Terry, 159 F.3d 86, 96 (2d Cir. 1998) (holding that a finding of willfulness strongly supports granting attorney's fees and costs); Weitzman v. Stein, 98 F.3d 717, 719 (2d Cir. 1996) ("Indeed, to survive review in this court, a district court, having found willful contempt, would need to articulate persuasive grounds for any denial of compensation for the reasonable legal costs of the victim of contempt."). Within thirty days of this Order, Gianni Versace shall serve and file a memorandum and affidavits in support thereof itemizing its total attorneys' fees and costs associated with this application.
If any of these conditions has not been met within the stated periods, Alfredo Versace shall pay a fine of $2,000 each day thereafter until he fully complies with this Opinion and Order. A.V., 87 F. Supp.2d at 296-97; Playboy Enters., 939 F. Supp. at 1041.
II. Motion to Modify Injunction
Gianni Versace argues that in light of Alfredo Versace's repeated violations of the preliminary injunction, the Court should modify the preliminary injunction so as to bar Alfredo Versace from any use of the name "Versace" in connection with the "licensing, manufacture, offering for sale, sale, distribution or promotion of goods or services." Pl's Mot. at 1-2. For the reasons described below, the Court grants Gianni Versace's motion to modify the preliminary injunction in this manner.
A. Right to Use One's Own Name
Modern jurisprudence has evolved such that there is no inherent right to use one's own name as a trademark. Indeed, as the Second Circuit recognized as early as 1936 in John B. Stetson Co. v. Stephen L. Stetson Co., "[w]e do no understand that the right to use one's own name is absolute unless fraud is consciously planned. A newcomer whose name will cause the public to confuse his product with that of an established competitor may be required `to take reasonable precautions to prevent the mistake.'" 85 F.2d 586, 587 (2d Cir. 1936) (quoting Waterman Co. v. Modern Pen Co., 235 U.S. 88, 94 (1914)).
As Alfredo Versace correctly points out, there is appropriate judicial reluctance to preclude an individual's use of his own surname when the use is "honest and straightforward." Def's Opp. at 5 (citing Taylor Wine Co. v. Bully Hill Vineyards, Inc., 569 F.2d 731, 736 (2d Cir. 1978)). Indeed, in Taylor Wine, the Second Circuit prohibited Walter S. Taylor, a member of a famous wine family, from using his surname as a trademark, but allowed Taylor to use his signature on a wine label, accompanied by a disclaimer explaining that Taylor was not associated with the Taylor Wine Company. See 569 F.2d at 736. Likewise, in Joseph Scott Co. v. Scott Swimming Pools, the Second Circuit recognized a qualified right to use a personal name in conjunction with a business. 764 F.2d 62, 68-69 (2d Cir. 1985).
In both Taylor Wine and Joseph Scott Co., however, the injunctions enjoined parties who had established a personal reputation based on skill, experience, and years of participation in their industry. Taylor Wine, 569 F.2d at 736; Joseph Scott Co., 764 F.2d at 68-69. In recognition of the reputation these parties had developed, the Second Circuit permitted these parties to use their name, subject to a disclaimer, to identify their goods. See Taylor Wine Co., 569 F.2d at 736; Joseph Scott Co., 764 F.2d at 68-69. Thus, "[I]f the second comer owns the company and evinces a genuine interest in establishing an enterprise in which his own skill or knowledge can be made known to the public, that argues in favor of allowing him to use his name in some restricted fashion." Taylor Wine, 569 F.2d at 735.
Alfredo Versace has shown no interest in establishing an enterprise in which his own skill can be made known to the public, and his use of his surname has been less than "honest and straightforward." Rather, the record reflects a deliberate pattern of deception by which Alfredo Versace has repeatedly used his surname in ways designed to create the impression that his goods are associated with those of Gianni Versace, in violation of judicial orders to the contrary. See supra, Section I. Indeed, this Court now sanctions Alfredo Versace for a second time for infringing upon Gianni Versace's trademarks. Further, Alfredo Versace has offered little evidence of his own reputation. As Judge Stein noted in granting the preliminary injunction: "[d]efendant has not offered any evidence to demonstrate that his mark acquired secondary meaning before 1979, when plaintiff registered its mark `Gianni Versace,' or ever for that matter. . . . Defendant has not offered any advertising expenditures, consumer studies, proof of unsolicited media coverage, proof of sales success, attempts to plagiarize the mark or proof of exclusivity of the mark. . . ." Transcript of Preliminary Injunction Hearing, Feb. 4, 1998 at 10-11, attached as Exh. H to Max Aff.
Although Alfredo Versace posits that "the Court has already established Alfredo Versace's long-standing use of his own name for his own products," Alfredo Versace offers no citation or evidence to support his naked assertion. Defs Opp at 5-6. Further, the record does not support Alfredo Versace's contention.
Indeed, an absolute ban on the use of a surname is appropriate where the enjoined party's only interest in the use of the surname is to free ride on the reputation of a better known party. See Bertolli U.S.A. Inc. v. Filippo Bertolli Fine Foods Ltd., 662 F. Supp. 203, 207 (S.D.N.Y. 1987) ("[W]e fail to see any legitimate interest of defendants which would counsel in favor of allowing them to use Filippo's name even in the restricted fashion suggested."); see also Leavy v. Rappaport, 124 U.S.P.Q. 438, 439 (N.Y.Sup.Ct. 1960) ("Ample authority seems to exist to justify barring the use of one's own name when such a use is a part of a pattern or scheme in an attempt to deceive."). In addition, a party that has repeatedly infringed on a trademark, as Alfredo Versace has done in the present case, "may be required to suffer a position less advantageous of that of an innocent party." Oral-B Labs., Inc v. Mi-Lor Corp., 810 F.2d 20, 24 (2d Cir. 1987) (citing Conan Props., Inc. v. Conans Pizza, Inc., 752 F.2d 145, 154 (5th Cir. 1985)); see also Cerruti 1881 S.A. v. Cerruti Inc., 45 U.S.P.Q.2d 1957, 1959 (S.D.N.Y. 1998) (Mukasey, J.) (indicating that the court would consider barring the defendant from any use of the name Cerruti if defendant refused to comply with an injunction permitting defendant to only use his name subject to a disclaimer). "A trademark infringer, once caught in the act of contempt, should expect some fencing in. It should have its conduct carefully scrutinized in future use and should not be allowed to claim the same license accorded a good faith user who starts use of the mark which the enjoined defendant has shifted to." J. Thomas McCarthy, 5 McCarthy on Trademark and Unfair Competition § 30:21 at 30-41. Indeed, allowing a repeat infringer the further opportunity to use his surname to cause confusion is particularly dangerous in the fashion industry, where designers frequently use their surname to identify their goods and services. See In re Leshe Fay Cos., 216 B.R. 117, 123-26, 135-36 (S.D.N.Y. 1997) (prohibiting a well known fashion designer who had sold his design trademarks from any use of his name in association with garments he had designed); Nina Ricci S.A.R.L. v. Haymaker Sports Inc., 134 U.S.P.Q. 26, 28 (T.T.A.B. 1962) (recognizing the fashion industry practice of referring to surnames only).
Caselaw from the Ninth Circuit further supports this proposition. See EJ Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1288 (9th Cir. 1992) (noting that the Ninth Circuit will not hesitate to preclude an individual's business use of his own name where that individual has attempted to confuse the public); Robi v. Five Platters, Inc., 918 F.2d 1439, 1445 (9th Cir. 1990) (same); Max Factor Co. v. Factor, 226 F. Supp. 120, 126-27 (S.D. Cal. 1963) (imposing an absolute ban on the use of a personal name where the court found the defendant was deliberately attempting to confuse the public).
Therefore, the Court grants Gianni Versace's motion to modify the preliminary injunction to bar Alfredo Versace from any use of the name "Versace" in connection with the licensing, manufacture, offering for sale, sale, distribution or promotion of goods or services. Within thirty days of this Opinion and Order, Gianni Versace shall submit a proposed amended preliminary injunction consistent with this decision.
CONCLUSION
For the foregoing reasons, both Gianni Versace's motion for a finding of civil contempt against Alfredo Versace and Gianni Versace's motion to modify the preliminary injunction are
HEREBY GRANTED.
SO ORDERED.