Opinion
01-CV-0096E(Sc)
February 23, 2001
Attorneys for the plaintiff: Harry E. Werner, Esq., c/o Lipsitz, Green Fahringer, Roll, Salisbury Cambria, Buffalo, NY
Attorneys for the defendant: Lorrie Turner-Proulx, Esq., c/o Hodgson Russ, Buffalo, NY
MEMORANDUM and ORDER
Plaintiff filed this declaratory judgment action February 9, 2001 and seeks redress for an alleged deprivation of property rights in certain trademarks it claims to have owned, as such rights are protected by the Due Process Clause of the Fifth Amendment to the Constitution. Presently before the undersigned is plaintiff's motion for a preliminary injunction staying enforcement of the January 31, 2001 Order of this Court ("the January Order") in Kusha, Inc. Rex Intern'l Ltd., No. 98-CV-0747E(Sc) ("Kusha"), — which placed alien upon and assigned to Kusha those certain trademarks which are the subject of the instant action — enjoining defendant from selling, transferring, hypothecating or otherwise encumbering the trademarks that are the subject of the January Order and enjoining defendant from using these trademarks pending a further order of this Court. For the reasons set forth below, a preliminary injunction will be entered — upon plaintiff's posting of a security bond in the amount of $10,000 with the Clerk of the Court pursuant to Rule 65(c) of the Federal Rules of Civil Procedure ("FRCvP") — enjoining defendant from selling, transferring, hypothecating or otherwise encumbering the trademarks that are the subject of the January Order and enjoining defendant from using these trademarks pending further order of this Court. An order will not be entered staying further or other enforcement of the January Order.
As all the parties are undoubtedly aware and as alluded to previously, the present action finds its genesis in an order recently granted in Kusha wherein the instant defendant — the plaintiff therein — was assigned five trademarks in partial satisfaction of a judgment entered in Kusha. Such was granted because the undersigned found that a defendant therein, Top Star Distribution Group Inc. ("Top Star"), was the owner of those trademarks. Plaintiff was not a named party to that action. Plaintiff brings the present action claiming that the January Order was issued in error — principally because it and not Top Star owns the trademarks — and that it was afforded no opportunity to contest the January Order. In response, defendant argues that no injunction should issue because plaintiff has failed to submit any proof that it is not merely a "straw company" of the defendants in Kusha, because plaintiff has failed to submit any proof that it will suffer irreparable harm, because such assignments had never been properly recorded and because plaintiff has failed to establish there was a denial of its due process rights.
A party seeking a preliminary injunction must show (1) that it will suffer irreparable harm if the injunction does not issue and (2) "either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in its favor." Warner-Lambert Co. v. Northside Development Corp., 86 F.3d 3, 6 (2d Cir. 1996). Irreparable harm is harm that is neither remote nor speculative but actual and imminent and cannot be adequately compensated by an award of monetary damages. Shapiro v. Cadman Towers, Inc., 51 F.3d 328, 332 (2d Cir. 1995). Where a deprivation of a constitutional right is alleged, moreover, a finding of irreparable harm is presumed. Jolly v. Coughlin, 76 F.3d 468, 482 (2d Cir. 1996).
Insofar as irreparable harm is alleged, the undersigned finds that such has been established here because, as is set forth below, plaintiff has demonstrated sufficiently serious questions going to the issue of whether it owned the trademarks in question and, consequently, to the issue of whether this Court had the power to assign such trademarks to defendant. Should it be ultimately determined that plaintiff was the true owner of these trademarks and that defendant has marketed products thereunder, plaintiff would have been deprived of the use and control of its property through an erroneously issued court order and for which it is likely that the harm posited may not be adequately redressed through an award of monetary damages.
With regard to whether plaintiff has demonstrated either a likelihood of success on the merits or sufficiently serious questions going to the merits of the action, the undersigned opines that the materials thus far submitted raise sufficiently serious questions going to the merits to make them a fair ground for litigation. By affidavit dated February 8, 2001 Paria Akhavan, who claims to be "an officer and sole shareholder" of plaintiff, indicates that, through a series of transfers executed in 1998 and 1999 between Top Star and plaintiff, the trademarks in question were acquired by plaintiff. Attached to this affidavit are what are asserted by Akhavan to be the assigning documents. While defendant has good reason to be skeptical of the veracity of those submissions, the undersigned is in agreement with plaintiff that such concerns are based on facts and conclusions yet to be determined. See Reina Aff. ¶ 7. Similarly, the fact that such assignments may not have been properly recorded is not determinative at this juncture. Section 1060 of Title 15 to the United States Code provides only that "[a]n assignment shall be void against any subsequent purchaser for valuable consideration without notice, unless the prescribed information reporting the assignment is recorded in the Patent and Trademark Office within 3 months after the date of the subsequent purchase or prior to the assignment. By its terms, there is no legal requirement that plaintiff have recorded its assignment except insofar as it desired to be protected against a "subsequent purchaser for valuable consideration without notice." In this regard, the undersigned agrees with the proposition that 15 U.S.C. § 1060 permits, rather than requires, recordation of such assignments. Teter, Inc. v. Rheem Mfg. Co., 334 F.2d 784, 787 (7th Cir. 1964). That said, it remains to be determined whether — if, in fact, plaintiff had properly acquired these trademarks from Top Star but failed to record such assignments — defendant, as a judgment creditor, can be deemed a subsequent purchaser for value without notice and negate such earlier assignments.
The argument that plaintiff failed to intervene in the Kusha matter and thereby waived any rights it had in the trademarks is also without merit. The undersigned is aware of the fact that plaintiff attempted to intervene on the same day on which the January Order was signed. Such papers, however, were not brought to the undersigned's attention until after such had been effectuated. In addition, whether or not plaintiff had knowledge of the then impending order in Kusha appears irrelevant at this point. "Joinder as a party, rather than knowledge a lawsuit and an opportunity to intervene, is the method by which potential parties are subjected to the jurisdiction of the court and bound by a judgment or decree." Martin v. Wilks, 490 U.S. 755, 765 (1989).
As concerns any balance of the hardships issue, it appears plain that such greatly tips in favor of plaintiff at this time. As stated previously, should it be shown that plaintiff was deprived of the use and control of its property through an erroneously issued court order, a possiblity exists that an award of damages may not be able to fully compensate plaintiff for such temporary loss of control of its trademarks. The issuance of a preliminary injunction poses no such similar threat to defendant's interests.
Consequently and because plaintiff has shown that it will suffer irreparable harm if the injunction is not issued and sufficiently serious questions going to the merits to make them a fair ground for litigation with a balance of hardships tipping decidedly in its favor, its application for a preliminary injunction, to the extent outlined in this order, will be granted.
Pursuant to FRCvP 65(c), a bond is required upon the issuance of a preliminary injunction in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained." Considering the fact that the trademarks in question have been valued in an amount of $10,000, requiring that such amount be posted in order to effectuate the injunction is reasonable and proper.
Accordingly, it is hereby ORDERED that defendant is enjoined and restrained from selling, transferring, hypothecating or otherwise encumbering the trademarks that are the subject of the January Order and enjoining defendant from using these trademarks pending further order of this Court, and that plaintiff shall post a bond in the amount of $10,000 with the Clerk of the Court, upon which posting this injunction shall take effect.