Opinion
CASE NO. 01-6732-CIV-LENARD/TURNOFF.
February 4, 2002
ORDER ADOPTING REPORT AND RECOMMENDATION
THIS CAUSE is before the Court on the Report and Recommendation of U.S. Magistrate Judge William C. Turnoff on Plaintiffs Motion for Preliminary Injunction, filed September 14, 2001. (D.E. 51.) Plaintiff Seiko Kabushiki Kaisha, d/b/a/ Seiko Corporation, filed Objections on September 28, 2001. (D.E. 58.) Defendants Swiss Watch International, Inc., Lior Ben-Shmuel and Eliahu Ben-Shmuel filed a Response on October 31, 2001. (D.E. 70.) Plaintiff filed a Reply on November 7, 2001. (D.E. 73.) Based on a de novo review of the record, the Court finds as follows.
I. Introduction
Plaintiff has moved for a preliminary injunction preventing Defendants from manufacturing or selling watch boxes bearing reproductions of Plaintiffs SEIKO, SEIKO (stylized), and PULSAR trademarks, including an order requiring Defendants to deliver up their counterfeit goods, and for an expedited discovery order. Plaintiff owns a number of federal registrations involving the SEIKO and PULSAR trademarks, most of which pertain to watches and clocks. Plaintiff also owns a registration for SEIKO "watch boxes not made of metal," U.S. Trademark Registration 1,729,408. Plaintiff alleges that Defendants are engaged in the sale and distribution of counterfeit watch boxes bearing reproductions of the SEIKO and PULSAR trademarks.
Defendants concede that they have applied the SEIKO and PULSAR marks to their watch boxes. Plaintiff claims that it first became aware of Defendants' activities as a result of seizures conducted by Plaintiff of counterfeit SEIKO watches and related goods and documents pursuant to an order of this Court in an action filed in July of 2000. Defendants allege that Plaintiff has known of Defendants' activities for sixteen years, reaching back to a 1985 lawsuit brought by Plaintiff against Defendant Eliahu Ben-Shmuel. Defendants contend that Plaintiff is barred from obtaining a preliminary injunction due to the doctrine of laches, and because Plaintiff has not met the elements needed to obtain preliminary injunctive relief
On November 9, 2000, Plaintiffs counsel sent a letter to Defendants demanding that Defendants cease and desist from selling reproductions of Plaintiffs SEIKO and SEIKO (stylized) trademarks. After correspondence and conversations with Defendants regarding the alleged differences between the parties' watch boxes, Plaintiff sent a second cease-and-desist letter on February 15, 2001, demanding that Defendants provide written confirmation that they would cease and desist from selling unauthorized watch box reproductions. Defendants did not respond as Plaintiff requested.
On May 2, 2001, Plaintiffs filed a Complaint, along with a Motion for Preliminary Injunction and Expedited Discovery. The Motion was referred to Magistrate Turnoff, who recommended that the Court deny the Motion because Plaintiff has not met the standard for obtaining a preliminary injunction.
II. Preliminary Injunction Standard
A preliminary injunction is an extraordinary and drastic remedy" that should be granted only if the moving party has clearly established four elements: (1) substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998).
III. Analysis
A. Likelihood of Success on the Merits
To demonstrate a likelihood of success on the merits under Section 32(1) of the Lanham Act, 15 U.S.C. § 1114 (1), Plaintiff must show: (1) the validity of its marks; and (2) a likelihood of confusion as to the source or sponsorship of Defendant's products. See Deiter v. BH Ind. of Southwest Fla., Inc., 880 F.2d 322, 326 (11th Cir. 1989). Plaintiff contends that, under Sections 15 and 33(b) of the Landham Act, 15 U.S.C. § 1065 and 1115(b), its Seiko and Pulsar marks are incontestably valid. However, as Judge Turnoff found, Plaintiff has only shown that its SEIKO trademark on "watch boxes not of metal" (U.S. Trademark Registration 1,729,408) is likely valid as a matter of law. Plaintiff has not established that this trademark is "incontestible," because it has not submitted a certificate of inconstestability pursuant to 15 U.S.C. § 1065. Moreover, Plaintiff has not submitted any evidence of a valid mark for PULSAR watch boxes.
To determine whether a likelihood of confusion exists, the Eleventh Circuit requires a balancing of the following factors: (1) type of mark; (2) similarity of mark; (3) similarity of the products the marks represent; (4) similarity of the parties' customers and retail outlets; (5) similarity of advertising campaigns; (6) defendant's intent; and (7) evidence of actual confusion. Deiter, 880 F.2d at 326; Jellibeans, Inc. v. Skating Clubs of Ga., 716 F.2d 833, 840 (11th Cir. 1983). Generally, the type of mark and evidence of actual confusion are the most important factors. Deiter, 880 F.2d at 326. However, a court must consider the circumstances of each particular case, and evaluate the weight to be accorded to individual subsidiary facts, in order to make its ultimate factual decision. Jellibeans, 716 F.2d at 840 n. 17.
Judge Turnoff found that Plaintiffs submissions indicate a strength in SEIKO watch trademarks, but do not indicate the same strength in SEIKO watch box trademarks, or that customers would likely be confused by Defendant's sale of genuine SEIKO and/or PULSAR timepieces in boxes marked SEIKO or PULSAR. Plaintiff asserts that it has common law trademarks in the mark for SEIKO and PULSAR watch boxes, based on actual prior use, and that even if it did not, it would be successful in establishing trademark infringement under the "related goods" doctrine. (Obj. at 9-10.) Plaintiff contends that, because it owns incontestable marks on PULSAR watches and clocks, it may enjoin the use of the PULSAR mark on watch boxes because watch boxes are related to watches. (Id.)
In the Eleventh Circuit, the test for "related goods" is whether the buying public would reasonably think that two goods came from the same source, or were affiliated with, connected with, or sponsored by, the trademark owner. Tally-Ho, Inc. v. Coast Cmty. Coll. Dist., 898 F.2d 1018, 1023 (11th Cir. 1990). Plaintiff has gone to great length to document the fame of the SEIKO and PULSAR names, but has offered only conclusory allegations, with no proof, that the public assumes that a watch comes from the same manufacturer as the watch box in which it is sold. The standard for an injunction is high, and the Court finds that Plaintiff has not met its burden of showing that consumers would likely be confused by Defendant's sale of genuine SEIKO or PULSAR watches in boxes marked "SEIKO" or "PULSAR".
The most persuasive evidence of a substantial likelihood of confusion is proof of actual confusion. Alliance Metals Inc. of Atlanta v. Hinely Indus. Inc., 222 F.3d 895, 907 (11th Cir. 2000). Plaintiff has presented no evidence of actual confusion. Additionally, Plaintiff has failed to establish a similarity of customers and retail outlets or similarity of advertising campaigns. Plaintiff claims it is unable to submit such evidence due to Defendants' refusal to comply with Plaintiff's discovery requests. At the hearing before Judge Turnoff, however, Plaintiff rested on its pre-hearing submissions, without producing any affidavits, witnesses, or exhibits. (7/6/01 Hrg. Tr. at 10.) This simply demonstrates that a preliminary injunction is inappropriate at this juncture, and that more discovery is necessary before the issues may be resolved.
Alternatively, a likelihood of confusion can be found as a matter of law if Plaintiff shows that Defendants intended to derive benefit from Plaintiffs trademark. Babbitt Elec Inc. v. Dynascan Corp., 38 F.3d 1161, 1179 (11th Cir. 1994). Plaintiff argues that Defendants knowingly and willfully affixed counterfeit reproductions of SEIKO and PULSAR marks to watch boxes, as shown by Defendants' admissions to Plaintiffs counsel and Defendants' offer to sell an investigator watch boxes bearing the SEIKO and PULSAR marks. (Obj. at 13.) In fact, Defendant Eli Ben-Shmuel told Plaintiffs counsel that he believed he was entitled to sell the watch boxes because they differed in color and style from the watch boxes sold by Seiko Corporation, and the trademarks SEIKO and PULSAR applied by Defendants to the goods appear in different logo formats than the logo formats used by Seiko Corporation. (Skog Dec. ¶ 11.) Moreover, unlike cases such as Babbitt, where defendants intentionally mislabeled a product in an attempt to mislead the public to believe that the product inside the box is genuine, Defendants were selling genuine SEIKO and PULSAR watches inside the allegedly counterfeited boxes. Cf. Amstar Corp. v. Domino's Pizza Inc., 615 F.2d 252 (5th Cir.), cert. denied, 449 U.S. 899 (1980) (noting that bad faith usually involves an attempt to "pass off" a party's product as the product of another), cited with aporoval in Babbitt, 38 F.3d at 1179. Thus, the Court finds that Plaintiff has not submitted evidence of Defendant's intent sufficient to establish a likelihood of confusion.
Based on the Court's review of all the factors and the surrounding circumstances, Plaintiff has failed to meet its burden of proving a substantial likelihood of success on the merits.
B. Irreparable Injury
"[P]reliminary injunctions are generally granted under the theory that there is an urgent need for speedy action to protect the plaintiffs' rights." Citibank, N.A. v. Citytrust, 756 F.2d 273, 276 (2d Cir. 1985). Because a preliminary injunction is an extraordinary form of relief, Plaintiff must demonstrate that it will suffer irreparable injury unless the injunction issues. See McDonald's Corp., 147 F.3d at 1306. Financial damage alone is insufficient to warrant injunctive relief. Snook v. Trust Co. of Ga. Bank of Savannah N.A., 909 F.2d 480, 487 (11th Cir. 1990) (quoting Sampson v. Murray, 415 U.S. 61, 90 (1974) ("Mere injuries. however substantial, in terms of money, time and energy necessarily expended in the absence of a stay, are not enough . . .").
In trademark cases, "a sufficiently strong showing of likelihood of confusion . . . may by itself constitute a showing of a substantial threat of irreparable harm." McDonald's Corp., 147 F.3d at 1310. To obtain a preliminary injunction, however, a plaintiff must demonstrate a particularly high likelihood of confusion or potential danger to customers' health and safety. See id. ("McDonald's faces damage to its own reputation and loss of customers caused by the [Defendants'] distribution of an allegedly inferior (and possibly dangerous) product held out to be McDonald's."); Levi Strauss Co. v. Sunrise Int'l Trading Co., 51 F.3d 982, 986 (11th Cir. 1995) ("There is no doubt that the continued sale of thousands of pairs of counterfeit jeans would damage LS Co.'s business reputation and might decrease its legitimate sales.")
By contrast, this Court has not found a substantial likelihood of confusion, nor has it found that Defendant's watch boxes are inferior to Plaintiffs. Judge Turnoff found that Defendants' watch boxes differed from Plaintiffs in kind, but not in quality. (7/6/01 Hrg. Tr. at 7.) Significantly, Defendants are not selling counterfeit watches; they are selling genuine SEIKO and PULSAR watches in watch boxes that are not apparently inferior to genuine SEIKO and PULSAR watch boxes. At the hearing, Judge Turnoff posited that customers care about buying watches, rather than watch boxes, and Plaintiffs counsel offered no evidence to the contrary. (7/6/01 Hrg. Tr. at 5.) Accordingly, the Court finds that the threat to Plaintiffs goodwill and reputation is minimal, and that Plaintiff may be compensated sufficiently with monetary damages.
Furthermore, a plaintiffs delay in seeking an injunction in a trademark case "tends to neutralize any presumption that infringement alone will cause irreparable harm pending trial, and such delay alone may justify denial of a preliminary injunction for trademark infringement."Citibank, 756 F.2d at 276. "Although a particular period of delay may not rise to the level of laches and thereby bar a permanent injunction, it may still indicate an absence of the kind of irreparable harm required to support a preliminary injunction." Id. (holding excessive a delay of ten weeks from direct notice and nine months after press release); Lanvin, Inc. v. Colonia, Inc., 739 F. Supp. 182, 192 (S.D.N.Y. 1990) (denying preliminary injunction after seven-month delay); Comic Strip, Inc. v. Fox Television Stations, Inc., 710 F. Supp. 976, 981 (S.D.N.Y. 1989) (seven-month delay).
In the instant case, Plaintiff admits to knowing of Defendants' activities in the summer of 2000. (7/6/01 Hrg. Tr. at 7-9.) Yet counsel for Plaintiff waited until November 9, 2000 to send the first cease-and-desist letter to Defendants. More than three months later, on February 15, 2001, Plaintiff sent a second cease-and-desist letter. Plaintiff waited until May 2, 2001, almost a full year after it admits to knowing about Defendant's activities, to file this lawsuit. Even giving Plaintiff credit for attempting to reach a settlement without litigation, there remains a three-month delay between Plaintiffs last communication with Defendants and commencement of this suit. Plaintiffs dilatory prosecution of its rights somewhat vitiates the notion of irreparable harm. See Comic Strip, Inc., 710 F. Supp. at 981 (three-month delay since parties' last communication). The Court finds that this unexplained delay undercuts any sense of urgency and, therefore, Plaintiff has failed to demonstrate sufficient need for a preliminary injunction.
IV. Conclusion
The standard for injunctive relief is stringent because the nature of the relief is extraordinary. Even though Plaintiff might ultimately prevail at trial, the Court finds that Plaintiff has not shown a likelihood of success on the merits or that it will suffer irreparable harm without the injunction. In particular. Plaintiffs delay in filing this action undercuts any sense of urgency and demonstrates that a preliminary injunction is not warranted. Accordingly, it is
ORDERED AND ADJUDGED that:
1. The Report and Recommendation of U.S. Magistrate Judge William C. Turnoff on Plaintiffs Motion for Preliminary Injunction (D.E. 51). filed September 14, 2001, is ADOPTED.
2. The Motion for Preliminary Injunction and Expedited Discovery (D.E. 5), filed May 2, 2001. by Plaintiff Seiko Kabushiki Kaisha d/b/a Seiko Corporation, is DENIED.