Summary
holding that contributory infringement "occurs when a defendant either intentionally induces a third party to infringe the plaintiff's mark or supplies a product to a third party with actual or constructive knowledge that the product is being used to infringe that mark"
Summary of this case from Eliya, Inc. v. Steven Madden, Ltd.Opinion
01 Civ. 9703 (GEL)
January 29, 2002
Cynthia E. Johnson, Fish Richardson P.C., Boston, MA (Anthony L. Fletcher and Stacy J. Grossman, Fish Richardson P.C., New York, NY, for Plaintiffs.
Joseph Peterson, Maxim H. Waldbaum, Salans Hertzfeld Heilbronn Christy Viener, New York, NY, and Paul E. Adams, Peacock, Myers Adams, P.C., for Defendants.
OPINION AND ORDER
Plaintiffs Steinway, Inc. and Steinway Musical Instruments, Inc. ("Plaintiffs") bring this action against defendants Larry Ashley, d/b/a Pierce Piano Atlas, Decals for Pianos, and Leap Entertainment ("Defendants"), alleging that Defendants are selling piano decals bearing Plaintiffs' registered trademarks to "people who apply [the piano decals] to the fallboards and soundboards of pianos which may not be STEINWAY pianos or, in any event, to pianos that while originally STEINWAY pianos, have now been rebuilt, reconditioned, repaired or restored using parts and methods not utilized or approved by Steinway." Compl. ¶ 21. Plaintiffs allege that Defendants accept orders for Steinway piano decals that are advertised in their catalog and on their website; invoice and accept payment for those orders; and forward those orders to a competitor-supplier that actually fills the orders. Compl. ¶¶ 20-28. While Plaintiffs do not plead Defendants' state of mind as directly as they might have, they also allege that Defendants acted willfully. Compl. ¶ 34.
Based on these factual allegations, Plaintiffs claim that Defendants are liable for (1) direct or contributory trademark infringement, in violation of Lanham Act § 32, 15 U.S.C. § 1114; (2) direct or contributory false representation, in violation of Lanham Act 43(a), 15 U.S.C. § 1125 (a); (3) direct or contributory trademark dilution, in violation of Lanham Act 43(c), 15 U.S.C. § 1125 (c); (4) deceptive business practices, in violation of N.Y. Gen. Bus. L. § 349; and (5) breach of a 1999 settlement agreement that resolved a similar action between the parties that had been filed in this district. Compl. ¶¶ 32-45 see Steinway v. Ashley, No. 99 Civ. 3593 (LAK). Defendants now move to dismiss pursuant to Fed.R.Civ.P. 12(b) for failure to state a claim and lack of supplemental jurisdiction.
When adjudicating a motion to dismiss, the Court must accept "as true the facts alleged in the complaint," Jackson Nat'l Life Ins. Co. v. Merrill Lynch Co., 32 F.3d 697, 699-700 (2d Cir. 1994), and may grant the motion only if"it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief" Thomas v. City of New York, 143 F.3d 31, 36 (2d Cir. 1998) (internal citations omitted). The "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996) (internal quotation marks and citations omitted).
Here, Plaintiffs' factual allegations are sufficient to permit each of their claims for relief to survive Defendants' motion to dismiss. First, Plaintiffs have pleaded sufficient facts in support of their claim for direct or contributory trademark infringement in Count One of the complaint. While Plaintiffs might well find it difficult to prove any direct trademark infringement by Defendants, since Defendants do not themselves manufacture or sell pianos, Plaintiffs certainly have alleged facts sufficient to support a claim for contributory infringement, which occurs when a defendant either intentionally induces a third party to infringe the plaintiff's mark or supplies a product to a third party with actual or constructive knowledge that the product is being used to infringe that mark. Inwood Labs., Inc. v. Ives Labs. Inc., 456 U.S. 844, 853-54 (1982); Polymer Tech. Corp. v. Mimran, 975 F.2d 58, 64 (2d Cir. 1992). Since Plaintiffs might be able to prove that Defendants supply the Steinway piano decals to people that they know or have reason to know are using those decals to infringe Steinway's mark — for example, unauthorized piano refurbishers that are applying those decals to refurbished Steinway pianos, or manufacturers that are applying the decals to non-Steinway pianos — Count One survives Defendants' motion to dismiss.
Second, the Complaint sufficiently alleges facts in support of the claims in Counts Two and Four, respectively, for direct or contributory false representation in violation of Lanham Act § 43(a) and deceptive business practices in violation of N.Y. Gen. Bus. L. § 349. As the parties note in their briefs, these two unfair competition claims are governed by similar substantive standards. To state a claim under Lanham Act § 43(a), Plaintiffs must allege that Defendants, "on or in connection with any goods or services," use or encourage the use of a mark that is "likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection or association" of those goods or services with Plaintiffs. N.Y. Gen. Bus. L. § 349 proscribes "[d]eceptive acts and practices in the conduct of any business, trade or commerce or in the furnishing of any service" in New York, and a party challenging an act or practice under that provision "must show `(i) that the act or practice was misleading in a material respect, and (ii) that the plaintiff was injured.'" Ortho Pharmaceutical Corp. v. Cosprophar. Inc., 32 F.3d 690, 697 (2d Cir. 1994). Again, while Plaintiffs might find it difficult to prove that Defendants have directly violated either of these statutory provisions, they may be able to prove that they are liable for contributory unfair competition, based on the same factual allegations advanced in support of their trademark infringement claim in Count One. Plaintiffs have alleged that Defendants knowingly distribute Steinway piano decals to customers that use Plaintiffs' marks in commerce, and that such use is likely to deceive or cause confusion as to the affiliation or association of Defendants' customers with Plaintiffs. Compl. ¶¶ 12-15, 20-28, 38. Those allegations are sufficient to support both of these unfair competition claims.
Third, the same factual allegations adequately support Plaintiffs' trademark dilution claim in Count Three of the complaint. As amended by the Federal Trademark Dilution Act of 1995, Lanham Act § 43(c)(1), 15 U.S.C. § 1125 (c)(1), provides that the owner of a "famous mark" may seek an injunction "against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the famous mark." "Dilution," in turn, is defined in the statute to mean "the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of — (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception." 15 U.S.C. § 1127;see Federal Express Corp. v. Federal Espresso. Inc., 203 F.3d 168, 174-75 (2d Cir. 2000). Here, Plaintiffs allege that their marks are "famous marks" within the meaning of the federal dilution statute, and that Defendants have used and encouraged others to use those marks in commerce after they became famous in a manner likely to cause the dilution of their distinctive quality. Compl. ¶¶ 8, 12-16, 20-28, 31, 41. These allegations are more than adequate to support Plaintiffs' claims for direct and contributory trademark dilution and therefore to survive Defendants' motion to dismiss. While Defendants are correct that the notion of "contributory dilution" remains somewhat novel, the viability of such a claim seems entirely plausible — a number of courts have discussed the notion of contributory dilution, and at least one court has implicitly recognized that cause of action, apparently by analogy to the cause of action for contributory infringement recognized by Inwood Laboratories. See Kegan v. Apple Computer Inc., 42 U.S.P.Q.2d 1053, 1062, 1996 WL 667808, at * 11 (ND. Ill. 1996); see also Lockheed Martin Corp. v. Network Solutions. Inc., 194 F.3d 980, 986 (9th Cir. 1999). Especially at this early stage of the litigation, the Court need not definitively determine now whether Count Three may proceed as a claim for both direct and contributory dilution — the Court only concludes that the dilution claim pleaded in Count Three is sufficiently supported by the factual allegations in the complaint to survive Defendants' motion to dismiss.
Finally, Defendants' motion to dismiss Count Five of the complaint, for lack of supplemental jurisdiction, necessarily fails given the Court's denial of Defendants' motion to dismiss Counts One through Four. The Court properly may exercise supplemental jurisdiction over that claim under 28 U.S.C. § 1367.
Accordingly, for the foregoing reasons, Defendants' motion to dismiss is hereby DENIED.
SO ORDERED.