New York Law Review

Tag: unfair competition

  • ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467 (2007): Unfair Competition and Protection of Foreign Marks

    ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467 (2007)

    Under New York common law, unfair competition, specifically misappropriation, can protect a foreign business’s goodwill from being exploited in New York if the business has a demonstrable reputation and commercial advantage within the state.

    Summary

    ITC, an Indian corporation, sought to prevent Punchgini, Inc. from using the name “Bukhara Grill” for its New York restaurants, arguing unfair competition based on ITC’s famous Bukhara restaurant in India. ITC had previously operated a Bukhara restaurant in New York but had abandoned the mark in the U.S. The Second Circuit certified questions to the New York Court of Appeals regarding whether New York common law protects famous foreign marks. The Court of Appeals held that New York law recognizes unfair competition claims but does not specifically adhere to a “famous marks” doctrine. Protection hinges on whether the foreign mark possesses demonstrable goodwill within New York, and consumers associate the mark with the foreign entity.

    Facts

    ITC owns and operates the Maurya Sheraton in New Delhi, which includes the Bukhara restaurant. ITC had limited success franchising Bukhara restaurants globally, including a closed Manhattan location. Punchgini’s principals, some former employees of ITC’s Bukhara, opened Bukhara Grill in New York, featuring similar dishes and design elements. ITC accused Punchgini of capitalizing on Bukhara’s reputation, demanding they cease using the name. Punchgini claimed ITC abandoned the mark in the U.S.

    Procedural History

    ITC sued Punchgini in the Southern District of New York, alleging trademark infringement and unfair competition under the Lanham Act and New York common law. The District Court granted summary judgment to Punchgini, finding ITC abandoned the trademark. The Second Circuit affirmed the dismissal of federal claims but certified questions to the New York Court of Appeals regarding New York common law claims, specifically concerning the “famous marks” doctrine.

    Issue(s)

    1. Does New York common law permit the owner of a famous mark or trade dress to assert property rights therein by virtue of the owner’s prior use of the mark or dress in a foreign country?

    2. How famous must a foreign mark or trade dress be to permit its owner to sue for unfair competition?

    Holding

    1. Yes, because New York recognizes unfair competition claims, particularly misappropriation, when a business has demonstrable goodwill within the state.

    2. The mark must have a level of fame that the relevant consumer market primarily associates the mark with the foreign plaintiff and their goods or services.

    Court’s Reasoning

    The Court clarified that New York common law recognizes two types of unfair competition: palming off and misappropriation. While the “famous marks doctrine” is debated, New York cases like Maison Prunier v Prunier’s Rest. & Cafe, Inc. and Vaudable v Montmartre, Inc., often cited as examples of this doctrine, are actually grounded in misappropriation theory. The Court emphasized that a foreign business with a reputation extending into New York possesses goodwill protectable from misappropriation. The court stated, “Under New York law, ‘[a]n unfair competition claim involving misappropriation usually concerns the taking and use of the plaintiffs property to compete against the plaintiffs own use of the same property’”. To succeed, ITC needed to show Punchgini deliberately copied ITC’s mark, and that New York consumers primarily associate the “Bukhara” mark with ITC’s restaurants. The Court refused to provide an exhaustive list, but some factors that would be relevant include evidence that the defendant intentionally associated its goods with those of the foreign plaintiff in the minds of the public, direct evidence, such as consumer surveys, indicating that consumers of defendant’s goods or services believe them to be associated with the plaintiff; and evidence of actual overlap between customers of the New York defendant and the foreign plaintiff. This case clarifies that while New York protects against unfair competition, such protection for foreign marks depends on establishing a real presence and consumer association within New York, not merely international fame.

  • Editorial Photocolor Archives, Inc. v. The Granger Collection, 61 N.Y.2d 517 (1984): Copyright Preemption of State Law Claims

    Editorial Photocolor Archives, Inc. v. The Granger Collection, 61 N.Y.2d 517 (1984)

    The Copyright Act of 1976 preempts state law claims that seek to protect rights equivalent to those protected by federal copyright law, thus federal courts have exclusive jurisdiction over such claims.

    Summary

    Editorial Photocolor Archives (EPA) and Scala sued The Granger Collection (Granger), alleging unfair competition, interference with contractual relations, and violation of New York’s anti-dilution law. EPA claimed Granger was wrongfully reproducing and selling Scala’s film transparencies, infringing on EPA’s exclusive rights to do so. The New York Court of Appeals held that the Copyright Act of 1976 preempts these state law claims because the rights EPA sought to protect were equivalent to those protected by federal copyright law. Therefore, state courts lacked jurisdiction, and the preliminary injunction against Granger was vacated.

    Facts

    EPA and Scala were in the business of maintaining archives of film transparencies and photographs, licensing them for reproduction. EPA had the exclusive right in North America to license Scala’s photos. Granger, a competitor, allegedly reproduced and sold Scala’s transparencies without permission. EPA discovered publications crediting Granger with images that appeared to be Scala’s and sued Granger, seeking a preliminary injunction to stop the unauthorized reproduction and sale.

    Procedural History

    EPA obtained a preliminary injunction against Granger when Granger failed to appear in court. Granger moved to vacate the injunction, arguing that the court lacked subject matter jurisdiction because the claims were preempted by federal copyright law. Special Term denied the motion, and the Appellate Division affirmed. Granger appealed to the New York Court of Appeals.

    Issue(s)

    Whether the Copyright Act of 1976 preempts state law claims for unfair competition, interference with contractual relations, and violation of New York’s anti-dilution law, when those claims are based on the unauthorized reproduction and sale of copyrighted material?

    Holding

    No, because the rights asserted by EPA are equivalent to the exclusive rights of use and reproduction granted by the federal copyright laws and are thus preempted.

    Court’s Reasoning

    The Court of Appeals reasoned that the Copyright Act of 1976 (specifically, 17 U.S.C. § 301) explicitly preempts state laws that grant equivalent rights to those within the scope of federal copyright law (17 U.S.C. § 106). The court examined EPA’s complaint and the preliminary injunction and determined that the rights EPA sought to protect (reproduction, sale, and licensing of the transparencies) were equivalent to the exclusive rights granted by federal copyright law. The court noted that the subject matter of the dispute, the transparencies and photographs, fell within the scope of copyright protection. The court emphasized that a state law claim is preempted even if it requires additional elements not necessary for copyright protection, as long as the underlying right is equivalent to a copyright right. As the court stated, “Plaintiffs could not, by miscasting their causes of action, secure the equivalent of copyright protection under guise of State law.” Since the cause of action accrued after January 1, 1978, and the rights were equivalent to copyright rights, the state court lacked subject matter jurisdiction. The court cited Lacks v. Lacks, stating that a judgment issued without subject matter jurisdiction is void and cannot be waived.

  • Findlay v. Findlay, 18 N.Y.2d 12 (1966): Limits on Using One’s Own Name in Business When It Creates Confusion

    Findlay v. Findlay, 18 N.Y.2d 12 (1966)

    A person’s right to use their own name in business is not absolute and can be limited when such use tends to create confusion or diversion that harms the business of another, even without a showing of fraud or intent to deceive.

    Summary

    Two brothers, David and Walstein (Wally) Findlay, were involved in a family art business. David operated a gallery in New York City under the name “Findlay Galleries,” building a strong reputation. Wally, who operated a gallery in Chicago under a similar name, decided to open a gallery next door to David’s on East 57th Street, using the name “Wally Findlay Galleries.” David sought an injunction, arguing that Wally’s use of the name would cause confusion and divert customers. The court agreed, finding that Wally’s use of the “Findlay” name would inevitably lead to confusion, harming David’s established business and goodwill.

    Facts

    The Findlay art business was established in 1870 by the grandfather of David and Wally Findlay.
    Their father expanded the business, with David managing a New York branch and Wally a Chicago branch.
    In 1938, after a dispute, David sold the Chicago gallery to Wally, allowing him to use the name “Findlay Galleries, Inc.” in Chicago.
    David continued to operate his gallery on East 57th Street in Manhattan, building a strong reputation.
    In 1963, Wally purchased a building next door to David’s gallery and planned to open his own gallery under the name “Wally Findlay Galleries.”
    David objected, claiming it would cause confusion and damage his business.

    Procedural History

    The trial court issued an injunction preventing Wally from using the name “Findlay” on East 57th Street.
    The Appellate Division affirmed the trial court’s decision.
    Wally Findlay appealed to the New York Court of Appeals.

    Issue(s)

    Whether a person’s right to use their own name in business is absolute, or if it can be restricted when it causes confusion and harms the business of another.

    Holding

    No, because the right to use one’s own name in business is not unlimited and can be restricted when such use tends to produce confusion in the public mind and impairs the goodwill of an existing business.

    Court’s Reasoning

    The court emphasized that while individuals generally have the right to use their own name in business, this right is not absolute. It cannot be exercised in a way that injures the business of another or misleads the public. The court found that Wally’s use of the name “Findlay” next door to David’s established gallery would inevitably cause confusion. Customers looking for “Findlay’s on 57th St.” would likely enter Wally’s gallery by mistake, diverting business from David.

    The court noted that the present trend of the law is to enjoin the use even of a family name when such use tends or threatens to produce confusion in the public mind. The court cited World’s Dispensary Med. Assn. v. Pierce, 203 N. Y. 419, 425 stating that, “The defendant has the right to use his name. The plaintiff has the right to have the defendant use it in such a way as will not injure his business or mislead the public. Where there is such a conflict of rights, it is the duty of the court so to regulate the use of his name by the defendant that, due protection to the plaintiff being afforded, there will be as little injury to him as possible.”

    The court found that the objective facts of unfair competition and injury to plaintiff’s business were determinative, not the defendant’s subjective state of mind. The injunction was narrowly tailored to prevent the use of the name Findlay only on East 57th Street, minimizing the injury to Wally while protecting David’s business.