Wednesday, January 20, 2016

If the messiah tarries, how long until we find laches?

Vaad L’Hafotzas Sichos, Inc. v. Kehot Publication Society, --- F.Supp.3d ----, 2016 WL 183226, No. 10–CV–4976 (E.D.N.Y. Jan. 14, 2016)
Found this one in another search and was fascinated.  After the death of Rabbi Menachem Mendel Schneerson (the Rebbe), a religious dispute divided the Chabad Lubavitch community. Counterclaim defendants Vaad L’Hafotzas Sichos, Inc. (Vaad) and Zalman Chanin held the belief that the Rebbe is the Messiah and still lives. One result was a lot of copyright and trademark lawsuits.  The court previously upheld the PTO’s registration of the Kehot Publication Society logo by Merkos L’Inyonei Chinuch (Merkos).

The court then conducted a bench trial about whether Vaad’s use of the logo, which it did on all its publications, infringed Merkos’ trademark rights and caused dilution under New York law.  Apparently, “Merkos would have no objections if Vaad did not omit the appellation “of blessed memory” after references to the Rebbe’s name—which is contained in Merkos’s publications. Vaad does this consistent with its belief that the Rebbe is the Messiah and still lives.” Merkos didn’t want to be associated with Vaad’s messianic belief and thus sought an injunction.
Rabbi Joseph I. Schneersohn founded the Kehot Publication Society, then established Merkos to provide broader educational services to the Lubavitcher community. In 1942, Merkos took over direction of Kehot, an unincorporated entity, and affixed the Kehot logo to almost all its publications. During Joseph I. Schneersohn’s tenure, several entities used the Kehot logo, some part of Chabad Lubavitch’s umbrella organization and others independent. All uses of the logo were contingent on Schneersohn’s approval. This practice continued when the Rebbe succeeded the previous Rebbe in 1951.
Vaad was formed in 1967 to centralize the publication and distribution of the Sichos (talks or sermons by the Rebbe).  From then through 1994, Vaad submitted its weekly pamphlets to the Rebbe, upon which Vaad would publish and distribute the pamphlets under the Kehot logo.  In 1994, the Rebbe died, but Vaad did not include the “of blessed memory” appellation in its next publication.  Members of Merkos’ board sent a letter to Vaad chastising it for doing so, and Vaad used the appellation for about a year, but then resumed publishing without it.  Merkos protested again in 1995, but Vaad did not stop its practice. 
In 2001, Merkos applied for a registration of the Kehot logo as a trademark for use on “books, magazines, charts, maps, and photographs on a variety of aspects of Jewish life.” The TTAB dismissed Vaad’s opposition in 2010.  The court affirmed Merkos’ ownership in a prior opinion; in a footnote, it noted that, even had it disagreed with the TTAB, B&B v. Hargis would likely have required it to apply preclusion to the TTAB ruling.
Strength of the mark: Conceptually strong (“an original image and … thus fanciful and inventive”) but commercially weak, because it was and continued to be used by numerous entities other than Merkos in the production of books for sale in the Hasidic community.  Thus, the logo didn’t provide strong source identification for Merkos. (But apparently strong enough to be more than merely descriptive?)  Weighed against confusion.
Similarity: the logos were identical, favoring a confusion finding.  So did the proximity of the products and their identical quality.  The books were identical except for the omission of the appellation after the Rebbe’s name in Vaad’s publications, and Vaad and Merkos targeted the same market, the Hasidic community.
Actual confusion: Merkos provided emails from prospective customers to the Kehot customer service email address asking questions related to books published by Vaad. E.g.: “I’m interested in purchasing the likutei sichos parshios from you but I don’t see it online do you have it in stock?”  But the authors didn’t testify, and the court didn’t know why they believed that Merkos published Vaad publications.  It was possible that confusion stemmed from the logos, but also possible that confusion stemmed from the high similarity of the parties’ books.  For example, while Merkos does not offer the Likkutei Sichos organized by parsha (weekly Torah portion), Merkos does publish the Likkutei Sichos.  Moreover, Rabbi Mendel Sharfstein testified that individual members of the Hasidic community are “reluctant to interact with [him] and the activities that [he is] involved in for Merkos,” if they think Merkos believes the Rebbe is the Messiah. But the internal dispute about whether the Rebbe is the Messiah “is well-known throughout the Hasidic community, and it is likely that individuals in the community would inquire as to Merkos’s beliefs regardless of whether Vaad used the Kehot logo.”  Weighed against confusion.
Bad faith: Vaad’s continued use of the logo after Merkos’ protest was not in bad faith; the letters indicated that Merkos objected to the omission of the appelation, but didn’t demand that Vaad cease publishing under the Kehot logo. “Considering Vaad’s longstanding permission and practice to publish under the Kehot logo, Vaad’s disregard of Merkos’s instruction to include the appellation does not necessarily establish that from that point forward it was intentionally infringing upon Merkos’s trademark.”  Plus, Vaad believed that the Rebbe granted it permission to use the logo and that Merkos didn’t have the authority to revoke that permission. While that was wrong as a matter of law, it was not a decision made in bad faith.
Consumer sophistication: Merkos’ witness “candidly” admitted that “those who are interested in the Hasidic life” are aware of the present litigation and that there “are many savvy enough” in the community to recognize the difference between a Vaad and Merkos publication. Didn’t favor confusion.
On the whole, the multifactor test weighed against finding likely confusion.  The court weighed the commercial weakness of the mark—its use by numerous publishing organizations since the 1940s—heavily, as well as the lack of convincing evidence of actual confusion despite unauthorized use of the logo for over 20 years.
Even if the court had found likely confusion, it would have also found laches.  Vaad was entitled to a presumption of laches (using the analogous limitations period of  New York’s six-year period for fraud claims). Merkos delayed for 17 years before asserting infringement counterclaims, a delay that was not reasonable under the circumstances.  Vaad didn’t change the extent of its alleged infringement by, in 1998, changing the title page of Vaad publications from “Published and Copyrighted by ‘Kehot’ Publication Society” to “Published and Copyrighted by Vaad L’Hafotzas Sichos.”  “[I]f anything, clearly identifying a book as being published by Vaad could only help reduce consumer confusion.”  Nor were occasional communications/negotiations during the period between the 1995 letter and the 2001 litigation sufficient to excuse the delay.  Finally, bad faith didn’t disentitle Vaad to laches because Vaad acted in good faith when it continued to publish under the Kehot logo “in a manner it believed was consistent with the Rebbe’s directives.”
These findings also doomed Merkos’ unfair competition claims under New York common law and New York General Business Law § 349 fail.
As for dilution under New York General Business Law § 360–1, New York applies dilution only to those marks “which are truly of distinctive quality or which have acquired a secondary meaning in the mind of the public.” The Second Circuit has held held that the statute “protects only extremely strong marks.” Here, the numerous entities using the mark prevented the court from finding that the logo was an extremely strong mark.

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