Perfect sued Majestic for unfair competition and false
advertising under the Lanham Act, alleging infringement of the marks Majestic
and Majestic Pearl. Majestic
counterclaimed. The court found that
Perfect was the first to use the marks in the field of pearl jewelry and had
the exclusive right to use the marks for pearl jewelry, though not for other
products such as pearl beads and loose pearls (the vast majority of Majestic’s
business).
Perfect makes pearl jewelry, while Majestic is a wholesale
retailer of pearl beads as well as pearl jewelry. Historically they were both
business-to-business operations, but Perfect has begun to sell directly to
consumers through QVC.
Perfect used “Majestic Pearl Company” as a business name
since 1965, when it began to sell a line of pearl jewelry under the name
“Majestic,” and employees used “Majestic Pearl” to identify themselves since at
least 1986. Though some of its jewelry
is sold as private label jewelry by retailers, a number of retailers sell it
with the Majestic marks present on the tags.
The line generated over $1 million/year from 1988-2010, though some of
that was the private label sales. The
court summarized Perfect’s use of the marks before Majestic’s entry into the
market as “limited to (1) selling pearl jewelry; (2) to national clothing and
accessories retailers; (3) including tags bearing the MAJESTIC marks; and (4)
from a showroom in New York City.”
Majestic began selling jewelry in the US in 1996 (it began
in Hong Kong in 1980). It primarily
sells pearl beads to bead shops, jewelry manufacturers, and designers, though
about 5% of its business is in pearl jewelry.
It spent over $2.3 million on advertising in connection with the marks
since 1996, a lot of it at trade shows.
Majestic obtained a registration for MAJESTIC in connection with the
sale of pearls in 2001. Its promotional
materials had ® next to “majestic” during that time, and when the registration
lapsed in 2008, the company continued to use those materials. When, as a result of the present litigation,
Majestic learned in October 2009 that its registration had lapsed, it stopped
using the ®. Majestic filed new
applications for the Majestic marks, which have been published; Perfect has
opposed; the proceedings were suspended pending the outcome of this suit.
There were numerous instances of actual confusion since
2009, caused by Perfect’s marketing on QVC.
“Perfect at some point ceased displaying its jewelry on QVC for a period
of time, and that a number of Perfect's customers set out to find the retailer
of the jewelry they had previously seen on QVC, and came upon Majestic, not
Perfect. Believing Majestic to be the company responsible for the line of ‘majestic
pearl’ jewelry shown on QVC, these customers reached out to Majestic to ask how
to order Perfect's products.” In
addition, a party to the Filene’s Basement bankruptcy attempted to purchase
Majestic Pearl Co.’s claim, and contacted Majestic, though it was Perfect that
had the potential claim.
The court found that Perfect, as the senior user of a
suggestive and inherently distinctive mark, was “necessarily” entitled to “exclusive”
use of the marks. Then (note the contradiction
here, not at all unique to this court) the court evaluated whether there was
likely confusion, and found that there was, but only in the sale of pearl
jewelry, not loose pearls or pearl beads.
Majestic could continue to use its trade name and use the marks on loose
pearls or pearl beads.
The court noted that the suggestive/descriptive line could
be a difficult one, and found it reasonably close here. A suggestive mark
“requires imagination, thought or perception to reach a conclusion as to the
nature of the goods,” while a descriptive mark “conveys something about the
qualities, ingredients or characteristics of a product.” Majestic argued that the term was a laudatory
mark describing the pearls, like “original” or “famous.” The Second Circuit case law wasn’t entirely
consistent, occasionally finding self-laudatory terms suggestive (e.g., “plus,”
“100%,” “first”). Being laudatory wasn’t
necessarily enough for descriptiveness.
“The defining feature of a descriptive mark is that it gives
the consumer an immediate idea of the contents of the product.” (Note that this is unduly compressed, which
may affect the analysis. It should be: a
term is descriptive when it gives the consumer an immediate idea about the
product when the consumer knows the
product. Compare Apple for computers
(arbitrary) with Apple for lipstick (descriptive). Some laudatory terms may not require that
extra step—“best” is going to be descriptive for pretty much everything—but you
still need to know the product to conduct a full descriptiveness analysis. For example, the court cited POWER CHECK as
descriptive for batteries that allow users to check the remaining power. But POWER CHECK for, say, a line of sports
apparel wouldn’t be descriptive.)
Regardless, the court ruled that “MAJESTIC does not convey
the qualities of the subject pearls with the immediacy normally associated with
a purely descriptive mark,” but instead required consumers to consult their
imaginations to determine what the pearls are like. At most, the customer could infer that the
pearls were viewed as having high quality, or that the wearer would convey a
regal or high-quality impression while wearing them. This still required imagination to grasp the
nature of the product.
The Second Circuit also considers the effect on
competitors. “MAJESTIC is not so
elemental or necessary to describe products in this area that it must be left
unprotected.” Query: what about ad copy
that says, “These pearls are truly majestic”?
Is a descriptive fair use impossible?
That seems misguided.
Finally, the court noted that Majestic’s earlier
registration wasn’t based on §2(f) acquired distinctiveness. PTO findings are given a substantial degree
of deference, at least when the evidence is in equipoise. However, the court didn’t find that Majestic
was bound by its earlier implicit position that the mark was inherently
distinctive. “The position a party takes as to distinctiveness when seeking to
register its mark with the PTO may have a sound strategic basis” (citing
McCarthy’s encouragement to applicants to seek registration based on inherent
distinction). “In light of this, the
Court is not persuaded that it needs to bind Majestic to the position it
implicitly took in front of the PTO more than a decade ago.”
The parties agreed that confusion was likely in the market
for pearl jewelry, but the court undertook its own analysis as well. As a suggestive mark, Majestic was
“moderately strong”: “inherently distinctive and entitled to some protection, [but]
otherwise weak.” This somewhat favored
Majestic. Everything else fell out as
you’d expect given the summary above. On
product relatedness:
These are different types of
products sold through different channels—Perfect sells jewelry to retail stores
largely by having store representatives visit its showroom in New York and by
cold-calling potential customers; Majestic, by contrast primarily sells its
goods at trade shows. Thus, insofar as Majestic's pearl beads and loose pearls
business is concerned, this factor favors Majestic, as it appears that its
pearl bead and loose pearl products generally do not compete directly with
Perfect’s pearl jewelry.
By contrast, “[h]aving two companies selling pearl jewelry
in a national market using effectively the same or highly similar marks
presents a high potential for confusion.”
Individual consumers weren’t sophisticated, but retail store buyers
were. Retailers, wholesalers, and
designers were likely to differentiate between the two, especially if as the
record suggested Majestic’s pearls were genuine and Perfect’s simulated.
The opinion seems to conclude that both parties have a right
to operate in the non-individual consumer market (despite the one instance of
debt buyer confusion, which didn’t represent consumers of any stripe), but the
parties may be free to litigate that at a full merits trial if they
choose. Majestic was enjoined from using
Majestic on its line of pearl jewelry.
Perfect also alleged false advertising based on use of the ®
after the registration lapsed. In the
Second Circuit, literal falsity may be enjoined without reference to an ad’s
impact on the buying public, which the court read to make a separate showing of
materiality unnecessary. Majestic used
the ® on promotional materials including shopping bags, tape measures, and
calculators at trade shows all across the country. The court found that this constituted
advertising: a way of promoting Majestic’s product to existing and potential
customers.
Perfect proved literal falsity, but didn’t present evidence
that the misuse of ® “played a substantial role in the decision of Majestic's
customers to purchase Majestic's product.”
Still, that didn’t bar an injunction.
Thus, the court granted summary judgment to Perfect, and entered an
injunction barring Majestic from misusing the ® symbol in connection with the
MAJESTIC marks on any product.
Majestic’s trademark dilution claim was moot, and useless
because it wasn’t famous.
The state law trademark infringement claims were resolved in
the same way. As for NY unfair
competition, that requires a showing of bad faith by the infringing party, but
neither party established bad faith. And
the state law false advertising claim under N.Y.G.B.L. § 350 based on use of ®
failed because the gravamen of the state law is harm to consumers, not harm to
business interests. There was no
evidence of harm to the public interest from Majestic’s inadvertent error. Also, courts have found that trademark cases
are outside the scope of the NY consumer protection statute, because the public harm from trademark infringement
is too insubstantial. As for Majestic’s
N.Y.G.B.L. § 349 claim for deceptive business practices, that requires materially
misleading practices causing harm to Majestic.
But (even ignoring the result on infringement) there was no evidence
that the marks were used in a materially misleading way or that Majestic was
harmed by Perfect’s use. And courts have
also found that trademark claims aren’t actionable under § 349 without specific
and substantial injury to the public interest over and above the ordinary harms
of infringement.
Majestic also brought a state law claim for dilution. Perfect’s seniority precluded this claim.
Majestic further raised a laches defense. Laches requires plaintiff’s knowledge of
defendant’s use, inexcusable delay, and prejudice to the defendant. Perfect first became aware of Majestics use
around October 2009, after the instances of actual confusion, and Perfect sued
in May 2010, after a “lengthy” exchange with Majestic’s counsel at the
time. The relevant statute of
limitations for borrowing purposes is six years. Perfect sued well within that period. Thus, prejudice couldn’t be presumed. Majestic couldn’t show any, and Majestic was
on notice of a possible lawsuit as soon as Perfect reached out.
Majestic argued that Perfect had constructive notice by
virtue of Majestic’s 2000 registration.
But knowledge is imputed to a party of another's use of the marks only
where “the facts already known to him were such as to put upon a man of
ordinary intelligence the duty of inquiry.” (Hmm, I wonder whether that’s a correct
statement of the law in the ordinary case.
Registration provides constructive notice, and a junior user can’t avoid
that by claiming that an ordinary business in its position wouldn’t have
searched the register and had actual notice; that’s part of the point of
registration. But perhaps senior users
are in a different position.) Majestic
failed to explain what facts known to Perfect would have created a duty to
inquire as to Majestic’s use.
Also, it was purely speculative to argue that Perfect knew
as of December 2007, when it looked for a website name and searched a database of
potential domain names for different iterations of “Majestic [and] some other
adjective.” That didn’t mean that
Perfect must have found out about
Majestic’s website, majesticpearl.com.
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