Via Sarah Burstein:
Worldwide Diamond Trademark S, Ltd., v. Blue Nile, Inc., No.
14-cv-03521 (S.D.N.Y. Nov. 6, 2014)
Worldwide sought a preliminary injunction in its patent and
trade dress lawsuit against Blue Nile for allegedly copying its Hearts and
Arrows trade dress/diamond design. The
court declined, citing Worldwide’s failure to show irreparable harm; any lost
sales or goodwill could be adequately compensated with damages, since the only
record evidence was that Worldwide had lost some business/business
opportunities. Other posited harms were
speculative and remote.
Worldwide makes cushion-cut diamonds, called the Ideal
Cushion, which generate a “hearts and arrows” pattern visible in the
presence of light at low magnification.
It has a patent for the design of its cushion-shaped diamond and a
pending application for “Ideal Cushion with corresponding diamond design.” Worldwide diamonds come from Canada and thus
cost more than diamonds from other sources; to maintain its profits, Worldwide
charges a premium, and allegedly cultivated a reputation of exclusivity by
telling customers that the Ideal Cushion cannot be obtained from any other
source. Worldwide only sells its
proprietary cuts to brick and mortar retailers. It also has a relationship with
De Beers allowing it to obtain high quality rough diamonds, and certifications
from Forevermark, the De Beers brand reserved for the most exclusive and
reputable diamond manufacturers.
Blue Nile, an online retailer, also sells cushion-cut
diamonds that generate a hearts and arrows pattern. Blue Nile also has a patent for its diamonds.
Worldwide sought a preliminary injunction, and irreparable
harm is the most important prerequisite.
Irreparable injury requires injury that is neither remote nor
speculative, but actual and imminent.
The evidence the court discussed was as follows: Worldwide marketed
itself as the exclusive provider of cushion-cut diamonds that generate a hearts
and arrows pattern, enabling it to charge a premium. But soon after its introduction, Blue Nile began
selling the Blue Nile diamond. Worldwide
claimed that an unidentified number of its retailers returned an unquantified
number of the Ideal Cushion diamonds t because their customers believed that
they could purchase similar diamonds directly from Blue Nile. In addition, Worldwide
claimed that it lost other opportunities for new business because customers were
expressing doubt that Worldwide Diamond was the exclusive provider of cushion-cut
diamonds that generate a hearts and arrows pattern. A Malaysian diamond
retailer decided to delay a contract with Worldwide and a U.S. based jewelry
manufacturer and distributor “withdrew [its] interest” in selling the Ideal
Cushion. Worldwide was also concerned that loss of exclusivity could threaten
its relationship with Forevermark, De Beers, and two U.S. retailers, which
could negatively impact its reputation, sales, and revenues. Finally, Worldwide argued that Blue Nile’s
competition would force Worldwide to lower its prices, leading to insolvency.
But the mere possibility of irreparable harm was
insufficient. Worldwide only provided
speculation about the risk of losing additional customers. It claimed to have suffered returns because
of the Blue Nile diamonds, but didn’t produce affidavits, emails, letters, or
any other form of correspondence from these retailers or customers to
substantiate this claim. A subjective belief in injury was insufficient. Worldwide didn’t offer evidence that sales
decreased from prior years or below projections since the Blue Nile diamonds
entered the market, and even if it had, it would have needed to show a causal
connection.
Nor did Worldwide show evidence that its business
relationship with either Forevermark or De Beers was in jeopardy. Neither
Forevermark nor De Beers had indicated that these relationships were at risk. As for price erosion, Worldwide hadn’t
lowered its prices, and had no expert or other testimony about the likelihood
of price erosion, or evidence that retail customers had requested price
reductions because of the Blue Nile diamonds.
Moreover, any injury would be compensable with money
damages. If Worldwide ultimately
prevailed, Worldwide’s sales could be compared against its established track
record and its reasonable forecasts to determine the extent of its damages. What about goodwill? Well, when a product has a sales record and
its loss wouldn’t affect other aspects of business, damages could generally be
proven. “In general, injury resulting
from the loss of goodwill is irreparable only when ‘the very viability of the
plaintiff’s business, or substantial losses of sales beyond those of the
terminated product, have been threatened.’”
Here, however, Worldwide’s history of operation allowed it
to calculate money damages for any lost goodwill. Worldwide had sold more than
7,600 diamonds that generate the hearts and arrows pattern, and made at least
fifteen different types of proprietary cut diamonds. By contrast, Blue Nile
sold a redacted but apparently non-significant number of Blue Nile diamonds;
even if every Blue Nile sale constituted a lost sale to Worldwide, the court
held, it was “inconceivable” that those losses would completely destroy
Worldwide’s business.
At the hearing, Worldwide didn’t identify what percentage of
its business was based on sales of the Ideal Cushion or quantify the number of
retailers who returned diamonds or how many were returned. Without that, the
court wouldn’t speculate that such returns or loss of goodwill would threaten
the viability of Worldwide’s overall business.
Thus, Worldwide failed to show that any harm resulting from the loss of
goodwill was irreparable.
Worldwide’s alleged lost business opportunities with a Malaysian
diamond retailer and U.S. manufacturer didn’t come with evidence about the stage
of negotiations, the length or term of the contract, or the quantity of
products to be provided, so it was “entirely unclear” that Worldwide lost an
actual, tangible, business opportunity as a result of the alleged infringement.
Moreover, Worldwide failed to establish a causal link between Blue Nile
diamonds and its lost opportunities. It
also didn’t assert obstacles to calculating damages for these lost business
opportunities.
Finally, Blue Nile averred that it could satisfy any damage
award in the event liability
Injunctive relief denied.
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