Hermes Int'l v. Lederer De Paris Fifth Ave.

• Decision Date: 01 August 1999
• Docket Number: Docket No. 99-9283
• Parties: (2nd Cir. 2000) HERMES INTERNATIONAL, ET AL, Plaintiffs-Appellants, v. LEDERER DE PARIS FIFTH AVENUE, INC. and ARTBAG CREATIONS, INC., Defendants-Appellees. (L), 99-9365(XAP)
• Court: U.S. Court of Appeals — Second Circuit

Page 104

219 F.3d 104 (2nd Cir. 2000)

HERMES INTERNATIONAL, ET AL, Plaintiffs-Appellants, v. LEDERER DE PARIS FIFTH AVENUE, INC. and ARTBAG CREATIONS, INC., Defendants-Appellees.

Docket No. 99-9283(L), 99-9365(XAP)

August Term, 1999

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

(Argued: May 5, 2000)

(Decided: July 10, 2000)

CHRISTOPHER LANDAU, Kirkland & Ellis, Wahington, DC, for Plaintiffs-Appellants-Cross-Appellees.

ANTHONY H. HANDAL, Handal & Morofsky, Norwalk, Connecticut, for Defendants-Appellees-Cross-Appellants.

Before: MESKILL, CABRANES, Circuit Judges, TELESCA, District Judge.^*

Appeal and Cross-Appeal from the March19, 1999 judgment of the UnitedStates District Court for the Southern District of New York (Scheindlin, J), granting in part and denying in part appellees' motions for summary judgment, and denying appellees' motions for attorneys' fees. Affirmed in part, Reversed in part and Remanded.

TELESCA, Senior United States District Judge:

Appellants Hermes International, Hermes Sellier, Hermes Gestion, Inc., and Hermes of Paris, Inc., (collectively referred to as "Hermes"), appeal an Order of final judgment entered by the UnitedStates District Court for the Southern District of New York (Scheindlin, J.) granting summary judgment in favor of appellees Lederer de Paris Fifth Avenue, Inc. ("Lederer"), and Artbag Creations, Inc., ("Artbag"). See Hermes Int'l v. Lederer de Paris Fifth Ave., Inc., 50F. Supp.2d 212 (S.D.N.Y. 1999). Hermes, which brought this trademark and trade dress infringement action against Lederer and Artbag seeking monetary and injunctive relief, claims that the district court erred in granting appellees' motions for summary judgment with respect to Hermes' claim for injunctive relief, and erred in fully granting Artbag's motion for summary judgment with respect to Hermes' monetary damages claims. Hermes argues on appeal that the district court erroneously held that the doctrine of laches barred Hermes' claim for injunctive relief against both defendants and for monetary relief against defendant Artbag with respect to certain allegedly infringing products. Appellees cross-appeal claiming that the district court erred in determining that Hermes had not abandoned its right to enforce the trademarks and trade dress at issue and in accordingly denying their motions for summary judgment. Appellees also claim on cross-appeal that the district court erred in denying their motions for attorneys' fees.

For the reasons set forth below, we affirm the district court's denial of appellees' motions for attorneys' fees, and deny appellees' cross-appeal on the issue of abandonment on grounds that the order appealed from is not a final order, and thus is not appealable. We find, however, that the district court erred in applying the doctrine of laches to appellants' claim for injunctive relief, and applied the doctrine too broadly with respect to appellants' claim for damages. Accordingly, we remand this case for further proceedings consistent with this opinion.

BACKGROUND

Appellant Hermes is a manufacturer and retailer of high-quality handbags and other fashion accessories. According to Hermes, its products incorporate a number of distinctive design characteristics that constitute its "famous mark and trade dress." Hermes, 50 F. Supp. 2d at 215. Detailed descriptions of these items are found in the district court's opinion. See id. at 215-16.

Appellees Lederer and Artbag sell replicas of various Hermes products such as the "Kelly Bag," a handcrafted purse with an average selling price of over $5,000, with some models selling for over $30,000. Id. at 215, n.4. Some of the knockoff bags sold by Lederer sell for as much as $27,000.00. Id. at 218.

According to the record, Hermes knew that Lederer and Artbag had been selling copies of Kelly bags since at least 1979 and 1989 respectively. Id. at 223. Hermes claimed, however, that it did not become fully aware of the scope of the appellees' alleged infringement until 1996, when it began investigating Lederer and Artbag's sales of knockoff Hermes products. According to Hermes, its investigation revealed that Lederer and Artbag were selling entire lines of knockoff Hermes products. In 1998, upon completion of its investigation, Hermes brought suit against the appellees pursuant to Section 32 of the Lanham Act of 1946, 15 U.S.C. § 1114; Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); Section 43(c) of the Lanham Act, 15 U.S.C. §1125(c); New York General Business Law § 360-1; and New York common law seeking monetary and injunctive relief for the alleged violation of its trademarks and trade dress.

Appellees moved for summary judgment against Hermes on grounds that Hermes had abandoned its trademark and trade dress rights, or, in the alternative, that Hermes was estopped from obtaining relief under the doctrine of laches. The district court held that appellees had not met their burden of proving that Hermes had abandoned its trademarks or trade dress, and accordingly denied in part appellees' motions. Id. at 222. The district court found, however, that Hermes had unreasonably delayed bringing an infringement suit against Lederer and Artbag, and thus was barred by the doctrine of laches from obtaining monetary or injunctive relief against those companies. The district court determined that the delay of between 9 and 19 years in bringing suit against Lederer and Artbag was unreasonable and prejudiced the appellees. Accordingly, the district court granted appellees' motions for summary judgment with respect to Hermes' claims for monetary damages and injunctive relief.

DISCUSSION

I. Summary Judgment Standard

A district court's grant of summary judgment is reviewed de novo. Terwilliger v. Terwilliger, 206 F.3d 240, 244 (2d Cir. 2000). Summary judgment is appropriate when there is no genuine issue as to a material fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); see Galabya v. New York City Bd. of Educ., 202 F.3d 636, 639 (2d Cir. 2000) (citing Fagan v. New York State Elec. & Gas Corp., 186 F.3d 127, 132 (2d Cir. 1999)). All inferences are drawn in favor of the non-moving party. Carlton v. Mystic Transp., Inc., 202 F.3d 129, 133 (2d Cir. 2000). Although the district court did not address whether or not Hermes' designs are protectable as trademarks or trade dress, in viewing the record in the light most favorable to the non-movant below, Hermes, this court presumes that the designs are protected.

II. Laches

A. Injunctive Relief

In evaluating whether laches should bar Hermes request for injunctive relief, the district court began by noting that "the balance of the equities must be weighed, including an analysis of defendants' intent and the public interest." 50 F. Supp. 2d at 225. The court then determined that because appellees Lederer and Artbag did not use the name "Hermes " on their products and because they openly acknowledged to customers that their products were Hermes copies, the appellees had not deceptively attempted to "pass off" or "palm off" their products as genuine Hermes. Id. However, the court also found that by explicitly informing their customers that the style and workmanship of the knock-offs were such that no third party observer would be able to tell they were not genuine Hermes bags, the appellees had "attempt[ed] to encourage consumer confusion in the post-sale context." Id. The court went on to consider the public interest and concluded that, although the behavior of appellees Artbag and Lederer might have increased their companies' sales at the expense of Hermes, it did not harm the public in the post-sale context and therefore did not compel rejection of the laches defense. Id. at 225-26.

In so holding, the district court misapplied the law governing the doctrine of laches. It is well established that "laches is not a defense against injunctive relief when the defendant intended the infringement." Harlequin Enters. Ltd. v. Gulf & W. Corp., 644 F.2d 946, 950 (2d Cir. 1981); see also Nihon Keizai Shimbun, Inc. v. Comline Bus. Data Inc., 166 F.3d 65, 75 (2d Cir. 1999)(quoting Harlequin). This good-faith component of the laches doctrine is part of the fundamental principle that "he who comes into equity must come with clean hands." Precision Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806, 814 (1945). Thus, the appellees' intentional infringement is a dispositive, threshold inquiry that bars further consideration of the laches defense, not a mere factor to be weighed in balancing the equities, as the district court did in this case.

Viewing the record in a light most favorable to Hermes, it is clear that appellees Lederer and Artbag intentionally copied Hermes' designs and sought to sell knockoffs of Hermes originals. Appellees thus intentionally traded off the Hermes name and protected products and should not have been entitled to invoke the doctrine of laches as a defense against Hermes' claims for injunctive relief.

The district court's ruling that Hermes' claims should be barred by the doctrine of laches was based, in part, on the erroneous conclusion that the appellees' conduct did not create confusion among consumers or harm the public. Trademark laws exist to protect the public from confusion. The creation of confusion in the post-sale context can be harmful in that if there are too many knockoffs in the market, sales of the originals may decline because the public is fearful that what they are purchasing may not be an original. Furthermore, the public may be deceived in the resale market if it requires expertise to distinguish between an original and a knockoff. Finally, the purchaser of an original is harmed by the widespread existence of knockoffs because the high value of originals, which derives in part from their scarcity, is lessened.

The Eleventh Circuit concisely summarized the theory behind protecting the public interest...