Malletier v. Burlington Coat Factory Warehouse Corp.

• Decision Date: 12 October 2005
• Docket Number: Docket No. 04-2907-CV.
• Citation: 426 F.3d 532
• Parties: Louis Vuitton MALLETIER, Plaintiff-Appellant, v. BURLINGTON COAT FACTORY WAREHOUSE CORP., Defendant-Appellee, Four Seasons Handbags Company, and John Does 1-10, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

Page 532

426 F.3d 532

Louis Vuitton MALLETIER, Plaintiff-Appellant, v. BURLINGTON COAT FACTORY WAREHOUSE CORP., Defendant-Appellee Four Seasons Handbags Company, and John Does 1-10, Defendants.

Docket No. 04-2907-CV.

United States Court of Appeals, Second Circuit.

Argued: March 2, 2005.

Decided: October 12, 2005.

COPYRIGHT MATERIAL OMITTED

Theodore C. Max, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (Charles A. LeGrand, of counsel), New York, NY, for Plaintiff-Appellant.

Robert S. Weisbein, Darby & Darby (Edward V. DiLello and Atul R. Singh, of counsel), New York, NY, for Defendant-Appellee.

Before: CALABRESI, POOLER, and B.D. PARKER, Circuit Judges.

CALABRESI, Circuit Judge.

When faced with the claim that two products are confusingly similar, a person's natural reaction is to place the two products side-by-side, and then, looking back and forth at them, to ascertain how comparable the two goods are. This process of simultaneous observation is, without doubt, an efficient way of identifying similarities and differences between products. One can understand, then, why district courts would engage in such a process as part of their resolution of trademark infringement suits under the Lanham Act, 15 U.S.C. § 1051 et seq. However, while simultaneous comparison may be a useful heuristic means of identifying the similarities and differences between two products, the ultimate conclusion as to whether a substantial number of consumers are likely to be confused by the similarities must be reached with a focus on actual market conditions and the type of confusion alleged. Where products in the relevant market are not typically displayed in the same locations, centering on whether they are likely to be distinguished when viewed simultaneously is incorrect, and will result in a faulty likelihood-of-confusion analysis.

In this case, it appears that the district court (Berman, J.) denied a preliminary injunction, at least in part on the basis of an inappropriate focus on the likelihood that consumers would be confused when viewing the products side by side. We therefore vacate the judgment and remand for further proceedings.

I. BACKGROUND

Plaintiff-Appellant Louis Vuitton Malletier ("LVM") is a famous French fashion design firm engaged in the business of designing, manufacturing, importing, advertising, selling and distributing designer luggage, handbags, travel leather accessories, high fashion apparel and accessories. LVM owns the federally registered Louis Vuitton Toile Monogram Designs ("Toile marks"), its flagship handbag design, which was first introduced in France in the spring of 1896. LVM also owns the unregistered Louis Vuitton Monogram Multicolore Designs ("Multicolore mark"), developed in 2002 by New York fashion designer Marc Jacobs and Tokyo-based artist Takashi Murakami and introduced in the spring of 2003. The Multicolore marks are updated versions of the traditional Toile marks, slightly rearranged and printed in a variety of colors on white or black leather surfaces. Since their introduction two years ago, they have been very successful, and (despite a selling price of between $400 and $4,000 per Multicolore bag) production has not kept up with demand.

LVM's Toile marks consist of eight trademarks registered with the U.S. Patent and Trademark Office ("PTO"). Three of those marks are "incontestable" under 15 U.S.C. § 1065, which provides that a registered mark in continuous use for a five-year period is presumptively valid.¹ The Toile Designs feature "entwined LV initials with three motifs, a curved diamond with a four-point star inset, its negative, and a circle with a four-leafed flower inset." It is these three motifs, which have been used for nearly a century on LVM's handbags, clothing, and jewelry, that are "incontestable" under the Lanham Act.

In October 2002, Louis Vuitton introduced four new collections of "multicolored patterns and styles of handbag and accessory designs based upon [the Toile marks]," one of which featured the Multicolore mark. The Multicolore mark consists of the Louis Vuitton Toile Monogram pattern in 33 colors on either a white or black background and includes the four-leafed flower inset and the positive and negative of the curved diamond with a four-point star inset. As previously mentioned, the Multicolore mark, which includes visual elements of LVM's registered Toile trademarks (including the "four-leafed flower inset"), has become "extremely popular," but is currently unregistered.

In the United States, both the Toile and the Multicolore LVM handbags are sold in more than 90 Louis Vuitton stores, as well as through LVM's affiliated website, www.eluxury.com. LVM bags are also available at "exclusive department and specialty retail stores" such as Neiman Marcus, Macy's, Bloomingdale's, and Saks Fifth Avenue. To date, LVM has sold over 47,000 of its Multicolore bags in the United States, with sales totaling over $25 million.

Defendant-Appellant Burlington Coat Factory ("BCF") is a discount clothing and accessory retail chain with 341 retail stores in 42 states. BCF also conducts extensive commerce through its website, www.bcfdirect.com. Burlington has become famous for selling name-brand fashions and accessories at discount prices. At the time relevant to this lawsuit, BCF's website claimed to sell "the very best designer and famous label fashions, 20% — 60% off department store prices." See www.bcfdirect.com (via www.archive.org capture, October 2003). But despite the presence of other famous fashion brands, LVM has never sold its Toile or Multicolore bags in BCF's stores or on BCF's website.

On October 10, 2003, Burlington began offering for sale a line of beaded handbags ("BCF bags") with colorful designs reminiscent of the LVM Multicolore bags. Specifically, the BCF bags are "[1] beaded on their entire exterior surface; [2] decorated with the letters `NY' standing for `New York;' and [3] also decorated with an assortment of shapes, including circles, diamonds and flowers," on a white or black background. These bags, manufactured by Four Seasons under the "Pengyuan" name, were sold by BCF using the sales code and style number "LVTN" (apparently shorthand for "Louis Vuitton") at a price of $29.98 per bag. Id. BCF sold approximately 1,700 such bags before this litigation began.

BCF's buyer, Clare Larson, testified that, when she purchased the bags at issue, she was immediately aware that they would remind consumers of LVM's popular Multicolore bags. In Larson's words:

From the first time [I] saw samples of the [BCF bags], I was aware that their design pattern would call to mind products offered by Vuitton, among other manufacturers, which are also decorated with criss-cross patterns featuring a letter or monogram, and which are currently popular in the marketplace. I considered that the look of the [BCF bags] might make BCF customers think of other popular handbag styles, including Vuitton bags. However, this was certainly not the only reason BCF chose to buy the [BCF bags].

BCF, in its brief to this Court, states that the bags were purchased, in part, because of their resemblance to LVM's bags, and that, in addition to Larson, "others at BCF were aware that the pattern of the [BCF bags] might call to mind handbags offered by other manufacturers, including (but not only) [LVM]." But it also asserts that other factors were important in the purchasing decision, including price and the bag's unique beaded fabric.

Upon learning of the BCF "Pengyuan" bags in January 2004, LVM started an investigation into their origin. On February 20, 2004, LVM issued to BCF a cease-and-desist letter specifically addressing the BCF bags. BCF and LVM then began negotiations that ran through March 2004. The negotiations broke down on April 6, 2004, when BCF sent LVM a letter, confirming its refusal to stop selling the BCF bag.

The next day, LVM brought suit against BCF, the Four Seasons Handbag Company ("Four Seasons") and John Does 1-10. In its complaint, LVM claimed trademark infringement and counterfeiting under 15 U.S.C. §§ 1114, 1116, unfair competition and false designation of origin under 15 U.S.C § 1125(a), trade dress infringement under 15 U.S.C. § 1125(c), and trademark dilution under 15 U.S.C. § 1125(c). It also asserted related claims of unfair competition and trademark dilution under state law, including N.Y. General Business Law § 360-1 and the general common law of New York. LVM sought, inter alia, disgorgement of profits, treble and punitive damages, costs, and attorney's fees, along with injunctive relief barring BCF's continued sale of the allegedly infringing handbags.

On May 6, 2004, the district court (Berman, J.) held oral argument on LVM's motion for a preliminary injunction. At that hearing, BCF presented a consumer survey conducted by Walter McCullough, president of Monroe Mendelsohn Research, Inc. The McCullogh study purported to demonstrate that the BCF handbags were not likely to create point-of-sale confusion with LVM's handbags. McCullogh's report concluded that "[t]otal likely confusion [equaled] [l]ess than 10%" among women 18 and older.

In rebuttal, LVM presented the testimony of Dr. Robert C. Sorensen, who took issue with the methodology and conclusions of the McCullough report. Sorensen contended that the sampling methodology for the McCullough report, as well as the order in which products were displayed and questions were asked, systematically lowered the incidence of point-of-sale confusion. If these errors were corrected, Sorensen asserted, consumer confusion would equal at least 18%, and perhaps much more if only self-identified "fashion-conscious" consumers were sampled. LVM did not, however, submit its own survey evidence on the issue of confusion.

On May 24, 2004, the court denied LVM's request for a preliminary injunction. The court determined that, because point-of-sale confusion was unlikely, LVM had not established...