568 F.3d 390 (2nd Cir. 2009), 08-3181, JA Apparel Corp. v. Abboud

Docket Nº:08-3181-cv.
Citation:568 F.3d 390, 91 U.S.P.Q.2d 1095
Opinion Judge:KEARSE, Circuit Judge:
Party Name:JA APPAREL CORP., Plaintiff-Counterclaim-Defendant-Appellee, v. Joseph ABBOUD, Houndstooth Corp., Herringbone Creative Services, Inc., Defendants-Counterelaimants-Appellants, v. Martin Staff, Counterclaim-Defendant-Appellee.
Attorney:Thomas A. Smart, New York, N.Y. (Phillip A. Geraci, Richard A. De Sevo, Michael Denvir (pending admission), Kaye Scholer, New York, NY, on the brief), for Plaintiff-Counterclaim-Defendant-Appellee and Counterclaim-Defendant-Appellee. Randy Lipsitz, Kramer Levin Naftalis & Frankel, New York, N.Y. ...
Judge Panel:Before: KEARSE, SACK, and KATZMANN, Circuit Judges.
Case Date:June 10, 2009
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 390

568 F.3d 390 (2nd Cir. 2009)

91 U.S.P.Q.2d 1095

JA APPAREL CORP., Plaintiff-Counterclaim-Defendant-Appellee,

v.

Joseph ABBOUD, Houndstooth Corp., Herringbone Creative Services, Inc., Defendants-Counterelaimants-Appellants,

v.

Martin Staff, Counterclaim-Defendant-Appellee.

No. 08-3181-cv.

United States Court of Appeals, Second Circuit.

June 10, 2009

Argued: Oct. 22, 2008.

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[Copyrighted Material Omitted]

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Thomas A. Smart, New York, N.Y. (Phillip A. Geraci, Richard A. De Sevo, Michael Denvir (pending admission), Kaye Scholer, New York, NY, on the brief), for Plaintiff-Counterclaim-Defendant-Appellee and Counterclaim-Defendant-Appellee.

Randy Lipsitz, Kramer Levin Naftalis & Frankel, New York, N.Y. (Louis Ederer, Arnold & Porter, New York, NY, on the brief) for Defendants-Counterclaimants-Appellants.

Before: KEARSE, SACK, and KATZMANN, Circuit Judges.

Judge SACK concurs, in a separate opinion.

KEARSE, Circuit Judge:

Defendants Joseph Abboud (" Abboud" ) et al. appeal from so much of a final judgment entered in the United States District Court for the Southern District of New York following a bench trial before Theodore H. Katz, Magistrate Judge, as permanently enjoined them from using, inter alia, the name " Joseph Abboud" to sell, market, or promote, goods, products, or services to the consuming public, and dismissed their counterclaims against plaintiff JA Apparel Corp. (" JA Apparel" or " JA" ) and counterclaim-defendant Martin Staff alleging improper use of Joseph Abboud's name. The district court found that JA, Abboud, and defendant Houndstooth Corp. (" Houndstooth" ) had entered into an unambiguous contract pursuant to which Abboud and Houndstooth sold to JA the exclusive rights to the commercial use of the name " Joseph Abboud" and trademarks containing that name, and that Abboud's proposed use of his name in connection with a new line of clothing would breach the terms of that sale agreement and infringe trademarks sold to JA. On appeal, defendants contend principally that the district court misinterpreted the sale agreement, erred in rejecting their defense of fair use, and fashioned an overly broad injunction. For the reasons that follow, we conclude that the district court erred in finding that the sale agreement is unambiguous

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and in declining therefore to consider extrinsic evidence as to the contracting parties' intent. We also conclude that the judgment cannot be upheld on the basis of the court's rulings on the trademark issues. We thus vacate the judgment and remand for further proceedings on the contract issue and, if necessary, on the trademark issues.

I. BACKGROUND

The following facts are taken from the district court's findings after trial, see JA Apparel Corp. v. Abboud, 591 F.Supp.2d 306 (S.D.N.Y.2008) (" JA Apparel " ), and, unless otherwise indicated, are not disputed.

A. The Parties

Abboud is a world-famous fashion designer and philanthropist whose work in both capacities has garnered numerous honors and awards. Defendants Houndstooth and Herringbone Creative Services, Inc. (" Herringbone" ), are companies wholly owned by Abboud. Since 1987, Abboud's personal name " Joseph Abboud" has been registered as a trademark with the United States Patent and Trademark Office.

JA is a corporation engaged in the manufacture, marketing, and sale of products using " Joseph Abboud" trademarks; Martin Staff is JA's chief executive officer. JA was formed in 1988 as a joint venture between Houndstooth and GFT International B.V. (" GFT" ) and operated under a license from Abboud. In 1996, GFT purchased Houndstooth's interest in JA, thereby becoming JA's sole owner. The 1988 license was canceled and Abboud issued new licenses to JA.

B. The Sale Agreement

In 2000, Abboud, Houndstooth, and JA entered into an Agreement of Purchase and Sale dated June 16, 2000, and executed on July 13, 2000 (" Sale Agreement" or " Agreement" ), for the sale of certain assets to JA. The Sale Agreement provided in pertinent part that Abboud and Houndstooth would, in exchange for the payment to Abboud of $65.5 million, transfer to JA all of their

right, title and interest in and to:

(A) The names, trademarks, trade names, service marks, logos, insignias, and designations identified on Schedule 1.1(a)(A), and all trademark registrations and applications therefor, and the goodwill related thereto (collectively the " Trademarks" ), together with all causes of action (and the proceeds thereof) in favor of [Abboud and Houndstooth] heretofore accrued or hereafter accruing with respect to any of the Trademarks, and all other Intellectual Property (as hereinafter defined).

(B) All licenses to use the Trademarks granted by Houndstooth or Abboud. (collectively, the " License Agreements" ).

(C) All rights to use and apply for the registration of new trade names, trademarks, service marks, logos, insignias and designations containing the words " Joseph Abboud," " designed by Joseph Abboud," " by Joseph Abboud," " JOE" or " JA," or anything similar thereto or derivative thereof, either alone or in conjunction with other words or symbols (collectively, the " New Trademarks" ), for any and all products or services.

(D) All books, financial records, invoices, and other documents, records and data files relating primarily to the Trademarks or the License Agreements.

(E) The goodwill of or pertaining to the Trademarks. (The items referred to in clauses (A) through (E) of this Section

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1.1(a) are collectively referred to as the " Assets" ).

(Sale Agreement ¶ 1.1(a) (emphasis in original).) The Agreement defined " Intellectual Property," referred to in ¶ 1.1(a)(A), as " all of the trademark registrations, service mark registrations and applications and copyright registrations and applications currently used by [Abboud and Houndstooth] in connection with the Trademarks" listed in " Schedule 1.1(a)(A). " ( Id. ¶ 3.6(a) (emphasis in original).)

Schedule 1.1(a)(A), referred to in ¶ ¶ 1.1(a)(A) and 3.6(a), bore the title " Joseph Abboud/J.A. Apparel," with a subheading " Trademark Report by Mark." It listed pending and completed trademark and service mark registrations in various countries, grouped largely by type of design, with headings such as " Diamond and Rectangle Design," " Miscellaneous Diamond Design," " Joseph Abboud," " Joseph Abboud & Design," and " Joseph Abboud and Miscellaneous Diamond Design."

In conjunction with their execution of the Sale Agreement on July 13, 2000, Abboud and JA also executed a Personal Services Agreement that was to span a total of seven years. In the Personal Services Agreement, Abboud agreed that for the first five years he would provide personal services to JA (the " personal services period" ) by, inter alia, becoming " Chairman Emeritus" and supplying ideas for the design and marketing of " Joseph Abboud" products. For two additional years, Abboud agreed not to compete with JA (the " non-compete period" ).

C. The Present Action

During the non-compete period of the Personal Services Agreement, which ended on July 13, 2007, Abboud undertook, in part through Herringbone, preparations for the design and launch of a new collection of high-end men's clothing for sale under the label " jaz" in the fall of 2008. Abboud's plans became public in two articles published on August 6, 2007, one in the Wall Street Journal -Ray A. Smith, What's in a Name? Not Much, He Hopes, Wall Street Journal, Aug. 6, 2007, at B1-and the other in DNR, the leading magazine of the men's fashion industry. The DNR article initially stated that " Abboud, the person, is prohibited from using the Joseph Abboud name on any product or marketing materials." David Lipke, All That Jaz: Abboud Unveils His New Label, DNR, Aug. 6, 2007, at 12. At Abboud's request, however, DNR issued a " Clarification" that stated, " according to Abboud and his attorney, ... the designer ... is, in fact, allowed to use his name on marketing and advertising materials for Jaz." DNR, Aug. 13, 2007, at 5.

JA commenced the present action on September 4, 2007. Its complaint alleged principally that Abboud's proposed use of his personal name to sell the " jaz" brand breached the Sale Agreement and constituted trademark infringement in violation of § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), and New York common law. The complaint also contained claims of, inter alia, false designation of origin and trademark dilution in violation of § § 43(a) and (c) of the Lanham Act, 15 U.S.C. § § 1125(a) and (c), and New York General Business Law (" N.Y.Gen.Bus.Law" ) § 360-1, and false and deceptive trade practices in violation of N.Y. Gen. Bus. Law § § 349-50. JA requested damages and permanent injunctive relief, and it moved for a preliminary injunction.

Abboud, Houndstooth, and Herringbone denied wrongdoing and asserted defenses of, inter alia, trademark fair use and unclean hands. They also asserted counterclaims alleging that JA and Staff had improperly used Abboud's name in connection with " Joseph Abboud" products

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following the expiration of the Personal Services Agreement's personal services period. The counterclaims alleged that JA and Staff had thereby engaged in, inter alia, false endorsement, false advertising, and unfair competition, and had violated New York civil rights laws. The counterclaims requested injunctive relief and damages.

The parties consented to have the proceedings conducted before a magistrate judge. They also agreed to have the magistrate judge conduct a hearing on JA's preliminary injunction motion consolidated with trial on the merits.

Prior to the trial, JA moved in limine to exclude parol evidence as to...

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