Vibrant Sales, Inc. v. New Body Boutique, Inc.

• Decision Date: 29 June 1981
• Docket Number: No. 744,D,744
• Parties: VIBRANT SALES, INC., Plaintiff-Appellee, v. The NEW BODY BOUTIQUE, INC., Maximum Exposure Advertising Inc., Harvey S. Fishman and Avram C. Freedberg, Defendants-Appellants. ocket 80-7877.
• Court: U.S. Court of Appeals — Second Circuit

Page 299

652 F.2d 299

211 U.S.P.Q. 297

VIBRANT SALES, INC., Plaintiff-Appellee, v. The NEW BODY BOUTIQUE, INC., Maximum Exposure Advertising

Inc., Harvey S. Fishman and Avram C. Freedberg,

Defendants-Appellants.

No. 744, Docket 80-7877.

United States Court of Appeals,

Second Circuit.

Argued March 30, 1981.

Decided June 29, 1981.

George B. Yankwitt, Esq., New York City (Floran L. Fink, Mark J. Sugarman, Robinson, Silverman, Pearce, Aronsohn & Berman, New York City, of counsel), for defendants-appellants.

Jacob W. Heller, New York City (Richard F. Horowitz, Heller, Horowitz & Feit, P.C., New York City, of counsel), for plaintiff-appellee.

Before WATERMAN and MANSFIELD, Circuit Judges, and B. NEWMAN, Judge. ^*

MANSFIELD, Circuit Judge:

In this action for unfair competition and breach of contract defendants The New Body Boutique, Inc., Maximum Exposure Advertising Inc. ("MEA"), Harvey S. Fishman, and Avram C. Freedberg appeal from a decision of the District Court for the Southern District of New York, entered by Judge Morris E. Lasker after a non-jury trial, holding that defendants, by selling a waist-reducing belt called "Shrink Wrap" in competition with a similar belt already being marketed by plaintiff Vibrant Sales, Inc. ("Vibrant"), under the name "Waist Away," violated § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), ¹ and breached an agreement We reverse. Since Vibrant's Lanham Act claim alleged that defendants' actions amounted to a false designation of origin, a violation could only have been made out if it had been shown that Vibrant's "Waist Away" belt (which defendants allegedly copied) had acquired secondary meaning and that the features allegedly copied were non-functional in nature. No such finding was or could have been made. The district court's decision on the Lanham Act allegation was therefore incorrect. The district court also erred in its interpretation of the agreement on which Vibrant's contract claim was based.

between Vibrant and defendants Fishman and Freedberg (MEA's assignees), entitling Vibrant to permanent injunctive relief.

In late 1978 or early 1979, Isaac Bikel, Vibrant's principal owner, began marketing a waist-reducing belt called "Waist Away" on a limited scale. This original belt, which was never patented or trademarked, consisted of a strip of thick black rubber which could be fastened around the waist by the use of a set of Velcro fasteners. In order to increase sales, Vibrant entered into a joint venture agreement with MEA on September 4, 1979. Under the terms of that agreement, MEA was to market Vibrant's Waist Away belt nationwide.

By the end of 1979 the joint venture was enjoying considerable success as a result of MEA's extensive advertising campaigns. ² Despite this prosperity, the joint venturers had a falling out early in 1980 and determined to end their relationship. After extensive negotiations in which both sides were represented by counsel, a "Termination Agreement" ("Agreement") was executed which provided that MEA's assignees, Fishman and Freedberg, should relinquish their half interest in the joint venture to Vibrant for the sum of $1,250,000 cash, the greater part of which represented sales already consummated but not yet accounted for to the joint venturers. The Agreement contained a clause which defined MEA's continuing right to compete in the waist-reducing belt market in the future (the "freedom-to-compete" clause):

"Sellers, MEA and any organization or other entity organized by Sellers, shall be free, without restriction or claim by the Purchaser, to sell, advertise, market, manufacture, distribute or promote, by mail order or otherwise, ... a reducing belt or other similar or related products, except that:

"(a) the name 'Waist-Away' shall not be used in any advertisement to describe any product, except as may otherwise be authorized herein;

"(b) The name 'Vibrant' and 'Vibrant Sales' shall not be used, except as may be authorized herein;

"(c) The likeness of the persons depicted in the advertisement annexed hereto as Exhibit B shall not be used;

"(d) A belt identical in all respects to the Waist-Away Belt currently being shipped by Purchaser shall not be marketed or manufactured by Sellers or MEA. For this purpose the parties hereto agree that belts differing in any respect whatever, including, but not limited to different fastening system, a different texture, dimensions, or otherwise differing in any respect whatever, shall not be deemed to be an identical product." (Emphasis supplied).

Soon after the Agreement was executed, defendants Fishman and Freedberg began marketing their own waist-reducing belt through a company called The New Body Boutique, Inc. The belt was called "Shrink Wrap," and was similar to the all-black belt marketed prior to the joint venture by Isaac Bikel. In response, Vibrant filed this suit on May 28, 1980.

The complaint, invoking § 43(a) of the Lanham Act, and New York common law The district court, finding for the plaintiff on both the Lanham Act and breach of contract claims, concluded that defendants had "violated the Lanham Act ... by advertising Shrink Wrap in a manner which falsely designates its origin." The court's finding on this point was based on several facts: (a) defendants on one occasion "used a photograph of plaintiff's belt in defendants' advertisement with the result that the advertisement has actually confused and is likely to continue to confuse the public as to the source of origin of defendants' belt"; (b) "(t)he appearance of the models in the defendants' ads is also of such striking similarity to that of the appearance in the plaintiff's ads to create a likelihood of confusing the public as to the origin of the designation of the products respectively advertised"; (c) letters from customers showed that some members of the public were actually confused about the origin of the two belts; and (d) while the all-black belt being sold by defendants was not identical in all respects to the blue belt primarily being sold by plaintiff, the differences were not visible in magazine advertisements, and in any case "there is no proof, nor even a contention that the color (or materials used) has any functional significance."

alleges that plaintiff's "Waist Away" belt is original and unique; that it has "come to be associated by the consuming public with plaintiff as the source of origin of said belt"; that defendants' advertisements picture a belt identical to that marketed by plaintiff, representing an attempt "wrongfully to pass off as theirs" the belt sold by plaintiff; that defendants' conduct is likely to cause confusion, mistake and deception as to "the source of origin of the belts being advertised by defendants"; and that defendants' purpose is "to induce the purchasing public to believe that defendants' products are the original", with a view of "trading upon plaintiff's good will and reputation and of passing off plaintiff's (sic) products as and for the products of defendants (sic)". This conduct is alleged to constitute a false designation of origin and a false description and representation of the product offered for sale, in violation of § 43(a). Additional claims alleged that defendants' conduct breaches the Agreement, violates § 368(d) of the N.Y. General Business Law, and constitutes fraud. (The last two claims are not before us on this appeal.) Plaintiff seeks compensatory and punitive damages and injunctive relief.

Turning to the breach of contract claim, the district court held that defendants had breached the Agreement in two respects. First, it found that defendant had marketed "(a) belt identical in all respects to the Waist-Away Belt currently being shipped by Purchaser", since the all-black belt did not differ in any material way from the blue belt. The court rejected defendants' argument that the language of the Agreement should be read literally on this point, because that would have the effect, in the court's opinion of "repeal(ing) pro tanto the public's right under the Lanham Act to be protected against false designation of origin", and because such a reading would totally eliminate "a right of protection" which the contract had been designed to confer on Vibrant.

Second, the court found that defendants had also breached the Agreement by using in their advertisements photographs of models who were similar in appearance to those used by plaintiff. The court held that the language of the Agreement prohibiting defendants from using "the likeness of the persons depicted in (plaintiff's) advertisements" did not mean that defendants were free to use any models other than those used in plaintiff's ads, but instead ruled out the use of "any persons who substantially resemble the models appearing in the Vibrant photograph." It found support for its conclusion on this point both in the language of the Agreement itself, and in the fact that any other reading would reduce the level of protection conferred by the Agreement on plaintiff while increasing the chances of confusion as to source of origin which § 43(a) was designed to prohibit.

By order dated October 9, 1980, Judge Lasker granted Vibrant broad permanent injunctive relief "without prejudice to

plaintiff's other rights and remedies"; defendants appeal.

DISCUSSION

Section 43(a) of the Lanham Act contains two separate prohibitions: one against false designation of origin, and another against false description or representation. See Comment, The Present Scope of Recovery for Unfair Competition Violations Under Section 43(a) of the Lanham Act, 58 Neb.L.Rev. 159, 161 (1978). An action like the present one, which is predicated almost entirely on the false designation of origin leg of § 43(a), can only succeed if the features allegedly copied have acquired secondary meaning in the marketplace and are non-functional. ³ See, e. g., Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200 (2d Cir. 1979); ...