Osawa & Co. v. B & H PHOTO

• Decision Date: 27 July 1984
• Docket Number: No. 83 Civ. 6874 (PNL).,83 Civ. 6874 (PNL).
• Citation: 589 F. Supp. 1163
• Parties: OSAWA & COMPANY, Plaintiff, v. B & H PHOTO, Tri State Inc. and John Does 1-10 Defendants.
• Court: U.S. District Court — Southern District of New York

589 F. Supp. 1163

OSAWA & COMPANY, Plaintiff, v. B & H PHOTO, Tri State Inc. and John Does 1-10 Defendants.

No. 83 Civ. 6874 (PNL).

United States District Court, S.D. New York.

May 24, 1984.

As Modified July 27, 1984.

Wallenstein, Wagner, Hattis, Strampel & Aubel, Robert E. Wagner, Linda A. Kuczma, Chicago, Ill., Pennie & Edmonds, John E. Kidd, Gideon D. Stern, Robert M. Kunstadt, New York City, Michael W. Havrilla, Chicago, Ill., for plaintiff.

Miller, Cassidy, Larroca & Lewin, Nathan Lewin, James L. Volling, Washington, D.C., Groman & Wolf, P.C., Marvin H. Wolf, Mineola, N.Y., for defendant B & H Photo.

Harvey M. Greene, New York City, for defendant Tri State Inc.

OPINION AND ORDER

LEVAL, District Judge.

The owner of U.S. trademarks pertaining to goods of foreign manufacture seeks by this action to enjoin others from independently importing and dealing in goods of the same manufacture, bearing the same marks lawfully applied abroad by the foreign owner of the marks. The commerce against which this action is directed is colloquially named the "grey market".

Plaintiff Osawa & Company, a Delaware corporation, is the registered owner of United States trademark rights for the Mamiya marks,¹ which are used on high quality medium-format photographic equipment manufactured in Japan by the Mamiya Camera Co. ("Mamiya Co."). Mamiya Co. is the owner of the Mamiya marks in Japan, where it lawfully places those marks on the camera equipment it manufactures. J. Osawa & Co. Ltd., a Japanese entity ("Osawa-Japan"), is the exclusive worldwide distributor of Mamiya Co.'s products. It has granted exclusive U.S. distribution rights to the plaintiff, to whom it sells. Osawa-Japan and Mamiya Co. own, respectively, 93% and 7% of plaintiff's stock. Osawa-Japan owns 30% of Mamiya Co.'s stock. Under the "Genuine Goods Exclusion Act," 19 U.S.C. § 1526, in May 1982 plaintiff, as the owner of the U.S. trademark rights, was granted by the U.S. Customs Service an order of exclusion barring the unauthorized importation of goods bearing the Mamiya marks.

The defendants B & H Photo and Tri State Inc. are New York discount camera dealers. They are alleged to have imported cameras and related equipment bearing the Mamiya marks to the United States without plaintiff's authorization and in violation of the Customs order of exclusion.

Plaintiff moves for a preliminary injunction barring the defendants from advertising and dealing in such Mamiya-marked equipment. Plaintiff alleges that its right to such an injunction is conferred by the Exclusion Act as well as § 42 of the Lanham Act, 15 U.S.C. § 1124, by §§ 32 and 43 of the Lanham Act, 15 U.S.C. §§ 1114, 1125, forbidding trademark infringement and unfair competition, and by state law principles of unfair competition and trade-mark dilution.

This is plaintiff's second effort to obtain an injunction against grey market importation and sale of Mamiya-marked products. On the first occasion, plaintiff, then using its predecessor name Bell & Howell: Mamiya Co. (reflecting that at the time it was 50%-owned by Bell & Howell Company), brought a similar action in the U.S. District Court for the Eastern District of New York against another dealer, Masel Supply Co. Judge Edward Neaher, finding trademark infringement and a substantial likelihood of confusion, granted a preliminary injunction. Bell & Howell: Mamiya Co. v. Masel Supply Co., 548 F.Supp. 1063 (E.D.N.Y. 1982). The Court of Appeals ruled that plaintiff had not adduced sufficient evidence of likelihood of confusion to carry its burden of showing irreparable harm and vacated the injunction. Bell & Howell: Mamiya Co. v. Masel Supply Co., 719 F.2d 42 (2 Cir.1983).

In the Masel action, plaintiff had proceeded on the theory that proof of infringement would entitle it to injunctive relief and therefore offered no substantial evidence of harm. The hearing in this action was held after the Court of Appeals' reversal of Masel. At this hearing plaintiff remedied the deficiency, offering substantial proofs of irreparable harm.

"To obtain a preliminary injunction in this circuit, a party must make `a showing of (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.' Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979) (per curiam);" Bell & Howell : Mamiya Co. v. Masel Supply Co., 719 F.2d at 45. I find that the standard has been thoroughly and convincingly met. I find that plaintiff has proved entitlement to the preliminary injunction under the Exclusion Act, 19 U.S.C. § 1526, and, although it is unnecessary at this stage to decide on additional grounds, under the trademark laws as well.

I. Facts

Plaintiff is the duly registered owner in the United States of the Mamiya marks. Although a controlling interest of plaintiff's stock is owned by Osawa-Japan, plaintiff functions as a legally separate entity with its board of directors and executive staff. For a number of years it has been the exclusive distributor of Mamiya products in the United States. Over these years (including also the period during which plaintiff was 50%-owned by Bell & Howell Company), plaintiff has devoted extensive expenditures, activities and energies to the successful development of goodwill for the Mamiya marks.

The Mamiya equipment is sophisticated and expensive, designed for use by professional photographers and advanced amateurs. Accordingly it includes a wide range of peripheral equipment designed for special applications. In order to be able to supply promptly the needs of its professional photographer customers, plaintiff maintains at all times a stock of all such peripheral equipment.

Plaintiff purchases advertising and incurs other public relations expenses. To educate users, dealers and potential customers in the advantages and complex capabilities of its equipment, it organizes seminars, which are conducted in various parts of the country. To stimulate sales, it occasionally offers rebates, sometimes consisting of a free piece of peripheral equipment to one who purchases a Mamiya camera during a specified period.

Plaintiff distributes the Mamiya equipment through authorized camera dealers who apply for dealerships. Plaintiff's sales policy is based on its perception of a fundamental difference between equipment of such complexity and a simple amateur's camera. Because of the high cost and complexity of the equipment and because of the sophisticated demands of purchasers, plaintiff foresees a continuing relationship between dealer and customer involving advice, service and the future purchase of specialized peripheral equipment expanding the capabilities of the camera. According to its perception, a purchaser of a Mamiya camera who was unable to obtain such support from his dealer would soon be a dissatisfied customer. Accordingly, plaintiff has been unwilling to distribute its equipment through any camera store but will authorize and sell only to those dealers who demonstrate a willingness to take in an adequate full line stock so that they will be both able and motivated to service future needs of their customers.

Plaintiff also devotes considerable care to handling, including inspection on arrival. It offers free warranty repairs, performed either by its employees or by authorized service representatives, who must receive training in the equipment.

Defendants are discount camera dealers, offering camera equipment often at prices substantially cheaper than are available at other stores. Defendants advertise in national photography magazines. These advertisements characteristically are concerned with price; they set forth, mostly in small print, items of available equipment with prices. They sell by mail and by telephone to credit card purchasers, as well as over the counter. Defendants formerly were authorized Mamiya dealers purchasing from plaintiffs. Their dealerships were terminated as a result of the dispute over grey market merchandising.

Defendants advertise and sell Mamiya equipment that has been imported in violation of the Customs exclusion order. They are found also to have imported such merchandise.² They sell this equipment at retail prices far below the prices of authorized dealers. In some cases they sell at prices cheaper than those at which plaintiff offers its merchandise to its dealers.

The reasons for the price disparity have not been fully shown by the evidence. Defendants contend it is because Osawa-Japan, the worldwide distributor, discriminates against the U.S. consumer by selling to plaintiff at arbitrarily higher prices than it charges to distributors in other countries. However, defendants have offered no proof that this is true. Nor have they shown in which countries their equipment is purchased or from whom.

Plaintiffs point to several possible factors explaining price differences. One is currency fluctuation, especially the recent strength of the U.S. dollar as against certain European currencies. Another possible explanation suggested by plaintiff is price differences set by Osawa-Japan that are not arbitrary or discriminatory but are justified by differing cost factors.³

Third, plaintiff has convincingly proved that in support of the Mamiya trademarks it incurs substantial costs that defendants do not have. These include the whole range of activities described above in which plaintiff engages in order to create, maintain, protect and enhance the goodwill of the Mamiya marks.⁴

Defendants seek to undercut this proof by showing that they too incur expenses of similar nature. But their contentions miss the point and do not alter the conclusion. For example, defendants point out that they also advertise, contending that this undermines plaintiff's argument as to its advertising...