Allied Maintenance Corp. v. Allied Mechanical Trades, Inc.

• Decision Date: 18 October 1977
• Citation: 399 N.Y.S.2d 628,42 N.Y.2d 538
• Parties: , 369 N.E.2d 1162, 198 U.S.P.Q. 418 ALLIED MAINTENANCE CORPORATION, Appellant, v. ALLIED MECHANICAL TRADES, INC., Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 628

399 N.Y.S.2d 628

42 N.Y.2d 538, 369 N.E.2d 1162, 198

U.S.P.Q. 418

ALLIED MAINTENANCE CORPORATION, Appellant, v. ALLIED MECHANICAL TRADES, INC., Respondent.

Court of Appeals of New York.

Oct. 18, 1977.

Emanuel Dannett, New York City, Robert I. Gosseen, Great Neck, and Barbara E. Schlain, New York City, for appellant.

Howard C. Amron, New York City, for respondent.

JASEN, Judge.

We are called upon today to decide whether the trade name "Allied Maintenance" is entitled to protection pursuant to section 368-d of the General Business Law commonly referred to as the anti-dilution statute.

The plaintiff, Allied Maintenance Corporation, has been in business, in one form or another, since 1888. Throughout the many years since its inception, Allied Maintenance has concentrated the scope of its services upon the cleaning and maintenance of large office buildings. The defendant, Allied Mechanical Trades, Inc., a corporation organized in 1968 as a successor to Controlled Weather Corporation, is engaged primarily in the installation and repair of heating, ventilating and air-conditioning equipment.

Alleging that the defendant performed maintenance services identical to those it performed, Allied Maintenance brought this action to enjoin Allied Mechanical from operating under the name "Allied" or "Allied Mechanical Trades, Inc.", or using the word "Allied" in any way in connection with its business. The trial court granted the injunction, finding that the parties were actual and potential competitors in the cleaning and maintenance industry in the metropolitan New York City area and that the auditory and visual similarity between their names created a likelihood of confusion. On this basis, the court concluded that defendant's use of the name Allied Mechanical would result in irreparable injury to plaintiff's reputation, good will, and proprietary business interests, and would thus constitute unfair competition. The Appellate Division reversed, however, finding an absence of either competition or confusion, actual or potential. The court concluded that "no user of the services of either party has been or may probably be confused or deceived by any similarity in the names of the parties." (55 A.D.2d 865, 866, 390 N.Y.S.2d 101, 102.)

In addition to the protection of trade-marks and trade names afforded by the traditional actions for trade-mark infringement and unfair competition, New York, as well as a number of other States, ¹ has adopted an anti-dilution statute. (General Business Law, § 368-d). This statute provides: "Likeliho of injury to business reputation or of dilution of the distinctive quality of a mark or trade name shall be a ground for injunctive relief in cases of infringement of a mark registered or not registered or in cases of unfair competition, notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services." (Emphasis added.) The purpose behind the enactment of this statute was the prevention of trade-mark or trade name dilution i. e., "the whittling away of an established trade-mark's selling power and value through its unauthorized use by others upon dissimilar products." (N.Y. Legis. Ann., 1954, p. 49 (emphasis added).) In the absence of a statute of this nature, a plaintiff seeking to prohibit the use of a trade name by another would be required to frame his complaint within the strictures of an action for either trade-mark infringement or unfair competition. A brief review of the elements of these actions is useful in interpreting the legislative intent behind the enactment of section 368-d.

Historically, two causes of action have existed to protect the user of a trade-mark or trade name from its improper use by another viz., trade-mark infringement and unfair competition. Trade-mark infringement developed as the remedy designed to protect technical trade-marks i. e., those marks which were arbitrary, fanciful or coined. (See 3 Callman, Unfair Competition, Trademarks and Monopolies (3d ed.), § 66.1.) Trade-marks such as "Kodak", "Xerox", "Exxon" and "Coke" would fall within this category. As the law evolved, the protection provided by an action for trade-mark infringement was supplemented by the formulation of a broader remedy an action for unfair competition. (See Dell Pub. Co. v. Stanley Pub., 9 N.Y.2d 126, 133, 211 N.Y.S.2d 393, 398, 172 N.E.2d 656, 660.) This remedy was intended to protect nontechnical, common-law trade-mark marks used although not registered as well as trade names. (1 Callman, Unfair Competition Trademarks and Monopolies (3d ed.), § 4.1.) ²

Today, in an action for trade-mark infringement brought pursuant to either New York (General Business Law, § 368-b) or Federal law (Lanham Act, § 32, subd. (1), U.S.Code, tit. 15, § 1114, subd. (1)), it is necessary to show that the defendant's use of the trade-mark is likely to cause confusion, mistake or to deceive; actual confusion need not be shown. (See Dell Pub. Co. v. Stanley Pub., 9 N.Y.2d at p. 134, 211 N.Y.S.2d at p. 399, 172 N.E.2d at p. 660, supra; James Burrough Ltd. v. Sign of Beefeater, 7 Cir., 540 F.2d 266, 274; Bunn Co. v. AAA Replacement Parts Co., 5 Cir., 451 F.2d 1254, 1261; General Mills v. Regnery Co., 421 F.Supp. 359, 361; Chips 'n Twigs v. Chip-Chip, D.C., 414 F.Supp. 1003, 1013.) Similarly, it has been held that in an action for unfair competition a showing of a likelihood of confusion, rather than actual confusion, is all that is required to state a cause of action. (See Dell Pub. Co. v. Stanley Pub., 9 N.Y.2d at p. 132, 211 N.Y.S.2d at p. 397, 172 N.E.2d at p. 659, supra; Avon Shoe Co. v. David Crystal, Inc., 2 Cir., 279 F.2d 607, 614; Field Enterprises Educ. Corp. v. Grossett & Dunlap, D.C., 256 F.Supp. 382, 390.)

Since an action for infringement as well as an action for unfair competition both require a showing that the public is likely to confuse the defendant's product or service with that of the plaintiff, relief may be difficult to secure in situations in which the parties are not in competition, nor produce similar products or perform similar services. It is for this reason that section 368-d specifically provides that an injunction may be obtained notwithstanding the absence of competition or confusion.

Generally, courts which have had the opportunity to interpret an anti-dilution statute have refused to apply its provisions literally. New York courts, State and Federal, have read into the statute a requirement of some showing of confusion, fraud or deception. (See, e. g., Cue Pub. Co. v. Colgate-Palmolive Co., 45 Misc.2d 161, 256 N.Y.S.2d 239, affd. 23 A.D.2d 829, 259 N.Y.S.2d 377; King Research v. Shulton, Inc., D.C., 324 F.Supp. 631, affd., 2 Cir., 454 F.2d 66; Geisel v. Poynter Prods., D.C., 295 F.Supp. 331; but see National Lampoon v. American Broadcasting Co., D.C., 376 F.Supp. 733, affd., 2 Cir., 497 F.2d 1343.)

Judicial hesitance to enforce the literal terms of the anti-dilution statute has not been limited to New York. In Illinois, for example, some courts have gone so far as to declare the statute inapplicable where the parties are competitors and a likelihood of confusion does exist. These decisions were premised upon the belief that a plaintiff who can frame his complaint under a theory of infringement or unfair competition albeit unsuccessfully perhaps should not succeed under a dilution theory. (See Filter Dynamics Int. v. Astron Battery, 19 Ill.App.3d 299, 314-315, 311 N.E.2d 386; Edgewater Beach Apts. Corp. v. Edgewater Beach Mgt. Co., 12 Ill.App.3d 526, 534, 299 N.E.2d 548; Alberto-Culver Co. v. Andrea Dumon, Inc., 7 Cir., 466 F.2d 705, 709.) However, one court in Illinois has interpreted the anti-dilution statute literally, reasoning that unless recovery for dilution is permitted in the absence of competition or confusion the statute adds nothing to existing law. (Polaroid Corp. v. Polaraid, Inc., 7 Cir., 319 F.2d 830, 836-837.) This approach has also been taken in Massachusetts. (See, e. g., Tiffany & Co. v. Boston Club, D.C., 231 F.Supp. 836, 844; Clairol, Inc. v. Cody's Cosmetics, 353 Mass. 385, 391, 231 N.E.2d 912.)

Notwithstanding the absence of judicial enthusiasm for the anti-dilution statutes, we believe that section 368-d does extend the protection afforded trade-marks and trade names beyond that provided by actions for infringement and unfair competition. The evil which the Legislature sought to remedy was not public confusion caused by similar products or services sold by competitors, but a cancer-like growth of dissimilar products or services which feeds upon the business reputation of an established distinctive trade-mark or name. Thus, it would be of no significance under our statute that Tiffany's Movie Theatre is not a competitor of, nor likely to be confused with Tiffany's Jewelry. (See N.Y.Legis.Ann., 1954, p. 50, citing Tiffany & Co. v. Tiffany Prods., 147 Misc. 679, 264 N.Y.S. 459, affd. 237 App.Div. 801, 260 N.Y.S. 821, affd. 262 N.Y. 482, 188 N.E. 30.) The harm that section 368-d is designed to prevent is the gradual whittling away of a firm's distinctive trade-mark or name. It is not difficult to imagine the possible effect which the proliferation of various noncompetitive businesses utilizing the name Tiffany's would have upon the public's association of the name Tiffany's solely with fine jewelry. The ultimate effect has been appropriately termed dilution.

Although section 368-d does not require a showing of confusion or competition to obtain an injunction, it does require a "(l)ikelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name." (Emphasis added.) The statute prohibits any use of a name or mark likely to dilute the distinctive quality of a name in use. To merit protection, the plaintiff must possess a strong mark one which has a distinctive quality or has acquired a secondary meaning which is capable of dilution....