Bel Canto Design, Ltd. v. MSS Hifi, Inc.
| Decision Date | 16 December 2011 |
| Docket Number | No. 11 Civ. 6353 (CM).,11 Civ. 6353 (CM). |
| Citation | 837 F.Supp.2d 208 |
| Parties | BEL CANTO DESIGN, LTD., Plaintiff, v. MSS HIFI, INC. and John Boey a/k/a Johnny Boey, Defendants. |
| Court | U.S. District Court — Southern District of New York |
OPINION TEXT STARTS HERE
Benjamin J. Court, John Harper, III, Messerli & Kramer P.A., Minneapolis, MN, Edward Steven Rudofsky, Zane & Rudofsky, New York, NY, Mark A. Larsen, Larsen Christensen & Rico, PLLC, Salt Lake City, UT, for Plaintiff.
Sam Peter Israel, Sam P. Israel, P.C., New York, NY, Troy J. Hutchinson, Benjamin E. Gurstelle, Briggs & Morgan, PA, Minneapolis, MN, for Defendants.
On November 28, 2011, Plaintiff Bel Canto Design, Ltd.'s (“Bel Canto”) Motion for Preliminary Injunction came on for hearing. Based upon the Motion for Preliminary Injunction, Bel Canto's Memorandum in Support of its Motion for Preliminary Injunction, the Direct Testimony of Michael McCormick in Support of Bel Canto Design's Motion for Preliminary Injunction (“McCormick Declaration”) (ECF No. 88), the Supplemental Direct Testimony of Michael McCormick in Support of Bel Canto Design's Motion for Preliminary Injunction (“Supplemental McCormick Declaration”) (ECF No. 90), the Direct Testimony of P.J. Zornosa in Support of Bel Canto Design's Motion for Preliminary Injunction (“Zornosa Declaration”) (ECF No. 89), and the cross-examination of Messrs. McCormick, Zornosa and Boey, and all other documents submitted, including Plaintiff's Exhibits 1 through 74, and the arguments of counsel, the Court makes the following:
FINDINGS OF FACT
1. Since 1990, Bel Canto has designed, manufactured, and sold fine audio electronic components throughout the United States and internationally. Bel Canto's broad line of audio products include preamplifiers, amplifiers, digital to analogue converters, and virtual battery supplies. In its more than 20 years in business, Bel Canto has emerged as an industry leader and has become well known for its innovative audio systems focused on the importance of the Digital to Analogue Converter (“DAC”) control center, as well as efficient, low-power consuming amplifiers and source components.
2. Bel Canto is the owner of United States Trademark Registration Nos. 2,726,987 & 3,226,424 for “Bel Canto” and “e.One,” respectively. Bel Canto manufacturers, sells, and markets for sale to the public all of its products using these trademarks.
3. Bel Canto has spent large sums advertising and promoting its products using the “Bel Canto” and “e.One” trademarks throughout the United States and in dozens of other countries. As a result of its extensive promotion and advertising, Bel Canto has become known to the trade and the public, and has established and sustained invaluable goodwill and recognition for the “Bel Canto” and “e.One” marks as identifiers of Bel Canto products and quality. The monetary value of this goodwill would be difficult to quantify.
4. All of Bel Canto's preamplifiers, amplifiers, digital to analogue converters, and virtual battery supplies have serial numbers affixed to their rear panel as part of the manufacturing process. Bel Canto tracks these serial numbers for invoicing and warranty purposes. Also, to sell products in Canada, Bel Canto is required to accurately track the serial numbers on its products to comply with CSA International requirements. Without a CSA International Factory Inspection report demonstrating compliance with CSA International safety standards, Bel Canto cannot sell its products in Canada. Finally, accurate tracking of serial numbers is necessary so that any safety related complaints can be effectively resolved.
5. Bel Canto's products are supposed to be sold only through a network of authorized dealers throughout the country and through authorized international distributors doing business in some 35 countries. The Authorized Dealership Agreement between Bel Canto and its authorized dealers prohibits Bel Canto dealers from selling Bel Canto products to unauthorized dealers. As a matter of corporate policy, Bel Canto refuses to extend certain services to consumers who purchase Bel Canto products from unauthorized dealers, such as manufacturer's warranty, product and service assistance, product use information, software upgrades, rebates, and recall notices.
6. Defendant MSS HiFi, Inc. (“MSS HiFi”) is not an authorized Bel Canto dealer, although it was at one time; it became an authorized dealer in 2009 and was terminated in 2010. However, it advertises Bel Canto products for sale in its stores, and on its own and other websites, and it sells Bel Canto products to consumers in the United States and abroad. See Pl.'s Ex. 74. MSS HiFi obtains the Bel Canto products it sells by purchasing them from authorized dealers who are violating their Dealer Agreements by selling to MSS HiFi. MSS HiFi advertises on its website to legitimate authorized dealers that it will buy their inventory of new products in violation of their dealership agreements with the original equipment manufacturers:
Need to place a $50k or $100k order with a manufacturer in order to get the proper discount? JB Audio can be your secret investor. We are very discreet, and we already have arrangements with a number of dealers to keep the big brothers guessing. We will do everything in our power to protect your interest.
See McCormick Declaration ¶ 25 & Pl.'s Ex. 10.
7. Defendant John Boey a/k/a Johnny Boey (“Mr. Boey”) owns, controls, and operates MSS HiFi. Bel Canto ended MSS HiFi's authorized dealer status when it learned that Mr. Boey would be involved in its operations.
8. MSS HiFi has engaged in the practice of altering the serial numbers that are placed on the back of Bel Canto products during the manufacturing process before selling those products.
9. Bel Canto became aware of that MSS HiFi had altered serial numbers on Bel Canto products when a consumer from France, Mr. Saim Bensaada, called Bel Canto with a complaint. MSS HiFi had sold a Bel Canto S300iUSB to Bensaada and told him that the Bel Canto factory would change the voltage on the unit from standard United States current to European current. When he had not received the converted unit six weeks after he paid for it, Bensaada called Bel Canto to complain about the delay. Bel Canto had no idea what the man was talking about, since it knew nothing about the sale and did not have the product.
10. Shortly thereafter, MSS HiFi shipped Bensaada a Bel Canto C5i instead of the product he had originally ordered, the S300iUSB. MSS HiFi obtained this Bel Canto C5i from Mt. Washington Valley Audiophile, Inc. (“MWVA”), a retail dealer of audio equipment and, until recently, an authorized Bel Canto dealer. When Bel Canto looked into the matter, it ascertained that the exterior serial number on the Bel Canto C5i MSS HiFi sold to the French consumer—C5i–076—was counterfeit. McCormick Declaration ¶¶ 39–50 and Pl.'s Exs. 13–17.
11. Bel Canto had Bensaada remove the rear panel on the C5i unit in his possession. On the inside of the unit there are two “interior” serial numbers, one on the preamplifier and the other on the amplifier. Those numbers were 2237B–110 and 125–942, respectively. McCormick Declaration ¶ 51 and Pl.'s Ex. 15.
12. Mr. McCormick located the “e.One Series Shipping Check Out” for the C5i with the two internal serial numbers. It showed that the actual serial number assigned to the unit before it left the Bel Canto factory was Serial No. C5M06—not 076. The C5i unit bearing that serial number was to Mt. Washington Valley Audiophile—the Bel Canto dealer who in turn sold the unit to MSS HiFi in blatant violation of its Dealership Agreement with Bel Canto. McCormick Declaration ¶ 52–53 and Pl.'s Exs. 16, 18.
13. The counterfeit serial number on the back of the C5i that MSS HiFi sold to Mr. Bensaada, C5i–076, was actually assigned at the factory to a product that Bel Canto sold directly to a company called Hifi Guru OY, in Finland. Pl.'s Ex. 17. From this I conclude that Defendants altered the external serial number on the product sold to Bensaada in order to disguise the identity of its supplier of Bel Canto products—MWVA.
14. Bel Canto terminated MWVA as an authorized Bel Canto dealer as a result of this incident. See Plaintiff's Exhibit 19, which is a letter from Mark A. Larsen to MWVA dated July 13, 2011. Also, Mr. McCormick reviewed the MWVA purchases from Bel Canto since it became an authorized Bel Canto dealer. McCormick Declaration ¶ 54 and Pl.s' Ex. 20. This purchase history indicates that, after its initial order, MWVA purchases were below $2,500 per order. Suddenly, on February 19, 2011, the order jumped to $19,596, and then on April 4, 2011, another relatively large order of $9,214 was placed. These orders were shipped to MWVA. On June 30, 2011, MWVA placed an order for $15,965, which Bel Canto did not fill. McCormick Declaration ¶ 54.
15. Bel Canto then investigated MSS HiFi's listings on eBay and concluded that MSS HiFi was listing Bel Canto products with counterfeit serial numbers. Bel Canto was able to identify a number of serial numbers that appeared in MSS HiFi's web site as corresponding to products that had been sold by Bel Canto to other domestic and foreign consumers, domestic dealers and distributors in foreign countries:
To continue reading
Request your trial
-
Maui Jim, Inc. v. Smartbuy Guru Enters.
...court held that inordinate shipping delays were a material difference. But Maui Jim does direct us to Bel Canto Design, Ltd. v. MSS HiFi, Inc. , 837 F. Supp. 2d 208, 224 (E.D.N.Y. 2011) and Beltronics USA, Inc. v. Midwest Inventory Distrib. LLC , 522 F. Supp. 2d 1318, 1327 (D. Kan. 2007), a......
-
TechnoMarine Sa v. Jacob Time, Inc.
...fails to address why differences in packaging are material; for instance, unlike in cases such as Bel Canto Design, Ltd. v. MSS Hifi, Inc., 837 F.Supp.2d 208, 225 (S.D.N.Y.2011), in the instant case there is no allegation that lack of particular packaging voids the product's warranty. Plain......
-
Chanel, Inc. v. WGACA, LLC
... ... PROPERTIES, INC., WGACA WEB, LLC, PINES VINTAGE, INC., VINTAGE DESIGNS LTD., WCAGA LA, LLC, and Individuals SETH WEISSER and GERARD MAIONE, ... calls into question the methodology, survey design, and ... sample size of the Franklyn surveys. Id. ¶ 164 ... Bel ... Canto Design, Ltd. v. MSS Hifi, Inc. , 837 F.Supp.2d 208, ... 222 ... ...
-
Nutradose Labs, LLC v. Bio Dose Pharma, LLC
...product codes invalidated defendants' exhaustion defense, even though the removal did not damage the packaging. Id. at *3. Similarly, in Bell Canto, the defendant altered serial numbers that plaintiff placed on the back of its trademarked products. Bell Canto, 837 F.Supp.2d at 231. The cour......