Bowmar Instrument Corp. v. Continental Micro.

• Decision Date: 21 August 1980
• Docket Number: No. 77 Civ. 6059 (CHT).,77 Civ. 6059 (CHT).
• Citation: 497 F. Supp. 947
• Parties: BOWMAR INSTRUMENT CORPORATION, Plaintiff, v. CONTINENTAL MICROSYSTEMS, INC., CMI Products, Inc., Global Marketing Co. and International Fastener Research Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

497 F. Supp. 947

BOWMAR INSTRUMENT CORPORATION, Plaintiff, v. CONTINENTAL MICROSYSTEMS, INC., CMI Products, Inc., Global Marketing Co. and International Fastener Research Corporation, Defendants.

No. 77 Civ. 6059 (CHT).

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

August 21, 1980.

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Marshall, Bratter, Greene, Allison & Tucker, New York City, for plaintiff; Charles H. Miller, Paul A. Feigenbaum, New York City, Maura Wogan, of counsel.

Marshall G. Kaplan, Brooklyn, N. Y., for defendant Global Marketing Co.; Lowell M. Rubin, Brooklyn, N. Y., of counsel.

OPINION

TENNEY, District Judge.

The plaintiff in this trademark infringement suit, Bowmar Instrument Corp. ("Bowmar") has moved for summary judgment against defendants Global Marketing Co. ("Global"), Continental Microsystems, Inc. ("Continental"), and CMI Products, Inc. ("CMI") and for a default judgment against Continental and CMI. Bowmar claims that the defendants: (1) infringed its trademark rights in violation of section 32 of the Lanham Act, 15 U.S.C. § 1114; (2) committed false designation of origin in violation of section 43(a) of the Lanham Act, id. § 1125(a); (3) violated New York's "anti-dilution" law, N.Y. General Business Law § 368-d (McKinney 1968); (4) committed acts of unfair competition; and (5) breached a License Agreement between the parties. Bowmar seeks a default judgment against Continental and CMI on the grounds that (1) both defendants failed to meet their discovery obligations and do not intend to respond; and (2) CMI did not comply with this Court's January 18, 1979 Order to retain new counsel. Bowmar has also moved to dismiss the defendants' counterclaims. The plaintiff seeks injunctive relief, actual damages, treble damages, and attorneys' fees.

Summary judgment is granted against Global and CMI on the first four claims and against Continental on all five. A default judgment is also granted against Continental and CMI. The defendants' counterclaims are dismissed. Bowmar is entitled to injunctive relief, damages, which are to be determined in an accounting of defendants' profits as described herein, costs of this litigation, and the attorneys' fees incurred since the time this action was restored to the active calendar.

Background

Bowmar is an Indiana corporation engaged in the business of manufacturing and selling electronic and electromechanical components, including consumer electronic products. Affidavit of William M. Crilly, President and Chief Executive of Bowmar, sworn to February 4, 1980 ("Crilly Aff."), ¶ 2. Bowmar owns a group of trademarks, including "Bowmar" and "Bowmar Brain," that have been promoted through advertising. Id. In June 1975, Bowmar entered into an Agreement with International Fastener Research Corporation ("IFR"), a New York corporation, under which Bowmar sold its calculator and watch operations to IFR and granted that company an exclusive license and right to use the Bowmar Trademarks on a limited group of products. Pursuant to the Agreement, Bowmar granted to IFR,

subject to the license agreement in the form of Schedule 6 hereto, an exclusive license and right, in connection with the manufacture and sale of calculators and watches, but not otherwise, to use the trademark "Bowmar" and all other trademarks and copyrights, registered and unregistered, domestic and foreign, owned by the Sellers and used in connection with the manufacture and sale of calculators and watches ("Trademark Licenses"), it being understood that (A) the Buyers shall not use the name "Bowmar" or any name similar thereto in or as part of any company name, nor as the trade name or style of any business, and (B) the Buyers and their successors and assigns shall have no right to transfer the rights under the Trademark Licenses granted hereunder except in connection with a transfer of the entire business of manufacture and sale of calculators and watches, either transferred as one or separate businesses.

Exh. A. to Crilly Aff. ¶ 1(a)(iii).

Under the License Agreement, Bowmar retained the right to sell any merchandise not purchased by IFR. Id., Schedule 6, ¶ 1. Paragraph Two provided that the "Licensee agrees that it will not use the License Trademarks or any other trademark likely to be confused therewith on any product other than calculators and watches." Id. ¶ 2. The merchandise manufactured and sold pursuant to the Agreement was to "be of the same nature and of at least the same quality as those products" previously manufactured by Bowmar. Id. ¶ 3. To insure that this standard of quality was met, Bowmar would receive samples of the merchandise sold and could preclude the sale of any item to which it objected. Id. ¶ 4. Paragraph Eight stated that the "Licensee agrees that it will not use the name `Bowmar' as or in connection with its trade name or any part thereof." Id. ¶ 8. All the provisions of the License Agreement were deemed to be binding on the parties' assigns and successors. Id. ¶ 10.

In the fall of 1975, Continental purchased from IFR the watch and calculator operation, including the title and interest to the License Agreement. Prior to receiving official notice of this transaction, Bowmar had complained to IFR about the manner in which that company had been using the "Bowmar" trademark in its advertising. Exhs. C and D to Crilly Aff. Bowmar first found out about Continental from a letter written by that company's president to a Bowmar officer on stationery that appeared to violate the License Agreement in that it made the Bowmar name and trademark part of Continental's letterhead. After several complaints and discussions, Continental revised its letterhead. Counsel for Continental wrote Bowmar that the new stationery "clearly indicates that Continental is the manufacturer of Bowmar calculators, digital time pieces and does not give the impression that Bowmar Instrument Corporation is the source of such products." Exh. G to Crilly Aff., Letter to Jerome Coben, counsel to Bowmar, from Jay Howard Grodin, dated December 1, 1975.

Unfortunately, the matter did not end there. After seeing some magazine articles suggesting that Continental had the right to manufacture and sell other Bowmar-labelled products, Bowmar again registered its complaints. Continental's counsel responded that the references resulted from an inadvertent error and that Continental "will not introduce, manufacture, distribute or sell home video games or any other product (other than electronic calculators and watches) under the Bowmar trademark." Exh. K to Crilly Aff., Letter to Stanley Moss, counsel to Bowmar, from Jay Howard Grodin, dated June 10, 1976. These assurances, however, soon became suspect when a series of articles and advertisements appeared that referred to Continental's production and sale of a complete line of Bowmar video home games. See Exhs. L through P to Crilly Aff. After yet another complaint, Bowmar was advised that these representations resulted from the same inadvertent error that had given rise to the earlier complaints and that the original assurances were still firm. Bowmar was also informed that Continental intended to run advertisements for a variety of products that it sold but that the name "Bowmar" would appear only with respect to watches and calculators. Exh. R. to Crilly Aff., Letter to Jerome Coben from Jay Howard Grodin, dated August 11, 1976.

Soon after, just the opposite occurred. In the Summer 1977 issue of Consumer Electronic Product News an advertisement offering watches, television games, and smoke detectors was published under the name CMI Products: Bowmar and a New York address was given. Exh. S to Crilly Aff. Telephone calls to that office were answered "Bowmar."

Bowmar decided to terminate the License Agreement. A letter from Bowmar's counsel to Continental informed that company that "by reason of your continuing flagrant violations of the Agreement, which have occurred notwithstanding repeated assurances to the contrary, our client has instructed us to advise you that it is hereby terminating the Agreement and the license granted thereunder as and for your repeated breaches thereof." Exh. T to Crilly Aff., Letter to Continental from Stanley Moss, dated September 28, 1977. Bowmar demanded that Continental stop manufacturing and selling any product under the Bowmar name and trademark and that it account for any sales made in violation of the Agreement.

Several weeks later, a meeting was held between Bowmar, Continental, and IFR officers. After that meeting, Continental's counsel wrote to counsel for Bowmar explaining that the unauthorized advertisements had resulted from the use of a new advertising agency that was not familiar with the limitations of the Agreement and the inexperience of the new staff in Continental's New York office. Exh. U to Crilly Aff., Letter to Stanley Moss from Jay Howard Grodin, dated November 4, 1977. The letter repeated the standard assurances that the Agreement's restrictions would not be violated in the future. Bowmar soon concluded that these assurances were groundless. Several days after receiving this letter, two employees of Bowmar's counsel sought to purchase a "Bowmar Fire Warden Smoke Detector" that had been advertised by the defendants. One individual was referred to Global after calling the New York office listed in the CMI: Bowmar advertisement. Global had an office right next door in the same building. Both individuals asked specifically for Bowmar merchandise and purchased what were allegedly Bowmar products. Exhs. V and W to Crilly Aff., Affidavit of Patricia Consolazio, sworn to December 13, 1977; Affidavit of Joseph J. Ceccarelli, sworn to December 1, 1977. Counsel for Bowmar also visited this building and photographed the "CMI-Bowmar" sign on the wall and the Bowmar trademark on the door of the "CMI-Bowmar" office. The door of the Global office had a sign reading "Global Marketing Co." without the...