Cicena Ltd. v. Columbia Telecommunications Group, 90-1053

• Decision Date: 03 April 1990
• Docket Number: No. 90-1053,90-1053
• Citation: 900 F.2d 1546,14 USPQ2d 1401
• Parties: CICENA LTD. and Cicena, Inc., Plaintiffs-Appellees, v. COLUMBIA TELECOMMUNICATIONS GROUP, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1546

900 F.2d 1546

14 U.S.P.Q.2d 1401

CICENA LTD. and Cicena, Inc., Plaintiffs-Appellees, v. COLUMBIA TELECOMMUNICATIONS GROUP, Defendant-Appellant.

No. 90-1053.

United States Court of Appeals Federal Circuit.

April 3, 1990.

Richard Z. Lehv, Zelnick & Lehrman, P.C., New York City, argued for plaintiffs-appellees. With him on the brief were Weiss Dawid Fross, Allan Zelnick, Stephen F. Mohr & Glenn Mitchell.

William J. Thomashower, Kaplan, Thomashower & Landau, of New York City, argued for defendant-appellant. With him on the brief was Mark Landau and Eugenia S. Nathanson.

Before RICH and MICHEL, Circuit Judges, and SKELTON, Senior Circuit Judge.

RICH, Circuit Judge.

Columbia Telecommunications Group (CTG) appeals from the September 27, 1989 order of the District Court for the Southern District of New York, Civil Action No. 89 Civ. 6078, preliminarily enjoining CTG from infringing the trade dress of Cicena Ltd.'s and Cicena, Inc.'s (collectively Cicena's) clear plastic neon-lit telephone pursuant to section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a). We vacate and remand.

BACKGROUND

This lawsuit centers around both parties' manufacture and sale of clear plastic neon-lit telephones. Cicena began making its telephone, which it calls the "ROXANNE," in January of 1988. The ROXANNE telephone is similar in shape to the common desk telephone, although of a lower profile, flattened "wedge" shape. The base and handset casings are made of transparent colorless plastic. The internal mechanisms of the telephone are therefore visible, including a printed circuit board, with all its components, which are painted white. Also within the housing is a U-shaped neon tube which extends around the sides and front inside the base of the telephone and, when lit, illuminates the interior and surrounding area with a colored light and flashes when a call is received. It is a novelty or "conversation piece" type of consumer equipment.

Cicena sells the ROXANNE telephone through both large retailers and mail-order catalogs. Cicena's marketing of the ROXANNE telephone was an instant success, with 40,000 telephones sold in 1988 and a projected 60,000 telephones to be sold in 1989. Cicena spent approximately $360,000 on advertising and promotion in 1988 and expected to exceed $1,000,000 in advertising and promotion in 1989. The telephone also received publicity through its appearance on MTV, a national cable music video network, and television shows such as the McNeil-Lehrer News Hour and Good Morning America. It sold at retail at $200 or more.

CTG has, since 1983, been making various "novelty" telephones, such as a piano-shaped telephone, one shaped like a woman's shoe and animal-shaped telephones. CTG developed its clear plastic neon-lit telephone, the NE587, in 1989. It is similar to the ROXANNE but with distinct differences. Like the ROXANNE, the NE587 resembles the basic "wedge-shaped" desk telephone, and has a clear plastic housing so that the components, including a printed circuit board painted blue or pink, can be seen from the outside. An internal neon tube like that in the ROXANNE extends around three sides of the base and blinks when a call is received.

The main differences between the NE587 and ROXANNE are: The housings and handsets are of clearly different shapes. The keypad on the ROXANNE is a plain white, black lettered, conventional deskset touchtone keypad (12 square keys numbers 0-9 plus a * key and a # key), while the keypad of the NE587 has keys of distinctly different, low profile, horizontal oblong shape with rounded edges and distinctive alpha-numeric design, as well as additional function keys such as hold, redial, on-off for the ringer, and bright-soft for the neon light. The keys are colored. The keypad plate of the NE587 is white, the keys are larger than those of ROXANNE, and the circuit board inside the base and keys are in matching colors. In sum, the ROXANNE and NE587 do not look alike and the average purchaser could, therefore, readily distinguish them.

CTG's president, Mr. David Giladi, was aware of the ROXANNE telephone as well as other see-through neon-lit telephones when, in late 1988 and early 1989, he began discussions with a manufacturer in Taiwan concerning the possibility of making a clear plastic neon-lit telephone. After several such discussions in which Mr. Giladi explained to his Taiwanese manufacturer the type of telephone he wanted, the Taiwanese manufacturer on February 26, 1989 provided Mr. Giladi with drawings which would serve as the basis for making the NE587 telephone. In early April, 1989, CTG received a model of the NE587 from the Taiwanese manufacturer. Later in April, 1989, CTG sent two ROXANNE telephones to the Taiwanese manufacturer, although it does not appear that the existing design of the NE587 changed significantly after their receipt. CTG's NE587 telephone was publicly displayed at a trade show in June of 1989, although it is unclear from the record before us on what date, if any, the NE587 was first actually sold.

Cicena brought suit on September 14, 1989, based on theories of unfair competition under both New York state law and Sec. 43(a) of the Lanham Act (15 U.S.C. Sec. 1125(a)), as well as design patent infringement of U.S. Pat. No. D 300,134 (thus giving us jurisdiction over this appeal). Cicena sought a preliminary injunction, and a two day hearing was held on September 21 and 22, 1989, at the conclusion of which the injunction was granted orally. September 27, 1989, the district judge signed a preliminary injunction order based solely on Sec. 43(a), while refusing to reach the issues of design patent infringement and state law unfair competition. In the opinion given orally from the bench, the district judge found that while the balance of hardships did not weigh decidedly in Cicena's favor, they had shown both irreparable harm and a likelihood of success on the merits. CTG appeals.

OPINION

A. Standard of Review and Applicable Law

When dealing with issues of unfair competition law, over which this court does not have exclusive appellate jurisdiction, we look to the law of the regional circuit where the district court sits, here the Second Circuit. Windsurfing International Inc. v. AMF Inc., 828 F.2d 755, 757, 4 USPQ2d 1052, 1054 (Fed.Cir.1987). Under Second Circuit law, the decision to issue a preliminary injunction is reviewed under an abuse of discretion standard, meaning that we must affirm the district court unless we find the court relied on clearly erroneous findings of fact or on an error of law. Cliffs Notes, Inc. v. Bantam Doubleday Dell Publishing Group, Inc., 886 F.2d 490, 493, 12 USPQ2d 1289, 1291 (2d Cir.1989). Failure to consider relevant factors or to apply the proper standards constitutes an error of law. Stormy Clime Ltd. v. Progroup, Inc., 809 F.2d 971, 973-74, 1 USPQ2d 2026, 2028 (2d Cir.1987).

In the Second Circuit, a party seeking a preliminary injunction must establish

both possible irreparable injury and either (1) a 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 in the movant's favor.

LeSportsac, Inc. v. K Mart Corp., 754 F.2d 71, 74, 225 USPQ 654, 656 (2d Cir.1985). Because the district judge specifically found that the balance of hardships was not decidedly in Cicena's favor, a finding not contested here, Cicena must meet the higher "likelihood of success" burden rather than the "serious questions" standard.

B. Secondary Meaning

In a trade dress infringement suit under Sec. 43(a) of the Lanham Act, the Second Circuit requires the plaintiff to establish that his trade dress has acquired secondary meaning. Stormy Clime, 809 F.2d at 974, 1 USPQ2d at 2028. This requirement follows naturally from the language of Sec. 43(a), which offers redress for "false designation of origin." 15 U.S.C. Sec. 1125(a) (Supp. V, 1987). ¹ If the plaintiff cannot show that his trade dress has acquired secondary meaning, i.e. that "the purchasing public associates that dress with a single producer or source rather than just with the product itself," ² then use of that trade dress by a competitor will not designate any origin and there is no violation of Sec. 43(a).

The district court did not explicitly make a finding of secondary meaning, but instead found "at least ... secondary meaning in the making," citing Jolly Good Industries Inc. v. Elegra Inc., 690 F.Supp. 227, 9 USPQ2d 1534 (S.D.N.Y.1988). The doctrine of "secondary meaning in the making" is generally credited to have begun with the case of The National Lampoon, Inc. v. American Broadcasting Cos., Inc., 376 F.Supp. 733, 182 USPQ 24 (S.D.N.Y.), aff'd on other grounds, 497 F.2d 1343, 182 USPQ 6 (2d Cir.1974), in which the trial court cited the following passage from 3 Callman, Unfair Competition, Trademarks and Monopolies (3d ed. 1971) p. 356:

A mark with secondary meaning in-the-making should also be protected, at least against those who appropriate it with knowledge or good reason to know of its potential in that regard, or with an intent to capitalize on its goodwill.... "Piracy should no more be tolerated in the earlier stages of development of good will than in the later." (citations omitted)

Later cases have refined the doctrine as follows:

[A] Lanham Act claim may be based on the theory that, where secondary meaning is "in the making" but not yet fully developed, a trademark or trade dress will be protected against intentional, deliberate attempts to capitalize on a distinctive product.

Metro Kane Imports, Ltd. v. Federated Department Stores, Inc., 625 F.Supp. 313, 316, 228 USPQ 761, 762 (S.D.N.Y.1985), aff'd without opinion sub nom. Metro Kane Imports, Ltd. v. Brookstone Co., 800 F.2d 1128 (2d Cir.1986); see also Jolly Good, 690 F.Supp. at 230, 9 USPQ2d at 1537. The purpose of the doctrine of secondary meaning in the making is to...