Dial-A-Mattress v. Mattress Madness

• Decision Date: 27 January 1994
• Docket Number: No. 92-CV-3670 (TCP).,92-CV-3670 (TCP).
• Citation: 841 F. Supp. 1339
• Parties: DIAL-A-MATTRESS OPERATING CORP., Plaintiff, v. MATTRESS MADNESS, INC., 2765 Bedding Corp. and/or 2765 Bedding Corp. d/b/a Mattress Madness, 1947 Bedding Corp., Dial-A-Mattress Inc., a New York Corporation, Mark Graber, Craig Graber, and Richard Graber, Defendants.
• Court: U.S. District Court — Eastern District of New York

841 F. Supp. 1339

DIAL-A-MATTRESS OPERATING CORP., Plaintiff, v. MATTRESS MADNESS, INC., 2765 Bedding Corp. and/or 2765 Bedding Corp. d/b/a Mattress Madness, 1947 Bedding Corp., Dial-A-Mattress Inc., a New York Corporation, Mark Graber, Craig Graber, and Richard Graber, Defendants.

No. 92-CV-3670 (TCP).

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

January 27, 1994.

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Robert S. Fink, Kathryn Kenneally, Kostelanetz, Ritholz, Tigue & Fink, New York City, for plaintiff.

Mitchell A. Stein, Steven M. Hoffberg, Stein & Hoffberg, New York City, for defendants.

MEMORANDUM AND OPINION

PLATT, Chief Judge.

The present cross-motions require this Court to attempt to resolve William Shakespeare's vexing query, "What's in a name?"¹ In the present case, it is that which the parties' call Dial-A-Mattress. Although Shakespeare surely would adjudge the name of the parties' bedding business to be immaterial, they do not share his enthusiasm. Rather, plaintiff and defendants seek an order of this Court preliminarily enjoining their competitor's respective use of the name "Dial-A-Mattress" in commerce. In order to succeed in their efforts, "the moving party must demonstrate both (1) irreparable harm in the absence of the requested relief, and (2) either (a) a likelihood that it will succeed on the merits of the actions, or (b) a sufficiently serious question going to the merits combined with a balance of hardships tipping decidedly in favor of the moving party." Bristol-Myers Squibb Co. v. McNeil-P.P.C., Inc., 973 F.2d 1033, 1038 (2d Cir.1992); American Direct Marketing, Inc. v. Azad Int'l, Inc., 783 F.Supp. 84, 90 (E.D.N.Y. 1992).²

Plaintiff moves pursuant to Section 34(a) of the Lanham Act, 15 U.S.C. § 1116, and State unfair competition law for an order preliminarily enjoining defendants' use of plaintiff's federally registered service marks. Defendants cross-move for cancellation of plaintiff's federal registration and for a preliminary injunction under the Lanham Act and State law enjoining plaintiff's use of the "Dial-A-Mattress" mark. Plaintiff argues (1) that it owns an incontestable federal registration of the "Dial-A-Mattress" and related service marks; (2) that it is the senior user of that name and mark in commerce; (3) that defendants sold any rights they may have had in the mark; and (4) that defendants' claims are barred by laches. Defendants counter (1) that plaintiff's federal registration is invalid by virtue of plaintiff's abandonment of the mark and inequitable conduct before the Patent and Trademark Office; (2) that Marc Graber is the senior user of the mark in commerce; (3) that no rights in defendants' intellectual property passed incident to the sale of their corporate name; and (4) that plaintiff's action is barred by laches and estoppel. Because this Court finds that plaintiff has demonstrated probable irreparable harm and a likelihood of success on the merits on its claims of unfair competition and service mark infringement, this court hereby preliminarily enjoins defendants from further use of plaintiff's trade name and service marks during the pendency of this lawsuit.

Background

Plaintiff and defendants are engaged in the business of selling mattresses and other bedding products to the public by soliciting telephone orders and delivering the merchandise directly to the purchaser. The defendant Marc Graber claims to have started direct-marketing of bedding products from the basement of his home in Westbury, New York under the name "Dial-A-Mattress" as early as 1972. Hrg. 22-26M; M. Graber 19-20.³ However, plaintiff secured a federal registration of the service mark "Dial-A-Mattress" in 1985 and subsequently obtained registration for six other marks related to their direct-marketing business.⁴ Plaintiff's service mark application to the Patent and Trademark Office (PTO) and the moving papers herein claim to have first used the "Dial-A-Mattress" name in commerce in 1976. HX 70A; Pl. Mem. ¶ 8. Because the historical development of these two businesses is dispositive of the present motions for preliminary injunction, this Court sets forth their respective progeny in significant detail.

Plaintiff Dial-A-Mattress Operating Corporation ("Operating Corp.") is a New York corporation formed in 1990. Napolean Barragan, president and principal shareholder of Operating Corp., first entered the bedding business in January 1976 when he incorporated a New York corporation under the name Dial-A-Mattress, Inc. for the purpose of tele-marketing bedding products directly to the public. Barragan 158, 174-76; DX 48. Plaintiff first advertised using the phrase "Dial-A-Mattress" in New York area newspapers on or about August 1, 1976. HX 744-45. Between 1976 and 1981, Barragan operated a succession of businesses out of the same retail location, all, according to plaintiff, under the badge of the Dial-A-Mattress service mark. Barragan 119-34; 485-90. Although New York State dissolved Dial-A-Mattress, Inc. by proclamation on December 31, 1980 for failure to pay franchise taxes, Barragan registered his organization in the rolls of Queens County as doing business under the name Dial-A-Mattress Company in October and November 1980. PX 12-13.

Barragan incorporated the Dial-A-Mattress Company under the name Dial-A-Mattress Franchise Corporation ("Franchise Corp.") in September 1983. PX 67. Shortly thereafter, on October 31, 1983, Franchise Corp. filed the first of several applications for federal registration of service marks used in connection with the bedding business. Franchise Corp. was awarded a federal registration for the "Dial-A-Mattress" service mark on June 4, 1985. HX 70A. Six additional service mark registrations were issued to Franchise Corp. between 1989 and 1993. HX 70A-E. See Appendix. Franchise Corp. changed its name to Dial-A-Mattress Operating Corporation in 1990. PX 67. As the successor-in-interest to Barragan's prior business entities, Dial-A-Mattress Operating Corporation claims continuous uninterrupted use of the Dial-A-Mattress marks in advertising, on invoices and letters, and on signs and delivery trucks since the first advertisement appeared in commerce as early as 1976. Barragan 174, 488-91. Plaintiff presently makes extensive use of these marks pursuant to its advertising budget of nearly $4 million per year on annual sales totalling nearly $30 million. Barragan 364-65; Vincens 192.

The defendants to this action consist of four corporations presently or previously in competition with plaintiff or its predecessors and three individuals who purportedly own or owned some interest in those corporate defendants. Defendant Marc Graber asserts that he began selling mattresses under the name "Dial-A-Mattress" from the basement of his parents' home in Westbury, New York after graduating from high school in 1972. Hrg. 22-26; M. Graber 26, 31. Graber claims to have operated and advertised this business exclusively under the name "Dial-A-Mattress" between 1972 and 1978. Hrg. 30-38, 61-62; M. Graber 309. In March 1978, Graber first used the name Mattress Madness in connection with his bedding business and claims to have used both Mattress Madness and Dial-A-Mattress continually since that time. M. Graber 175-77.

Graber opened his first bedding store under the name Dial-A-Mattress in Hempstead, New York by late 1979 or early 1980. Hrg. 131; M. Graber 25-26. Graber incorporated this business under the name Dial-A-Mattress, Inc. on June 18, 1981, approximately five and one-half months after Napolean Barragan's corporate registration of that name lapsed. DX 49, 52, 55. Following incorporation of Dial-A-Mattress, Inc., Graber listed his business in the Nassau County White Pages under the name Dial-A-Mattress for the first time, though Graber concedes that another entity was already listed in the phone book under that name. M. Graber 31-32. Graber continued doing business exclusively from his Hempstead, New York store until opening a second location in East Meadow, New York in 1986. M. Graber 26-30.

Dial-A-Mattress, Inc. ceased operations at or about the time Graber incorporated Mattress Madness, Inc. in 1986. Hrg. 155, 176-78, 226; M. Graber 309-15. Graber contends that Mattress Madness, Inc. continued selling mattresses under the trade names and/or service marks Dial-A-Mattress, Mattress Madness and Bed King from the same Hempstead and East Meadow store locations until approximately 1988. M. Graber 10-20, 309-330. In 1988, Graber opened additional store locations in Hicksville and Huntington Station, New York. M. Graber 323-25. Mattress Madness, Inc. was dissolved and replaced by 1947 Bedding Corporation in late 1988 or early 1989. Hrg. 155, 176-77. 1947 Bedding Corporations operated out of the same locations, with the same phone numbers and under the same trade names as Mattress Madness, Inc. Hrg. 176-85. Since 1947 Bedding Corporation dissolved in early 1991, Marc Graber no longer owns any interest in any bedding company presently doing business. He is currently a salesman and consultant to 2765 Bedding Corporation, a corporation jointly owned by his wife and defendant Richard Graber. Hrg. 185-87. 2765 Bedding continues to operate at the same store locations as Graber's prior business entities and continues to operate interchangeably under the names Dial-A-Mattress and Mattress Madness. Hrg. 185-87. 2765 Bedding Corporation, as well as 1947 Bedding Corporation and Mattress Madness, Inc., did not succeed to the assets and liabilities of Graber's predecessor corporations. Hrg. 176-90.

Napolean Barragan, the principal shareholder of plaintiff in this action, approached Graber's in the summer of 1989 seeking to purchase Graber's rights in the corporate name "Dial-A-Mattress, Inc." At the time, Barragan's company was involved in trademark suit against another bedding retailer who was selling mattresses to the public using the telephone number 1-800-M-A-T-...