Essie Cosmetics, Ltd. v. Dae Do Intern., Ltd.

• Decision Date: 24 December 1992
• Docket Number: No. CV 92-5126 (JBW).,CV 92-5126 (JBW).
• Citation: 808 F. Supp. 952
• Parties: ESSIE COSMETICS, LTD., Plaintiff, v. DAE DO INTERNATIONAL, LTD., JMRS, Inc. and New High Glass, Inc., Defendants.
• Court: U.S. District Court — Eastern District of New York

808 F. Supp. 952

ESSIE COSMETICS, LTD., Plaintiff, v. DAE DO INTERNATIONAL, LTD., JMRS, Inc. and New High Glass, Inc., Defendants.

No. CV 92-5126 (JBW).

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

December 24, 1992.

COPYRIGHT MATERIAL OMITTED

Darrell L. Olson, Knobbe, Martens, Olson & Bear, Newport Beach, CA, for plaintiff.

Stanley R. Goodman, Goodman & Saperstein, Garden City, NY, for defendants.

MEMORANDUM AND ORDER

WEINSTEIN, District Judge:

Plaintiff sells nail polish to the salon trade in a bottle and cap distinctive for their simplicity. Defendant is about to enter this market using a practically identical container. A motion for a preliminary injunction must be granted.

I. FACTS

Fingernails are big business. Even a casual stroller on the streets of New York City will notice the recent proliferation of nail salons. Professional nail care in Metropolitan New York has become a Korean specialty. Susan Edmiston, Self-selected for Success; 1986 Year of the Woman Immigrant, Working Woman, July, 1986, at 53. The entrepreneurial spirit of this immigrant group is reflected in estimates that from 450 to 600 nail salons are owned by Koreans in the five boroughs. See Alair A. Townsend, The Old American Dream With a Special Korean Polish, Crain's N.Y.Bus., Apr. 17, 1989, at 11. Their quick, inexpensive approach to manicures has "brought manicures to the masses," attracting customers that might not go to expensive salons. Pat Widder, Koreans Nail Down Share of New York's Manicures, Chic.Trib., Aug. 21, 1989, at Cl. In the United States, there are estimated to be more than 200,000 nail salons. Gamble Pays Off for Nail-Care Catalogue King, Crain's Detroit Bus., Jul. 20, 1992, at Sec. 1, p. 23.

At the hearing on the motion for a preliminary injunction it was estimated that millions of adult women in the New York Metropolitan area spend as much as $500 a year on their nails. Sales of nail polish run well into the billions. Id. One recent report of the cosmetic industry reveals that the popularity of nail salons has caused a dramatic decline in retail purchases of nail care products. Drug and Cosmetic Industry, June 1992, at 24.

Plaintiff, Esther Weingarten ("Essie"), has taken advantage of this boom in nail care. Since 1987, she has been selling nail polish in a square clear glass bottle with a simple cylindrical white cap to nail salons and to beauty supply houses who in turn sell to nail salons. She currently offers one hundred and forty-seven colors with such catchy names as "Bit a Sweet Mauve" and "Hot Fudge Sundae." Her bottle has no identifying label, only a small circular sticker on the underside indicating the color and the trade name "Essie Cosmetics." Adherence to the dictum of celebrated architect Mies van der Rohe that "less is more," has led her to commercial success. Since she designed the bottle and cap, over twenty million bottles of the polish have been sold, with sales totaling approximately $20 million through the end of 1992. She estimates, without contradiction, that she has captured between forty and sixty percent of the national nail salon market. Employing the slogan, "For the salon whose own name is enough," plaintiff also sells her bottle for private labeling to salons and retail outlets. Such sales constitute about 10% of her business.

Essie has spent $250,000 in promoting her polish in industry magazines, in which her bottle is prominently displayed, as well as at trade shows. Approximately twenty-five percent of her business is with Korean nail salons in the New York Metropolitan area.

To establish that the public associates her bottle design with Essie Cosmetics, plaintiff has submitted survey evidence conducted at nail trade shows. Interviewees with purchasing authority were shown an unlabeled Essie bottle and cap. When asked who they believed sold the product, more than sixty-five percent identified Essie by name. Seventy-five percent of those who identified the polish as Essie's gave packaging design as the reason. This survey was appropriately conducted. A recent unsolicited magazine article stated, "There's no mistaking that square, labelless little bottle that's seen in nail and hair salons worldwide." How to Polish Your Act, Mademoiselle, March 1991, at 78.

Defendants are Dae Do International Ltd., a manufacturer and distributor of cosmetics products, JMRS, Inc. (a newly formed corporation) and New High Glass, Inc. (supplier of the bottle to Dae Do). They are about to enter the nail salon market with a polish packaged in a bottle and cap indistinguishable from Essie's with the name "Cile" imprinted in small letters on one side on a small transparent peel-off label. Even the form of defendants' label is designed not be noticed, mimicking the Essie labeling tactic of placing printed source identity on the underside so as not to interfere with the stark simplicity of Essie's container. Other competitors (including Almay and Chanel) package nail polish in similar, but clearly different, square bottles with distinctive caps.

Defendants concede they possess the bottles, shipped from Florida to New York. They are ready to offer their product nationwide.

The hearing established that Koreans operating nail salons, like many first and second generation immigrant groups in this country, tend to prefer to deal with members of their own ethnic group. The Korean identity of defendant Dae Do thus makes appropriation of trade dress particularly significant.

Plaintiff seeks a preliminary injunction under the Lanham Act, 15 U.S.C. § 1125(a), for common law trade dress infringement, and under New York's anti-dilution statute, N.Y.Gen.Bus.Law § 368-d. Defendants ask for a declaratory judgment that they may enter the market with their bottle design.

II. LAW

A. State Law Claim

New York's anti-dilution statute, N.Y.Gen.Bus.Law § 368-d, on its face seems to apply. It reads:

Likelihood 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.

Nevertheless, reflecting an "absence of judicial enthusiasm for the anti-dilution statutes," New York has interpreted this provision to exclude cases where infringement is claimed by a direct competitor selling a similar product. Allied Maint. Corp. v. Allied Mechan. Trades, Inc., 42 N.Y.2d 538, 544, 399 N.Y.S.2d 628, 369 N.E.2d 1162 (1977). See also Business Trends Analysts v. Freedonia Group, Inc., 650 F.Supp. 1452, 1458 (S.D.N.Y.1987); SmithKline Beckman v. Proctor & Gamble Co., 591 F.Supp. 1229, 1246 (N.D.N.Y. 1984), aff'd, 755 F.2d 914 (2d Cir.1985). According to New York's highest court, in enacting section 368-d the legislature sought to remedy the evils associated with a "cancer-like growth" of dissimilar products feeding upon the reputation of an established name, not the public confusion associated with similar products or services. Allied Maint. Corp. v. Allied Mechan. Trades, Inc., 42 N.Y.2d 538, 544, 399 N.Y.S.2d 628, 369 N.E.2d 1162 (1977).

Since this decision was originally issued, the Second Circuit has decided that N.Y.Gen.Bus.Law § 368-d is applicable to competitors as well as to noncompetitors. See Nikon, Inc. v. Ikon Corp., 1993 WL 47802, *5, 1993 U.S.App. Lexis 3245 at *15 (2d Cir.1993). That ruling, however, has no effect on the outcome of this case which is favorable to plaintiff.

B. Lanham Act Claim

Plaintiff has a valid Lanham Act claim. 15 U.S.C. § 1125(a). The statute provides protection against false designation and description of origin. It reads:

Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same ... shall be liable to a civil action ... by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.

The interesting new legal problem posed by this case is whether the absence of a description or representation on a product can be misrepresented. Where, as here, the simplicity of design itself speaks of origin without explicit attribution, copying that design is, under the statute, a false designation of origin.

1. Timeliness

In a trademark infringement action, a court may grant injunctive relief "even before defendant actually opens the business," so long as the threatened act of defendant is "imminent and impending." J. Thomas McCarthy, 2 Trademarks and Unfair Competition, § 30.5 at 470 (2d ed. 1984). See e.g., Bertolli USA, Inc. v. Filippo Bertolli Fine Foods, Ltd., 662 F.Supp. 203, 205 (S.D.N.Y.1987) (preliminary injunction granted over defendant's argument that the claim was premature where defendant had printed labels and cartons and sent one bottle to a potential distributor). New High Glass's shipment of five hundred bottles from Florida to Dae Do in New York meets the "use in commerce" test.

C. Preliminary Injunction

A court may issue a preliminary injunction where the moving party demonstrates "both possible irreparable injury and either (1) a likelihood of success on the merits or (2) sufficiently serious questions going to the merits making 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 (2d Cir.1985). Both elements can be established by a showing that there is a likelihood of "an appreciable number of ordinary prudent purchasers" being confused or misled about the source of the product. Western Pub. Co., Inc. v. Rose Art Industries, Inc., 910 F.2d 57, 59 (2d Cir.1990) (quoting prior...