H. Lubovsky, Inc. v. Esprit de Corp.

• Decision Date: 28 January 1986
• Docket Number: No. 81 Civ. 2161 (PNL).,81 Civ. 2161 (PNL).
• Citation: 228 USPQ 814,627 F. Supp. 483
• Parties: H. LUBOVSKY, INC., Plaintiff, v. ESPRIT DE CORP., Defendant.
• Court: U.S. District Court — Southern District of New York

627 F. Supp. 483

228 USPQ 814

H. LUBOVSKY, INC., Plaintiff, v. ESPRIT DE CORP., Defendant.

No. 81 Civ. 2161 (PNL).

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

January 22, 1986.

As Amended January 28, 1986.

Boris Haskell, Paris & Haskell, Washington, D.C., for plaintiff.

Fredric W. Yerman, Randolph S. Sherman, Richard A. DeSevo, Kaye, Scholer, Fierman, Hays & Handler, New York City, for defendant.

OPINION AND ORDER

LEVAL, District Judge.

This is a trademark infringement action pursuant to the Lanham Act § 32 et seq., 15 U.S.C. § 1114 et seq. Plaintiff, H. Lubovsky, Inc., the owner of the mark ESPRIT for women's shoes, sues for damages and for an injunction barring defendant Esprit de Corp., from using Esprit and Esprit de Corp as marks on the defendant's clothing, accessories and shoes.

A. History

1. Plaintiff.

Plaintiff is a small importer and wholesale distributor of women's shoes. Its staff consists of two full-time and two part-time employees and eight commission sales-people. Its annual sales have ranged from a low of $692,000 in 1963 to a high of $3,318,000 in 1978. For the year ending June 30, 1983, sales were $1.8 million and for 1984, $2.4 million. Plaintiff markets its shoes nationwide, primarily through sales representatives and by showings at national and regional shoe shows.

On March 1, 1963, plaintiff adopted the label Esprit. On March 3, 1964, it obtained a federal trademark registration of Esprit for women's shoes (registration no. 765,974). Since that time, plaintiff has continuously used Esprit as one of its trademarks. Plaintiff also markets its shoes under the trademark Robertina. For many of its larger customers, plaintiff does not use Robertina or Esprit but has the shoes made up showing the customer's in-house brand.

Plaintiff displays the Esprit logo on the sock lining of Esprit shoes and on the shoe boxes. Beyond this, however, plaintiff does practically nothing to promote or publicize the Esprit mark. It does virtually no advertising. Its promotion expenses have slightly exceeded a total of $100,000 over twenty-two years, most of which has been spent entertaining buyers.

Plaintiff's Esprit mark, so far as the evidence shows, commands virtually no public recognition. Consumers who buy plaintiff's shoes do not ask for them by the Esprit name. And buyers who place orders with plaintiff for stock rarely specify that the merchandise should bear the Esprit label.

Although plaintiff's catalogue shows a variety of styles and types of shoes, it appears that the vast majority of its sales are of traditional, dressy, high-heeled shoes with pointed toe.

Plaintiff's business is exclusively limited to women's shoes, as is its Esprit mark registration. Except for a foray several years ago into women's handbags and hats (which bore no trademarks), plaintiff has marketed only women's shoes since its business began thirty-seven years ago and it has no plans to expand beyond that area in the future.

2. Defendant.

Defendant, Esprit de Corp designs and markets sportswear, primarily women's and children's. Its merchandise is described as imaginative, trendy, forward fashion or avant-garde, appealing to a youthful, active, sporty clientele. It has been enormously successful, with sales increasing from $17.6 million in 1975, to $43.1 million in 1980 and to $211 million in 1984 (stip. facts pp. 18-19).

Defendant's business began in 1968 under the name "Plain Jane"; in 1970 it incorporated and adopted its present name "Esprit de Corp." During the following decade, defendant marketed its women's sportswear under a variety of "divisional" trademarks and labels including, Plain Jane, Sweet Baby Jane, Cecily, In Good Hands, Jasmine Teas, Esprit's Chemise, and Rose Hips. Around 1976, it began to use the mark Esprit on some of its merchandise. In 1978, to promote a distinctive unified image, the company began a trademark unification program aimed toward marketing under the single name Esprit. As part of the change a new Esprit logo was designed, using modern stencil block print and an E consisting of triple horizontal bars without the vertical staff. To preserve the goodwill established under the seven original divisional trademarks, defendant decided to make the transition gradually. Beginning in the 1979 holiday season, defendant added to its hangtags and labels the new Esprit logo under each of the seven divisional names, e.g., Plain Jane/Esprit, In Good Hands/Esprit, etc. The Esprit logo captioned defendant's catalogues and advertisements. It was planned that as the second stage, Esprit would go into the dominant position, above the old trademarks, and finally that the old trademarks would be dropped, leaving Esprit alone to identify all defendant's merchandise.

On November 13, 1978, defendant had filed an application to register the mark Esprit for clothing. The application was rejected by the trademark office on December 5, 1979 by reason of plaintiff's previously registered Esprit mark for women's shoes. Up to this point, defendant had never heard of plaintiff's Esprit mark. It had sold already approximately $13 million of merchandise under the Esprit mark.

Defendant then took steps to learn whether plaintiff was using the Esprit mark and learned that it was. Defendant's investigations showed four users of Esprit as a mark for clothing and accessories— plaintiff (for shoes), Mistee Lingerie, Inc. (for lingerie), Fuqua Cycle Corp. (for motorcycle boots, gloves and accessories) and Campus (for men's clothing). In addition, an H.D. Lee Co. had used Esprit de Corps for wearing apparel.

In part because of the weakness of the mark, the number of users, the time during which defendant had already used Esprit and Esprit de Corp in its business, and the distance between shoes and clothes, defendant's trademark attorney advised that plaintiff's exclusive rights for women's shoes should not bar defendant from use of the Esprit mark on clothing. He counseled, however, that Esprit not be used for the sale or advertising of shoes and that shoes not be offered through defendant's Esprit mail order catalogues. Defendant, meanwhile, submitted a new application for registration, now based on the new stylized logo, which also was eventually rejected. The application did not include shoes or accessories.

Defendant meanwhile proceeded with its program of trademark unification. Having begun in 1979 to put "Esprit" below its various divisional marks, in 1981, defendant reversed the order placing Esprit above the divisional names. Then in 1982, the old divisional names were dropped leaving the name Esprit alone.

From 1979 to 1984, defendant spent $20 million advertising its fashion under the Esprit mark. Its advertisements appeared in all the major fashion magazines. In addition, it distributed 15 million mail order catalogues under the Esprit name.

Notwithstanding the advice of its attorney, defendant used the Esprit mark for shoes, in combination with its divisional mark "In Good Hands." After plaintiff brought this action, defendant began to mark its shoes In Good Hands/Esprit de Corp and later, in 1983, Esprit de Corp. Throughout, however, contrary to its counsel's advice, defendant marketed shoes in its mail order catalogues which featured the name Esprit prominently on the covers and throughout. (In tiny print inconspicuously placed on a page offering shoes, defendant places a legend "Footwear by Esprit de Corp.")

Also, in 1984, defendant began to sell its merchandise in its own Esprit retail stores. As to shoes sold in those stores, although the sock linings and the shoe boxes say "Esprit de Corp.," the shoes are nonetheless sold there under the Esprit mark in the sense that this mark dominates the store, and appears to cover all the merchandise.

Defendant's sales of shoes have grown enormously. In 1983, defendant established the Esprit de Corp. shoe division and invested heavily in it. In 1983, shoe sales reached $3.3 million which exceeded the three prior years combined. In 1985, shoe sales have run at a rate of $1.3 million per month.

In January 1981, defendant made an offer to plaintiff to buy plaintiff's Esprit mark, which was refused. While its second application for registration was pending, defendant negotiated to buy Mistee Lingerie's mark from its new owner. Mistee had used Esprit since 1946 but had ceased to use it in July 1978 when its assets were sold off during a Chapter XI proceeding. Defendant's purchase was concluded in 1981, a day before defendant received notification of the rejection of the second application (which was based in part on Mistee's registration). Defendant then sought reconsideration, bringing this acquisition to the examiner's attention.

In October 1982, the reconsideration was put on suspense pending termination of this suit. The trademark examiner indicated that he would have been inclined to publish the Esprit mark for clothing but for the pendency of this action (DX-403, pp 21-22). One year later, in November 1983, defendant's application was removed from suspense and the Esprit mark was published for clothing only. The examiner indicated that plaintiff's Esprit registration for shoes "stands as no bar to the registrability of applicant's Esprit mark for clothing" (DX-403, pp 35-36). He further indicated that his decision to pass defendant's requested mark to publication was, among other factors, based on the fact that "registrant's goods are shoes, applicant's goods contain no footwear items" (DX-403, pp 35-36).

The Trademark Office then officially issued a notice of publication which stated that defendant's mark for clothing "appears to be entitled to registration" and accordingly "the mark will ... be published in the Official Gazette ... for the purpose of opposition by any person who believes he will be damaged by the registration of the mark" (DX-403 p. 48). Plaintiff opposed the registration and an opposition proceeding was scheduled. The...