A & H Sportswear Co. v. Victoria's Secret Stores, Civil Action No. 94-7408.

• Decision Date: 27 June 1997
• Docket Number: Civil Action No. 94-7408.
• Citation: 967 F.Supp. 1457
• Parties: A & H SPORTSWEAR CO., INC. & Mainstream Swimsuits, Inc., Plaintiffs and Counterclaim-Defendants, v. VICTORIA'S SECRET STORES, INC. & Victoria's Secret Catalogue, Inc., Defendants and Counterclaim-Plaintiffs.
• Court: U.S. District Court — Eastern District of Pennsylvania

967 F.Supp. 1457

A & H SPORTSWEAR CO., INC. & Mainstream Swimsuits, Inc., Plaintiffs and Counterclaim-Defendants, v. VICTORIA'S SECRET STORES, INC. & Victoria's Secret Catalogue, Inc., Defendants and Counterclaim-Plaintiffs.

Civil Action No. 94-7408.

United States District Court, E.D. Pennsylvania.

June 27, 1997.

Revised Order July 1, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Arthur Seidel, Stephen J. Meyers, Michael F. Snyder, Philadelphia, PA, for Plaintiffs.

Frank J. Colucci, Richard P. Jacobson, New York City, H. Robert Fiebach, Philadelphia, PA, for Defendants.

DECISION AND ORDER

VAN ANTWERPEN, District Judge.

I. BACKGROUND

This action arose under the common law, Sections 32 and 43(a) of the Trademark Act of 1946 (the Lanham Act), 15 U.S.C. § 1114, 1125(a), and the Pennsylvania Antidilution Law, 54 Pa.C.S.A. § 1124. The parties were diverse in citizenship and the amount in controversy exceeded $50,000 exclusive of interests and costs. This court had jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332, 1337, 1338 and 1367. Plaintiffs chose to bring this action directly in district court pursuant to 28 U.S.C. § 1338 rather than through the adjudication of the Patent and Trademark Office. On December 8, 1994, Plaintiffs A & H Sportswear, Inc. and Mainstream Swimsuits, Inc. ("A & H")¹ filed their complaint alleging trademark infringement by Defendants Victoria's Secret Stores, Inc. ("VS Stores") and Victoria's Secret Catalogue, Inc. ("VS Catalogue"). Defendants were alleged to have infringed the Plaintiffs' MIRACLESUIT mark with their The MIRACLE BRA line of products. Pursuant to a telephone conference on June 13, 1995 and an order of June 15, 1995, the parties agreed to consolidate a hearing on a preliminary injunction with a trial on the merits. We deemed letters from counsel a stipulation waiving a jury trial in our order of July 31, 1995. In our order of October 20, 1995, we granted Defendants' motion for separate trials on the issues of liability and damages. A two-week non-jury civil trial to determine issues of liability was conducted from October 25 to November 3, 1995. Pursuant to Fed.R.Civ.P. 52(a), on May 24, 1996 we made our findings of fact and conclusions of law on the issue of liability. A & H Sportswear Co., Inc. v. Victoria's Secret Stores, Inc., 926 F.Supp. 1233, 1234-35 (E.D.Pa.1996).

We concluded as a matter of law that Plaintiffs had not met their burden of establishing a likelihood of confusion under the applicable legal doctrines summarized in Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1225 (3d Cir.1978) and its progeny. A & H Sportswear, 926 F.Supp. at 1269. Likewise, we found that Defendants had not violated the Pennsylvania Antidilution statute, 54 Pa.C.S.A. § 1124. Id. We concluded that Plaintiffs had met their burden of establishing a possibility of confusion under Country Floors, Inc. v. A Partnership Composed of Gepner and Ford, 930 F.2d 1056, 1058 (3d Cir.1991) and Merchant & Evans v. Roosevelt Bldg. Products, 963 F.2d 628, 637 (3d Cir.1992) between THE MIRACLE BRA and the MIRACLESUIT trademarks in the swimwear market. A & H Sportswear, 926 F.Supp. at 1269.

The opinion in A & H Sportswear also made or supports the following findings, which we reiterate here:

1. Plaintiffs acted promptly in bringing suit upon Defendants' extension of their trademark into swimwear. THE MIRACLE BRA Bikini first entered VS Catalogue's assortment in the Resort '95 Catalogue edition which was mailed in November 1994. A & H Sportswear, 926 F.Supp. at 1243 (citing Finding of Fact No. 33). Plaintiffs filed suit on December 8, 1994. Thus, Plaintiffs had been aware of Defendants' use of THE MIRACLE BRA for use with swimsuits for approximately one month when this complaint was filed. A & H Sportswear, 926 F.Supp. at 1254 (citing Finding of Fact No. 74).

2. Plaintiffs did not prove that Defendants acted in bad faith or illegitimately. We made this finding at least three times in our prior opinion. First, we found that Defendants' actions with respect to Plaintiffs' MIRACLESUIT were not willfully tortious. We noted that instead, "these actions at most amounted to a `decision to take the risk of coming very close to infringement, for the sake of a trade name defendant evidently believed would be more valuable to it than any of the available alternatives.'" A & H Sportswear, 926 F.Supp. at 1255 (citing Syntex Laboratories, Inc. v. Norwich Pharmacal Co., 315 F.Supp. 45, 52 (S.D.N.Y.1970), aff'd, 437 F.2d 566 (2nd Cir.1971)). Second, we noted that neither bad faith nor deliberate intent had been shown because Defendants did not intentionally choose the name "miracle" for use with bras to ride on the success of Plaintiffs' MIRACLESUIT swimsuit but had conceived of their name independently. A & H Sportswear, 926 F.Supp. at 1261 (citing Finding of Fact 23). Finally, we found that while Defendants had constructive notice from the trademark register and actual notice from their trademark searches of Plaintiffs' mark in the swimwear industry, Defendants' choice to extend THE MIRACLE BRA to swimwear (an area already occupied by Plaintiffs) for the purposes of the Lanham Act and the "possibility of confusion" standard were not illegitimate. We reiterated that Plaintiffs had not proven bad faith or illegitimacy. A & H Sportswear, 926 F.Supp. at 1267-68, Findings of Fact No. 1, 21, 25, 32-34. We will not find that Defendants have been unjustly enriched.

3. Plaintiffs presented evidence of only a few incidents of actual confusion which we did not find completely credible. There were only a "few incidents" of actual confusion which occurred two months following Defendants' extension of THE MIRACLE BRA to swimwear. A & H Sportswear, 926 F.Supp. at 1260, 1263-64, Findings of Fact No. 71-72. A majority of these incidents involved professional swimwear buyers who ordinarily are held to a higher standard of care. We stated that those incidents as related to the Court apparently did confuse the maker of THE MIRACLE BRA with the manufacturer of the MIRACLESUIT. However, we refrained from finding that the incidents of confusion actually occurred: "While the incidents testified to probably did occur, their second hand accounting must be carefully scrutinized. The potential to inflict substantial harm on a successful product line by uncorroborated if believable accounts compels us to be vigilant in holding Plaintiff to its ultimate burden of proof." Id. at 1262-63.

4. Both the MIRACLESUIT and THE MIRACLE BRA trademarks are strong in their respective industries (swimsuits and lingerie, respectively), but the strength of their marks and the amount of protection they receive commensurately decreases when they extend into the industry dominated by the other. A & H Sportswear, 926 F.Supp. at 1263.

5. The MIRACLESUIT is targeted to a consumer pool similar to Defendants' products. A & H Sportswear, 926 F.Supp. at 1263.

6. Both parties engaged in substantial promotion activities which undoubtedly resulted in increased public recognition for the respective products. A & H Sportswear, 926 F.Supp. at 1257.

7. Although the VS Catalogue is carefully reviewed, in the past there have been references to the "Miracle Bikini" and the "Miracle Bodysuit" which omitted the word "bra." The Defendants' mark is often used without "THE" if to do so would read awkwardly or be grammatically improper. A & H Sportswear, 926 F.Supp. at 1258.

8. Plaintiffs were willing to give Defendant VS Catalogue at least a 2% and probably a 6% discount on Plaintiffs' MIRACLESUIT swimwear for Plaintiffs' mark to appear in Defendant VS Catalogue's catalog. In prior negotiations between Defendant VS Catalogue and Plaintiffs, Plaintiffs had agreed to pay Defendant VS Catalogue a 2% advertising fee over the standard 4% for the appearance of the MIRACLESUIT mark in the catalog. This two percent was refunded when the MIRACLESUIT mark did not appear in the Catalog. Plaintiffs' witness Mr. Mark Waldman had testified that he believed the standard 4% discount Defendant VS Catalogue had first received was in consideration for the appearance of the MIRACLESUIT trademark in the Catalogue. A & H Sportswear, 926 F.Supp. at 1242-43.

9. The parties' swimwear is comparably priced. The MIRACLESUIT normally retails in the range of $54.00 to more than $100. Defendants retail THE MIRACLE BRA Bikini at a cost of $69.00 for the top and $29.00 for the bottom and THE MIRACLE BRA Maillot (one-piece) for $69.00. A & H Sportswear, 926 F.Supp. at 1238.

II. FINDINGS OF FACT²

A. Success of THE MIRACLE BRA Swimwear

1. The financial information provided by VS Catalogue and VS Stores, in particular, Defendants' Exhibits 285, 286, 287 and 82, are true and accurate representations by these entities of their respective sales and expenses related to THE MIRACLE BRA swimwear, and the information provided by such exhibits consists of actual business records of both Defendants which they rely upon in the regular and ordinary course of their businesses. (11/5 at 4-8; Fisher); (11/5 at 33, 42; Joyce).

2. Defendants' net sales for THE MIRACLE BRA swimsuits are $28.753 million. This figure has not been disputed. (Pls.' Ex. 413; 11/4 at 44-45); (Victoria's Secret's Resp. to A & H's Proposed Findings of Fact at ¶ 1); (Victoria's Secret's Proposed Findings of Fact at ¶ 1). The net sales during this period were $27.166 million and $1.587 million for VS Catalogue and VS Stores, respectively. (Pls.' Ex. 413 at 5-6).

3. The costs properly deductible from Defendants' net sales are those variable costs directly related to the sale or manufacture of the products in issue.³ This accounting approach is appropriate in view of the Defendants' size, the $1 billion in assets of Defendants' parent company, annual sales for Defendants' parent company of over $2 billion (including $1.286 billion for VS Stores and $661 million for VS Catalogue in 1995), and the fact that the sale of THE...