Imagineering, Inc. v. Van Klassens, Inc.

• Decision Date: 30 March 1994
• Docket Number: No. 92 Civ. 0751 (RLC).,92 Civ. 0751 (RLC).
• Citation: 851 F. Supp. 532
• Parties: IMAGINEERING, INC., Plaintiff, v. VAN KLASSENS, INC. and Robert Lukingbeal, Defendants.
• Court: U.S. District Court — Southern District of New York

851 F. Supp. 532

IMAGINEERING, INC., Plaintiff, v. VAN KLASSENS, INC. and Robert Lukingbeal, Defendants.

No. 92 Civ. 0751 (RLC).

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

March 30, 1994.

COPYRIGHT MATERIAL OMITTED

Heslin & Rothenberg, P.C. (Susan F. Gullotti, Nicholas Mesiti, of counsel), Albany, NY, for plaintiff.

Robinson Brog Leinwand Reich Genovese & Gluck, P.C. (David C. Burger, of counsel), New York City, Pitts & Brittian (Robert E. Pitts, Raymond E. Stephens, of counsel), Knoxville, TN, for defendants.

OPINION

ROBERT L. CARTER, District Judge.

The background of this trade dress infringement case involving rival manufacturers of garden furniture, Imagineering, Inc. ("Imagineering") and Van Klassens, Inc. ("Van Klassens"), is set forth in an opinion issued September 4, 1992, with which familiarity is assumed. Van Klassens and its president, Robert Lukingbeal, are the defendants in this action. On October 28, 1993, a jury trial commenced to hear plaintiff's federal law claims of trade dress infringement and false advertising, and state law claims of unfair competition and violation of the New York State Anti-Dilution statute.

The jury returned a verdict favorable to plaintiff on its federal law claims and state law claim for unfair competition, and awarded plaintiff $860,000 in compensatory damages and $4,000,000 in punitive damages. Prior to the close of trial, the parties had agreed to submit plaintiff's anti-dilution claim and defendants' laches claim to the court. Following the jury's verdict, plaintiff voluntarily withdrew its anti-dilution claim.

This action is presently before the court for consideration of: 1) whether laches bars all of plaintiff's claims, and 2) whether plaintiff is entitled to attorney's fees, costs, enhanced damages and injunctive relief.

I.

A.

A laches defense, which may be raised as a bar to a claim for both injunctive relief and money damages, Carl Zeiss Stiftung v. VEB Carl Zeiss, Jena, 433 F.2d 686, 703 (2d Cir.1970), cert. denied, 403 U.S. 905, 91 S.Ct. 2205, 29 L.Ed.2d 680 (1971), requires defendants to show that 1) plaintiff had knowledge of defendants' use of its trade dress; 2) plaintiff inexcusably delayed in taking action with respect thereto; and 3) defendants will be prejudiced by permitting plaintiff inequitably to assert its rights at this time. See, e.g., Cuban Cigar Brands N.V. v. Upmann Int'l, Inc., 457 F.Supp. 1090, 1096-1100 (S.D.N.Y.1978) (Weinfeld, J.), aff'd, 607 F.2d 995 (2d Cir.1979). Further, the particular circumstances of the case must be considered, and the interests and equities of the parties balanced. Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1040 (2d Cir. 1980); Carl Zeiss Stiftung, 433 F.2d at 703. Moreover, because laches is an equitable remedy, defendants must also prove that they acted in good faith in that they did not intend to deceive or confuse the public as to the source of their furniture. See, e.g., Cuban Cigar, 457 F.Supp. at 1098-99; Grotrian, Helfferich, Schulz, Th. Steinweg Nachf. v. Steinway & Sons, 523 F.2d 1331, 1344 (2d Cir.1975).

Inexcusable Delay

Defendants seek to show that plaintiff "inexcusably delayed" initiating this action. They contend that Imagineering, which first became aware of Van Klassens's infringing activities in 1987, could not wait until 1991 to pursue its infringement claim.

In June, 1987, Imagineering's founder, William Fisher, saw a Van Klassens' advertisement featuring furniture which Fisher believed infringed his company's trade dress. Imagineering subsequently put Van Klassens on notice of the potential illegality of its activities in a letter sent in July of that year.¹

Having received no response to this letter and knowing that Van Klassens had shipped its first piece of furniture in August, Imagineering sent a second letter in November, 1987, requesting that the company "cease and desist" the production of its infringing furniture. Van Klassens responded that same month telling plaintiff that it intended to continue to manufacture its furniture ("Van Klassens's 1987 Letter"). Plaintiff did not respond to this letter because, as Victoria Howe, Imagineering's president, testified, she did not see any further advertisements for the furniture immediately thereafter, and so concluded that Van Klassens had ceased production of its infringing pieces.

It was not until February, 1989, that plaintiff saw a Van Klassens advertisement, which, according to Howe, again featured infringing pieces of furniture. However, at this time, a law suit was not feasible because of the turmoil within Imagineering ongoing since June, 1987, when Fisher died suddenly, leaving control of the company uncertain. Fisher had left a majority of the stock in the company to Howe, but had also set up a management trust for the employees of the company, and left additional stock both to a good friend and to one of his chief co-workers. All of the stock remained in escrow from the time of his death until March, 1990, at which time Fisher's attorneys settled his estate and Howe took over the company.

Then, in August, 1991, plaintiff learned that additional pieces of infringing furniture had been introduced by Van Klassens shortly after it mistakenly received a bid package containing blueprints for Imagineering pieces to be built for a municipal project in Orange County, California. As Howe testified, this was the "final straw" because the blueprints were for plaintiff's "signature pieces," its half circle and quarter circle settee. (Trial Tr. at 218.)

Imagineering's ownership having been settled by this time, and it being apparent that Van Klassens's infringing activities were not abating, plaintiff sent two cease and desist letters to Van Klassens in October, 1991. Van Klassens responded in November by filing suit in Tennessee, which action plaintiff removed to this court in January, 1992.

Ultimately, Imagineering put Van Klassens on notice of the potential consequences of its actions, and then proceeded with the requisite diligence and prudence. The court, therefore, cannot find that Imagineering inexcusably delayed filing this action.

Prejudice

Defendants claim that they have been "prejudiced" because, since plaintiff's failure to respond to Van Klassens's 1987 Letter, they have continued to manufacture and advertise Van Klassens furniture, develop goodwill in the "Van Klassens" name, expand the product line, and hire additional employees. Further, they claim prejudice to the degree that Ms. Howe's deteriorating health prevented them from deposing her earlier during discovery, and the Lukingbeals' memories had faded by the time this matter came to trial. Defendants also allege other, but unspecified, instances of such "evidentiary prejudice." Defendants' Post-Trial Memorandum of Law in Support of Defendants' Defense of Laches and in Opposition to Plaintiff's Claim for Dilution at 5.

To show prejudice, however, defendants must show more than "the simple fact that the business continued during the period of delay." Cuban Cigar, 457 F.Supp. at 1098; Am. Express Co. v. Am. Express Limousine Service, Ltd., 772 F.Supp. 729, 737-38 (E.D.N.Y.1991). Moreover, the nature of the prejudice allegedly suffered by defendants cannot be measured without due regard to their own willful conduct, see Stone v. Williams, 891 F.2d 401, 404 (2d Cir.1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3215, 110 L.Ed.2d 662 (1990), rev'd on other grounds, 970 F.2d 1043 (2d Cir.1992), specifically as it concerns defendants' continued exploitation of Imagineering's trade dress. See Weight Watchers Int'l, Inc. v. Stouffer Corp., 744 F.Supp. 1259, 1287 (S.D.N.Y.1990) (Mukasey, J.).

Particularly considering that Van Klassens's 1987 Letter followed two unequivocal letters from Imagineering, defendants cannot credibly maintain that the silence following Van Klassens's 1987 Letter constituted acquiescence by Imagineering or justified defendants' claimed reliance.² Rather, defendants seemingly took advantage of this silence in order to continue and increase their infringing activities.

Further, although defendants may have been prejudiced to some extent as a result of fading memories, stale evidence or similar problems, see Stone v. Williams, 873 F.2d 620, 623 (2d Cir.), cert. denied, 493 U.S. 959, 110 S.Ct. 377, 107 L.Ed.2d 362 vacated on other grounds, 891 F.2d 401 (2d Cir.1989), such prejudice, to the extent that it does exist, is insubstantial. In particular, defendants' claim that the ability to depose Ms. Howe earlier would have yielded tangible benefits is purely speculative, and, in any event, defendants were not restricted in the amount of time available to them for Howe's deposition, even if it came later than they wished. Moreover, having heard the testimony of the Lukingbeals at trial, which included specific recollections of certain trips to Europe prior to 1987, the court cannot conclude that the possibility of these two witness' loss of memory justifies a bar against Imagineering's claims.

Good Faith

Finally, defendants did not act in good faith. After a three-week trial, the jury concluded that they had willfully infringed Imagineering's trade dress. This finding of bad faith alone is sufficient to defeat defendants' laches claim. See, e.g., Harlequin Enters. Ltd. v. Gulf & Western Corp., 644 F.2d 946, 950 (2d Cir.1981); Nikon, Inc. v. Ikon Corp., 803 F.Supp. 910, 924-25 (S.D.N.Y. 1992) (Gershon, J.), aff'd, 987 F.2d 91 (2d Cir.1993); West Indian Sea Island Cotton Ass'n v. Threadtex, Inc., 761 F.Supp. 1041, 1051 (S.D.N.Y.1991) (Ward, J.); Cullman Ventures, Inc. v. Columbian Art Works, Inc., 717 F.Supp. 96, 135 (S.D.N.Y.1989) (Conboy, J.); Cuban Cigar, 457 F.Supp. at 1099-1101; accord McDonald's Corp. v. Druck & Gerner, DDS., P.C., 814 F.Supp. 1127, 1138-39 (N.D.N.Y.1993).

B.

Defendants also argue that a presumption of laches arises after three years, which would shift the burden onto plaintiff to prove that defenda...