Jordan K. Rand, Ltd. v. Lazoff Bros., Inc.
| Decision Date | 06 April 1982 |
| Docket Number | Civ. No. 81-2465(PG). |
| Citation | 537 F. Supp. 587 |
| Parties | JORDAN K. RAND, LTD., Plaintiff, v. LAZOFF BROS., INC., Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
COPYRIGHT MATERIAL OMITTED
Iván Reichard, Reichard & Colberg, San Juan, P. R., for plaintiff.
Rodolfo Gluck, Hato Rey, P. R., for defendant.
This is an action brought by plaintiff against defendant for trademark infringement and for unfair competition pursuant to the Lanham Trademark Act, 15 U.S.C. §§ 1051-1127, and the laws of Puerto Rico. Jurisdiction exists under 15 U.S.C. § 1121 and under 28 U.S.C. § 1338.
Plaintiff's complaint is in five counts. Count I alleges that Lazoff Bros., Inc.'s (hereinafter referred to as Lazoff) use of the Chardón trademark on the goods and merchandise sold by it constitutes infringement of the registered trademark Chardón owned by plaintiff, Jordan K. Rand, Ltd. (hereinafter referred to as Rand). Count II alleges that defendant's use of its trademark falsely attributes the origin of its product to plaintiff in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and that Lazoff, by its use of Chardón Paris engages in unfair competition with plaintiff, appropriating to itself plaintiff's goodwill and reputation to the detriment of plaintiff and of the purchasing public who is confused thereby. Counts III and IV allege trademark infringement and unfair competition under Puerto Rican law, 10 L.P.R.A. § 191, et seq., and § 259, et seq. Count V alleges a breach of contract under the Civil Code of Puerto Rico.
Plaintiff is seeking a preliminary injunction to prevent Lazoff from using the trademark Chardón in connection with the advertising and sale of its products.
Defendant denied the complaint's allegations, raised several affirmative defenses, and counterclaimed against the plaintiff. The affirmative defenses are essentially that defendant had acquired an exclusive right to use the trademark Chardón in Puerto Rico and Venezuela; that defendant had lawfully registered the trademark Chardón in Puerto Rico; that plaintiff is precluded from enjoining defendant's exclusive right by equitable principles of laches, estoppel and acquiescence; and that plaintiff's ultimate purpose is to terminate a valid dealer's agreement without cause.
Defendant has counterclaimed against plaintiff alleging violation of the Puerto Rico Dealer's Act, 10 L.P.R.A. 278, et seq., and seeking (1) the Court to order the United States Patents and Trademark Office to register defendant's rights to the exclusive use of the trademark Chardón in Puerto Rico and Venezuela in connection with jeans and general apparel; (2) to award damages, costs and attorney's fees.
On February 25, 1982, the Court held a hearing on the preliminary injunction motion. After observing the demeanor and weighing the credibility of both witnesses, Messrs. Bob Gurevitch and Mike Lazoff, the Court accepts plaintiff's version of the facts and rejects defendant's testimony as unworthy of belief. On the pleadings on the proof adduced at the hearing and on the written briefs and affidavits, the Court makes the following findings of facts.
Jordan K. Rand, Ltd., is a California corporation with its principal place of business therein and a designer of clothing who distributes in Puerto Rico, United States and foreign countries and also licenses the distribution and sale of jeans and other clothing bearing the trademark Chardón Paris since June 1980.
Plaintiff has its jeans and garments manufactured to its specifications and standards in factories throughout the world. It has spent 3.5 million dollars in advertising through television, radio, billboards, prints and posters.
On January 5, 1982, plaintiff obtained a registration from the United States Patent and Trademark Office (Plaintiff's Exhibit 14). From the registration it appears that the trademark application was filed on July 7, 1980, that its first use was on June 12, 1980, and that it is for men's and women's jeans. Plaintiff has also filed applications for registration of the Chardón trademark in Canada, Germany, Great Britain, Japan, Indonesia, Taiwan, Philippines and Venezuela. Registration in the Benelux countries has been issued. Moreover, plaintiff applied for registration of the Chardón trademark in Puerto Rico, but said application was denied because defendant had already had the trademark registered to its name. During the month of March 1980 plaintiff contacted defendant Lazoff about the new line of jeans and commented to him that there was going to be a show in New York. Defendant went to New York where plaintiff was presented the new line of jeans.
During the months of May and June 1980 plaintiff and defendant conferred by telephone to set up a license agreement to distribute the jeans in Puerto Rico and Venezuela. Under this arrangement defendant would place orders for jeans with plaintiff at agreed prices and plaintiff would authorize the manufacture of said goods for defendant's account, to be released to defendant against a letter of credit. Defendant agreed to pay a royalty of $1.25 for every jean ordered. As a result of these communications, Mr. Bob Gurevitch, Vice President of Jordan K. Rand, Ltd., wrote a letter addressed to Mr. Mike Lazoff with date of July 9, 1980, wherein he states that he is detailing their agreement for Lazoff Bros.' license for the distribution of jeans in Puerto Rico with the trademark Chardón. The agreement (Exhibit 1) sets forth that "all jeans must be purchased through Jordan K. Rand, Ltd., and a royalty of $1.25 per unit is to be paid to Jordan K. Rand, Ltd." upon shipment; that Jordan K. Rand, Ltd., will provide T.V. commercials and art work for in-store display; that "Lazoff Bros. agrees to spend approximately 12% of jeans sales for T.V. advertising"; that "Jordan K. Rand, Ltd. must approve in writing any production of garments with the Chardón Paris trademark"; and that "the format for license royalties of any other products other then (sic) jeans will follow.".
Pursuant to the agreement, defendant obtained a line of credit from Citibank, N.A., (Defendant's Exhibit B). Defendant placed orders indicating the amount of different sizes it wanted to purchase, in person, in New York or in the offices of plaintiff in Los Angeles, California, or called in by phone. Plaintiff would then telex or would forward the order to its agent, East-West Trade Development Co. (hereinafter referred to as E-W Co.) in Hong Kong. E-W Co. would then place the order with the factories in different countries. The shipper was the factory that produced the goods, and the goods were then consigned to either the bank or defendant (Plaintiff's Exhibit 9). Plaintiff would then make the invoices for royalties after receipt of the copy of the commercial invoice from E-W Co. The royalties were due once the factory or E-W Co. shipped and the bank accepted the letter of credit and invoices. Ten checks appeared to be made by defendant to plaintiff in payment of royalties due to invoices from the Chardón jeans dated from October 28, 1980, to August 26, 1981 (Plaintiff's Exhibit 10). By November 12, 1981, defendant owed plaintiff the sum of $41,130.00, in royalties, due for invoices of the Chardón jeans (Plaintiff's Exhibit 17).
Lazoff Bros., Inc., is a corporation organized under the laws of Puerto Rico with principal place of business in Puerto Rico dedicated to the business of selling clothing at the wholesale level.
Lazoff, as licensee of plaintiff's trademark, carried out an extensive advertising program to promote Chardón jeans, which as of December 31, 1981, added up to $112,265.00. Defendant entered into a contract to lease a property in San José Shopping Center and invested $47,000 in repairs and improvements (testimony of Mr. Lazoff). He had three salesmen to sell the Chardón jeans. Defendant placed orders for plaintiff's jeans in the sum of more than one million dollars and paid $175,000.00 in royalties. The gross sales totalled 2.9 million dollars from the beginning of the agreement through 1981. Defendant testified that he has 30,000 Chardón jeans still in stock.
Defendant filed an application for registration of the trademark Chardón in the Department of State of Puerto Rico in July 1980, wherein it states that the trademark was adopted and used since June 1, 1980. Said application was approved on October 20, 1980, and the trademark was so registered (Plaintiff's Exhibit 16).
Defendant manufactured and sold garments other than the jeans manufactured by plaintiff under the trademark Chardón and applied the trademark Chardón to those garments. Some of those garments were presented at the hearing as plaintiff's Exhibits 2 thru 7, and consisted of shirts, blouses, slacks and trousers, some made with polyester or low-quality fabric and styles out of line with the fashion of today and with the image of Chardón.
Defendant published in the newspaper in Puerto Rico, The San Juan Star, a note clarifying and informing the public that Lazoff Bros., Inc., had registered the trademark Chardón Paris (TM) under the certificate 23209, dated July 10, 1980, and that it was the only entity authorized to offer, distribute and sell the Chardón products in the territory of Puerto Rico, The newspaper notice was authorized by Lazoff Bros., Inc. (Plaintiff's Exhibit 15).
Defendant's version of the facts is as follows: that plaintiff and defendant entered into an oral agreement for the exclusive distribution in Puerto Rico and Venezuela of the jeans bearing the trademark Chardón; that defendant agreed to pay plaintiff a commission of $1.25 for every jean ordered by Lazoff, but that in no event such commissions would exceed $175,000.00; that defendant could use the trademark Chardón in other garments besides the jeans manufactured by defendants without the prior authorization or control...
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