Leon Finker, Inc. v. Schlussel
| Decision Date | 02 May 1979 |
| Docket Number | 79 Civ. 0068 (GLG). |
| Citation | 469 F. Supp. 674 |
| Parties | LEON FINKER, INC., d/b/a L. F. Industries, Plaintiff, v. Joseph SCHLUSSEL, d/b/a the Diamond Registry, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Brumbaugh, Graves, Donohue & Raymond, New York City, for plaintiff by Edward V. Filardi, M. Andrea Ryan, Robert B. Smith, New York City, of counsel.
Feldman & Feldman, New York City, for defendant by Marvin Feldman, Stephen E. Feldman, New York City, of counsel.
In this trademark action brought under the Lanham Act, the plaintiff seeks to enjoin the defendant both from using a similar, or identical, mark to its registered trademark, and from engaging in allegedly unfair competition. Plaintiff also seeks to recover monetary damages. A preliminary injunction was sought. Upon the submission of extensive papers and the hearing of argument on this motion, the Court concluded that an evidentiary hearing was necessary in order to resolve the disputed facts. This hearing was consolidated pursuant to Fed.R.Civ.P. 65(a)(2) with a trial on the merits.1
Plaintiff, Leon Finker, Inc. is a New York corporation which has been engaged in the business of cutting and wholesaling diamonds since 1969. Its principal, Leon Finker, has specialized in designing and cutting fancy shaped diamonds since he first entered the business in Belgium in the 1930's. L.F. Industries is a division of Leon Finker, Inc. formed in November of 1977 for the purpose of promoting the company's sale of brilliant cut, triangularly shaped diamonds. The plaintiff is one of only two manufacturers in the United States producing such diamonds.2
The defendant, an individual, is also engaged in the wholesaling, although not the cutting, of diamonds. The defendant's diamonds are sold to the trade through a brokerage house, "The Diamond Registry," which he runs (with the assistance of a computer), and through the publication of a newsletter. He has bought a number of cut diamonds from the plaintiff and marketed them in this manner.
As a result of transactions between the plaintiff and the defendant involving triangular shaped, brilliant cut diamonds, certain disputes arose. Before being able to consider these disputes, however, it is necessary to understand something about the history of this type of diamond.
Rough diamonds are only rarely found in triangular shape. When, however, a diamond in the rough has a natural triangular configuration its usage can be maximized by cutting it triangularly. (There would be far too much wastage involved in cutting a diamond with a different natural configuration into a diamond shape). Yet despite their rarity, diamonds so cut never attracted much popular acceptance.
Some years ago, a "brilliant cut"3 was utilized in the cutting of round and other shaped diamonds in order to enhance their luster and to give them a more brilliant appearance. This brilliant cut was first applied to a triangularly shaped stone in 1961 by the Asscher Diamond Works of Amsterdam. These Asscher diamonds had rounded triangular sides and a total of 74 facets. Asscher immediately began referring to this type of diamond as the "trilliant" and indicated that it expected the term "trilliant" to become a lower cased dictionary word, much like "marquise." See, Jewelers Circular-Keystone Directory, at page 21 (June 20, 1961). Trilliant was, in fact, a rather obvious name to apply to a triangle shaped, brilliant cut diamond as it was (as noted in the press release of the public relations firm of N. W. Ayer & Son in January of 1962), simply a contraction of the words "triangle" and "brilliant."
Asscher's trilliant diamond never became an important item in the diamond business in this country. Perhaps this is due to the fact that a diamond with rounded sides, even though three pointed, can be cut into one of the more conventional shapes, such as round, without excessive wastage. Consequently, the few dealers in the United States who did cut triangularly shaped diamonds chose rather to deal in straight-sided triangles with the corners slightly bevelled so as to avoid creating too sharp a point on the triangle. (If examined carefully, it can be seen that these diamonds, with the bevelling, actually have a total of nine sides.)
While the terms "trilliant" and "trilliant cut" were originally restricted to the Asscher type diamond, they came, in time, to refer to any triangularly shaped, brilliant cut diamond. (The gemological textbooks, however, continue to make an unclear distinction between the original Asscher type of rounded trilliant and the now more common straight sided trilliant). And although these terms are not extensively known even today, as triangularly shaped diamonds command only about 1% of the market for large diamonds, the evidence is clear that, within its rather limited market, a "trilliant" is any triangularly shaped, brilliant cut diamond.
In the spring of 1977, as the result of the defendant's solicitation of suppliers for his Diamond Registry business, the plaintiff and the defendant met, and the defendant became interested in the plaintiff's trilliant diamonds, marketed under the name "Trillion," which that company had then begun to emphasize (apparently upon the urging of Marvin Finker, Leon's son, who had joined the business a few years prior). That fall, the defendant took some of the plaintiff's diamonds on consignment and began advertising them in his bulletin. Promoting these diamonds under the plaintiff's mark, "Trillion," the defendant in his advertising stated that the "trillion cut" was "the most exciting new cut introduced in recent years." In turn, the defendant's customers, retail dealers, ran their own ads speaking of the "trillion cut" and the "Trillion" diamond.
Plaintiff applied for trademark registration of the mark "Trillion" in 1977. At that time the plaintiff was aware of the existence and usage of the trade word "trilliant." This fact was discussed with counsel (different attorneys than those representing plaintiff in this action) during the course of applying for registration. It was decided, however, not to call the attention of the Patent and Trademark Office to the possible conflict of the proposed mark with the trade term "trilliant." Conflicting testimony was given as to the reasons for this decision. The former attorneys themselves were not called to testify.
In the application for registration it was claimed that the first use of the term "Trillion" was made in May of 1972 and that its commercial use commenced in February, 1973. In support of this claim, the plaintiff produced a uniform form of memorandum substantially in the handwriting of Leon Finker, dated May 24, 1972. The word "Trillion," however, was inserted in the handwriting of his son. It is this Court's conclusion that the document was altered at a later date in order to substantiate a claim of an earlier usage. On the evidence presented, it does not appear that plaintiff was using "Trillion" as a mark until 1976 or 1977, when the son, Marvin, became active in the business and saw its possible commercial value. Any uses prior to that time were simply misspellings of the generic term. (The evidence demonstrated that neither Finker nor Schlussel were good or consistent spellers.) In any event, registration was granted on March 21, 1978.
Late in 1977, or early 1978, the defendant began aggressively to seek from the plaintiff an agreement designating him as the exclusive representative for the "Trillion" diamonds. The defendant asserts that an oral agreement to this effect was reached. The plaintiff denies this assertion. It is clear, however, that at about this time a letter was sent by the plaintiff to the defendant authorizing him to use the mark "Trillion" in advertising the triangular shaped diamonds obtained from it, provided that he use it only in connection with plaintiff's diamonds, and only with the trademark registration notation affixed.
The defendant did not comply with these instructions. In an article published in the American Jewelry Manufacturer (July, 1978), the defendant indicated that he had developed a new type of cut called the "Trillion cut" which would be advertised under the mark of "Solitaire For a Trillionaire," and which would be available only from the Diamond Registry. The defendant's diamond was also, at other times, marketed under the mark "Trillionaire." Moreover, the defendant's retail customers were advertising the plaintiff's diamonds, and using its mark, without the registration notation, or any indication that it was a mark of the plaintiff. (The defendant denies knowing that his retail dealers were advertising in this fashion, but offered no proof to indicate that he was giving any instructions to such dealers with respect to proper use of plaintiff's mark.) Ads of this nature appeared in New Jersey magazines and in Hartford, Connecticut, newspapers.4
In an attempt to resolve the disputes arising from the alleged breach of the exclusive representation agreement by the plaintiff, and the claimed trademark violations by the defendant, an arbitration proceeding was initiated before the Board of Arbitrators of the Diamond Dealers Club, with defendant seeking $100,000 in damages and the plaintiff cross-claiming for certain of its diamonds still in the possession of the defendant. The Diamond Dealers Club wisely refused to involve itself in the dispute concerning the trademark registration and alleged infringement. (The ultimate decision of the Arbitrators was that plaintiff would pay the defendant $5,000 for the advertising expenses, the defendant would return or pay for the goods held on memorandum, and the parties would share the arbitration costs.) This action was then commenced to decide the alleged trademark and unfair competition claims.
The plaintiff alleges that in using, and allowing his retailers to use, the mark "Trillion"...
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