Mortellito v. Nina of California, Inc.

• Decision Date: 06 January 1972
• Docket Number: No. 71 Civ. 4346.,71 Civ. 4346.
• Citation: 335 F. Supp. 1288
• Parties: Nina MORTELLITO and Nina Needlepoint, Inc., Plaintiffs, v. NINA OF CALIFORNIA, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

335 F. Supp. 1288

Nina MORTELLITO and Nina Needlepoint, Inc., Plaintiffs, v. NINA OF CALIFORNIA, INC., et al., Defendants.

No. 71 Civ. 4346.

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

January 6, 1972.

Orans, Elsen & Polstein, New York City, for plaintiffs by Jerome T. Orans, New York City, of counsel.

Christy, Frey & Christy, New York City, for defendants by Arthur H. Christy, David P. Steinmann, New York City, of counsel.

GURFEIN, District Judge.

This is an action to enjoin alleged violation of the Lanham Act (15 U.S.C. §§ 1051-1127), to enjoin alleged unfair competition, and to obtain an accounting of gains and profits derived from the unfair competition, as well as judgment for compensatory and punitive damages against certain of the defendants.¹ The jurisdiction of the Court is founded on 15 U.S.C. § 1121 and 28 U.S.C. § 1338(a). Pendent jurisdiction is alleged with respect to the unfair competition claims under New York law, relying on 28 U.S. C. § 1338(b).²

The action is brought by Nina Mortellito (Nina) and Nina Needlepoint, Inc. (Nina Inc.) to enjoin Nina of California, Inc. (Nina-Cal) from using the mark "Nina" in connection with the sale of needlepoint kits, patterns or canvasses manufactured by Nina-Cal. Such kits are presently being sold in New York City by the defendants R. H. Macy & Company, Inc. (Macy's), Associated Dry Goods Corp. (Lord & Taylor), and Federated Department Stores, Inc. (Abraham & Strauss); and injunctive relief is also sought against further sales of such needlework products by these store defendants.

A motion was made for a preliminary injunction. The Court ordered a hearing for the determination of disputed issues of fact. Thereupon, a stipulation was entered into by the parties that the hearing so ordered "may, pursuant to Fed.R.Civ.P. 65(a) (2) be considered . . . to be a trial on the merits of this action, except that the trial of the issue of damages is to be deferred until after the trial of the other claims raised in the complaint." A hearing was held and testimony taken. The testimony disclosed the following.

The art of needlepoint involves stitching wool through a pattern which has been drawn on a meshed canvas; different colors of wool are used for each color on the canvas. Depending on its size, the finished canvas can be used for anything from an eyeglass case to a rug. Generally, the larger the canvas the more expensive it is.

Needlepoint sewing has been taken up as a hobby by an increasing number of women, and even by some men. It is, nevertheless, a tiny industry.

Nina is a young woman of great artistic ability who turned her talent for design to the creation of canvasses for needlepoint about fourteen years ago. She has received the Audubon Exhibit award; the New Jersey and Cleveland Museums have exhibited her work. She has received prizes for her needlepoint design from the Lighthouse, which conducts the largest national exhibition of needlepoint in the United States. In their catalog she is described as the designer "Nina."

In 1965, she began the practice of signing all her canvasses with the mark "Nina," which is uniformly in block letters. At that time she also began wholesaling her designs exclusively to Alice Maynard, a well known needlepoint store on Madison Avenue in Manhattan, which in turn sold Nina's designs to stores in Chicago, Minneapolis and Nantucket. Over the years, Nina expanded her market, supplying shops in Westhampton, Baltimore, Philadelphia, Boston and Nantucket. She also sold to shops in California belonging to her sister, Jebba Maes, as will later appear.

Then, in 1970 Nina stopped selling to Alice Maynard, incorporated her own business, locating it on Madison Avenue, and began selling to many more stores from Naples, Florida to Seattle, Washington. She also opened a retail store of her own on Madison Avenue.

Since August 1, 1970 she has opened five Nina Needlepoint franchises at Stonington and Greenwich, Connecticut; Locust Valley, New York; Philadelphia; and Chicago. She gives her franchise dealers a logo and a shopping bag; she puts in their initial stock of yarn and canvasses; she sets them up as an operating store. They use her mark "Nina" in block letters, but must use her marked goods exclusively.

Nina Inc. now possesses an inventory which includes about 800 original designs, of which it reserves about 300 for its franchise dealers. It sells on both a retail and a wholesale basis, most of its sales being wholesale. The total sales of Nina Inc. from August 1, 1970 to July 31, 1971 amounted to approximately $184,000, representing an output of about 12,000 "Nina" canvasses per year, or an average of 1,000 per month. It sells much of its merchandise at prices of about sixty dollars (canvas, wool and needle). But it also sells a wide variety of canvasses retailing from $7.50 to $15. There are 89 designs retailing at $7.50 and over 100 designs retailing at $15. The average price for plaintiff's needlepoint canvas of the same size as that sold for $10 to $14 by Nina-Cal is $60 at retail.

Nina Inc. has done some advertising in House & Garden, Town & Country, Cue magazine, WGCH radio station in Greenwich, and the Charleston Evening Post. Local advertisements mentioning Nina also have been run by her customers. While the volume of advertising is not large it is in keeping with the nature of the needlepoint business, a small industry. Nina has received a good deal of media coverage gratis, because of her reputation. She has been written about in Life magazine on May 28, 1971, the New York Times on September 7, 1970 and McCall's magazine in March 1971; as well as the Chicago Daily News on September 17, 1971, the Middletown, New Jersey Daily Register of December 16, 1970, the Charleston News and Courier of March 26, 1970, and the French fashion magazine Elle of November 15, 1971.

The good will of the plaintiff embodied in the mark "Nina" was testified to by several witnesses: Erica Wilson, a writer and owner of needlepoint shops in Nantucket and Southampton; Charles Quaintance, Jr., Vice-President of Alice Maynard; Louise Hendrix, a Nina franchise dealer with stores in Stonington and Greenwich; Shirley Shaffer, buyer for a Great Neck store; Carol Devendorf, a Nina franchise dealer in Locust Valley; and Jebba Maes, the sister of Nina. The defendants, on the other hand, called several of their buyers who testified that they never heard of Nina or Nina Needlepoint, Inc.³ In addition, Mary Colucci, editor of Sew Business and Art Needlework Quarterly, with a circulation of about 11,000, testified similarly. Her magazines do not go to consumers; and advertising of Nina of California has been carried by them as well as an "editorial" about that firm submitted by Leitman himself.

The history of the defendant, Nina-Cal, can be recounted more briefly. It was incorporated in California in February 1971 and at once began preparing to produce needlepoint kits, which were first shipped in interstate commerce about May 1, 1971. These kits are sold in plastic bags and contained a canvas, some wool, a needle, a reproduction of the design, and instructions. They are attractive kits; the plastic bag is transparent so that the customer can see the reproduced design of the canvas. The canvasses differ from Nina's in that, inter alia, they are not hand-painted. They are painted by a silk-screen process which is, of course, a much cheaper process than hand-painting. Accordingly, they sell for less than one-quarter of her price. They are, however, like Nina's in that some of the designs appear to be copies of Nina Inc.'s designs.⁴ The kits also bear the legend "Nina of California." They appear to be packed so that "Nina" is clearly visible while "of California" is not easily read. The kits of Nina-Cal are now being sold to over 400 stores in over 40 states and Canada. Sales in the first five months of the corporation's existence consisted of about 17,000 canvasses for a total of $85,000.

The parties are in sharp dispute as to how the defendant Nina of California, a newcomer in the business, happened to take, as part of its trademark, the name "Nina."

The defendant's President, Donald Leitman, testified that he had previously been in the business of selling automobile tires through leased departments in department stores. He was also employed in late 1970 and early 1971 by Tec Cash Register. He had never had anything to do with needlepoint. His wife suggested one day that needlepoint canvasses produced cheaply would be a saleable item. He telephoned one of Jebba Maes stores in early January 1971 and made an appointment.

The Jebba Maes stores in California sold needlepoint canvasses at retail and featured Nina's designs. Jebba Maes, Nina's sister, ran them. She was also part owner of a company named Pippin Products, Inc., which produced both hand-painted canvasses and others by the silk-screen process, the latter being under the mark "One West."

Leitman told Stephen Alsberg, then production manager of Pippin Products, that he wanted to sell their needlepoint products in leased departments of department stores. Leitman then discovered that there were very few leased departments of that sort. He then offered to sell their One West kits on a trial basis. Dottie Eisenberg, a partner of Jebba Maes, told him she was interested in selling her interest in the business. Leitman asked for figures on their operation and a balance sheet. He elicited from them their costs of production, including the costs of outside silk screening, packaging and raw materials. After three or four meetings he finally decided not to buy into their business.

Leitman testified that, around the end of January, he decided to go into the needlepoint business himself. He got in touch with John Montalbano (John) whom he had known for fifteen years, and invited him to join in starting a new venture. John was in the advertising business and familiar with artwork. His wife,...