Patsy's Italian Rest. Inc. v. Banas

• Decision Date: 24 August 2011
• Docket Number: Docket Nos. 08–4487–cv(L),08–4774–cv(XAP).
• Citation: 100 U.S.P.Q.2d 1001,658 F.3d 254
• Court: U.S. Court of Appeals — Second Circuit
• Parties: PATSY'S ITALIAN RESTAURANT, INC., Plaintiff–Counter–Defendant–Appellant–Cross–Appellee,Patsy's Brand, Inc., Plaintiff–Appellant–Cross–Appellee,v.Anthony BANAS, doing business as Patsy's, doing business as Patsy's Pizzeria Trattoria Impazzire, doing business as Patsy's Bakery & Café, Allan Zyller, doing business as Patsy's Pizzeria Trattoria, doing business as Patsy's, Al & Anthony's Patsy's, Inc., I.O.B. Realty, Inc., Defendants–Counter–Claimants–Appellees–Cross–Appellants,Patsy's Bakery & Café, Patsy's Pizzeria, Defendants–Appellees,Anthony & Patsy's, Defendant–Appellee–Cross–Appellant,BSZ Realty Corp., Defendant,Patsy's Inc., Intervenor–Cross–Appellant.

658 F.3d 254

100 U.S.P.Q.2d 1001

PATSY'S ITALIAN RESTAURANT, INC., Plaintiff–Counter–Defendant–Appellant–Cross–Appellee,Patsy's Brand, Inc., Plaintiff–Appellant–Cross–Appellee,

v.Anthony BANAS, doing business as Patsy's, doing business as Patsy's Pizzeria Trattoria Impazzire, doing business as Patsy's Bakery & Café, Allan Zyller, doing business as Patsy's Pizzeria Trattoria, doing business as Patsy's, Al & Anthony's Patsy's, Inc., I.O.B. Realty, Inc., Defendants–Counter–Claimants–Appellees–Cross–Appellants,Patsy's Bakery & Café, Patsy's Pizzeria, Defendants–Appellees,Anthony & Patsy's, Defendant–Appellee–Cross–Appellant,BSZ Realty Corp., Defendant,Patsy's Inc., Intervenor–Cross–Appellant.

Docket Nos. 08–4487–cv(L)

08–4774–cv(XAP).

United States Court of Appeals, Second Circuit.

Argued: Oct. 19, 2009.Decided: Aug. 24, 2011.

Norman H. Zivin, Cooper & Dunham LLP, New York, NY, (Robert T. Maldonado, Tonia A. Sayour, on the brief), for Plaintiff–Counter–Defendant–Appellant–Cross–Appellee and Plaintiff–Appellant–Cross–Appellee.Paul Grandinetti, Levy & Grandinetti, Washington, D.C. (Rebecca J. Stempien, Steven M. Levy, on the brief), for Defendants–Counter–Claimants–Appellees–Cross–Appellants.Before: WINTER, POOLER, Circuit Judges, and RAKOFF, District Judge. ^*

WINTER, Circuit Judge:

+-----------------+
                ¦TABLE OF CONTENTS¦
                +-----------------+
                

                BACKGROUND                                                              258
                

    a) The Parties                                                      259
                    b) The Prior Sauce Dispute                                          260
                    c) The Current Dispute                                              261
                

                DISCUSSION                                                              262
                

    a) Patsy's Italian Restaurant's Appeal: Merits                      262
                

       1) Cancellation of Appellants' Registrations                     262
                

          A)   Cancellation Not Barred by the Prior Injunction          263
                          B)   Patsy's Pizzeria Only Partially Abandoned Its Marks      264
                          C)   Jury Instructions Pursuant to Grants of Judgment as a    267
                               Matter of Law
                

       2) Denial of Attorneys' Fees                                     268
                

    b) Patsy's Pizzeria's Cross–Appeal: Merits                        269
                

       1) Limitation of Appellees' Rights to Pizzeria Services          269
                       2) Fraud on the PTO                                              270
                       3) Refusal to Reinstate Registration No. 2,213,574               272
                

    c) Injunctive Relief                                                272
                

          Refusal to Enjoin Appellees from Using Patsy's Outside of
                       1) Manhattan                                                     273
                       2) Prohibiting Appellants and Patsy's Pizzeria From Using Solely 274
                          “PATSY'S”
                

                CONCLUSION                                                              276
                

This appeal is the latest, longest, and perhaps even the last, chapter in a long legal struggle involving a host of trademark and unfair competition claims over the name “Patsy's.” Patsy's Italian Restaurant, Inc., and Patsy's Brand, Inc. (collectively “Patsy's Italian Restaurant” or “appellants”) appeal from a judgment entered after a jury trial before Magistrate Judge Reyes. Anthony Banas, Anthony's & Patsy's Inc., Allan Zyller, Al & Anthony's Patsy's Inc., I.O.B. Realty, Inc., and Patsy's Inc. (collectively “Patsy's Pizzeria” or “appellees”) cross-appeal.

Patsy's Italian Restaurant's appeal raises the following issues: (i) whether the district court erroneously cancelled their service mark registrations; (ii) whether the district court's decisions regarding injunctive relief constituted an abuse of discretion; and (iii) whether the district court abused its discretion when it denied their request for attorneys' fees. Patsy's Pizzeria's cross-appeal raises the following issues: (i) whether their rights were erroneously limited to pizzeria services; (ii) whether the jury verdict that they fraudulently obtained their service mark registration can be upheld; (iii) whether the jury verdict that appellants did not fraudulently obtain their service mark registrations should have been vacated; (iv) whether the district court erroneously refused to reinstate their service mark registration; and (v) whether the district court's decisions regarding injunctive relief constituted an abuse of discretion.

We affirm. Relevant factual disputes were resolved by the jury, and the district court's equitable relief was appropriately balanced and designed to limit ongoing consumer confusion.

BACKGROUND

To shorten this section and overall opinion, we provide only an overview of the parties, their trademarks, their relationship with one another, and the current dispute. Relevant descriptions of the evidence at trial, the jury instructions, and various aspects of the motion practice in the district court will be given in the DISCUSSION section when relevant.

a) The Parties

Appellants are associated with Patsy's Italian Restaurant on West 56th Street in Midtown, New York City. It has been in operation since 1944 and is well-known for Italian cuisine. The entity Patsy's Italian Restaurant, Inc. operates the restaurant. Patsy's Brand, Inc. was created in 1993 to sell packaged food products in association with Patsy's Italian Restaurant. At the beginning of this action, Patsy's Italian Restaurant, Inc. held two federal service mark ¹ registrations issued November 1, 2005—Registration Nos. 3,009,836 (the “'836 Registration”) and 3,009,866 (the “'866 Registration”)—which have since been transferred to Patsy's Brand. The '836 Registration is for the stylized mark PATSY'S PR for restaurant services. The '866 Registration is for the mark PATSY'S for restaurant services not including pizza. Patsy's Brand also holds Registration No. 1,874,789 (the “'789 Registration”) for the trademark PATSY'S for sauces.

Appellees are associated with Patsy's Pizzeria. The original Patsy's Pizzeria opened in 1933 in East Harlem and claims to have been the first pizzeria to sell pizza by the slice. I.O.B. Realty, Inc. purchased the original Patsy's Pizzeria in 1991 and entered into a licensing agreement with Patsy's Inc. in 1998. Under the current agreement, I.O.B. Realty owns the real estate and trademarks, whereas Patsy's Inc. is the franchising arm of Patsy's Pizzeria. There are currently six Patsy's Pizzeria locations in Manhattan in addition to the original location, the Staten Island location, and the Syosset location. When appropriate, we refer to I.O.B. Realty and Patsy's Inc. collectively as the “intervening appellees.” I.O.B. Realty previously received two federal service mark registrations—Registration No. 1,975,110 (the “'110 Registration”) and Registration No. 2,213,574 (the “'574 Registration”). The ' 110 Registration, issued May 21, 1996, was for the mark PATSY'S for restaurant services. The '574 Registration, issued December 29, 1998, was for the mark PATSY'S PIZZERIA for restaurant services.

Appellees Banas and Anthony & Patsy's, Inc. are associated with the Staten Island location of Patsy's Pizzeria, and, when appropriate, are referred to collectively as the “Staten Island appellees.” The district court found that, as a matter of law, the Staten Island location was opened after they obtained a license to use I.O.B. Realty's marks. Appellees Banas, Zyller, and Al & Anthony's Patsy's, Inc. are associated with the Syosset location of Patsy's Pizzeria, and, when necessary, are referred to as the “Syosset appellees.” The district court found that, as a matter of law, the Syosset location also obtained a license to use I.O.B. Realty's marks.

b) The Prior Sauce Dispute

The parties coexisted without litigation until each began to sell packaged sauce under the name “Patsy's,” thereby causing considerable consumer confusion. On October 8, 1998, the intervening appellees brought a cancellation proceeding before the Patent and Trademark Office (the “PTO”) seeking the cancellation of Patsy's Brand's '789 Registration for PATSY'S for sauces. Patsy's Brand responded by filing a cancellation proceeding before the PTO seeking the cancellation of I.O.B. Realty's Registration No. 1,975,110 for PATSY'S for restaurant services and Registration No. 2,213,574 for PATSY'S PIZZERIA for restaurant services. Patsy's Brand also filed suit in the Southern District against the intervening appellees. The action (the “sauce litigation”) alleged trademark infringement and unfair competition due to appellees' sale of sauces using the PATSY'S mark. The cancellation proceedings were consolidated and suspended pending resolution of the sauce litigation.

In granting Patsy's Brand's a preliminary injunction in the sauce litigation, the district court rejected the intervening appellees' argument that they were entitled to bridge the gap into sauces as the senior user of the PATSY'S mark for restaurant services. Patsy's Brand Inc. v. I.O.B. Realty Inc. (“ Patsy's Brand I ”), 53 U.S.P.Q.2d 1861, 1862–63 (S.D.N.Y.2000). The court reasoned that the mark PATSY'S for restaurant services was weak, as both parties had the right to use the mark for restaurant services. Id. at 1863. It also observed that it was unclear when the intervening appellees entered the sauce market, because evidence provided in support of the alleged date of entry was clearly falsified, a fact that suggested that the intervening appellees “did not choose [their] sauce label in good faith.” Id. at 1862. In a later opinion granting Patsy's Brand's motion for summary judgment in the sauce litigation, the district court again reiterated its findings that the intervening appellees presented falsified evidence and ordered them to show cause why they should not be sanctioned for doing so. Patsy's Brand Inc. v. I.O.B. Realty Inc. (“ Patsy's Brand II ”), 58 U.S.P.Q.2d 1048, 1050, 1059 (S.D.N.Y.2001). The district court sanctioned the...