Sage Realty Corp. v. Sage Group, Inc.
| Decision Date | 21 April 1989 |
| Docket Number | No. 89 Civ. 1939 (PKL).,89 Civ. 1939 (PKL). |
| Citation | 711 F. Supp. 134 |
| Parties | SAGE REALTY CORPORATION, Plaintiff, v. SAGE GROUP, INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
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Shea & Gould, New York City (J. Joseph Bainton, William Dunnegan, Jonathan M. Landsman, of counsel), for plaintiff.
Weisberg & Berns, New York City (David E. Weisberg, of counsel), for defendant.
Plaintiff Sage Realty Corporation ("Sage Realty") brought suit on March 21, 1989, against Sage Group, Inc. ("Sage Group"), for violation of the Lanham Act, 15 U.S.C. § 1125(a), New York State's anti-dilution statute, N.Y.Gen.Bus.Law § 368-d, and an implied cause of action pursuant to N.Y. Bus.Corp.Law § 301(a)(2). A temporary restraining order and expedited discovery order was issued on March 21, 1989, by the Honorable Charles S. Haight, United States District Judge of this Court, sitting in Part I. At a hearing held on March 27, 1989, this Court vacated the temporary restraining order, granted expedited discovery for defendant, and consolidated the preliminary injunction hearing with a hearing on the merits, pursuant to Fed.R.Civ.P. 65. Defendant answered and asserted a counterclaim for damages allegedly sustained by the granting of the temporary restraining order.
The action is now before this Court on plaintiff's motion for a preliminary and permanent injunction, pursuant to Fed.R.Civ. P. 65, to enjoin defendant from using in commerce the service marks "SAGE" and "SAGE GROUP, INC." Based upon the memoranda and supporting papers submitted to the Court, and testimony and exhibits presented at a proceeding before the Court on April 12, 1989, the following shall constitute the findings of fact and conclusions of law of this Court pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
Plaintiff is a real estate management firm, incorporated in 1938. See PX 25. For over 50 years, plaintiff Sage Realty has been engaged in the business of managing buildings located principally in New York City. Since 1974, plaintiff has used the stylized logo "SAGE." See, e.g., PX 26. This logo is used on Sage Realty's letterhead, business cards, see PX 12-18, advertisements, see, e.g., PX 32, as well as when plaintiff attempts to rent commercial space. PX 28-31. Plaintiff asserts it has spent more than $500,000 promoting its business and that of the William Kaufman Organization, Ltd. ("Kaufman Organization") with the service marks "SAGE" and "SAGE REALTY CORPORATION."
Plaintiff Sage Realty only manages buildings that are owned by affiliates of the Kaufman Organization together with other investors, and that were constructed by affiliates of the Kaufman Organization. The Kaufman Organization itself is an affiliate of plaintiff.1 Among the buildings managed by plaintiff, and owned in part by the Kaufman Organization are: 320 West 13th Street, 210 East 49th Street, 777 Third Avenue, 437 Madison Avenue, 77 Water Street, 127 John Street, 747 Third Avenue, 5 Hanover, 767 Third Avenue, 209-211 East 48th Street and 17 State Street. Complaint ¶ 5.
Plaintiff's buildings, through its management, have gained significant recognition. For example, plaintiff has constructed on the roof of 77 Water Street a steel replica of a World War I Sopwith Camel fighter plane, complete with an astro turf runway, landing lights and a windsock, which was the subject of an article in the New York Times. PX 19. Additionally, at 777 Third Avenue, plaintiff has constructed an outdoor swing big enough to accommodate 20 people. This building was the subject of an article in the Real Estate Forum. PX 27. At 767 Third Avenue, plaintiff constructed the world's largest chessboard, which is three stories high with movable pieces 2½ feet in diameter, enabling the recreation of historical chess games. Complaint ¶ 3.
Plaintiff Sage Realty only manages buildings in which its affiliate, the Kaufman Organization, owns an equity interest. Plaintiff asserts that this policy was intended to create the impression among members of the real estate community that Kaufman Organization buildings would be managed with the utmost care. Sage Realty has worked to develop and maintain a reputation concerning the quality and integrity of the property it manages. Robert Kaufman ("Kaufman"), executive vice president of Sage Realty Corporation, testified that the success of plaintiff's efforts are demonstrated by the low turnover rate and high rerental rate of property managed by Sage Realty. Kaufman made a most favorable impression on the Court as a totally credible and reliable witness.
To demonstrate the care it takes in managing buildings and its concern over likely confusion with defendant's service mark and corporate name, Kaufman testified that plaintiff includes in all leases a provision requiring alterations in rented space be performed by contractors approved by Sage Realty. If a tenant does not use an approved contractor, Sage Realty imposes a supervision charge. This policy is aimed at maintaining the quality of the buildings managed by Sage Realty. However, in order to ensure good tenant relations, Sage Realty maintains no economic relationship with the approved subcontractors. Additionally, in order to maintain its reputation for quality, plaintiff has developed its own elevator maintenance company under the "sage" name. This company maintains all the elevators in the properties managed by Sage Realty within New York City.
Defendant Sage Group, is a New York corporation incorporated in August of 1987. Sage Group is in the business of construction and real estate development. It provides architectural design services, both interior and exterior, and general contracting services. Majed Khandji ("Khandji"), president and sole employee of Sage Group, testified that Sage Group is not, at the present time, in the business of managing buildings. However, a promotional pamphlet distributed by defendant contained a list of services offered, including "Property Management/Upgrade." PX 3. Moreover, defendant asserts that it is a growing, aggressive enterprise, and would not turn down any profitable business — including the management of a building — that was offered.
As of the present time, Sage Group has earned no profits. However, defendant has recently become the exclusive representative in the United States for Rochin International ("Rochin"), a British firm. Rochin is a an interior design and furnishing company, specializing in middle eastern designs. Khandji testified that a meeting was scheduled with Rochin, concerning a new project on March 25, 1989. Defendant cancelled this meeting due to Judge Haight's temporary restraining order served on March 21, 1989.
Defendant contends that the word "sage" was used in the name of Sage Group, Inc. because it denotes wisdom and expertise. Allegedly a prospective co-owner of the corporation, Tori Zorakhsh ("Zorakhsh"), suggested the name. Zorakhsh attended the Sage Graduate School at Cornell. At the time the name was chosen, Khandji was the sole shareholder of the corporation. He testified that the choice of the name "Sage Group, Inc." was solely his and that at that time, he had never heard of Sage Realty Corporation.
Initially, Sage Group used the logo as shown on PX 5. This logo was used from incorporation until June, 1988. Around that time defendant employed a graphic designer, Fran Banieri, "to develop a new logo" for Sage Group. The logo was changed because Khandji wanted a more professional look. Khandji gave the designer a copy of the February 1988 Real Estate Forum to aid her in developing the new logo. The centerfold of this magazine featured 17 State Street, a building owned by plaintiff. Plaintiff's name, but not its logo, appeared therein. Defendant distributed written announcements and brochures containing its name and new logo, PX 10 & 11, to approximately one thousand real estate professionals, including leasing brokers, in the greater metropolitan area. See DX D.
Khandji testified that at the time defendant's new logo was created he had neither seen plaintiff's logo nor knew of plaintiff's existence. Khandji testified that he was not aware of Sage Realty until he received the 1989 Real Estate Diary, in the middle of December, 1988. In the Real Estate Diary, Sage Realty and Sage Group are listed seriatim. The Real Estate Diary is sent, yearly, to thousands of real estate professionals.
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), provides in relevant part:
Any person who shall affix, apply, or annex, or use in connection with any goods or services, ... a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, ... shall be liable to a civil action ... by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.
The Act protects not only registered trademarks, but unregistered marks, such as "SAGE REALTY CORPORATION" and "SAGE." See Banff, Ltd. v. Federated Department Stores, Inc., 841 F.2d 486 (2d Cir.1988); Thompson Medical Co. v. Pfizer Inc., 753 F.2d 208, 212 & n. 5 (2d Cir.1985).
To determine whether an unregistered mark has been infringed a two-step test is applied. First, a plaintiff must demonstrate that its mark merits protection. See Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4 (2d Cir.1976); see also Yarmuth-Dion, Inc. v. D'ion Furs, Inc., 835 F.2d 990, 993 (2d Cir.1987); Abraham Zion Corp. v. Lebow, 761 F.2d 93, 104 (2d Cir.1985). Trademarks are divided into four categories with respect to protection. "Arrayed in an ascending order which roughly reflects their eligibility to trademark status and the degree of protection accorded, these classes are (1)...
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