Telerep Caribe, Inc. v. Zambrano, No. CIV 00-2586 HL JA.

Citation146 F.Supp.2d 134
Decision Date17 May 2001
Docket NumberNo. CIV 00-2586 HL JA.
PartiesTELEREP CARIBE, INC., Jerome Forsythe, Plaintiffs v. Otto ZAMBRANO, et. al Defendants
CourtU.S. District Court — District of Puerto Rico

Rosa M. Cruz-Niemiec, San Juan, PR, Luis E. Vazquez-Rodriguez, San Juan, PR, for plaintiffs.

Vilma M. Dapena-Rodriguez, Bayamon, PR, for defendants.

OPINION AND ORDER

ARENAS, United States Magistrate Judge.

On December 19, 2000, TeleRep Caribe, Inc., and Jerome Forsyth (collectively "plaintiff" and/or "TeleRep Caribe") filed a complaint against Otto Zambrano, OMZ International Importers, A, B, C & D Companies (collectively "defendant" and/or "Zambrano"), alleging, inter alia, trademark violation, unfair competition, and copyright violation. (See Docket No. 1.) Appurtenant to the complaint, plaintiff requested the issuance of a preliminary injunction enjoining defendant from selling and distributing prepaid calling cards that are almost identical to those of plaintiff. See id. This court has jurisdiction over this action pursuant to 28 U.S.C. § 1331, § 1338(b) and supplemental jurisdiction over the state law claim under 28 U.S.C. § 1367(a).

Plaintiff's complaint states that since December 1998, TeleRep Caribe had been the exclusive distributor of TeleRep CCC Inc.'s prepaid calling cards in Puerto Rico. TeleRep Caribe's president, Mr. Jerome Forsyth, prepared a customized prepaid calling card for each of its customers, including a specific art work for each client, along with a photograph of the client's business. Sometime in 1999, Otto Zambrano began working for TeleRep Caribe to assist with the delivery of its customized prepaid calling cards and in taking purchase orders from TeleRep Caribe's customers, but ceased working there in June, 2000. At about that same time, TeleRep CCC ended its relationship with TeleRep Caribe and entered into a distributorship relationship with Otto Zambrano.

Plaintiff filed two complaints in August, 2000, one against defendant Otto Zambrano for tortious interference and another against TeleRep CCC for termination of the distributorship relationship. See TeleRep Caribe v. TeleRep CCC, Civil No. 00-2008(JAG) and TeleRep Caribe and Mr. Jerome Forsyth v. Otto Zambrano, OMZ International Importers, Civil No. KAC 00-4419 (filed before the Puerto Rico Superior Court). On September 20, 2000, the Superior Court of Puerto Rico issued an order instructing Otto Zambrano not to interfere with TeleRep Caribe's clients in Puerto Rico. On October 17, 2000, plaintiff and TeleRep CCC entered into a settlement agreement reinstating TeleRep Caribe as the exclusive distributor for TeleRep CCC pursuant to which plaintiff voluntarily dismissed both pending complaints. In the complaint before the court, plaintiff alleges that the defendant's acts1 have caused plaintiff significant harm and seeks damages in an amount of not less than $250,000. Plaintiff alleges further that the defendant's conduct results in irreparable harm to TeleRep Caribe's goodwill and business reputation. The defendant, on the other hand, alleges that plaintiff's works are not valid trademarks and even if they were, the works are works made for hire. (See Docket No. 14.) Thus, the real owners of the works are the customers, not the plaintiff, and therefore, there is no likelihood of confusion of the public. Finally, the defendant alleges that in relation to the copyright claim, there is no valid copyright because the First Circuit has decided that to state a claim under the Copyright Law the plaintiff must produce the certificate of copyright issued by the United States Copyright Office.

An evidentiary hearing on the motion for preliminary injunction was held on January 31, 2001. Jerome Forsyth testified on behalf of plaintiffs. Argument was heard from both parties.

On February 1, 2001, the defendant filed a motion to dismiss the copyright claim since a certificate of copyright had not been obtained from the United States Copyright Office, and possession of the copyright registration is a prerequisite to an action for infringement. (Docket No. 9.) The answer to the complaint was also filed on that date. Plaintiff filed a post-hearing memorandum of law on March 9, 2001 (Docket No. 16) and the defendant filed an opposition on April 10, 2001. (Docket No. 21.) Plaintiff filed an opposition to defendant's memorandum of law on April 18, 2001. (Docket No. 23.)

PRELIMINARY INJUNCTION

The First Circuit uses a quadripartite test for determining whether litigants are entitled to preliminary injunction redress. Under this framework, trial courts must consider (1) the likelihood of plaintiff's success on the merits; (2) the potential for irreparable harm if the injunction is denied; (3) the balance of relevant impositions, i.e., the hardship to the nonmovant if enjoined as contrasted with the hardship to the movant if no injunction issues; and (4) the effect the court's ruling will have on the public interest. See Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir.1996) (citing Weaver v. Henderson, 984 F.2d 11, 12 n. 3 (1st Cir. 1993); Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.1991)); see also Ocean Spray Cranberries, Inc. v. PepsiCo, Inc., 160 F.3d 58, 60-61 (1st Cir.1998); DeNovellis v. Shalala, 135 F.3d 58, 62 (1st Cir.1998); Starlight Sugar, Inc. v. Soto, 114 F.3d 330, 331 (1st Cir.1997); Planned Parenthood League of Mass. v. Bellotti, 641 F.2d 1006, 1008-09 (1st Cir.1981).

A. Likelihood of Plaintiff's Success on the Theories of Trademark, Unfair Competition and Copyright Infringement.

At the stage of preliminary injunction, a trial court need not predict the eventual outcome of the case with absolute assurance, but rather make a statement as to the probable outcome of the case. See Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d at 16; Narragansett Indian Tribe v. Guilbert, 934 F.2d at 6. With this standard in mind, I consider each of plaintiff's claims in terms of probable success on the merits.

1. Trademark/Trade Dress

TeleRep Caribe contends that it has been using its mark since 1999 and thus, it is the owner of the mark. The mark consists of customized prepaid calling cards featuring a specific art work comprised of a photographic image, along with words, phrases, and slogans for each client. TeleRep Caribe also states that Otto Zambrano copied its works and thus, infringed its right to the mark. Otto Zambrano denies infringement on the grounds that the specific art work is not unique and can not be considered a mark affording protection for the plaintiff.

This is in part a trademark infringement and unfair competition action under Section 32 of the Lanham Act, 15 U.S.C. § 1114.2 "The purpose of trademark laws is to prevent the use of the same or similar marks in a way that confuses the public about the actual source of the goods or services." I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 36 (1st Cir.1998) (citing Star Fin. Servs., Inc. v. Aastar Mortgage Corp., 89 F.3d 5, 9 (1st Cir. 1996)). The rights to a trademark3 are acquired by use and not by registration; however, registration is prima facie evidence of the validity of and the rights to such registered mark. Veryfine Prods., Inc. v. Colón Bros., Inc., 799 F.Supp. 240, 250 (D.P.R.1992).

The breadth of the confusion-producing elements actionable under section 15 U.S.C. § 1125(a) has been held to embrace not just word marks and symbol marks, but also "trade dress," a category which includes, not only the packaging or "dressing" of a product, but also the product's design. See Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 209, 120 S.Ct. 1339, 146 L.Ed.2d 182 (2000). Trade dress "has been defined as `the design and appearance of [a] product together with the elements making up the overall image that serves to identify the product presented to the consumer'." Chrysler Corp. v. Silva, 118 F.3d 56, 58 (1st Cir.1997) (citations omitted). In short, Section 43(a) of the Lanham Act, gives a person a claim for the use by any other person of any word, term, name, symbol, device, or any combination thereof which is likely to cause confusion among the consumers as to the origin, sponsorship, or approval of the goods. 15 U.S.C. § 1125(a)(1)(A).

Plaintiff testified that its mark is a trade dress.4 (See Docket No. 14 at 66.) To be protected under the Lanham Act, a trademark or trade dress must not be functional.5 I.P. Lund Trading ApS v. Kohler Co., 163 F.3d at 36 (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 775, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992)). Plaintiff must prove that its design has acquired a secondary meaning6 or that it is inherently distinctive,7 and that there is a likelihood that prospective purchasers will be confused as to the source of the product. TEC Eng'g Corp. v. Budget Molders Supply, Inc., 82 F.3d 542, 545 (1st Cir.1996) (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. at 769, 112 S.Ct. 2753). See Romm Art Creations Ltd. v. Simcha Int'l, Inc., 786 F.Supp. 1126 (E.D.N.Y.1992) (discusses a claim of infringement of the trade dress of commercial reproduction of particular art work).

The degree of protection afforded under the Lanham Act is largely determined by the distinctiveness of the trade dress. Id. at 1136. Distinctiveness has been held to be an "explicit prerequisite for registration of trade dress under § 2 and `the general principles qualifying a mark for registration under § 2 of the Lanham Act are for the most part applicable in determining whether an unregistered mark is entitled to protection under § 43(a).'" Wal-Mart Stores, Inc. v. Samara Brothers, Inc., 529 U.S. at 210, 120 S.Ct. 1339 (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. at 768, 112 S.Ct. 2753). Arbitrary and fanciful marks are not required in order to show secondary meaning. Id. 768, 112 S.Ct. 2753. A descriptive mark,8 on the other hand, needs to prove secondary...

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