The Morningside Group v. Morningside Capital

• Decision Date: 01 August 1998
• Docket Number: Docket No. 98-9140
• Citation: 182 F.3d 133
• Parties: (2nd Cir. 1999) The Morningside Group Limited, Plaintiff-Appellant, v. Morningside Capital Group, L.L.C., Defendant-Appellee
• Court: U.S. Court of Appeals — Second Circuit

Page 133

182 F.3d 133 (2nd Cir. 1999)

The Morningside Group Limited Plaintiff-Appellant, v. Morningside Capital Group, L.L.C. Defendant-Appellee.

Docket No. 98-9140.

August Term, 1998

UNITED STATES COURT OF APPEALS SECOND CIRCUIT.

Argued May 5, 1999.

Decided June 28, 1999.

Appeal from a judgment of the United States District Court for the District of Connecticut (Janet C. Hall, Judge) dismissing both (1) plaintiff's Lanham Act infringement claim, on the alternative grounds that plaintiff does not have a valid service mark and that there is no proof of likelihood of confusion, and (2)plaintiff's federal dilution claim and state law claims. On appeal plaintiff principally claims that the district court erred in dismissing its infringement claim because the court engaged in faulty legal analysis. We agree, because we hold both that plaintiff does have a valid service mark and that it has demonstrated the necessary likelihood of confusion. We do not reach the federal dilution claim or the state law claims.

Judgment REVERSED as to the dismissal of plaintiff's federal infringement claim and REMANDED for entry of a permanent injunction and for determination of any other proper relief, including the consideration of one of plaintiff's state law claims. [Copyrighted Material Omitted] MARK G. MATUSCHAK, Hale and Dorr, Boston, MA (Paul Fields, Darby & Darby, New York, NY, on the brief) for Plaintiff-Appellant.

STEPHEN P. MCNAMARA, St. Onge Steward Johnston & Reens LLC, Stamford, CT, for Defendant-Appellee.

Before: CABRANES and SACK, Circuit Judges, and SHADUR,^* District Judge.

SHADUR, District Judge:

The Morningside Group Limited ("Morningside Group") brought suit against Morningside Capital Group, L.L.C., ("Morningside Capital") for unfair competition and trademark dilution under Lanham Act §§43(a) and (c)(15 U.S.C. 1125(a) and (c)), in addition to various state law claims. After a three-day bench trial in February 1998, the district court (Janet C. Hall, Judge) entered judgment for Morningside Capital, having found that Morningside Group's name did not constitute a service mark and that even if it did, it was not infringed because confusion was not likely.

Morningside Group appeals that judgment of dismissal, raising two principal issues: (1) whether the district court correctly held that Morningside Group does not provide services to others and therefore does not have a service mark entitled to protection under the Lanham Act; and (2) if a service mark is at issue, whether the district court correctly found that Morningside Capital does not infringe that mark because no likelihood of confusion exists under the factors articulated in Judge Friendly's opinion for this court in Polaroid Corp. v. Polarad Elec. Corp., 287 F.2d 492, 495 (2d Cir. 1961). We reverse on both grounds.

Background

We begin with a brief overview of the history and operations of the two financial institutions at war in this case. We will then turn to a brief recapitulation of the lawsuit itself.

Morningside Group

In the late 1980s members of the Hong-Kong-based Chan family began building a financial investment business. At that time they selected the "Morningside" mark to identify their evolving corporation and its affiliates, subsidiaries and licensees. Their primary corporation is The Morningside Group Limited, the plaintiff in this action and a British Virgin Islands corporation. According to the Chans, they chose the name "Morningside" because of the positive connotations of the word "morning" in Chinese, and because the first member of their family to be educated in the United States had attended Columbia University in New York City's Morningside Heights neighborhood.

Together the Morningside Group businesses and their licensees have engaged in various financial activities in the United States. For example, as the district court explained, members of the Morningside Group have structured and financed investments in a broad range of United States companies and assisted in managing their acquisitions. Significantly (though the district court viewed this as unimportant) Morningside Group has often solicited co-investors in those endeavors.¹

Members of the Morningside Group have also assisted Asian companies in acquiring United States technology through negotiations of joint ventures and licensing transactions. Finally, Morningside (China) has provided financial advice to United States investors regarding potential investments in Asia.

Morningside Capital

Morningside Capital is a Connecticut company formed in 1995 by business executive Vincent Wasik ("Wasik") and corporate lawyer Laurence Bathgate ("Bathgate"). Wasik and Bathgate chose the name "Morningside" because their offices are located at One Morningside Drive in Westport, Conn. Morningside Capital is a private equity investment group that sponsors, negotiates and finances the acquisitions of companies.

Events Leading to This Lawsuit

Morningside Capital first generated meaningful publicity in October 1995 when it advertised its recent acquisition of Carson Products Company ("Carson Products") in the Wall Street Journal. In that advertisement it identified itself as Morningside Capital Group of Westport, Conn. That morning Jacullo (whose Morningside Group offices are also in Westport) received several phone calls from financial professionals congratulating him on the Carson Products acquisition or inquiring as to why they had not been informed of the deal. Since then Jacullo has continued to receive phone calls meant for Morningside Capital and to field questions about the relationship between the two entities.

In response to the Wall Street Journal advertisement and the ensuing inquiries about Morningside Capital, Morningside Group filed a Lanham Act suit in the District of Connecticut. Ultimately a bench trial was held, and in July 1998 the district court entered judgment in favor of Morningside Capital. This is the appeal from that judgment.

Standard of Review

We review for clear error whether an entity provides a service and whether a mark has been used to identify a particular service, because both of those determinations are generally findings of fact (see, e.g., In re Advertising & Marketing Dev., Inc., 821 F.2d 614, 621 (Fed. Cir. 1987)). As both we and the Supreme Court have noted in other contexts, however, factual findings based on faulty legal analysis are not insulated by the clearly erroneous standard (see Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 n.15 (1982); Thomson v. Larson, 147 F.3d 195, 199 (2d Cir. 1998)). That principle applies here, and we keep it in mind as we review the district court's determination that Morningside Group does not have a valid service mark.

We will then turn to the district court's conclusion that there was not a likelihood of confusion under the Polaroid factors. In that respect, while a district court's finding of fact as to each Polaroid factor is reversed only if clearly erroneous, "[t]he ultimate weighing of the factors...is reviewed de novo" (Estee Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1510 (2d Cir. 1997)).

"Morningside Group" as a Service Mark

To prevail on a Lanham Act infringement claim, a claimant must show that "it has a valid mark entitled to protection and that the defendant's use of it is likely to cause confusion" (Cadbury Beverages, Inc. v. Cott Corp., 73 F.3d 474, 477 (2d Cir. 1996), quoting Gruner + Jahr USA Publishing v. Meredith Corp., 991 F.2d 1072, 1075 (2d Cir. 1993)). We therefore begin our analysis by reviewing the district court's initial determination: that "Morningside Group" is not a valid service mark because plaintiff does not provide "services" within the meaning of the Lanham Act.

Lanham Act §43(a) states in relevant part (emphasis added):

(1) Any person who, on or in connection with any goods or services,...uses in commerce any word, term, name, symbol, or device, or any combination thereof,... which

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person,

* * *

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

"Services" as used in the Lanham Act has been defined as "the performance of labor for the benefit of another" (Advertising & Marketing, 821 F.2d at 619, quoting In re Canadian Pac. Ltd., 754 F.2d 992, 994 (Fed. Cir. 1985)). Those services must not be "solely for the benefit of the performer; the services must be rendered to others" (Murphy v. Provident Mut. Life Ins. Co., 923 F.2d 923, 927 (2d Cir. 1990)). Further, the claimant must have used the claimed mark to identify its services (Advertising & Marketing, 821 F.2d at 620).

Morningside Group's activities clearly fall within that definition. In concluding otherwise the district court relied on an incorrect legal standard:² It found no services because Morningside Group's activities "were all intended to benefit plaintiff and the Chans alone," not third parties. That analysis is mistaken because the definition of "services" does not require that the service provider be motivated by a desire to benefit others indeed, the goal of most service providers (unsurprisingly in a free enterprise economy) is ultimately to benefit themselves. Instead the issue is whether the service provider in fact benefits third parties, regardless of its reason for providing its services.

Morningside Group has done just that. Its primary motivation--indeed, perhaps its only ultimate motivation--may well have been to benefit itself and the Chan family. But its activities did provide valuable benefits to others, as the district court recognized. As long as those "others" are truly third parties and not simply branches or affiliates of...