U-Neek, Inc. v. Wal-Mart Stores, Inc.

• Decision Date: 07 June 2001
• Docket Number: No. 99 Civ. 1583(RMB).,99 Civ. 1583(RMB).
• Parties: U-NEEK, INC., Plaintiff, v. WAL-MART STORES, INC., Stepping Stones Sportswear, Inc., a/k/a Stepping Stones, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

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147 F.Supp.2d 158

U-NEEK, INC., Plaintiff, v. WAL-MART STORES, INC., Stepping Stones Sportswear, Inc., a/k/a Stepping Stones, Inc., Defendants.

No. 99 Civ. 1583(RMB).

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

June 7, 2001.

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Robert B. Golden, Lackenbach Siegel, P.C., Scarsdale, NY, for plaintiff.

Robert G. Sugarman, Robert S. Berezin, Weil Gotshal & Manges, New York City for Wal-Mart Stores, Inc.

Richard S. Mandora, Amster, Rothstein & Ebenstein, New York City, Marcus A. Manos, Nexsen, Pruett, Jacobs & Pollard, LLP, Columbia, SC, for House of Perfection, Inc.

DECISION & ORDER

BERMAN, District Judge.

Plaintiff U-Neek, Inc. ("Plaintiff" or "U-Neek") filed this action against defendants Wal-Mart Stores, Inc. ("Wal-Mart") and Stepping Stones Sportswear, Inc. ("Stepping Stones")¹ asserting claims of copyright and trade dress infringement, false designation of origin, false descriptions, unfair competition, dilution, deceptive trade practices, and intent to deceive, under the Copyright Act of 1976, 17 U.S.C. §§ 101 et seq. (the "Copyright Act"), Section 43(a) of the Trademark Act of 1946 (the "Lanham Act"), 15 U.S.C. § 1125(a), and statutes of the State of New York and the common law. Plaintiff seeks injunctive relief, lost profits, damages, costs, and attorney's fees. Defendants now move for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Fed. R. Civ.P.") dismissing U-Neek's claims. For the reasons stated below, Defendants' motion is granted in part and denied in part. The parties are directed forthwith to prepare for trial.

I. Background

Plaintiff is engaged in the business of designing, manufacturing, distributing, advertising, offering for sale, and/or selling children's clothing and other products. (Amended Complaint ("Am.Cmplt.") ¶ 9). U-Neek uses a "whimsical" marketing theme for its girls clothing. (Plaintiff's Statement of Material Facts ("Pl.SOMF") ¶ 4). Defendant Wal-Mart owns and operates retail stores throughout the United States. (Am.Cmplt. ¶ 7). Defendant HOP is a designer and manufacturer of apparel, including children's clothing. (Defendants' Statement of Material Facts ("Def.SOMF") ¶ 2).

In 1995 and 1996, U-Neek created five new whimsical designs (the "Zing Designs") which include copyrighted designs titled: "Butterfly with Jewel," "You're My Sunshine," "Sunflower with Jewels," "Cow Girls," and "Fish with Jewels." (Def. SOMF ¶ 11). These five titles have been labeled "Artwork on Clothing" (under the heading "Nature of Work") on the certificate of registration with the Copyright Office of the United States (the "Copyright Office"). The Zing Design garments are girls dresses with patches placed on the lower left corner of the garments. (Id. ¶ 10). In addition to the artwork that appears on the patches, the garments themselves contain screen printed geometric symbols and shapes (i.e., stripes, circles and cow patches), that, except for the cow patch design (titled "Cow"), are not separately registered with the Copyright Office. (Id. ¶¶ 9, 11).²

In late 1997 and 1998, U-Neek developed the "Vignette Designs," each of which was different and employed themes that were common to the children's clothing industry. (SOMF ¶ 12). The Vignette Designs use screen printing, puff printing, sponge printing, and contain appliques, sequins, jewels, glitter, and embroidery as part of the designs. (Pl. SOMF ¶ 14). As of September 2000, four of the six Vignette Designs had been registered with the Copyright Office. (Def. SOMF ¶ 13). They are titled: "Dalmation Vignette," "Dogs With Presents Vignette," "Skating Bears Vignette," and "Christmas Bears Vignette." (Declaration of Robert G. Sugarman dated September 14, 2000 ("Sugarman Decl."), Ex. 9).

U-Neek began selling goods to Wal-Mart in approximately 1993. (Pl. Opp. at 5). U-Neek designed its clothing in its New York offices and contracted to have goods manufactured by overseas factories, one of which was RK Garments a/k/a Basicline ("RK") in the Philippines. (See Declaration of Andrew Cagan dated Nov. 16, 2000 ("Cagan Decl.") ¶ 17). U-Neek contends that, in or about 1997, its business with Wal-Mart began to decline. (Id. at ¶ 22). "For reasons which only later became apparent, Wal-Mart declined to purchase the styles from U-Neek." (Am. Cmplt.¶ 14). U-Neek alleges that, rather than buying the garments from U-Neek, Wal-Mart arranged a meeting in the Philippines with RK, and at that meeting Wal-Mart "instructed RK to manufacture directly for Wal-Mart goods which are substantially and confusingly similar to the Zing Designs." (Pl. Opp. at 7). Wal-Mart contends that the patches on the Philippines designs are not substantially similar to the patches on the Zing Designs. (Def. SOMF ¶ 26).

U-Neek also contends that a former U-Neek employee, who took a position with HOP, used the same (U-Neek) screen printer at HOP to produce garments that infringe the Vignette Design. (Pl. Opp. at 9). U-Neek further contends that HOP then sold these infringing garments (the "HOP Designs") to Wal-Mart. (Id.). Wal-Mart maintains that the HOP Designs are legally dissimilar to the Vignette Designs. (Def. SOMF ¶ 27).

As noted, Plaintiff asserts claims against Defendants for copyright infringement under the Copyright Act, 17 U.S.C. §§ 101 et seq., trade dress infringement, false designation of origin, false description and unfair competition under Section 43(a) the Lanham Act, 15 U.S.C. § 1125(a), dilution under New York General Business Law ("NYGBL") § 368d (the "New York Anti-Dilution Statute"), deceptive trade under NYGBL §§ 349 and 133, and tortious interference, infringement, and unfair competition under New York common law. (Am.Cmplt.¶¶ 30, 49, 55-57, 59-61). Defendants' instant motion seeks summary judgment as to each of Plaintiff's claims.

II. Standard of Review

The standard for granting summary judgment is well established. Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994).

The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The substantive law governing the case will identify those facts which are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); see also Gallo, 22 F.3d at 1223.

If the moving party meets its burden, the burden shifts to the nonmoving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). With respect to the issues on which summary judgment is sought, if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party, summary judgment is improper. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994).

III. Analysis

A. Copyright Infringement

To establish copyright infringement under Federal law, a plaintiff (with a valid copyright) must demonstrate that: "(1) defendant has actually copied the plaintiff's work; and (2) the copying is illegal because a substantial similarity exists between the defendant's work and the protectible elements of plaintiff's." Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996, 1002 (2d Cir.1995); Fisher-Price, Inc. v. Well-Made Toy Mfg. Corp., 25 F.3d 119, 122-23 (2d Cir.1994).

Actual copying must be shown, either by direct evidence or by indirect evidence. See Laureyssens v. Idea Group, Inc., 964 F.2d 131, 140 (2d Cir.1992). The latter "includ[es] access to the copyrighted work, similarities that are probative of copying between the works, and expert testimony." Id. It is only after actual copying is established that one claiming infringement is required to show substantial similarity between the two works. Id. In most cases, the test for substantial similarity is the "ordinary observer" test, which requires a determination of whether the average lay observer would find that the defendant misappropriated the copyrighted work. See Knitwaves, 71 F.3d at 1002. However, when a work contains both protectible and unprotectible elements, a court applies a "more discerning" test and attempts to eliminate the unprotectible elements from consideration, leaving only the protectible elements to be compared. Id.

1. Zing Design

Preliminarily, Defendants dispute the ownership and validity of the Zing copyrights, and contend that "U-Neek's copyright claim ... is ... limited ... to the screen printed cow patches and sewn-on patches," because "in all but one instance the copyright claimed is in the sewn-on patches [only]."³ (Defendants' Memorandum in Support of its Motion for Summary Judgment ("Def.Mem.") at 9). Defendants further assert that U-Neek registered the five sewn-on patches as "artwork on clothing" and, therefore, any copyright protection is limited to the artwork on the patch itself.⁴ Defendan...