A.V. by Versace, Inc. v. Gianni Versace, S.P.A.

• Decision Date: 04 January 2001
• Docket Number: No. 98 CIV. 0123PKLTHK.,No. 96 CIV. 9721PKLTHK.,96 CIV. 9721PKLTHK.,98 CIV. 0123PKLTHK.
• Parties: A.V. BY VERSACE, INC., Plaintiff, v. GIANNI VERSACE, S.p.A. and Alfredo Versace, Defendants. and Gianni Versace, S.p.A., Third-Party Plaintiff, v. Anthony J. Pellegrino, Patrick Marano, Transportation Services, Inc., TSI Equipment, Inc., and John Does 1-10, Third-Party Defendants. Gianni Versace, S.p.A., Plaintiff, v. Alfredo Versace and Foldom International (U.S.A.), Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

126 F.Supp.2d 328

A.V. BY VERSACE, INC., Plaintiff, v. GIANNI VERSACE, S.p.A. and Alfredo Versace, Defendants. and Gianni Versace, S.p.A., Third-Party Plaintiff, v. Anthony J. Pellegrino, Patrick Marano, Transportation Services, Inc., TSI Equipment, Inc., and John Does 1-10, Third-Party Defendants.

Gianni Versace, S.p.A., Plaintiff, v. Alfredo Versace and Foldom International (U.S.A.), Inc., Defendants.

No. 96 CIV. 9721PKLTHK.

No. 98 CIV. 0123PKLTHK.

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

January 4, 2001.

COPYRIGHT MATERIAL OMITTED

Walsh & Walsh, Hackensack, NJ (John Walsh, of counsel), for A.V. By Versace, Inc.

Quirk and Bakalor, P.C., New York City (H. Nicholas Goodman, James M. Andriola, of counsel), for A.V. By Versace, Inc., Anthony J. Pellegrino, and Patrick Marano.

Phillips, Nizer, Benjamin, Krim & Ballon LLP, New York City (Theodore C. Max, David E. Jacoby, of counsel), for Gianni Versace, S.p.A.

Alfredo Versace, Lawrence, NY, pro se.

OPINION AND ORDER

LEISURE, District Judge.

Gianni Versace, S.p.A. (hereinafter "Gianni") seeks an order, pursuant to Federal Rule of Civil Procedure 60(a), to modify a preliminary injunction entered by the Honorable Sidney H. Stein, United States District Judge, in Gianni Versace, S.p.A. v. Alfredo Versace and Foldom Int'l (U.S.A.), Inc. (hereinafter the "Foldom Action"). For the following reasons, Gianni's motion to modify the preliminary injunction is dismissed as moot because the Court clarifies that the preliminary injunction entered by Judge Stein applies extra-territorially.

BACKGROUND

Gianni is a world-famous design house founded in the 1970s by the late Italian designer, Mr. Gianni Versace. Gianni owns a number of famous trademarks incorporating the name "Versace," as well as its signature "Medusa" trademarks. A.V. By Versace, Inc. (hereinafter "A.V.") is a Texas corporation originally formed by Mr. Alfredo Versace (hereinafter "Mr. Versace"), Anthony Pellegrino, and Patrick Marano. A.V. is a manufacturer of clothing and athletic shoes bearing the trademarks "A.V. By Versace" and "Alfredo Versace," pursuant to an alleged license with Mr. Versace, an Italian citizen and United States resident alien.

I. The A. V. Action

The factual background of this action has been set forth in greater detail in this Court's January 28, 1997, Memorandum Order, see A.V. by Versace, Inc. v. Gianni Versace, S.p.A., No. 96 Civ. 9721, 1997 WL 31247, at *1 (S.D.N.Y. Jan.28, 1997), familiarity with which the Court assumes. In December 1996, A.V. commenced an action (hereinafter the "A.V. Action") against both Gianni and Mr. Versace after its customer, Kinney Shoe Corporation, received a "cease and desist" letter from Gianni's attorneys alleging that Kinney's sales of "A.V. By Versace" and "Alfredo Versace" clothing and shoes infringed various Gianni trademarks. As to Gianni, A.V. sought (1) declaratory relief, declaring that its products do not infringe Gianni's registered trademarks; (2) injunctive relief, enjoining Gianni from sending further "cease and desist" letters to A.V.'s customers; and (3) damages, under theories of unfair competition and tortious interference with contract. See id. Against Mr. Versace, A.V. requested (1) declaratory relief, ruling that (a) it has the sole right to use the mark "Alfredo Versace," and (b) if the mark is registered in the United States, it must be assigned the registration; and (2) compensatory and punitive damages. See id.

On January 28, 1997, this Court denied A.V.'s request for a preliminary injunction against the two defendants that would have prohibited both from using the mark "Alfredo Versace," based on A.V.'s failure to demonstrate a likelihood of irreparable harm. See id. at *2-*3. Gianni subsequently filed counterclaims, a cross-claim, and third-party claims of trademark infringement and unfair competition against A.V. and third-party defendants Anthony Pellegrino and Patrick Marano. See A.V. by Versace, Inc. v. Gianni Versace, S.p.A., No. 96 Civ. 9721, 1998 WL 832692, at *1 (S.D.N.Y. Dec.1, 1998).

II. The Foldom Action and Judge Stein's Preliminary Injunction

On January 8, 1998, Gianni filed a separate lawsuit against Mr. Versace and Foldom International (U.S.A.), Inc. (hereinafter "Foldom"), alleging trademark infringement, unfair competition, and trademark dilution in violation of the Lanham Act, 15 U.S.C. §§ 1114(l), 1125(a), and 1125(c); trademark dilution, pursuant to New York General Business Law § 360-l; and trademark infringement and unfair competition under New York common law. See Foldom Compl. ¶ 1. Gianni claimed that Mr. Versace and Foldom were manufacturing and selling products that infringed Gianni's registered trademarks, and/or licensing or franchising such infringing trademarks. See id. ¶ 17. These products allegedly included men's and women's suits, jeans, tee-shirts, sweaters, active wear, handbags, leather goods, and packaging bearing the names "AV Versace," "Versace by A.V.," or "Alfredo Versace." Id. ¶ 18. By its complaint, Gianni sought a preliminary injunction enjoining Mr. Versace and Foldom from using "its trademarks or trade dress or any designation so similar as likely to cause confusion, mistake or deception," including "Alfredo Versace," "A.V. by Versace," "Versace by A.V." and "A. Versace." Id. ¶ A. In addition, Gianni sought compensatory and punitive damages. See id. ¶ C, E-G. The case was originally assigned to the Honorable Sidney H. Stein.

On February 4, 1998, Judge Stein granted Gianni's request for a preliminary injunction, issuing his decision from the bench. See Feb. 4, 1998 Conf. Tr. at 3-17. Judge Stein instructed Gianni to submit a proposed preliminary injunction to the Court by February 5, 2000, and to model its proposal after the injunction issued in Gucci v. Gucci Shops, Inc., No. 83 Civ. 4453, 1988 WL 75263 (S.D.N.Y. July 13, 1988). See id. at 16-18. After Judge Stein issued the injunction, the parties sought clarification of a few issues. See id. at 19-32. First, counsel for Mr. Versace and Foldom asked Judge Stein if they could rely on the requirements of the Gucci preliminary injunction until he signed the preliminary injunction in the present case. See id. at 19. Judge Stein responded, "to the extent that [this order is] broader than the Gucci order, the answer is no." Id. Next, defense counsel raised the issue of the injunction's extraterritorial application. See id. at 21. Although never definitively ruling on the injunction's extraterritorial application at this hearing, Judge Stein made a few points clear regarding the injunction. First, Judge Stein recognized the Court's power to enjoin defendants' licensing and franchising activities abroad. See id. ("To the extent that [Mr. Versace] is directing things be done ... I have jurisdiction to stop him from doing things."). Second, Judge Stein noted that, with regard to the injunction's extraterritorial application, defendants had the burden to prove that their foreign activities were not subject to the injunction. See id. ("I think [Gianni's attorneys] are right [about the injunction applying to defendants' activities abroad.] I will let [defendant's attorneys] convince me otherwise."). Third, after further discussion, Judge Stein held that "[i]n the absence of [a clear holding from the Second Circuit], the proposed preliminary injunction should cover licensing in the States. For licenses to be entered abroad, let's see what the cases say." Id. at 24. Finally, Judge Stein directed the parties to submit applicable case law to him for a final determination of the injunction's extraterritorial application. See id.

Between February 4 and February 9, 1998, both parties submitted letter briefs and proposed orders arguing their respective positions on the issue of the Court's power to enjoin defendants' activities abroad. See Affidavit of Theodore C. Max., Esq., sworn to on May 23, 2000 (hereinafter "Max Aff."), ¶¶ 14-17 & Ex. C-F. On February 5, 1998, counsel for Gianni submitted a proposed preliminary injunction and cover letter which argued that the injunction should cover defendants' allegedly infringing conduct outside the United States. See id., Ex. C. The following day, February 6, 1998, counsel for Mr. Versace and Foldom submitted a letter to Judge Stein detailing their proposed changes to the order submitted by Gianni. See Max. Aff. ¶ 16 & Ex. D. In this letter, defense counsel argued that the injunction should be limited to defendants' activities within the United States and therefore proposed adding the phrase "in the United States" three times in paragraph 12, once in paragraph 14, and once in paragraph 15. See id. Further, defense counsel contended that these changes were necessary "to clarify the issue that this order is not preventing our client from conducting businesses in foreign countries which may allow him to use his name or a variation thereof as a trademark." Letter from John F. Kaley, Esq., to the Court, dated Feb. 6, 1998, at 2 (Max.Aff., Ex. D). Each party filed additional objections to the other side's proposals over the next four days. See Max. Aff. ¶¶ 17-18 & Ex. E-G.

On February 10, 1998, Judge Stein signed the preliminary injunction. See Prelim. Inj., dated Feb. 10, 1998 (hereinafter "Prelim. Inj."). The injunction did not incorporate defendants' proposed additions of the phrase "in the United States," in paragraphs 12, 14, or 15. See id. The injunction did, however, refer to the United States in paragraph 8. See Prelim. Inj. ¶ 8. Paragraph 8 appears to be a verbatim adoption of the original proposal submitted by Gianni. See Proposed Prelim. Inj, attached as Ex. B to Theodore C. Max letter to the Court, dated Feb. 5, 1998. This paragraph — the subject of the present motion — states:

[d]efendants, their officers, agents, servants, employees, representatives, licensees, and attorneys, and all persons in active concert or participation or privity with any of them who receive actual...