Vaad L'Hafotzas Sichos, Inc. v. Kehot Publication Society et al

Filing 62

MEMORANDUM & ORDER: The PTOs decision approving Merkoss application for registration of the Kehot logo as a trademark is affirmed. Accordingly, Vaads motion 41 for summary judgment is denied in that respect, while Merkoss cross-motion is granted. With regard to Merkoss counterclaims, Vaad and Chanins motion 47 for summary judgment is denied. Ordered by Judge Frederic Block on 4/1/2013. (Innelli, Michael)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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VAAD L’HAFOTZAS SICHOS, INC.,
Plaintiff/Counterclaim Defendant,
MEMORANDUM AND ORDER
Case No. 10-CV-4976 (FB) (JO)

-againstKEHOT PUBLICATION SOCIETY, a
division of MERKOS L’INYONEI
CHINUCH, INC.
Defendant/Counterclaim
Plaintiff/Third-Party Plaintiff,
-againstZALMAN CHANIN,
Third-Party Defendant.
-------------------------------------------------------x
Appearances:
For Vaad L’Hafotzas Sichos, Inc. and
Zalman Chanin:
PAUL FIELDS, ESQ.
KARIN SEGALL, ESQ.
YUVAL H. MARCUS, ESQ.
Leason Ellis LLP
One Barker, Avenue, Fifth Floor
White Plains, New York 10601

For Kehot Publication Society:
J. CHRISTOPHER JENSEN, ESQ.
Cowan, Liebowitz & Latman, P.C.
1133 Avenue of the Americas
New York, New York 10036-6799

BLOCK, Senior District Judge:
In 2010, the United States Patent and Trademark Office (“PTO”) approved the
application of Merkos L’Inyonei Chinuch, Inc. (“Merkos”) to register a trademark for use on
books and other publications distributed principally within the Lubavitcher community of

Hasidic Jews. See Vaad L’Hafotzas Sichos, Inc. v. Kehot Publ’n Soc’y, 2010 WL 3597243 (TTAB
Aug. 30, 2010). Vaad L’Hafotzas Sichos (“Vaad”) opposed the application and seeks judicial
review of the PTO’s decision. Vaad moves for a summary judgment cancelling the
registration; Merkos cross-moves for a summary judgment affirming it.
In addition to defending the PTO’s decision, Merkos counterclaims for
infringement, dilution and unfair competition; it makes the same claims against Zalman
Chanin (“Chanin”), Vaad’s president and principal owner, and seeks both injunctive and
monetary relief. On those claims, Vaad and Chanin have moved for summary judgment.
For the following reasons, the Court affirms the PTO’s decision and denies
Vaad and Chanin’s motion for summary judgment on Merkos’s counterclaims.
I
The Lubavitcher community has its roots in Tsarist Russia. In the midst of
World War II, its then-leader—or Rebbe—Rabbi Joseph Isaac Schneersohn (“the Previous
Rebbe”), emigrated to the United States. Today, the movement is headquartered in Crown
Heights, Brooklyn.
Shortly after arriving in the United States, the Previous Rebbe founded the
Kehot Publication Society (“Kehot”). A year later, he founded Merkos to provide broader
educational services to the Lubavitcher community. The Previous Rebbe installed his son-inlaw, Rabbi Menachem Mendel Schneerson (“the Rebbe”), as Merkos’s president.
At its first meeting in 1942, Merkos’s board of directors resolved to take over
direction of Kehot, an unincorporated entity. The resolution reads as follows:
Whereas “KEHOT” has been engaged in the publication of
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literature of great value both in the religious and pedagogic
field, and
Whereas it appears that such activity would well fit into the
program of MERKOS L’INYONEI CHINUCH, INC. and it
would be for the best interests of MERKOS L’INYONEI
CHINUCH, INC. to assume and adopt the continuance of these
publications hereafter, and
Whereas Rabbi Joseph I. Schneersohn has signified his
willingness to and does give and assign to MERKOS L’INYONEI
CHINUCH, INC. the right to use the trade names of “KEHOT”
and “KEHOT PUBLICATION SOCIETY” in publishing,
advertising and distributing religious and pedagogic literature,
Now, therefore, it is resolved that the proposal as set forth above
be and the same hereby is approved and the Executive
Committee is directed to carry out the terms of this resolution in
all respects.
Vaad, 2010 WL 3597243, at *5.
The resolution did not expressly mention the Kehot logo. That logo was first
used in 1941, the same year Kehot was founded. At the center of the logo is a circle
containing the word Kehot in Hebrew (;@%8). Kehot is an acronym for %9&; $&% *198 (Karnei
Hod Torah), which means “rays of the Torah’s glory” or, with some poetic license, “Torah is
a majestic crown.” That phrase runs around the top of the circle; around the bottom runs
:)*&&!"&*- (Lubavitch). Surmounting everything are the words .*952 ;!7&% (Hotzaat
Seforim)—“book press” or, more loosely, “publishing house.” In 1960, Merkos registered the
logo as a trademark under New York law.
During the Previous Rebbe’s tenure, several entities apart from Kehot used the
logo. Some, like Kehot, were part of the movement’s umbrella organization; others were
independent. All use of the logo was contingent on the Previous Rebbe’s approval. This
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practice continued when the Rebbe succeeded his father-in-law in 1951.
In 1958, and again in 1962, the independent Lubavitch Youth Organization
published a weekly pamphlet containing the Rebbe’s sichos (talks or sermons). Vaad was
formed in 1967 to provide the same service in a more regular manner. Indeed, Vaad’s full
name means “Council for Distribution of the Sichos.”
Thus, between 1967 and 1994, Vaad submitted its weekly pamphlets to the
Rebbe. Upon receiving his approval, Vaad would publish and distribute the pamphlets
under the Kehot logo. In addition, the Rebbe put Vaad in charge of some of Kehot’s printing
operations in 1979.
The Rebbe’s failing health and eventual passing in 1994 precipitated a
leadership crisis in the Lubavitcher community. Rabbi Yehuda Krinsky took over direction
of Kehot and Merkos, but no one acceded to the position of Rebbe. Instead, the movement
has been run in accordance with the Rebbe’s directives. As the present case attests, not
everyone agrees as to what those directives were. See also Merkos L’Inyonei Chinuch, Inc. v.
Sharf, 172 F. Supp. 2d 383, 384 (E.D.N.Y. 2001) (“Sharf and the other putative defendants
hold the heartfelt belief that, notwithstanding his physical passing in 1994, the Rebbe still
lives. Those authorized to act on behalf of Merkos in respect to the copyrighted volumes of
the Rebbe’s letters do not share this belief . . . . ”).
In January 1994, Rabbi Krinsky sent Vaad a letter purporting to terminate its
relationship with Merkos and Kehot. The letter demanded that Vaad stop using the Kehot
logo. Notwithstanding the letter, Vaad has continued to publish numerous works under the
logo; the works contain the sichos and other content previously approved by the Rebbe.
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In September 2001, Merkos applied to the PTO to register the logo as a
trademark for use on “books, magazines, charts, maps, and photographs on a variety of
aspects of Jewish life.” Vaad, 2010 WL 3597243, at *1. Vaad timely opposed the application.
The matter was referred to the PTO’s Trademark Trial and Appeal Board (“TTAB”), which
dismissed the opposition in a written opinion. See id. at *9. This action followed.
II
The Lanham Act gives jurisdiction over appeals from decisions of the PTO to
the Federal Circuit. See 15 U.S.C. § 1071(a)(1). However, it also allows an aggrieved party
to bring a civil action in district court. See id. § 1071(b)(1). In the latter case, the district court
is empowered to adjudge that a trademark should be registered or, conversely, that a
registration granted by the PTO should be canceled. See id. The administrative record is
admissible, but the parties are free to adduce other evidence. See id. § 1071(b)(3) (“In suits
brought hereunder, the record in the United States Patent and Trademark Office shall be
admitted on motion of any party . . . , without prejudice to the right of any party to take
further testimony.”); Goya Foods, Inc. v. Tropicana Prods., Inc., 846 F.2d 848, 853 (2d Cir. 1988)
(“The record made in the Patent and Trademark Office is admitted in evidence, but the
factfinding of that office is not conclusive, nor is the court’s consideration limited to that
record.” (internal quotation marks and citation omitted)).
The PTO’s conclusions of law are reviewed de novo. See In re Thrifty, Inc., 274
F.3d 1349, 1351 (Fed. Cir. 2001). Its findings of fact, by contrast, are reviewed under the
“substantial evidence” standard, under which a court must accept the findings if a
“‘reasonable mind might accept’ a particular evidentiary record as ‘adequate to support a
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conclusion.’” Dickinson v. Zurko, 527 U.S. 150, 162 (1999) (quoting Consolidation Edison Co.
v. NLRB, 305 U.S. 197, 229 (1938)). Matters not raised in the administrative proceeding do
not, of course, receive any deference.
Vaad offers two reasons why the PTO’s registration of the Kehot logo should
be canceled. Those reasons frame the following questions, which the Court answers in turn.
A. Who owns the Kehot logo?
In its opposition to registration, Vaad contended that the owner of the Kehot
logo was the Rebbe, and not Merkos. The TTAB rejected the argument, finding that “Merkos
is the owner of the KEHOT logo and is the proper applicant for this trademark.” Vaad, 2010
WL 3597243, at *7. Vaad argues that this finding was not supported by substantial evidence.
The principal evidence of ownership is the transfer of the right to use the trade
names “Kehot” and “Kehot Publication Society” to Merkos. That evidence is undisputed.
Vaad points out, however, that the transfer did not explicitly mention the right
to use the logo. That omission is of no consequence because courts and commentators agree
that the transfer of a going concern implicitly entails the transfer of trademarks and other
goodwill. See Speed Prods. Co. v. Tinnerman Prods., 179 F.2d 778, 782 (2d Cir. 1949) (“The
goodwill of the business, though unmentioned, passed with the transfer of the business.”);
J. Thomas McCarthy, 3 McCarthy on Trademarks and Unfair Competition § 18:37 (4th ed. 1994)
(“When a business is sold as a going concern, trademarks and the good will of the business
that they symbolize are presumed to pass with the sale of the business.”). This has been
called an “old and clear rule,” 3 McCarthy on Trademarks § 18:37, and its longevity is due to
its logic. The contrary proposition—that the names “Kehot” and “Kehot Publication
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Society” were assigned to Merkos, but the logo bearing the very same words (in Hebrew)
were not—is untenable. Cf. Oklahoma Beverage Co. v. Dr. Pepper Love Bottling Co., 565 F.2d
629, 632 (10th Cir. 1977) (“[T]he trial judge correctly found that ‘trade name’ used in the
contract meant ‘trademark.’”).
Vaad objects that the resolution reflects only a transfer of the “right to use” the
name Kehot and is, therefore, more a license than a transfer of ownership.

That

interpretation, however, is belied by the overwhelming evidence that Kehot, as an entity,
was folded into Merkos, which has now run its publishing operations for more than 70
years. In that role, it took steps to protect the logo by registering it under New York law.
To be sure, the Rebbe served as Merkos’s president and played a major role in its
management. But that role merely underscores that the steps he took to formalize the
operation of Kehot was something more than a license to use its name. Cf. Levitt Corp. v.
Levitt, 593 F.2d 463, 468 (2d Cir. 1979) (“Where . . . the infringing party has previously sold
his business, including use of his name and its goodwill, to the plaintiff, sweeping injunctive
relief [against his continued use of the name] is more tolerable.”).
In sum, the TTAB’s finding that Merkos owned the Kehot logo was supported
by substantial evidence. Indeed, even without giving any deference to that finding, the
Court would reach the same conclusion as a matter of law.
B. What is the Kehot logo?
The function of a trademark is “to identify and distinguish goods . . . and to
indicate their source.” American Express Co. v. Goetz, 515 F.3d 156, 159 (2d Cir. 2008) (citing
15 U.S.C. § 1127). Another type of mark—known as a certification mark—is used “to certify
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regional or other origin, material, mode of manufacture, quality, accuracy, or other
characteristics of [goods or services].” 15 U.S.C. § 1127. Thus, “[o]ne who sees a certification
mark on a product or in connection with a service is entitled to assume that that product or
service in fact meets whatever standards of safety or quality have been set up and advertised
by the certifier.” 1 McCarthy on Trademarks § 4:15. An example—particularly apt in this
case—are the various hechsherim used to certify that food products comply with Jewish
dietary laws.
Vaad argues that the Kehot logo is a certification mark. The parties dispute
whether this argument was raised in the administrative proceeding. The term “certification
mark” does not appear anywhere in the briefing or the TTAB’s decision. On the other hand,
Vaad argued throughout the proceeding “that the Kehot logo represents something spiritual,
namely that the Rebbe has sanctioned the use material identified by the logo.” Vaad, 2010
WL 3597243, at *8. In response, the TTAB reasoned that “[o]wnership of a trademark gives
the owner the right to determine what goods will be sold or offered under the mark” and,
therefore, that the Rebbe’s “actions in approving the use of the logo are no different from
any other trademark holder.” Id.
In the Court’s view, Vaad’s argument to the TTAB is a certification mark
argument in all but name. But, as with the ownership issue, the standard of review is
immaterial because the Court would reject the argument even on de novo review.
Vaad lays heavy emphasis on the undisputed fact that placement of the Kehot
logo on any publication required the Rebbe’s approval. But the Court is in complete
agreement with the TTAB that a similar approval process is to be expected for any
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trademark. Nor does it follow that allowing Vaad and others to use the logo made it a
certification mark. “[Trademark] licensing is permissible provided the licensor retains some
degree of control over the quality of the goods or services marketed thereunder.” E.G.L. Gem
Lab Ltd. v. Gem Quality Inst., Inc., 90 F. Supp. 2d 277, 300 (S.D.N.Y. 2000) (citing Dawn Donut
Co. v. Hart’s Food Store, Inc., 267 F.2d 358, 367 (2d Cir. 1959)). Indeed, allowing others to use
a mark without a quality approval process—what trademark law calls a “naked
license”—risks abandoning the mark’s source-identifying function altogether. See id. (“A
licensor must exercise some degree of supervision over the licensee on pain of abandonment
of the mark, a result that never is in the licensor’s and rarely in the licensee’s interest.”
(footnote omitted)). In the context of this case, it is hardly surprising that the approval
process would be carried out by the founder of both Kehot and Merkos and the spiritual
leader of the Lubavitcher community during his lifetime. Nor is it surprising that others at
Merkos would have to take over the approval process upon the Rebbe’s passing. Whatever
ultimate account Merkos’s current management must make to the Rebbe for their actions is
beyond the Court’s competence to adjudge.
If the Rebbe’s approval does not conclusively answer whether the Kehot logo
is a trademark of a certification mark, then what does? Once again, the Court finds the
words of the logo itself dispositive. To anyone who reads Hebrew—and it is safe to assume
that most, if not all, in the relevant market do—the logo announces that a publication
bearing it emanated from a “publishing house” called “Kehot.” That is the very essence of
source identification. Thus, the Court concludes, as a matter of law, that the logo is a

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trademark.1
III
Having determined that Merkos owns the Kehot logo, and that the logo is a
trademark, the Court now turns to Merkos’s counterclaims that Vaad’s continued use of the
mark is unlawful. Vaad offers two reasons why it is entitled to summary judgment on those
claims. First, it argues that the claims are barred by the doctrine of laches. Second, it argues
that Merkos cannot recover money damages. The Court addresses those contentions in turn.
A. Laches
Because trademark infringement is a continuing wrong, “a statute of
limitations is no bar except as to damages beyond the statutory period.” 6 McCarthy on
Trademarks § 31:1. Thus, “it is almost always laches, not the statute of limitations, that is
invoked to determine the availability of both injunctive and monetary relief.” Id. Without

1

A conclusion that the Kehot logo was a certification mark would entail some
bizarre consequences. The owner of a certification mark cannot “engag[e] in the
production or marketing of any goods or services to which the certification mark is
applied.” 3 McCarthy on Trademarks § 19:92. Instead, the owner’s role is to decide which
good and services can bear the mark. If the Kehot logo were a certification mark,
Merkos could not use the logo on its own publications, but could withhold approval for
its use on Vaad’s publications. Thus, Vaad’s argument makes it the proverbial dog in a
manger:
A DOG was lying in a manger full of hay: An Ox, being hungry, came
near and offered to eat of the hay; but the envious ill-natured cur, getting
up and snarling at him, would not suffer him to touch it: Upon which the
Ox, in the bitterness of his heart, said, “A curse light on thee for a
malicious wretch, who wilt neither eat hay thyself, nor suffer others to do
it.”
Samuel Croxall, Fables of Aesop and Others 219 (London, A. Millar, W. Law & R. Cater
1722).
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that defense, “a plaintiff could delay filing suit indefinitely.” Id.
To prevail on a laches defense, the defendant must show “that plaintiff had
knowledge of defendant’s use of its marks, that plaintiff inexcusably delayed in taking action
with respect thereto, and that defendant will be prejudiced by permitting plaintiff
inequitably to assert its rights at this time.” Saratoga Vichy Spring Co. v. Lehman, 625 F.2d
1037, 1040 (2d Cir. 1980) (quoting Cuban Cigar Brands, N.V. v. Upmann Int’l, Inc., 457 F. Supp.
1090, 1096 (S.D.N.Y. 1978)). When the delay is longer than the analogous statute of
limitations, “a presumption of laches will apply and plaintiff must show why the laches
defense ought not be applied in the case.” Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 191
(2d Cir. 1996). The analogous limitations period here is New York’s six-year period for fraud
claims. See id. Since Merkos’s delay is substantially longer—17 years elapsed between its
1994 letter to Vaad and the assertion of its counterclaims—Vaad is entitled to the
presumption.
Merkos argues that laches ought not to bar its counterclaims for two reasons.
First, it notes that laches is not a defense to intentional infringement. See, e.g., Hermès Int’l
v. Lederer de Paris Fifth Ave., Inc., 219 F.3d 104, 107 (2d Cir. 2000). Intentional infringement
is infringement done in bad faith to confuse consumers or trade on the plaintiff’s goodwill.
See id. (“[The infringers] intentionally traded off the Hermès name and protected products
and should not have been entitled to invoke the doctrine of laches . . . .”); Harley Davidson,
Inc. v. Grottanelli, 164 F.3d 806, 813 (2d Cir. 1999) (“[The infringer’s] intention to confuse
undermines any claim of good faith . . . .”).
On the facts of this case, Vaad has a colorable claim that it continued to use the
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Kehot logo in the good-faith belief that the Rebbe’s prior approval entitled it to do so. The
Court cannot rule out, however, the alternative theory that Vaad intended to sow confusion
as to the source of its publications after the Rebbe’s passing. In other words, Vaad’s good
faith presents a question of fact.
The infringer’s good faith presents “a dispositive, threshold inquiry that bars
further consideration of the laches defense, not a mere factor to be weighed in balancing the
equities.” Hermès Int’l, 219 F.3d at 107. Thus, if the factfinder were to find that Vaad acted
in bad faith, its laches defense would fall out of the picture. This means that Merkos’s
second argument—that its delay was occasioned by litigation against other infringers—must
also await resolution. The Court notes, however, that the excuse, if accepted by the
factfinder, is a valid one. See 6 McCarthy on Trademarks § 31.16 (“A trademark owner is not
bound to take on more than one infringer at a time.” (quoting Cuban Cigar Brands, 457 F.
Supp. at 1097 n.28)). Although Vaad points out that Merkos did not initiate any other
litigation until 2001—after the six-year period had run—Merkos is, at this stage, entitled to
the reasonable inference that at least some preparation for the litigation fell within the
period.
B. Money Damages
Consumer confusion is the cornerstone of trademark infringement. Injunctive
relief—“the usual and standard remedy,” 5 McCarthy on Trademarks § 30.1—is appropriate
when there is a likelihood of confusion; such a likelihood exists, as a matter of law, “when a
junior user has affixed a senior user’s mark to ‘substantially identical products directed at
the same market and sold through the same outlets.’” Vitarroz Corp. v. Borden, Inc., 644 F.2d
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960, 966 (2d Cir. 1981) (quoting Mushroom Makers, Inc. v. R.G. Barry Corp., 580 F.2d 44, 47-48
(2d Cir. 1978)).2 To recover damages, by contrast, a plaintiff must show either “actual
consumer confusion or deception resulting from the violation,” or “or that the defendant’s
actions were intentionally deceptive thus giving rise to a rebuttable presumption of
consumer confusion.” George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992).
As noted, whether Vaad engaged in intentionally deceptive conduct presents
a question of fact. Therefore, the Court cannot say, as a matter of law, that Merkos is limited
to only injunctive relief.
IV
The PTO’s decision approving Merkos’s application for registration of the
Kehot logo as a trademark is affirmed. Accordingly, Vaad’s motion for summary judgment
is denied in that respect, while Merkos’s cross-motion is granted. With regard to Merkos’s
counterclaims, Vaad and Chanin’s motion for summary judgment is denied.
SO ORDERED.
_______________________
FREDERIC BLOCK
Senior United States District Judge
Brooklyn, New York
March 29, 2013

2

Although it appears that Vaad’s use of the Kehot logo creates a likelihood of
confusion as a matter of law, Merkos has not moved for summary judgment on its
claims for injunctive relief. In any event, the issue of fact regarding the availability of a
laches defense would preclude summary judgment on those claims. See Saratoga Vichy
Spring, Inc., 625 F.2d at 1041 (rejecting argument that “in trademark suits the defense of
laches is not available to defeat equitable claims for an injunction”).
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