Tiffany (NJ) Inc. et al v. eBay Inc.

Filing 30

ORDER denying 14 Motion to Amend/Correct. the Clerk of the Court is instructed to terminate the motion . (Signed by Judge Kenneth M. Karas on 3/31/06) (cd, )

Tiffany (NJ) Inc. et al v. eBay Inc.

Doc. 30

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK TIFFANY (NJ) INC. and TIFFANY AND COMPANY, Plaintiffs,

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Case o. 04-CV-4607 (KMK)

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eBAY INC., Defendant.

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KENNETH M. KARAS, District Judge: Plaintiffs Tiffany (NJ) Inc. and Tiffany and Co. have initiated tqe present action against Defendant eBay, Inc., seeking to enjoin Defendant from certain allegedinfringements of the Lanham Act. The parties have already engaged in some discovery, and Defendant now seeks to amend its Answer in order to plead an "unclean hands" defense, arguin that Plaintiffs have engaged in inequitable conduct that is related to the subject matter of tdeir infringement suit. Plaintiffs oppose Defendant's Motion to Amend the Answer on the futile to do so, specifically arguing that there is no evidence that inequitable or in bad faith, and further, that the alleged related to the subject matter of the litigation. As this Defendant's Motion to Amend the Answer is facially Amendment Under Federal Rule Typically, the district court "has discretion whether or not to grmt leave to amend, and its decision is not subject to review on appeal except for abuse of

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Oppenheimer & Co., 987 F.2d 129, 131 (2d Cir. 1993).

Dockets.Justia.com

Procedure 15(a), "[lleave [to amend] shall be freely given when justice o requires." Fed. R. Civ. P. 15(a). Thus, if the "underlying facts or circumstances relied upon" b the moving party may constitute a proper subject of relief, that party "ought to be afforded an pportunity to test his claim on the merits." Foman v. Davis, 371 U S . 178, 182 (1962). '"[Ulndue delay, bad faith or dilatory motive on the part of the

to cure deficiencies by amendments previously allowed, undue prejudic to the opposing party

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ovant, repeated failure

. . . [or] futility of amendment' will serve to prevent an amendment prior to trial." Dougherty v.
Town ofN. Hempstead Bd. of Zoning Appeals, 282 F.3d 83,87 (2d Cir. 2002) (quoting Foman, 371 U.S. at 182). "A motion for leave to file an amended answer shoulj not be denied on the basis of futility unless the proposed amendment is clearly frivolous or fl~cially insufficient and, where the proposed amendment raises a colorable defense, the court should not consider its substantive merits but should grant leave to amend and allow the oppo ing party to subsequently test the merits of the amendment through a dispositive motion." Citize s Bank & Trust Co. v. SeFish Assocs., No. 99-CV-04 17E, 2002 WL 3 1017604, at *4 (W.D.N.Y July 23,2002); see also Health-Chem Corp. v. Baker, 915 F.2d 805,8 10 (2d Cir. 1990) ("Alth ugh Fed. R. Civ. P. 15(a) provides that leave to amend should be given freely when justice so re uires, where, as here, there is no merit in the proposed amendments, leave to amend should b denied."). However, "outright refusal to grant the leave [to amend] without any justifying denial is . . . abuse of (11 discretion and inconsistent with the spirit of 371 U.S. at 182. son appearing for the Federal Rules." Foman,

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The Unclean Hands Defense Here, Defendant seeks to amend the Answer under Rule 15(a) i order to add an unclean hands defense because of certain "inequitable" misrepresentations by plaintiffs to eBay users. (Def. Mem. 10) Defendant claims that Plaintiffs "improperly enlarge[] :he scope of the very trademark rights [they] seek[] to assert" by "perpetuating the false notion that [authentic] products bearing the Tiffany marks are only available through Tiffany skores, catalogues and websites." (Def. Mem. 11) "Unclean hands" may be a defense to a suit in equity such as on? under the Lanham Act where the party seeking to stop the other from infringing its trademark "is guilty of conduct involving fraud, deceit, unconscionability, or bad faith related to the ms.tter at issue to the detriment of the other party." Gidatex, S.r.L. v. Campaniello Imports, Ltd., 82 F. Supp. 2d 126, 131 (S.D.N.Y. 1999) (citations and emphasis omitted). While Defend t must show that Plaintiffs' conduct is (1) inequitable and (2) related to the subject matt r of its claims, Fuddruckers, Inc. v. Doc S B.R. Others, Inc., 826 F.2d 837, 847 (9th specific formula for a court to apply-instead, the court is free to 1987), there is no its discretion where said to transgress rights have been U.S. 806, 8 15 (1945). of bad faith." *4 (S.D.N.Y. June Aug. 11,

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"[alny willful act concerning the cause of action which rightfully can equitable standards of conduct" has been taken by the party that infringed. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. However, "[ilt is undisputed that an unclean hands defense Jones Apparel Group, Inc. v. Piccone, No. 94 Civ. 0754,
8, 1994); see also Deere Co. v. MTD Holdings, Inc., No.

2004). Furthermore, it should be remembered that the

used as a loose cannon, depriving a plaintiff of an equitable remedy to hich he is otherwise entitled merely because he is guilty of unrelated misconduct." Am. Hos . Supply Corp. v. Hosp. Prods. Ltd., 780 F.2d 589,601 (7th Cir. 1985).

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Was Plaintiffs Conduct Inequitable and in Bad aith?

In considering whether conduct is inequitable, courts look to m e sure plaintiffs have not "misused their trademarks or trade identities in furtherance of ineq 'table conduct" or "procured or maintained [its] trademark registrations by false or fraudu ent misrepresentation." See De Beers LV Trademark Ltd. v. DeBeers Diamond Syndicate Inc., o. 04 Civ. 4099,2005

WL 1164073, at *4 (S.D.N.Y. May 18,2005). For example, when the llegedly infringed
trademark is itself deceptive, the defendant may raise the defense of un lean hands. See Russian Kurier, Inc. v. Russian Am. Kurier, Inc., 899 F. Supp. 1204, 1211 (S.D .Y. 1995). Further, a

defendant may claim a defense of unclean hands where the trademark i self is not deceptive, but the plaintiff acted in bad faith towards the defendant. See Worthington v. Anderson, 386 F.3d 1314, 1320 (10th Cir. 2004) (stating that unclean hands defense applie where "the plaintiff has acted inequitably towards the defendant in relation to the trademark").

Citing emails from Tiffany to eBay members, as well as statem nts on an "About me" webpage and in an advertisement in the national media, Defendant con ends that Plaintiffs have falsely advised eBay customers and other consumers that Tiffany & C . is the only authorized seller of Tiffany merchandise, thus erroneously implying that Tiffany's merchandise sold or resold by any other supplier, including one using eBay, is counterfeit. ( ef. Mem. 4-5) Plaintiffs argue that the statements relied upon by Defendant, t ken together and in their full context, are not false or misleading. For example, one email from p Tiffany employee to an

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eBay member explicitly acknowledged that an "individual who owns a iffany & Co. item, bought in a Tiffany store, can justifiably re-sell their authentic Tiffany i em on eBay." (Decl. of R. Bruce Rich, Ex. D, TCO 12281) ("Rich Decl.") Moreover, while an ther email indicates that a customer can "ONLY find authentic Tiffany merchandise at a Tiffany & Co. store or on our internet site," (Rich Decl. Ex. D, TCO 1228 1) the "About me" website ontains a statement that the only way a customer can "be certain that" that a Tiffany product is enuine is by purchasing it directly from Tiffany. (Rich Decl. Ex. G) Furthermore, Plaintiffs argu , some of the statements about genuine Tiffany merchandise being available solely from Tiffany explicitly relate only to jewelry and implicitly discuss only new items. (Rich Decl. Ex. G; Pls.' Mem. 7) Beyond this, it is apparent from the emails that Plaintiffs believe that the vast majority (approximately ninety percent) of Tiffany items sold on eBay are counterfeit, (Rich Decl. Ex. , , TCO 1228 1) and that Plaintiffs have used these emails to eBay members as a means of preve ting the sale of additional counterfeit items. (Rich Decl. Ex. C, TCO 12281, TCO 24100) For e ample, some of the emails warn would-be sellers that the items they are putting up for auction on Bay were purchased from previously identified counterfeiters, andlor request the eBay sellers to roduce a valid proof of purchase for the Tiffany item before selling it on eBay. (Rich Decl. Ex. D, TCO 3437-40; Ex. E, TCO 321 10-12)

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While Plaintiffs' explanation of the statements is more persuasi e than that of Defendant, it cannot be said as a matter of law that Plaintiffs' statements are subje t only to the interpretation they ascribe to them, namely, that authentic Tiffany items may be re-s Id on eBay (or anywhere), but that "new" items may only be purchased from Tiffany stores and based on how some of the recipients of the emails reacted, it would Tiffany website. Indeed, to be a fact question

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whether all who would read Plaintiffs' statements would agree with tk Thus, the motion cannot be denied on the basis that the statements are one interpretation.

interpretation of them. :curate, or subject only to

However, even assuming that Plaintiffs' statements could be i: rpreted as Defendant suggests, and thus could qualify as inequitable conduct, Defendant ha the part of Plaintiffs in making these statements. "Typically, courts tl relief due to plaintiffs unclean hands have found plaintiff guilty of tn brazen behavior." Gidatex, 82 F. Supp. 2d at 131. Here, the most tht Plaintiffs were aggressive in the defense of their mark, and that staten scare off would-be sellers of counterfeit Tiffany products on eBay als sale of genuine Tiffany products. Such actions in the defense of a ma not rise to the level of unconscionable or brazen behavior that is nece clean hands doctrine. See Clorox Co. v. Sterling Winthrop, Inc., 117 ("Efforts to protect trademarks, even aggressive ones, serve the comp trademark policies."). As such, this case is similar to Deere, supra, where the defenc .t sought to tender an unclean hands defense against a plaintiff accused of "knowingly misr nature and scope of its alleged green and yellow marks," and "purpos confusion of which it now complains." 2004 WL 1794507, at * 1. In defense, the court held that there was "no evidence in the record to su contention that Deere has intentionally misrepresented the nature and :esenting to the public the llly causing the consumer smissing the affirmative ort [defendant's] ope of its trademarks and ot pled any bad faith on have denied injunctive unconscionable and an be said is that ~ t that were intended to s leterred the legitimate reeven if aggressive, do

.ry to succeed under the
Id 50,61 (2d Cir. 1997) tive purpose of Whering

trade dress to the public through bad-faith promotional efforts." Id. at * 3. The same is true here. The proposed affirmative defense therefore fails.

Was Plaintiffs Conduct Related to the Subject Matter or its Claims?
Even assuming, however, that Plaintiffs' conduct was inequitable and done in bad faith, the proffered defense fails because it is not related to the subject matter of Plaintiffs' claims against Defendant. "The equitable defense of unclean hands applies 0n.y when the inequitable conduct complained of by the defendant relates to the claim asserted ag inst it." Precision Instrument, 324 U.S. at 8 14-15; see also Gidatex, 82 F. Supp. 2d at 131;De Beers L V Trademark Ltd., 2005 WL 1164073, at *3 (holding plaintiffs alleged anti-competi ive, monopolistic behavior in the general diamond market to be too disconnected to the s bject matter of the infringement action to constitute unclean hands). "[E]xamples of cond ct that might qualify as sufficiently related to a trademark action to support an unclean hands d fense are when a plaintiff 'encouraged or induced the commission of a wrong, or . . . a trademark allegedly infringed by the defendant, is itself deceptive, or . . . the plaintiff procured or maint ined his trademark registrations by false or fraudulent misrepresentations."' Id. at *4 (quo ing Louis Altman, Callman on Unfair Competition, Trademarks and Monopolies

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activities that do not qualifL as related to the action include instances here a valid mark was used in a deceptive manner against a non-party, see Russian Kurier, 89 F. Supp. at 1211 (no unclean hands where plaintiff infringed copyrights of non-party news rganizations in the newspaper whose trademark plaintiff sought to protect from defendant infringement) (listing cases), and where there was false advertising, see R.J. Reynolds Tobacco Stores, Inc., No. 99 C 1174,2001 WL 747422, at *3
o Co. v. Premium

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4th ed.)). Examples of

June 29,200 1) (holding

that advertisements misleading public as to safety of cigarettes did not c institute unclean hands). Defendant argues that Plaintiffs' alleged misrepresentations are related to the subject matter of this claim because through the challenged statements, "Tiffany improperly enlarges the scope of the very trademark rights it seeks to assert" in an attempt to prevent secondary market sales. (Def. Mem. 11-12) However, Defendant's claim fails on this element because Plaintiffs' representations as to the scope of its trademark to eBay users are unre1a:ed to Plaintiffs' suit against Defendant for direct and contributory infringement of Plaintiffs' trademarks. Defendant has not alleged the existence of any deceptive marks, or that Plaintiffs lave engaged in any fraud in connection with the procurement or maintenance of the trademark re istration. Nor does Defendant claim that any misleading representations were to Defendan itself. Put another way, there is nothing in Defendant's proposed use of the unclean hands doct ine that would serve as a valid defense to Plaintiffs' allegations.' Therefore, because the propos d unclean hands defense is facially insufficient, the Answer should not be amended to include thjis defense.

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To the extent that Defendant believes it was does not make out a defense of unclean hands. At improper anti-competitive behavior. See Deere, are unsettled about whether the defense of where a defendant can show that a had made misrepresentations to However, that is a different Lansa, Inc., No. 01 Civ. misuse and inequitable conduct are different defenses.").

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of its marks."). Inc. v.

Conclusion As Defendant has not proposed an amendment to its Answer v sufficient defense, leave to amend is DENIED. The clerk of the Cour the Motion. (Doc. No. 14) :h a raises a facially instructed to terminate

SO ORDERED. Dated: March 3 1,2006 New York, New York

STRICT JUDGE