I.O.B. Realty, Inc. v. Patsy's Brand, Inc. et al

Filing 17

OPINION & ORDER: Defendant Patsy's Brand, Inc. ("Patsy's Brand") moves, pursuant to Fed. R. Civ. P. 12 (b) (6), to dismiss I.O.B. Realty, Inc.'s ("IOB Realty") complaint alleging trademark infringement for failure t o state a claim upon which relief can be granted. For the reasons that follow, the motion is denied. Patsy's Brand's motion to dismiss IOB Realty's complaint (Dkt. No. 11) is denied, and as further set forth in this order. Motions terminated: 11 MOTION to Dismiss Complaint For Failure To State A Claim Upon Which Relief Can Be Granted, filed by Patsy's Brand, Inc. (Signed by Judge Louis L. Stanton on 5/15/2017) (ap)

[JORIGINAL

.'

USDCSDNY
DOCUMENT
ELECJRO~ICALL Y

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
I.O.B. REALTY,

FILED

INC.,

Plaintiff,
- against -

16 Civ. 7682

PATSY'S BRAND, INC. and
JOHN DOES 1-10,

(LLS)

OPINION & ORDER

Defendants.
Defendant Patsy's Brand, Inc.

("Patsy's Brand") moves,

pursuant to Fed. R. Civ. P. 12 (b) (6), to dismiss I.O.B. Realty,
Inc.'s ("IOB Realty") complaint alleging trademark infringement
for failure to state a claim upon which relief can be granted.
For the reasons that follow, the motion is denied.
BACKGROUNDl

The complaint (Dkt. No. 1) alleges the following:
IOB Realty is a New York corporation based in New York
City. Id.

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2. IOB Realty and its predecessors have continuously

used the mark PATSY'S PIZZERIA for restaurant services since
1933. Id.

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13. IOB Realty licenses the mark PATSY'S PIZZERIA to

its Patsy's Pizzeria franchisees for use in restaurant services
in the New York metropolitan area. Id.

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2, 12-13. IOB Realty

obtained U.S. Trademark Registration Number 2,213,574 for the
mark PATSY'S PIZZERIA, but as a result of what IOB Realty

For the purpose of this motion, the complaint's allegations are accepted as
true.

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alleges was "shenanigans" engaged in by Patsy's Brand's counsel,
that registration was canceled. Id.

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14.

Patsy's Brand is a New York corporation based in New York
City. Id.

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3. Patsy's Brand uses and licenses the marks PATSY'S

OF NEW YORK and PATSY'S OF NEW YORK ITALIAN RESTAURANT for
restaurant services in New York. Id.

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4. Patsy's Brand obtained

U.S. Trademark Registration Number 3,090,551 for the mark
PATSY'S OF NEW YORK. Id.

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11. Use of IOB Realty's mark PATSY'S

PIZZERIA predates use of Patsy's Brand's mark PATSY'S OF NEW
YORK.

Id.

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21.

The Trademark Office has denied two IOB Realty applications
to register the mark PATSY'S PIZZERIA for restaurant services
and franchising services because of Patsy's Brand's registration
for the mark PATSY'S OF NEW YORK. Id.

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17.

In a consolidated action brought in United States District
Court for the Eastern District of New York by Patsy's Brand and
non-party Patsy's Italian Restaurant, Inc.

("Patsy's Italian

Restaurant"), in which IOB Realty was a defendant, Judge
Irizarry ordered the restoration of "I.O.B. Realty,

Inc.'s U.S.

Trademark Registration No. 2,213,574 for non-stylized rendition
of PATSY'S PIZZERIA for restaurant services." See Patsy's
Italian Rest.,
2007). The U.S.

Inc. v. Banas, 508 F. Supp. 2d 194, 221

(E.D.N.Y.

Patent and Trademark Office did not restore the

registration at that time, choosing to await final disposition
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of the case. Compl.

14.2

In ruling on a post-trial motion in that action, Magistrate
Judge Reyes declined IOB Realty's invitation to order the
cancelation of Patsy's Brand's registration for the mark PATSY'S
OF NEW YORK.

Id.

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15.

Following an appeal, Judge Reyes ordered that Patsy's Brand
and Patsy's Italian Restaurant "are required to refer to their
restaurant services using the mark PATSY'S ITALIAN RESTAURANT"
and IOB Realty and its Patsy's Pizzeria franchisees "are
required to refer to their pizzeria services using the mark
PATSY'S PIZZERIA." Id.

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16; see Exhibit H to Defendant's Brief

(Dkt. No. 12-8) at 4, quoting Patsy's Italian Rest., Inc. v.
Banas, 575 F. Supp. 2d 427,
F.3d 254

470-71

(E.D.N.Y. 2008), aff'd,

658

(2d Cir. 2011).

IOB Realty sought an order from Judge Reyes holding Patsy's
Brand in contempt for continuing to use the mark PATSY'S OF NEW
YORK despite being ordered to use the mark PATSY'S ITALIAN
RESTAURANT. Compl.

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18. In a hearing on that application held

on January 6, 2015, Judge Reyes reemphasized his prior order
that Patsy's Brand was to use the mark PATSY'S ITALIAN
RESTAURANT and Patsy's Pizzeria was to use the mark PATSY'S

After the trial in that case, Magistrate Judge Reyes ordered the U.S. Patent
and Trademark Office "not to restore trademark registration number 2,213,574
for the mark PATSY'S PIZZERIA for restaurant services (thereby superseding
the prior restoration order of August 8, 2007 issued by the Honorable Dora L.
Irizarry)." See Exhibit F to Defendant's Brief (Dkt, No, 12-6) at 2.

2

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PIZZERIA. Id.; see Exhibit 4 to the Complaint (Dkt. No. 1-4).
Patsy's Brand argued that disputes over the mark PATSY'S OF NEW
YORK were beyond the scope of that

~ase.

Judge Reyes referred

the matter to a special master who recommended against holding
Patsy's Brand in contempt, noting, among other things, that
"Plaintiffs [Patsy's Brand and Patsy's Italian Restaurant]
apparently are not using the mark PATSY'S OF NEW YORK." Compl.

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18; see Exhibit H to Defendant's Brief at 13-14. Accepting the
special master's recommendation, Judge Reyes did not issue the
requested contempt order. Compl.

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18.

The registration for the mark PATSY'S OF NEW YORK was set
to expire on May 19, 2016, and IOB Realty expected that the
expiration would enable it to register its mark PATSY'S
PIZZERIA. Id.

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19. However, on August 5, 2016, after Patsy's

Brand asserted that it was still using the mark PATSY'S OF NEW
YORK in interstate commerce, the Trademark Office renewed the
registration for that mark; with limited exception, renewing a
trademark registration requires proof that the mark is in use in
interstate commerce. Id.

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19-20.

On September 30, 2016, IOB Realty commenced this action
asserting that the continued use and the registration of the
mark PATSY'S OF NEW YORK by Patsy's Brand promotes consumer
confusion and infringes on its more senior mark PATSY'S PIZZERIA
in violation of section 43 of the Lanham Act, 15 U.S.C.
-4-

§

1125(a), and New York common law. Id.

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21-30. IOB Realty

seeks, among other things, compensatory and punitive damages to
be determined at trial, an order enjoining Patsy's Brand from
using the mark PATSY'S OF NEW YORK for restaurant services, and
cancelation of U.S. Trademark Registration Number 3,090,551 for
the mark PATSY'S OF NEW YORK. Id. at 7-8.
Patsy's Brand argues that the complaint must be dismissed
for three reasons:

(1) under 15 U.S.C.

§

1065, its right to use

the mark PATSY'S OF NEW YORK cannot be contested because it has
been used continuously for five consecutive years subsequent to
the date of registration, Defendant's Brief (Dkt. No. 12) at 78;

(2) the doctrine of laches precludes IOB Realty from bringing

this action more than ten years after the mark was registered,
id. at 8-12; and (3) the complaint was brought against the wrong
party because while Patsy's Brand owns the mark PATSY'S OF NEW
YORK, it is Patsy's Italian Restaurant, and not Patsy's Brand,
that operates the restaurant using that mark, id. at 12-13.
DISCUSSION
1. Incontestabi1ity

Patsy's Brand argues that its right to use the mark PATSY'S
OF NEW YORK cannot be contested because the complaint concedes
that it has been registered for more than five years. Under 15
U.S.C.

§

1065, an owner's right to use its "registered mark in

commerce for the goods or services on or in connection with
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which such registered mark has been in continuous use for five
consecutive years subsequent to the date of such registration
and is still in use in commerce, shall be incontestable .

,

However, section 1065 provides that an owner's right to use
a qualifying mark is incontestable "except to the extent, if
any, to which the use of a mark registered on the principal
register infringes a valid right acquired under the law of any
State or Territory by use of a mark or trade name continuing
from a date prior to the date of registration under this chapter
of such registered mark .
Tonawanda St. Corp. v.

" 15 U.S.C. § 1065; see also 815

Fay's Drug Co., 842 F.2d 643, 646 (2d

Cir. 1988), quoting Wrist-Rocket Mfg. Co., Inc. v. Saunders
Archery Co., 578 F.2d 727, 731

(8th Cir. 1978)

("the plain

meaning of [the § 1065 exception] is that if a party has
acquired common-law trademark rights continuing since before the
publication of the federal registration, then to that extent the
registration will not be incontestable."). Because IOB Realty
alleges that it has acquired rights to the mark PATSY'S PIZZERIA
under New York law continuing since before the publication of
the registration for the mark PATSY'S OF NEW YORK, the complaint
states a claim upon which relief can be granted. 3

While an incontestable mark may only be canceled for a ground listed in 15
§ 1064(3) and (5)
(~, if the mark becomes generic, is functional,
has been abandoned, was obtained fraudulently, or is used to misrepresent the
source of goods or services), the complaint seeks ten forms of relief other
than cancelation of the mark PhTSY'S OF NEW YORK. Cornpl. at 7-9.
3

u.s.c.

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Moreover, the mere fact that Patsy's Brand's mark has been
registered for five years, which the complaint concedes, is not
enough to establish incontestability. Patsy's Brand must show
what the complaint does not allege, that its "registered mark
has been in continuous use for five consecutive years subsequent
to the date of such registration and is still in use in
commerce," 15 U.S.C.

1065, and under the assertions by both

§

sides in the submissions, that is a factual issue for trial.4
Patsy's Brand argues that the mark PATSY'S OF NEW YORK
cannot infringe on IOB Realty's more senior mark PATSY'S
PIZZERIA because the marks "are dissimilar on their face." Reply
(Dkt. No. 15) at 8-9. However, apparently the trademark examiner
disagrees. See Compl.

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17. IOB Realty plainly alleges that "The

continued existence of the Patsy's Brand registration for the
mark PATSY'S OF NEW YORK blocks the two pending application of
I.O.B. Realty at the Trademark Office from being allowed as
registrations for the mark PATSY'S PIZZERIA for restaurant
services and franchising services." Id.; see also Exhibits K and
L to Defendant's Brief (Dkt. Nos. 12-11 and 12-12). Furthermore,
IOB Realty alleges that Patsy's Brand's use of the mark PATSY'S
OF NEW YORK "is likely to cause confusion or mistake and/or
deceive the consuming public as to the affiliation and/or

It appears from the complaint that as of May 2015, the special master found
the mark PATSY'S OF NEW YORK not to be in use. See Compl. ~ 18; Exhibit H to
Defendant's Brief at 13-14

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connection of the Defendant's services as originating from or
being sponsored by the Plaintiff I.O.B. Realty when, in fact,
they are not." Compl. ! 26. Whether use of the mark PATSY'S OF
NEW YORK infringes on IOB Realty's trademark rights is a
question of fact beyond the scope of this motion.
The complaint cannot be dismissed on the ground of
incontestability because IOB Realty alleges facts that if true
would entitle it to relief even under section 1065.
2. Laches

Patsy's Brand argues that because IOB Realty was aware of
Patsy's Brand's registration for the mark PATSY'S OF NEW YORK
for more than ten years before it filed this suit, its complaint
should be barred by the doctrine of laches.
As with affirmative defenses generally, a complaint can be
dismissed because of laches only "when the defense of laches is
clear on the face of the complaint, and where it is clear that
the plaintiff can prove no set of facts to avoid the insuperable
bar." George Nelson Found. v. Modernica, Inc., 12 F. Supp. 3d
635, 655 (S.O.N.Y. 2014), quoting Lennon v. Seaman, 63 F. Supp.
2d 428,

439 (S.D.N.Y. 1999); see McKenna v. Wright, 386 F.3d

432, 436 (2d Cir. 2004), quoting Pani v. Empire Blue Cross Blue
Shield, 152 F.3d 67, 74

(2d Cir. 1998)

("[a]n affirmative

defense may be raised by a pre-answer motion to dismiss under
Rule 12(b) (6), without resort to summary judgment procedure, if
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the defense appears on the face of the complaint."). Here,
laches is not clear on the face of the complaint.
"In order to prevail on the affirmative defense of laches,
a defendant must prove that it has been prejudiced by the
plaintiff's unreasonable delay in bringing the action." Conopco,
Inc. v. Campbell Soup Co., 95 F.3d 187, 192 (2d Cir. 1996),
citing Tri-Star Pictures, Inc. v. Leisure Time Prods., B.V., 17
F.3d 38, 44

(2d Cir. 1994). The only prejudice cited by Patsy's

Brand is that for the last ten years it used the mark PATSY'S OF
NEW YORK. Defendant's Brief at 11-12. This is not sufficient to
establish prejudice because "prejudice ensues when a

'defendant

has changed his position in a way that would not have occurred
if the plaintiff had not delayed.'" Conopco, 95 F.3d at 192
quoting Goodman v. McDonnell Douglas Corp., 606 F.2d 800, 808
n.17

(8th Cir. 1979).
Patsy's Brand argues that because this suit was filed more

than ten years after its mark was registered it need not
demonstrate prejudice beyond the mere passage of time and IOB
Realty bears the burden to disprove prejudice. Id. at 13; Reply
at 12-13, citing Conopco, 95 F.3d at 191 ("When a suit is
brought within the time fixed by the analogous statute, the
burden is on the defendant to show .

. circumstances exist

which require the application of the doctrine of laches. On the
other hand, when the suit is brought after the statutory time
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has elapsed, the burden is on the complainant to aver and prove
the circumstances making it inequitable to apply laches to his

However, "It is well established that 'laches is not a
defense against injunctive relief when the defendant intended
the infringement.'" Hermes Int'l v. Lederer de Paris Fifth Ave.,
Inc., 219 F.3d 104, 107

(2d Cir. 2000), quoting Harlequin

Enters. Ltd. v. Gulf & W. Corp., 644 F.2d 946, 950

(2d Cir.

1981); see id., quoting Precision Instrument Mfg. Co. v. Auto.
Maint. Mach. Co., 324 U.S. 806, 814, 65 S. Ct. 993, 997

(1945)

("This good-faith component of the laches doctrine is part of
the fundamental principle that 'he who comes into equity must
come with clean hands.'"). IOB Realty's allegation that Patsy's
Brand willfully and in bad faith infringed on IOB Realty's
trademark rights, Compl.

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22, 27, if true, would defeat a

defense of laches. The complaint can therefore not be dismissed
on the ground of laches.s
3. Patsy's Brand is the wrong party

Patsy's Brand argues that the complaint should be dismissed

s To the extent Patsy's Brand argues that IOBRealty's claim has already been
adjudicated in Patsy's Brand's favor by Judge Reyes in Patsy's Italian Rest.,
Inc. v. Banas, No. 06 Civ. 729 (RER), 2016 WL 146461 (E.D.N.Y. Jan. 12,
2016), and affirmed by the Second Circuit in Patsy's Italian Rest., Inc. v.
Patsy's Inc., No. 16-0405-cv, ---F. App'x ----, 2017 WL 219094 (2d Cir. Jan.
19, 2017), see Defendant's Jan. 19, 2017 letter (Dkt. No. 16), in that case
the courts merely held that the use of the mark PATSY'S OF NEW YORK fell
outside the scope of Judge Reyes's September 9, 2008 injunction, but not that
Patsy's Brand had a right to use that mark.

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because Patsy's Italian Restaurant, and not it, operates the
restaurant under the mark PATSY'S OF NEW YORK. Defendant's Brief
at 12.
The complaint alleges, however, that, Compl.

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4:

Patsy's Brand uses, or purports to own and permit others to use
to its benefit, the trademarks PATSY'S OF NEW YORK and PATSY'S
OF NEW YORK ITALIAN RESTAURANT for restaurant services and
conducts business in this Judicial District under these marks,
or purports to permit others to conduct business in this Judicial
District under these marks.

Denying the truth of a complaint's allegations is not a
basis for dismissing the complaint for failure to state a claim
upon which relief can be granted. On the contrary, "On a motion
to dismiss, all factual allegations in the complaint are
accepted as true and all inferences are drawn in the plaintiff's
favor." Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51,
59 (2d Cir. 2016), quoting Littlejohn v. City of N.Y., 795 F.3d
297, 306 (2d Cir. 2015).
CONCLUSION

Patsy's Brand's motion to dismiss IOB Realty's complaint
(Dkt. No. 11) is denied.
So ordered.
Dated:

New York, New York
May 15, 2017

~.L.st~
LOUIS L. STANTON
U.S.D.J.

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