Asociacion de Industriales de Puerto Rico v. MarketNext, Inc. et al

Filing 58

MEMORANDUM OPINION, AND ORDER TO SHOW CAUSE. We reinstate the preliminary injunction against Defendants, Docket No. 46 , and ORDER the Defendants to show cause, on or before April 3, 2009, as to why the preliminary injunction should not be converted into a permanent injunction. Show Cause Response due by 4/3/2009. Signed by Chief Judge Jose A Fuste on 3/23/09.(mrj)

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UNITED STATES DISTRICT COURT DISTRICT OF PUERTO RICO ASOCIACIÓN DE INDUSTRIALES DE PUERTO RICO, Plaintiff, v. MARKETNEXT, INC., et al., Defendants. Civil No. 09-1122 (JAF)

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Rico

MEMORANDUM OPINION Plaintiff, Asociación de Industriales de Puerto Rico ("Puerto Manufacturers' Association," or "AIPR"), brings this case

against Defendants, MarketNext, Inc. ("MarketNext"), Edison R. MislaGrillasca ("Misla"), Yvette Olivero-Vázquez ("Olivero"), the conjugal partnership between Misla and Olivero, Graphic Print & Design, Inc. ("Graphic"), Guillermo Avilés-Aguirrechea ("Avilés"), Glorimar de Jesús-Mila ("de Jesús"), and the conjugal partnership between Avilés and de Jesús. Docket No. 50. Plaintiff alleges trademark

infringement, false designation of origin, unfair competition, false advertising, and trade name infringement under the Lanham Act, 15 U.S.C. § 1125(a); and trademark infringement, unfair competition, false advertising, trade name infringement, contractual breach, and pre-contractual liability under Puerto Rico law, Civil Code art. 1802 (P.R.). Id. Specifically, Plaintiff accuses Defendants of usurping

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Plaintiff's use of its trademark, "Industriales." Id. Plaintiff seeks a preliminary injunction against Defendants to bar them from further infringement of Plaintiff's trademark, Docket No. 3; Defendants opposed, Docket Nos. 42, 44. On March 11, 2009, we entered an order for a preliminary injunction against Defendants with a note that a memorandum opinion would follow. Docket No. 46. I. Factual and Procedural Synopsis We draw the following facts from the record in this case thus far. Docket Nos. 1, 3, 15, 27, 42, 44, 50; Prelim. Inj. Hr'g Tr. Plaintiff is a non-profit trade association, formed in 1928, that represents businesses in the manufacturing and services sectors of Puerto Rico. Manufacturing constitutes forty percent of the Puerto Rican economy. From a peak of 1600 members in 2001, Plaintiff's membership has declined in recent years to 1200 members. In addition to manufacturers, Plaintiff's membership includes law firms and universities in Puerto Rico, and port authorities and banks in the United States proper. Plaintiff regularly communicates with its members through electronic and print media, and seeks to inform the public on matters relevant to manufacturing and services through educational programs and publications. Plaintiff relies on its relationship with its members to achieve its educational and legislative aims. To communicate with its members, Plaintiff has published a trade magazine, "Industriales."

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People in the manufacturing and services sectors in Puerto Rico frequently refer to Plaintiff as "los Industriales." Several news articles, dating from as early as 1994, quoted statements by

Plaintiff as representative of the views of manufacturers in Puerto Rico. Docket Nos. 1-8, 15-4. An article dated August 29, 2000, referred to Plaintiff by the short form, "Industriales." Id.

MarketNext, Inc., is a Puerto Rico company engaged in marketing products and services through print media that it produces. Misla is the president of MarketNext; Olivero is Misla's wife. Graphic is a Puerto Rico company engaged in printing media for distribution. Avilés is the president of Graphic; de Jesús is Avilés' spouse. In 2001, Plaintiff published two supplements called

"Industriales" in El Nuevo Día, the daily newspaper with the largest circulation in Puerto Rico. The supplement dated July 1, 2001, bore the title, "Industriales," with the circular AIPR logo printed over the second "I" on the front cover. Docket No. 1-6. Disappointed with the inability of El Nuevo Día to run the supplement on glossy paper, Plaintiff terminated publication with El Nuevo Día and sought a new publisher. Plaintiff and MarketNext executed a contract dated April 29, 2003 ("Contract"), in which MarketNext agreed to undertake its best efforts in developing, publishing, and promoting Plaintiff's official publication, Industriales. Docket Nos. 1-10, 15-6. The Contract provided that MarketNext would be the exclusive dealer of the

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publication and would enjoy a portion of the profits from advertising for the magazine as compensation. Id. The Contract prohibited

MarketNext from contracting advertisements that promote partisan politics, religion, pornography, tobacco, or alcohol. Id.

Furthermore, the Contract required MarketNext to notify Plaintiff prior to changing advertising fees, report to Plaintiff monthly on the magazine's content and advertisements contracted by MarketNext, consult with Plaintiff regularly on MarketNext's promotional efforts for the magazine, submit proposed advertisements in digital format to Plaintiff MarketNext publications in advance of to printing, deviate for the and report an to Plaintiff schedule The if for

intended and

from first

agreed Id.

content

year.

Contract

provided for termination by either party with thirty days' notice. Id. Finally, the Contract was silent on intellectual property rights. See id. Plaintiff did not discuss or contemplate copyright and trademark protection in the course of forming the Contract. MarketNext produced the first issue of Industriales in 2003. The front cover bore the inscription, "Asociación de Industriales de Puerto Rico," above the title, as well as Plaintiff's website, "www.prma.com," immediately beneath the title. Docket No. 1-12. The title, however, does not include Plaintiff's logo. Id. The masthead within the magazine listed Misla as director, Olivero as sales agent, and Plaintiff's president, executive vice president, and public relations officer. Id. A notice appeared beneath the names, advising

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readers that "INDUSTRIALES is published quarterly by MarketNext for the Puerto Rico Manufacturer's Association." Id. Another advisory at the bottom of the masthead alerted readers to MarketNext's assertion of copyright protection over the first issue. Id. Lastly, a letter from Manuel Cidre, Plaintiff's president, appeared in a vertical column next to the masthead. Id. The letter endorsed the new magazine and bears Plaintiff's circular logo. Id.

During the course of MarketNext's performance on the Contract, William Riefkohl, Plaintiff's executive vice president, occasionally instructed Misla on content for Industriales, such as directing him to exclude coverage of politicians in an issue preceding the 2004 Puerto Rico elections. Plaintiff never received payments from

MarketNext under the profit-sharing clause in the Contract, and MarketNext never gave full accounting of its profits arising from its advertisement campaign for Industriales. At the hearing, Misla

testified that he had provided some figures to Plaintiff, but could not cite specific documents. Misla considered the advertisers to be the chief clients for MarketNext, as the fees paid by advertising companies contributed to the production of Industriales. MarketNext advertising membership Initially, had originally from obtained a list of of potential Plaintiff's in 2003. among

customers after the

Plaintiff of

comprised their

conclusion primarily

Contract

MarketNext

promoted

Industriales

Plaintiff's members. See Docket No. 1-14. MarketNext has further

Civil No. 09-1122 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 developed customer its that relations contacts Misla through its own efforts, updated a member and

-6has

supplemented directories

with

Plaintiff's as

membership of AIPR.

once

received

Plaintiff's members continue to comprise a substantial portion, perhaps nearly one-half, of MarketNext's advertising customer base. Between October 2005 and September 2007, MarketNext filed for, and secured, copyright protection from the United States Copyright Office for all issues of Industriales from 2004 to 2007. Docket No. 44-2. The certificates of registration include no reference to Plaintiff, and Misla affirmed by signature on each of these filings that he is the authorized agent of the copyright claimant. Id. On February 4, 2008, MarketNext sent a letter to Plaintiff seeking renegotiation of the Contract, demanding that Plaintiff recognize MarketNext's claim of intellectual property rights over Industriales. Docket Nos. 1-15, 15-10. Plaintiff resisted these demands in writing. Docket Nos. 1-16, 15-10. Riefkohl met Misla personally in August 2008 to discuss the contractual dispute. Misla attended the meeting under the belief that Riefkohl had invited him to discuss the content of the magazine, an authority which Riefkohl had rarely exercised during MarketNext's course of performance to that date. After this meeting, MarketNext and Plaintiff exchanged further correspondence in which MarketNext persistently claimed

ownership over the magazine and Plaintiff consistently contested these claims. Docket Nos. 1-20, 1-21, 15-14, 15-15.

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On May 5, 2008, MarketNext petitioned the Puerto Rico Department State to register Docket "Industriales" Nos. 1-17, as its In own trademark for

publications.

15-11.

the

petition,

Misla

certified that he had no knowledge of any other entity with the right to use the same mark in Puerto Rico. Id. In support of this

application, Misla also submitted an affidavit dated April 24, 2008, asserting MarketNext's own use of the mark in its publications since 2003. Docket Nos. 1-23, 15-17. Publication continued under the Contract until November 5, 2008, when Plaintiff gave notice of its intent to terminate the Contract. Docket Nos. 1-22, 15-16. Since then, Defendants have produced two more issues of their publication without Plaintiff's authorization. Docket Nos. 1-25, 1-26, 15-18. The masthead in the first of these issues omitted all references to Plaintiff and its officers, and stated that MarketNext is the publisher of Industriales. Docket Nos. 1-25, 15-18. The issue included a letter from Misla which asserted that MarketNext will continue publication after six years as publisher of Industriales. from firms Id. doing This issue in featured Puerto numerous Rico. Id.

advertisements

business

MarketNext maintains a website, "www.industrialesmag.com," to promote its publication. Docket No. 1-30. On December 17, 2008, after Plaintiff had learned of the

publication of the first issue without its permission, Plaintiff demanded that Graphic, MarketNext's printer, cease and desist from

Civil No. 09-1122 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 further publication. Docket Nos. 1-28, 15-20. In its

-8letter,

Plaintiff asserted ownership of the trademark, "Industriales," and informed Graphic that it had a pending application for trademark protection with the Puerto Rico Department of State. Id.

On January 23, 2009, MarketNext filed a petition before the United States Patent and Trademark Office ("PTO"), claiming ownership of the mark, "Industriales," and asserting that it had first used the mark in February 2003, and that it had first used the mark in commerce in September 2007. Docket No. 1-24. Subsequently, Plaintiff filed its own petition for trademark protection for "Industriales" on January 29, 2009, asserting first use and first use in commerce on July 1, 2001. Docket No. 1-33. Misla sent a letter dated February 5, 2009, informing his advertising customers that Industriales, as published by MarketNext, was no longer affiliated with Plaintiff. Docket Nos. 1-32, 15-22. The letter stated that MarketNext would continue to develop its publication and expand distribution in Puerto Rico and the United States. Id. Lastly, the letter asserted that Defendant Olivero was the only person authorized to receive communications on placing advertisements in Industriales. Id.

After Plaintiff had terminated its Contract with MarketNext, it hired a new publisher, Media & Marketing Partners Co. ("Media"), to continue publication of Industriales. José J. Balmaceda, the

president of Media, encountered significant problems from competition

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with MarketNext after Plaintiff had retained him in December 2008 to print Industriales. On January 27, 2009, MarketNext threatened Media with legal repercussions from Media's "illegal" use of "Industriales" for its publication authorized by Plaintiff. Docket No. 1-31. In the letter, MarketNext claimed trademark protection under Puerto Rico law and asserted that it had been using the title, "Industriales," since May 2003. Id. Potential interviewees and advertisers expressed

reservations about cooperating with Media due to their previous relationship with MarketNext, leading Balmaceda to believe that MarketNext is thwarting his efforts at producing Industriales on behalf of Plaintiff. Two of Plaintiff's members attested to their confusion over continued publication by MarketNext without

Plaintiff's authorization. Docket No. 1-29. These affiants asserted that they would not have advertised in MarketNext's publication if they had known that the magazine was unauthorized. Id.

Plaintiff depends on Industriales to effectively communicate with its members and to inform the public at large about its positions on economic policy in Puerto Rico. Since the termination of the Contract, Plaintiff has had no editorial control over Defendants' rival publication. Plaintiff risks loss of goodwill, business

opportunities, and a vehicle to expand its membership if it cannot use the mark, "Industriales," without interference. On February 10, 2009, Plaintiff commenced this action in federal district court seeking monetary damages and injunctive relief.

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Docket No. 1. Plaintiff sought a preliminary injunction against Defendants on February 10, 2009, Docket No. 3; Defendants opposed on March 9, 2009, Docket Nos. 42, 44; we held a hearing on March 10, 2009, Docket Nos. 47, 48, 49. On March 11, 2009, we entered an order against Defendants, preliminarily enjoining them from using the mark, "Industriales," in commerce via print or electronic media, causing the public to

associate Defendants' services with Plaintiff, and competing unfairly with Plaintiff or its licensees by falsely representing the nature of Defendants' services. Docket No. 46. We allowed Defendants ten days to comply with the order and certify their compliance by sworn affidavit. Id. Furthermore, we granted the preliminary injunction on the condition that Plaintiff post a duly-qualified surety bond in the amount of $20,000 within seventy-two hours to insure Defendants against the effects of an unwarranted injunction. Id. Lastly, we said that a memorandum opinion would follow the order. II. Analysis A party may move for a preliminary injunction pursuant to Federal Rule of Civil Procedure 65. In considering the motion, we must ascertain (1) the movant's likelihood of success on the merits; (2) the potential for irreparable harm to the movant absent the injunction; (3) the balance of the equities; and (4) the public Id.

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interest. Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, 115 (1st Cir. 2006). A. Likelihood of Success on the Merits To obtain a preliminary injunction against trademark

infringement, the likelihood of a plaintiff's success on the merits turns on the plaintiff's demonstration "that its mark merits

protection and that the allegedly infringing use is likely to result in consumer confusion." Borinquen Biscuit, 443 F.3d at 116. 1. Entitlement to Trademark Protection

Plaintiff asserts that the mark, "Industriales," is entitled to trademark protection and that Plaintiff has priority in right over the mark. Docket No. 3. We find that Plaintiff has sufficiently shown that "Industriales" is a distinctive mark in the market of trade magazines printed in Puerto Rico, and that Plaintiff has prior ownership of the mark. a. Distinctiveness

Federal trademark law only protects marks that distinguish one product from another. Borinquen Biscuit, 443 F.3d at 116 (citing Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 769 (1992)). The mark must "serve[] the purpose of identifying the source of the goods." Colt Def. LLC v. Bushmaster Firearms, Inc., 486 F.3d 701, 705 (1st Cir. 2007). Where a trademark is unregistered, the plaintiff seeking protection must satisfy the court of the mark's distinctiveness through specific facts. Borinquen Biscuit, 443 F.3d at 117. In

Civil No. 09-1122 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 rebuttal, the defendant may show the mark's genericness

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preponderance of the evidence. See Colt Def., 486 F.3d at 705. Firstly, marks classified as suggestive, arbitrary, or fanciful are inherently distinctive. Borinquen Biscuit, 443 F.3d at 116. A suggestive mark "itself does not convey information about [the] product," but rather "requires the consumer to exercise the

imagination in order to draw a conclusion as to the nature of goods and services." Equine Techs., Inc. v. Equitechnology, Inc., 68 F.3d 542, 545 (1st Cir. 1995). For instance, "COPPERTONE is suggestive of suntan lotion because it hints at the nature of the connected product." Boston Duck Tours, LP v. Super Duck Tours, LLC, 531 F.3d 1, 12 n.10 (1st Cir. 2008). An arbitrary mark consists of a word or symbol in common use, but applied to a product in an idiosyncratic way such that it cannot relate to the mark's common definition. Boston Duck Tours, 531 F.3d at 13 n.11 (citing "APPLE" computers as unrelated to fruits). A fanciful mark consists of a word that was specifically invented to identify a certain product. Id. at 13 n.12 (citing "EXXON" as "designed solely to designate petroleum and other related goods"). Secondly, descriptive marks are those that fall short of

inherent distinctiveness. Borinquen Biscuit, 443 F.3d at 116. For example, "Commerce" has been held to be descriptive as applied to an insurance company, rather than inherently distinctive, because it is a word in common use in business. Commerce Nat'l Ins. Servs., Inc. v.

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Commerce Ins. Agency, Inc., 214 F.3d 432, 440 (3d Cir. 2000). Descriptive marks must acquire secondary meaning before they warrant protection as distinctive marks. Borinquen Biscuit, 443 F.3d at 116. The holder must "establish that, in the minds of the public, the primary significance of the mark is to identify the source of the product rather than the product itself." Id. (internal quotation marks omitted). Secondary meaning could be founded upon the holder's longstanding use of the mark in a particular market. See Commerce Nat'l Ins. Servs., 214 F.3d at 443-44. Lastly, generic marks are never distinctive. Id. Their "primary significance to the relevant public [is] to identify the nature of a good, rather than its source." Colt Def., 486 F.3d at 705 (citing 15 U.S.C. § 1064(3)) (internal quotation marks omitted). For instance, "M4" was found to be a generic reference to a class of firearms, rather than a specific designation of a particular manufacturer's products. Id. at 710. To establish genericness as a defense, the defendant may resort to consumer surveys, common use in media, use by competitors, purchaser testimony, and plaintiff's own use. Id. at 706. I. Suggestive Mark

Plaintiff insists that "Industriales" qualifies as a suggestive and, hence, an inherently distinctive, mark. Docket No. 3. Although Spanish is an official language in Puerto Rico, 1 L.P.R.A. § 59 (1999), we translate non-English words into English to assess whether

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putative marks are suggestive or descriptive, see Attrezzi, LLC v. Maytag Corp., 436 F.3d 32, 38 (1st Cir. 2006) (applying the doctrine of foreign equivalents). The Spanish term, "Industriales," simply means "industrialists" in English. Cassell's Spanish-English Dictionary 367 (1978). Even though the readers of Industriales may apprehend that it is a trade magazine targeting manufacturers, "industrialist," by itself, does not require an Cf. imaginary Equine leap Techs., to 68 identify F.3d at the 545 nature of the that

publication.

(finding

imagination is needed to link "Equine Technologies" to plaintiff's hoof care products). Therefore, Plaintiff will not likely establish "Industriales" as an inherently distinctive mark at trial. See id. ii. Secondary Meaning does not meet the standard for

"Industriales"

suggestive marks, it has nonetheless acquired secondary meaning as a descriptive mark. To become distinctive, "the public [must]

associate[] the [descriptive] term . . . not only with a specific feature or quality, but also with a single commercial source." Boston Duck Tours, 531 F.3d at 13. Like "commerce," "industrialist" is a word in common use which describes certain goods or services. See Commerce Nat'l Ins. Servs., 214 F.3d at 440. However, Plaintiff points to news articles referring to it as "los Industriales" as early as 2000. Docket Nos. 1-8, 15-4. The first several issues of Industriales explicitly advertised its affiliation with Plaintiff on the front cover. See Docket No. 1-12.

Civil No. 09-1122 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mastheads in later issues continued to alert readers of

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publication's association with Plaintiff until Defendants produced two unauthorized editions in late 2008. Even if the title by itself failed to distinguish the magazine, MarketNext's tireless efforts in promoting the publication served to publicly associate "Industriales" with Plaintiff's periodical. Certainly, by the end of 2008, the advertising customer base of Industriales, which included many large entities engaged in commerce in Puerto Rico, had come to identify the mark with the journal itself. Such association explains the confusion of some customers when Media approached them for advertising and interviews for its licensed publication. Thus, Plaintiff has produced sufficient evidence for a preliminary finding that "Industriales" has gained secondary meaning to become a distinctive mark. See Boston Duck Tours, 531 F.3d at 13. iii. Genericness Defense In an effort to defeat trademark protection, Defendants assert that "Industriales" is a generic term. Docket No. 42. We direct our

inquiry to the meaning that the "relevant public" attaches to the word. See Colt Def., 486 F.3d at 706. Based on the evidence in the record, we find that the relevant market is that of potential advertisers and readers interested in doing business in, or engaging in commerce with, Puerto Rico. As noted above, Plaintiff has cited instances of actual confusion among potential advertisers who associated the mark with a single

publication. Docket No. 1-29. Defendant has presented no evidence of

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other publications with an identical title, such that "Industriales" has become a commonplace name for publications in Puerto Rico. Cf. Colt Def., 486 F.3d at 710 (finding that "M4" described an entire class of firearms). Although Defendants' own application for

trademark protection in Puerto Rico, Docket No. 1-17, does not estop them from raising the genericness defense, see Boston Duck Tours, 531 F.3d at 22-23, it is relevant evidence of the mark's primary

significance to the relevant public, see id. at 18. As Defendants' evidence is equivocal at best, they cannot rebut Plaintiff's case for trademark protection. See id. b. Priority in Right

In riposte, Defendants maintain that, even if "Industriales" deserves trademark protection, MarketNext, not Plaintiff, owns the mark. Docket No. 42. On the contrary, we find that Plaintiff owns the mark by virtue of its agency relationship with MarketNext. i. First Use

At the threshold, "it is well settled that the right to use [a] . . . mark is based on priority of appropriation." See Blanchard Importing & Distrib. Co. v. Charles Gilman & Son, Inc., 353 F.2d 400, 401 (1st Cir. 1965). However, for federal trademark protection to attach, a mark must have been used in interstate commerce. See The Trade-Mark Cases, 100 U.S. 82 (1879). Although Plaintiff first printed a newspaper supplement,

"Industriales," in El Nuevo Día in 2001, there is no evidence that circulation of this supplement reached beyond Puerto Rico. However,

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there is ample evidence that the magazine, Industriales, has been distributed to Plaintiff's members, which includes public and private entities in the United States proper. See Docket No. 48 (item 18). Moreover, Misla has informed his customers that MarketNext intends to expand distribution in the United States. Docket Nos. 1-32, 15-22. Thus, first use of "Industriales" as a mark for a magazine may not have occurred until 2003.1 Indeed, MarketNext asserted in its application for trademark protection that it had first used the mark in commerce in September 2007. Docket Nos. 1-17, 15-11. In other words, the mark did not become a valuable asset subject to ownership until it was appropriated by first use in a magazine under the Contract between Plaintiff and MarketNext. See Blanchard Importing, 353 F.2d at 401. Assuming that first use occurred during the course of performance on the Contract, we address the ownership of fruits of the contractual relationship. ii. Agency Relationship

The civil law of Puerto Rico, 31 L.P.R.A. § 4421-88 (1990), furnishes the substantive law of agency. González-González v. United States, 581 F. Supp. 2d 272, 279 (D.P.R. 2008) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)). In Puerto Rico, an agent binds himself to render a service on behalf of his principal. 31 L.P.R.A. § 4421. The agency relationship ("mandato") may be formed expressly or may be implied from the acts of the putative agent. Id. § 4422.

If Plaintiff had indeed first used "Industriales" as a mark for publications in 2001, Plaintiff would necessarily be the owner of the mark. See Blanchard Importing, 353 F.2d at 401.

1

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Generally, unless the parties agree to compensation, the agent presumably agrees to perform his services gratuitously. Id. § 4423. Finally, an agent must account for all transactions conducted on behalf of the principal. Id. § 4443. The agent must render to the principal all fruits received in the course of the agency

relationship, even if they did not arise from debts owed to the principal. Id. In the case at bar, Plaintiff contracted MarketNext to produce, publish, and promote the publication, Industriales. Docket Nos. 1-10, 15-6. MarketNext undertook to make its best efforts to promote Industriales as the exclusive dealer of the trade journal. Id. The Contract required MarketNext to abide by numerous conditions, in terms of production schedules and prohibited content, in rendering performance for Plaintiff. Id. The Contract obliged MarketNext to submit its advertising efforts to regular review by Plaintiff. Id. Although the Contract failed to specify the manner in which

MarketNext was to account for profits, it provided that a certain portion of the profits could become payable to Plaintiff. Id. In the course of performance, Riefkohl occasionally exercised final

discretion over the content of the publication. Furthermore, Misla testified that he believed that Riefkohl could influence the content of the magazine. Even if the Contract did not expressly define the relationship as one of agency, we may infer it from the terms of the Contract and MarketNext's conduct under the agreement. See 31

L.P.R.A. § 4422.

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Because MarketNext was Plaintiff's agent, all fruits received in the course of MarketNext's performance naturally belong to the principal, Plaintiff. See id. § 4443. The mark, "Industriales," became a valuable asset after its first use in the magazine in 2003. Although MarketNext was instrumental to the creation of this asset, MarketNext was an agent to Plaintiff and, thus, could not have "used" the mark for its own sake to appropriate it. Furthermore, MarketNext was under obligation to tender the mark to Plaintiff upon the termination of their Contract.2 See id. Therefore, ownership of the mark properly rests with Plaintiff. 2. Likelihood of Consumer Confusion

Plaintiff contends that it is likely to prevail on the merits because of actual confusion by Plaintiff's members and customers who advertise in Industriales. Docket No. 3. Eight factors guide the inquiry into consumer confusion: (1) the similarity of the marks; (2) the similarity of the goods; (3) the relationship between the parties' channels of trade; (4) the relationship between the parties' advertising; (5) the classes of prospective purchasers; (6) evidence of actual confusion; (7) the defendant's intent in adopting its mark; and (8) the strength of the plaintiff's mark.

In addition, Plaintiff did not grant its rights to Defendants as compensation. The Contract is silent on intellectual property rights, Docket Nos. 1-10, 15-6, and the law generally presumes gratuitous assumption of duties by an agent, 31 L.P.R.A. § 4423. Moreover, the Contract expressly provided for profit-sharing with MarketNext, Docket Nos. 1-10, 15-6, and, thus, fulfilled Plaintiff's obligation to pay MarketNext as an agent who specializes in marketing, see 31 L.P.R.A. § 4423.

2

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Borinquen Biscuit, 443 F.3d at 120. A court should take all eight factors into account, but none is dispositive by itself. Id. Of the eight factors, evidence of actual confusion is most probative of potential confusion in the market. Id. Plaintiff has presented statements from its members indicating actual confusion over the identity of the competing magazines of Plaintiff and

Defendants. Docket No. 1-29. Furthermore, Plaintiff and Defendants' sparring over the use of an identical magazine title easily disposes of the first two factors. See Borinquen Biscuit, 443 F.3d at 120. Plaintiff's evidence of reluctance of prospective interviewees and advertisers on account of their prior engagement with Defendants satisfies the third, fourth, and fifth factors. See id.

Misla's letter informing his customers of the severance of relations with Plaintiff satisfies the seventh factor. Docket Nos. 132, 15-22; see Borinquen Biscuit, 443 F.3d at 120. By projecting further expansion of the magazine's circulation, Misla clearly

understood that "Industriales" had become a valuable asset for advertising purposes. See Docket Nos. 1-32, 15-22. Furthermore, by insisting that Olivero is the only person authorized to contract advertisements for Industriales, Misla tried to steer clients away from Plaintiff and usurp Plaintiff's trademark ownership to reap anticipated benefits. See id. Lastly, our previous discussion of the mark's entitlement to protection suggests that the mark has some strength. See Boston Duck

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Tours, 531 F.3d at 23 (discussing strength of mark by reference to prior analysis of secondary meaning). Therefore, Plaintiff has shown that it is likely to prevail on the merits. See Borinquen Biscuit, 443 F.3d at 116. B. Irreparable Harm "[T]rademark infringements may be presumed without more to cause irreparable harm." Am. Bd. of Psychiatry & Neurology v. JohnsonPowell, 129 F.3d 1, 4 (1st Cir. 1997). As noted above, Plaintiff has

demonstrated its entitlement to trademark protection and actual confusion among consumers. Plaintiff's loss of editorial control over the contents of Defendants' publication also threatens to tarnish Plaintiff's public image, as readers may associate unauthorized statements with Plaintiff itself. Furthermore, Plaintiff has come to rely on the magazine for communicating with its members and the general public, and loss of the publication would erode its influence in print and electronic media associated with industrial interests in Puerto Rico. Lastly, Defendants' promotional efforts target

Plaintiff's members and, hence, threaten direct interference with Plaintiff's relationship with its members. Plaintiff has, therefore, established the likelihood of irreparable harm to its business opportunities, goodwill, and capacity for effective communication absent a preliminary injunction. C. Balance of Equities In addition to the probable harm noted above, Defendants' conduct is noteworthy for its flagrantly bad faith. While punitive

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damages are unavailable for contractual breach at common law, the civil law of Puerto Rico penalizes deceitful performance on a

contract. See Prado-Álvarez v. R.J. Reynolds Tobacco Co., 405 F.3d 36, 44-45 (1st Cir. 2005) (noting that contractual deceit (dolus or dolo) is basis for recovery). The doctrine of dolus extends to precontractual negotiations. Satellite Broad. Cable, Inc. v. Telefónica de España, S.A., 807 F. Supp. 218, 220 (D.P.R. 1992) (interpreting Civil Code art. 1802 to require good faith in negotiations). Defendants' applications for copyright and trademark protection evince steady encroachment on Plaintiff's rights to the fruits of its agency relationship with MarketNext. Docket Nos. 1-17, 15-11, 44-2. MarketNext should have been aware that it served at the pleasure of Plaintiff, and that MarketNext published the magazine expressly for Plaintiff under their Contract. See Docket Nos. 1-10, 15-6. It is manifest absurdity for MarketNext to demand Plaintiff's recognition of MarketNext's claim to intellectual property, i.e., Plaintiff's relinquishment of its own rights, as the basis for renegotiation of the Contract. Docket Nos. 1-15, 15-10. In addition, MarketNext owed a duty of loyalty, first and foremost, to Plaintiff. See 31 L.P.R.A. § 4442 (requiring agent to follow principal's instructions). MarketNext was, thus, under a duty not to compete with Plaintiff, its principal, or to usurp

opportunities that arose from its work on behalf of Plaintiff. See id. (requiring agent to act as a good parent would for a family).

Civil No. 09-1122 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

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Misla effectively confessed his disloyalty in open court when he testified that he considered his advertising customers to be the chief clients for MarketNext. Furthermore, MarketNext should have known that any customer relations that it had developed under the Contract were for Plaintiff's benefit and that it ought not wrest members away from Plaintiff. In attempting to cement its usurpation of Plaintiff's proprietary interests by its abuse of legal procedure, and in breaching its duty of loyalty to Plaintiff, MarketNext has proven itself to be a faithless servant indeed. D. Public Interest Lastly, the public interest weighs in favor of preliminary injunction. Defendants have insisted upon continuing their

publication without authorization from Plaintiff. Docket Nos. 1-32, 15-22. Defendants have represented themselves as publishers of

Industriales in such a way as to mislead Plaintiff's members into believing that MarketNext, not Media, is authorized to print the magazine. Docket No. 1-29. Under these circumstances, the public could be easily deceived into believing that Defendants' publication represents Plaintiff's views on behalf of Puerto Rico's industries. Given Plaintiff's advocacy on behalf of two-fifths of Puerto Rico's economy, the potential harm to the public is particularly grave.

Civil No. 09-1122 (JAF) 1 2 3 4 5 6 7 8 9 10 11 12 13 III. Conclusion

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Having heard all the witnesses with relevant knowledge, and examined all pertinent documents, we reinstate No. 46, the and preliminary ORDER the

injunction

against

Defendants,

Docket

Defendants to show cause, on or before April 3, 2009, as to why the preliminary injunction should not be converted into a permanent injunction. IT IS SO ORDERED. San Juan, Puerto Rico, this 23rd day of March, 2009. s/José Antonio Fusté JOSE ANTONIO FUSTE Chief U.S. District Judge