Moog Controls, Inc. v. Moog, Inc.

Citations: 923 F. Supp. 427; 1996 U.S. Dist. LEXIS 6548; 1996 WL 253879Docket: 1:96-cv-00074

Court: District Court, W.D. New York; May 7, 1996; Federal District Court

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Moog Controls, Inc. (MCI), a Delaware corporation based in East Aurora, New York, is the plaintiff against Moog, Inc., a New York corporation also located in East Aurora. The case is filed under the Lanham Act and the court's supplemental jurisdiction. MCI was originally a division of Moog, Inc. until it was established as a separate corporation in 1988, with Moog, Inc. permitting MCI to use the "Moog" name. Following a stock exchange agreement in 1988, MCI became independent, and its shares are no longer owned by Moog, Inc. An asset transfer agreement effectively transferred most assets from Moog's former division to MCI, alongside a trade name license that allowed MCI to use "Moog" in its corporate title but not as a trademark. Initially, the two companies were not competitors, but after MCI was sold, its new owner directly competed with Moog in both the U.S. and Europe, leading to trademark concerns.

The court is tasked with determining its subject matter jurisdiction over the dispute, which was initiated by Moog's Italian subsidiary, Moog Italiani S.r.l. (MIS), filing a lawsuit in Italy against MCI’s distributor, Mumax S.r.l., for trademark infringement and unfair competition. Neither Moog nor MCI are parties in the Italian lawsuit, which adds complexity to the current proceedings. The previous referral of the matter to a magistrate judge has been vacated.

The Italian lawsuit aims to prevent Mumax from using the name "Moog" for servovalves and other products, and to stop the sale and promotion of products resembling those of MIS. Following this suit, Moog's other subsidiaries in Europe have initiated or threatened similar legal actions. On February 28, 1996, Moog's president, Robert Brady, notified Edward Krasnicki of the termination of the Trade License Agreement, citing its lack of a specified term under New York State law. Krasnicki countered on March 1, 1996, arguing that the agreement included specific termination events, none of which had occurred. 

MCI's complaint alleges that the Italian suit against Mumax infringes on its rights under the Trade Name License Agreement and presents five causes of action. MCI acknowledges that the first three are contract claims but asserts that the fourth and fifth arise under federal statutes, asserting federal jurisdiction. The fourth cause seeks a declaratory judgment to cancel Moog's trademark and tradename, arguing that Moog has neglected to enforce its rights, thus abandoning the mark. The fifth cause contends that MCI has the right to use "Moog Controls" and that Moog's trademark registration is no longer valid. 

The court concluded it lacks subject matter jurisdiction over the claims. It clarified that while the Declaratory Judgment Act allows for declarations of rights in actual controversies, it does not independently confer federal jurisdiction. The Act expands relief options but does not alter substantive rights, as established in relevant case law.

If the availability of a declaratory judgment procedure is the only way a federal claim can arise as a defense to a state-created cause of action, jurisdiction is absent. In typical federal trademark or patent declaratory judgment actions, a potential infringer seeks a declaration regarding the non-infringement of the defendant's rights or the invalidity of their patent or trademark. However, when a trademark licensee sues a licensor to enforce rights under a licensing agreement, the dispute is fundamentally contractual, as established in Silverstar Enterprises, Inc. v. Aday. The court determined that merely mentioning a trademark issue in a contract does not grant federal jurisdiction over a contract dispute. This principle was echoed in Bear Creek Productions, Inc. v. Saleh, which stated that the Lanham Act does not disrupt contractual agreements between a trademark owner and a licensee; instead, contract law dictates the rights of the parties involved. 

The plaintiff argues for declaratory judgment of non-infringement as a recognized trademark remedy, citing Thompson Medical Co. v. National Center of Nutrition, Inc. and Colonial Penn, asserting federal question jurisdiction exists when a potential infringer seeks a declaration against a defendant's federal trademark rights. However, the defendant counters that Thompson Medical involved a first-use question of a trademark with claims from two parties holding registered marks, unlike the present case. Colonial Penn denied federal jurisdiction on similar grounds, classifying the plaintiff's federal action as merely a defense to a state law claim. 

Other cited cases, such as G. Heileman Brewing Co. v. Anheuser-Busch, Inc. and Jeffrey Banks, Ltd. v. Jos. A. Bank Clothiers, Inc., do not support the plaintiff’s position since they involved pre-existing federal infringement actions or specific threats of such actions, whereas the defendant here has made no such claim, asserting that any potential claim is merely a state contract issue. Consequently, the court cannot exercise federal jurisdiction over the declaratory judgment claim regarding the use of the "Moog" name, as it essentially serves as a defense to an expected breach of contract claim, which is governed by state contract law. Additionally, the court lacks jurisdiction under the fourth cause of action, as Section 1119 of the Lanham Act allows for determinations regarding registered marks but does not apply in this context.

Section 1119 of the Lanham Act allows the court to determine trademark registration rights and order cancellations, provided there is a properly instituted action with jurisdiction. A party seeking cancellation must first exhaust administrative remedies if relying solely on that claim for federal jurisdiction. This differs from cases with an independent federal jurisdiction basis where trademark validity is at issue as a defense or counterclaim. In Apex Beauty Products Mfg. Corp. v. Brown Shoe Co., the court found subject matter jurisdiction even without the plaintiff owning a registered trademark, emphasizing that federal courts lack jurisdiction on federal trademark laws alone when neither party holds a valid trademark, unless other jurisdictional grounds exist. The defendant argues based on Universal Sewing that the plaintiff cannot invoke section 1119 to establish a federal cause of action since the underlying issue pertains to a contract defense, not a registered trademark. The plaintiff counters that Apex Beauty's limitation applies only when neither party owns a federally registered mark. However, the jurisdictional issues in both cases centered on whether the plaintiff's action anticipated a suit regarding the defendant's Lanham Act rights. The registration status is vital as Lanham Act jurisdiction is valid if the plaintiff claims a right to the mark independent of any license from the defendant. In D.M. Antique Import Corp. v. Royal Saxe Corp., the court allowed a cancellation suit without a registered mark, but did not clarify jurisdictional grounds, as the plaintiff claimed prior ownership of the trademark. In contrast, the current plaintiff seeks to avoid multiple foreign suits related to a License Agreement, focusing on the agreement's terms rather than trademark validity, with trademark validity only arising as a defense in those suits. The denial of jurisdiction aligns with established legal commentary on the matter.

A plaintiff without federal trademark registration may initiate a federal declaratory judgment suit challenging the validity of a defendant's federal mark registration, particularly if the plaintiff seeks to avert a potential federal trademark infringement lawsuit. Courts have concurrent jurisdiction over trademark actions under the Lanham Act, allowing such cases to be heard in both state and federal courts without preference for federal jurisdiction. However, infringement suits involving federally registered trademarks filed in state court can be removed to federal court by the defendant. The plaintiff's assertion that the defendant's mark is invalid presents a federal defense to a state cause of action, which does not establish federal subject matter jurisdiction. Consequently, the court concludes it lacks subject matter jurisdiction, granting the defendant's motion to dismiss and denying the plaintiff's request for a temporary restraining order and injunction.