Flat Rate Movers, Ltd. v. Flatrate Moving & Storage, Inc.
Docket: No. 13 CV 0059(MGC)
Court: District Court, S.D. New York; April 22, 2015; Federal District Court
FlatRate Movers, Ltd. filed a lawsuit against FlatRate Moving & Storage, Inc. and its owners, Moshe, Eliyahu, and Itzhak Alush, alleging trademark infringement, unfair competition, and cybersquatting. The plaintiff's motion for summary judgment was partially granted and partially denied. The defendants did not respond to the plaintiff's statement of undisputed facts, which the court deemed admitted. The court noted that the defendants' opposition lacked substance, consisting mainly of a brief without legal citations and irrelevant documents.
The plaintiff has been operating as 'FLATRATE MOVING' since 1991 and applied for trademark registration on several occasions, achieving registration and incontestable status for three trademarks. The plaintiff has invested significantly in advertising and operates under the domain 'fla-trate.com,' having owned it since 1995. The defendants, who did not conduct trademark searches or seek legal advice before adopting their business name, operate under 'flatratemovers.com' and also own multiple similar domain names. The defendants' company, a family business, continues to function despite losing its corporate status in Maryland in 2009. Their marketing materials include the name 'FLAT RATE MOVERS.'
Multiple customers have mistakenly confused the services of the Plaintiff with those of the Defendants, leading to incorrect bookings and inquiries. In particular, some customers, believing they were repeat clients of the Plaintiff, contacted the Defendants, who did not clarify the misunderstanding. In one case, the Defendants provided a dissatisfied customer with the Plaintiff's contact information for complaints. The Plaintiff had previously sued FlatRate Moving for trademark infringement in 2004, during which Eliyahu Alush of the Defendants stated that his company avoided using the 'FLAT RATE' name in New York to prevent confusion and registered a different name, Tiptop Movers. The earlier case was dismissed without prejudice, and the Plaintiff continues to operate under the 'FLAT RATE MOVERS' name.
Regarding the legal standards for summary judgment, it is established that such judgment is warranted when no genuine dispute exists over material facts, with the court favoring the non-moving party. The non-moving party must present specific evidence to counter the moving party’s documented facts.
In evaluating claims of trademark infringement and unfair competition, two key questions arise: whether the Plaintiff's mark is protected and whether the Defendants' use of the mark is likely to cause confusion. The Plaintiff's registered marks are presumptively protected, shifting the focus to the likelihood of confusion, assessed through the eight Polaroid factors, which include the strength of the mark and actual confusion among consumers. The strength of a mark is determined by its distinctiveness, categorized as generic, descriptive, suggestive, or arbitrary/fanciful. Descriptive marks require proof of secondary meaning for protection, which can be demonstrated through various factors like advertising and market presence. Registration of a mark provides a rebuttable presumption of secondary meaning.
Plaintiffs' marks, while descriptive—specifically 'FLATRATE MOVING' indicating fixed-price moving services—are registered and have established secondary meaning, benefiting from a presumption of distinctiveness, particularly since two marks are incontestable. The marks have been in use for over twenty years with substantial advertising investment and recognition for quality service, supporting the strength-of-the-mark factor in favor of Plaintiff.
The similarity of the marks is significant, as 'FLATRATE MOVING' closely resembles Defendants' 'FLAT RATE MOVERS,' with the core term 'FLATRATE' being identical. Courts recognize that when dominant words in marks are the same, confusion among consumers is likely, and consumers may not distinguish between 'MOVING' and 'MOVERS' or 'FLATRATE' and 'FLAT RATE.'
Both Plaintiff and Defendants provide guaranteed fixed-rate moving services, with Plaintiff operating nationally and Defendants in select states, indicating competition and favoring Plaintiff in terms of product proximity. There is no gap to bridge regarding market entry, as both companies already operate within the same domain.
Evidence of actual consumer confusion further supports Plaintiff's position, highlighting instances where customers mistakenly associated Defendants with Plaintiff, attributing poor service experiences to Plaintiff, and contacting Defendants in error. This concrete confusion is strong evidence favoring the Plaintiff.
Defendant's bad faith is established by the intention to exploit the plaintiff's reputation and goodwill, as well as by knowledge of the senior user's mark. Bad faith can be inferred from the defendant's actual or constructive knowledge of the plaintiff's trademark, although such knowledge alone does not demonstrate bad faith. Good faith can be evidenced by conducting a trademark search or seeking legal counsel before adopting a mark. Courts have ruled bad faith is present when a defendant continues infringing after receiving a cease and desist letter.
In this case, the defendants did not perform a trademark search or consult an attorney before adopting their business name in 2003, despite being aware of the plaintiff's mark by 2004 when the plaintiff first filed a lawsuit. Defendant Eliyahu Alush acknowledged that the company name could cause confusion with the plaintiff's mark and even registered an alternative name to mitigate this issue. Nonetheless, the defendants continued using the "FLAT RATE" name after the lawsuit began.
Evidence of bad faith includes the defendants' misrepresentation of actions taken to avoid confusion and their failure to correct a customer's mistaken belief that they were associated with the plaintiff. The defendants' continued use of the "FLAT RATE" name, despite acknowledging potential confusion, further supports the finding of bad faith.
Regarding the quality of services, the plaintiff contends that the defendants offer inferior moving services, which may reduce the likelihood of consumer confusion. Additionally, the sophistication of buyers affects confusion likelihood; however, no specific sophistication level for the plaintiff's customers is indicated, rendering this factor neutral.
Overall, the analysis of the Polaroid factors indicates a likelihood of consumer confusion, as five of the eight factors favor the plaintiff, with significant evidence of actual customer confusion. Consequently, the plaintiff's motion for summary judgment regarding federal trademark infringement and unfair competition claims is granted.
The elements for trademark infringement and unfair competition claims under New York common law align with those under the Lanham Act. Specifically, a claim of unfair competition requires proof of the defendant's bad faith, which the Plaintiff has demonstrated regarding federal trademark infringement. Consequently, the Plaintiff's motion for summary judgment is granted for state trademark infringement and unfair competition claims.
In terms of federal cybersquatting, it involves the registration of domain names corresponding to well-known trademarks by non-trademark holders, who may attempt to resell them to the trademark owners. The Anticybersquatting Consumer Protection Act mandates proof that the trademarks were distinctive at the time of domain registration, that the domain names are identical or confusingly similar to the trademark, and that the infringer acted with a bad faith intent to profit. This "bad faith intent to profit" is distinct from the general bad faith associated with trademark infringement. A plaintiff must demonstrate that the defendant's domain name registration was an attempt to profit from squatting, rather than an extension of trademark infringement. The statute provides nine nonexclusive factors for assessing bad faith, yet the anticybersquatting statute was not designed for mark holders to claim any confusingly similar domain name. The Plaintiff failed to establish the required bad faith intent by the Defendants for the cybersquatting claim, lacking evidence of the Defendants' intent when registering their domain names, particularly regarding their knowledge of the Plaintiff's marks. Thus, a reasonable factfinder could determine that the Defendants were not attempting to extort any trademark holder.
Regarding individual liability, an individual can be held personally accountable for trademark infringement if they are a "moving, active, conscious force" behind the infringement, regardless of their corporate title. Eliyahu Alush and Moshe Alush, identified as owners of the corporation, admitted to their roles in advertising the infringing marks and managing the website, making them personally liable. The third individual defendant, Itzhak Alush, is implicated as an owner and incorporator of the company but lacks evidence demonstrating a significant active role in the infringement.
A factual dispute exists regarding the individual's involvement in the alleged trademark infringement, as established in Eu Yan Sang Int’l Ltd. v. S. M Enterprises. The defendants raise several defenses, notably laches and prior use. Laches, an equitable defense against injunctive relief for untimely actions, is at the trial court's discretion. However, it is not applicable if the infringement was intentional, which is the case here due to the defendants' bad faith actions. Regarding prior use, the defendants claim they used the "FLAT RATE" name since 2003, while the plaintiff applied for its trademark in 2002, establishing priority under 15 U.S.C. 1057(c).
In terms of injunctive relief, the traditional four-factor test is satisfied, allowing the court to issue an injunction against the defendants, prohibiting them from using "FLAT RATE MOVERS," "FLAT RATE MOVING," or similar terms associated with moving and storage services. They must also report compliance with the injunction within 30 days. The court grants the plaintiff's motion for summary judgment on federal and New York state trademark infringement and unfair competition claims against all defendants, except Itzhak Alush, while denying summary judgment on the cybersquatting claim. The plaintiff must inform the court within ten days if a trial on remaining claims is desired or if they seek a damages inquest based on resolved claims.
Evidence of customer confusion is presented mainly through emails, which are admissible to demonstrate the customers' state of mind under Federal Rule of Evidence 803(3), along with two customer declarations. The plaintiff also claims "counterfeiting" under a non-existent statutory provision, 15 U.S.C. 1114(c).
