Thursday, October 21, 2010

2d Circuit decision on "false endorsement" and unusual counterfeit-related unfair competition claims

The 2d Circuit today seemed to take a fairly forgiving view of what types of disputes are covered by the Lanham Act. The case is Famous Horse, Inc. v. 5th Ave. Photo Inc., No. 08-4523-cv (2d Cir. Oct. 21, 2010). Famous Horse is a clothing retailer. 5th Avenue Photo is a clothing wholesaler. Famous Horse bought what it thought were genuine “Rocawear” jeans from 5th Avenue Photo, but stopped buying them after determining they were counterfeit. 5th Avenue Photo, however, continued selling the counterfeit jeans to retailers competing with Famous Horse and also advertising that Famous Horse was a “satisfied customer.”

False Endorsement Claims – the 2d Circuit upheld Famous Horse’s “false endorsement” claims under both sections 32 and 43(a) of the Lanham Act (15 U.S.C. §§ 1114(1)(a) & 1125(a)(1)). It held that neither section’s “use in commerce” requirement requires the defendant to have attached the plaintiff’s mark to the goods themselves when the false endorsement related the defendant’s services.

Interesting Unfair Competition Claim – Famous Horse also alleged unfair competition under section 43(a) because 5th Avenue Photo sold counterfeit “Rocawear” jeans to Famous Horse’s competitors. Famous Horse alleged not only that it lost sales, but also that customers would view famous Horse as a price-gouger because the competing stores that 5th Avenue Photo sold to could then sell the counterfeit jeans for less than the genuine jeans sold by Famous Horse. 5th Avenue asserted that Famous Horse lacked standing because the parties weren’t competitors (Famous Horse is a retailer and 5th Avenue a wholesaler). The 2d Circuit rejected this argument, holding that there is no hard and fast rule in the 2d Circuit that, to have standing, the plaintiff be a retail competitor of the defendant, so long as the plaintiff demonstrates that it has a “reasonable interest” to be protected and a “reasonable basis” to think that the defendant is damaging that interest. The court held that Famous Horse’s allegations of injury adequately gave it standing to assert unfair competition under section 43(a).

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