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Nikon vs. Ikon

Here is something I ran across while working on a project at my office.  The interesting thing about this particular dispute is that Nikon got its start in the 1940s and 1950s by adopting a name similar to Zeiss-Ikon, a well-known German manufacturer of cameras.  In 1989, it came full circle when Nikon sued Ikon, a manufacturer of toy cameras.  Had I been on Ikon's defense, I would have pointed out that Nikon itself sold a lot of cameras piggybacking on Zeiss' trademark – and by selling superficial reproductions of Zeiss-Ikon cameras like the Contax, behavior just a little more egregious than what you see here.

United States District Court, S.D. New York.

NIKON, INC., Plaintiff,
IKON CORP., Defendant.

No. 89 Civ. 6044(KMW)(NG).

Dec. 18, 1992. 



GERSHON, Chief Magistrate Judge:

The parties Nikon, Inc. ("Nikon") and Ikon Corp. ("Ikon") have been unable to agree as to the form of injunctive relief to be entered following a bench trial, at which Ikon was found to have violated Nikon's rights under the Lanham Act, 15 U.S.C. §§1114 and 1125(a), and N.Y. General Business Law § 368-d. In addition, defendant has moved for relief under Rules 54(b) and 62(c) of the Federal Rules of Civil Procedure. This Memorandum and Order will address the relief awarded and defendant's motions.

Judgment and Order of Permanent Injunction.
The Judgment and Order of Permanent Injunction, to be entered today, permanently enjoins defendant, its officers, agents, servants and employees and all persons in active concert or participating with it from marketing, selling, promoting, advertising or importing cameras, lenses, photographic equipment or accessories using the name or mark IKON alone or in combination with any other mark or name. Although plaintiff's proposed judgment seeking this relief did not contain any territorial limitations, plaintiff acknowledges defendant's right to sell its products overseas and relies upon defendant's foreign marketing channels as a ground for strict limitations on Ikon's activities in this country. And plaintiff offered no evidence regarding foreign marketing which would support an extra-territorial injunction. Therefore, the injunction entered by the court extends only to defendant's activities within the United States and its territories.

Defendant's request for a grace period to sell off its inventory through the 1993 Christmas season is extraordinary and unwarranted. Defendant's assertion that it will have to declare bankruptcy if it receives no grace period is entirely speculative. Defendant also claims that it cannot move its inventory because of a weak marketplace. Plaintiff responds by showing that between July 15th and September 23rd of 1992, that is, after the trial and before the Court's Opinion and Order of September 25, 1992, finding Nikon entitled to relief, defendant placed five orders for a total of 194,000 cameras at a total cost of $241,319. Plaintiff argues that these large purchases constituted a calculated risk and that defendant took affirmative steps to bring harm upon itself. In light of Ikon's claim of a weak marketplace, it must be concluded that, while Ikon was under no obligation to refrain from purchasing new products, it is entitled to no special consideration to allow it to sell off large, recently purchased inventories.

Moreover, Ikon has had a considerable amount of time in which to dispose of its inventory. See Olay Co., Inc. v. Cococare Products, Inc., 223 U.S.P.Q. (BNA) 122, 124 (S.D.N.Y.1983), where the court denied a request for a grace period, saying: "It has already been over a month since this court's opinion issued. There is no reason why the injunction should not be effective immediately." In addition, as noted above, defendant is not barred from overseas activities and already has overseas markets.
Ikon attempts to minimize Nikon's need for relief. But Ikon's argument that there is a 90% non-overlap between the parties' products is a misleading characterization of the findings of fact as to the proximity of the products, see Opinion and Order of September 25, 1992 at pages 11-16, and completely ignores other relevant factors addressed in that decision, including, for example, bridging the gap, the sophistication of the buyers, the passing off of IKON brand cameras as NIKON brand cameras and Ikon's bad faith. In addition, Nikon's rights under New York's antidilution statute, N.Y.Gen.Bus.Law § 368- d, extend to nonoverlapping products. Ikon's suggestion that Nikon should be denied full relief because it presented only very limited evidence of actual confusion is rejected as contrary to law. As set forth in detail in the Opinion and Order of September 25, 1992, the central issue in a trademark infringement and false designation of origin action is the likelihood of confusion, and Nikon established its entitlement to relief under that standard, as well as under the standard for establishing its New York trademark dilution claim.

A recall provision, as requested by Nikon, is well within the court's equitable powers. Perfect Fit Industries, Inc. v. Acme Quilting Co., Inc., 646 F.2d 800, 805 (2d Cir.1981); Kiki Undies Corp. v. Promenade Hosiery Mills, Inc., 308 F.Supp. 489 (S.D.N.Y.1969), on remand from 411 F.2d 1097 (2d Cir.1969), cert. dismissed, 396 U.S. 1054 (1970). In determining whether to order a recall of IKON products, the burden and expense of the procedure must be carefully considered. Id. In Perfect Fit, in finding not unduly burdensome the recall ordered there, one similar to the recall sought by Nikon, the Court of Appeals for the Second Circuit said, "The order did not require Acme to take extensive action to retrieve the J-Boards. The company need only have written its customers requesting a return of the boards and paid the cost of the return for those customers who complied." 646 F.2d at 807. The Court of Appeals also noted Perfect Fit's need for "swift and complete relief." Id. Here, I have found not only a likelihood of confusion, but that Ikon adopted its mark with the intent of capitalizing on the reputation and good will of the NIKON mark. Nikon is clearly entitled to prompt and effective relief. By contrast, as noted above, Ikon has already had considerable time, since the finding of liability, to sell off its inventory, and its customers, in turn, have had considerable time to sell their inventories of IKON brand products. Also, Ikon has overseas markets which it can use to dispose of returns. In sum, balancing all of the equities, I conclude that the recall provision is a reasonable and appropriate remedy.

Finally, Ikon, while claiming that it would not be economically feasible to re-brand and package defendant's camera inventory, suggests that attaching a disclaimer to its products would be an adequate remedy. A party that seeks to use a disclaimer in order to avoid broader injunctive relief has the burden of demonstrating that its proposed disclaimer will be effective. Home Box Office, Inc. v. Showtime/The Movie Channel Inc., 832 F.2d 1311, 1315-17 (2d Cir.1987); Charles of the Ritz Group v. Quality King Distrib. Inc., 832 F.2d 1317, 1324 (2d Cir.1987). That party must meet "a heavy burden ... to come forward with evidence sufficient to demonstrate that any proposed material would significantly reduce the likelihood of consumer confusion." Home Box Office, 832 F.2d at 1316. Here, Ikon offers neither a specific proposal for a disclaimer nor a specific proposal for the manner in which it would be affixed to its products and packaging, and Ikon fails to meet its burden of showing that a disclaimer will in fact be effective. Its request is therefore denied.  Under 15 U.S.C. § 1117(a), plaintiff is entitled to reasonable costs, which are hereby granted.

Defendant's Motions for Relief under Rules 54(b) and 62(c)

Defendant argues that the court "should stay entry of judgment pursuant to Fed.R.Civ.P. 54(b) to permit a complete adjudication of all claims in this action" and should grant a "stay under Fed.R.Civ.P. 62(c) from any order that restrains defendant from disposition of its current 'IKON' brand product inventory."

The reference to Rule 54(b) is puzzling since it permits, on the Court's certification, an appeal prior to final resolution of all claims in an action, but here an injunction has been ordered, and injunctions are appealable. See 28 U.S.C. § 1292(a)(1). Since Rule 54(b) certification is not required for an appeal to be taken from an injunction, Rule 54(b) has no office to perform and is inapplicable; therefore, there is no basis for considering a "stay" of Rule 54(b) certification.

Rule 62(c) provides that "[w]hen an appeal is taken from [a] ... judgment granting ... an injunction, the court in its discretion may suspend ... [the] injunction during the pendency of the appeal upon such terms ... as it considers proper for the security of the rights of the adverse party." Here no appeal has yet been filed with the Court of Appeals for the Second Circuit. In the absence of a pending appeal, a request for relief under Rule 62(c) is premature. See Atlantic Prince Ltd. v. Jorling, No. CV-88-1803, 1989 WL 50817, at *1, 1989 U.S.Dist. LEXIS 5111, at *1 (E.D.N.Y. May 1, 1989) (summarily denying a motion for a stay under Rule 62(c) as premature because no notice of appeal had yet been filed).

However, it remains within the District Court's power to consider a stay for a period of time to allow for an appeal to be filed. See Fed.R.Civ.P. 62(a); Corpus Christi Peoples' Baptist Church, Inc. v. Texas Dep't of Human Resources, 481 F.Supp. 1101, 1112 (S.D.Tex.1979), aff'd without published op., 621 F.2d 438 (5th Cir.1980). That will now be considered. Briefly, Ikon argues that, because its equitable defense of unclean hands was rejected by the Court, the Court has deprived it of a jury trial in the upcoming SMILE trial. Ikon's sole unclean hands defense was that Nikon should be denied relief from Ikon's infringement of its NIKON mark because Nikon's SMILETAKER model camera intentionally infringes Ikon's SMILE model camera. Ikon's principal argument for relief from the injunction is that rejection of that defense will collaterally estop a jury verdict on its counterclaim based upon the alleged infringement by SMILETAKER of SMILE and deprive it of its constitutional right to a jury trial in the upcoming trial.
Defendant suggests no error in the court's rejection of its unclean hands defense. Nor does Ikon establish, nor the record reveal, any basis for concluding that Ikon will succeed on appeal on any other issue. [FN1] And the equities in favor of promptly securing Nikon's now-established rights are clear from the discussion above. The injunction also secures the public interest of protecting against customer confusion. Surely then there is no reason to stay relief.

In effect, however, Ikon seeks a modification of the judgment to be entered today, pending appeal, on the ground that its rights, in a trial not yet held, will be found to have been violated. But even assuming it is proper to consider its arguments at this time, there is simply no merit to Ikon's claim that its rights are in jeopardy. This is because, whether or not Nikon intentionally violated Ikon's trademark SMILE, Ikon cannot establish an unclean hands defense to the claim underlying the Judgment and Order of Permanent Injunction.

A claim of unclean hands on the part of the plaintiff must be "sufficiently related to the claim in suit to warrant its use as a shield by [the] defendant." W.E. Bassett Co. v. Revlon, Inc., 305 F.Supp. 581, 589 (S.D.N.Y.1969), aff'd in part, rev'd in part, 435 F.2d 656 (2d Cir.1970). " '[Misconduct] in the abstract, unrelated to the claim to which it is asserted as a defense, does not constitute unclean hands.' " A.H. Emery Co. v. Marcan Products Corp., 389 F.2d 11, 18 (2d Cir.) (quoting Republic Molding Corp. v. B.W. Photo Utilities, 319 F.2d 347, 349 (9th Cir.1963)), cert. denied, 393 U.S. 835 (1968); accord American Hospital Supply Corp. v. Hospital Products Ltd., 780 F.2d 589 (7th Cir.1986); Olay Co., Inc. v. Cococare Products, Inc., No. 81 Civ. 4102(RWS), slip op. at *6-*8 (S.D.N.Y. Aug. 16, 1982) (LEXIS, Genfed Library, Dist file); Jacoby-Bender, Inc. v. Jacques Kreisler Mfg. Corp., 287 F.Supp. 134, 135 (S.D.N.Y.1968). Here, Ikon's allegation of intentional infringement of its SMILE mark by Nikon's SMILETAKER model camera is collateral to Nikon's claim of infringement of its NIKON mark by the IKON mark. The alleged misconduct does not relate to the defendant's infringement of the NIKON mark and thus cannot serve as the basis for a valid unclean hands defense.
In sum, not only is there is no basis for concluding that there was error at the bench trial, but there is no basis for concluding that anything that occurred at that trial will result in a deprivation of Ikon's rights at the jury trial on Ikon's counterclaim. Only Ikon, and not plaintiff, or the Court, has suggested that Ikon will be collaterally estopped at the jury trial on its counterclaim by the Court's rejection of the unclean hands defense at the NIKON/IKON trial. Nor would a jury verdict in favor of Ikon be inconsistent with the Court's rejection of the unclean hands defense. In sum, neither Ikon's rights nor the public policy against inconsistent judgments will be infringed by full effectuation of the judgment against Ikon now. Accordingly, Ikon's motions for relief are denied.

FN1. The only error of law claimed by Ikon is the rejection of its argument that New York's anti-dilution law, N.Y.Gen.Bus.Law § 368-d, applies only to non-competing goods. As I noted in the Opinion and Order of September 15, 1992, at page 36 n. 6, there is a split among the district courts in this Circuit on this subject. But even were the court of appeals to agree with defendant on this issue, the Judgment and Order of Permanent Injunction would remain in effect, for it is based on Ikon's violation of the federal trademark laws as well as New York's anti-dilution law.