Zora Labs, Inc. v. Deloitte Consulting, LLP

Background

Zora Labs described itself as a web3 platform where users can create, buy, sell, curate, and view social-media content and other digital assets on a blockchain. Deloitte Consulting had launched an artificial-intelligence platform called “Zora AI.” Zora Labs sued Deloitte, alleging trademark infringement, unfair competition, cyberpiracy, unauthorized use of a trademark, and deceptive trade practices under the federal Lanham Act and New York law.

While the lawsuit was pending, Zora Labs sought a temporary restraining order and preliminary injunction. These are temporary forms of relief that can restrict a party’s conduct before a final decision in the case. Zora Labs asked the court to prevent Deloitte from using “Zora” or “Zora AI” in any way.

Likelihood of Success

The court applied the eight “Polaroid factors” used to assess whether consumers are likely to be confused by two marks: the strength of the mark, similarity of the marks, proximity of the products, whether the plaintiff might enter the defendant’s market, actual confusion, bad faith, product quality, and consumer sophistication.

The similarity factor favored Zora Labs because both companies used “Zora,” and Deloitte’s “zora.ai” domain was nearly identical to Zora Labs’s “zora.co” domain. But the court found that the other important factors did not establish likely confusion at this stage. Zora Labs had not provided enough evidence that its mark was commercially strong or distinctive in the marketplace. The court also found little overlap between the products and customers: Zora Labs primarily offered an NFT marketplace, while Deloitte offered a business-to-business product connected to SAP and marketed to large institutional clients seeking help with complex business tasks.

The court found that Zora Labs had not shown that it was likely to enter Deloitte’s workforce-automation market or had the capacity to develop a competing product there. Two isolated social-media posts did not establish meaningful actual confusion because they had few views and did not show lost customers, goodwill, or business opportunities. The court also found no sufficient showing that Deloitte adopted the mark in bad faith. Product quality was neutral, and the sophistication of the parties’ customers favored Deloitte because those customers were likely able to distinguish between the products.

After balancing the factors, the court held that Zora Labs had not made the required clear showing of a likelihood of confusion or likelihood of success on its trademark claims.

Irreparable Harm

The court also held that Zora Labs had not shown irreparable harm, meaning harm that cannot adequately be remedied later through money damages. Zora Labs relied on its investment of time and resources in building its reputation and goodwill, but the court found those assertions conclusory. The court also considered that Zora Labs waited four months after sending Deloitte a cease-and-desist letter before seeking emergency relief. The limited evidence of consumer confusion did not show that consumers changed their purchasing decisions or that Zora Labs suffered business harm.

Public Interest and Balance of Harms

The court found that neither the public interest nor the balance of harms favored an injunction. Because Zora Labs had not shown likely success or irreparable harm, and because Deloitte’s Zora AI product had already launched, the court concluded that forcing Deloitte to withdraw or change the product during the litigation would be inequitable. The court noted that Zora Labs could seek monetary damages at trial if it ultimately proved an entitlement to relief.

Disposition

The court denied Zora Labs’s motion for a temporary restraining order and preliminary injunction. The Clerk of Court was directed to terminate Docket Entry 6. The court also encouraged the parties to consider relatively simple measures, such as changing Deloitte’s “zora.ai” domain, to reduce the conflict while the litigation continued.