Patsy's Brand, Inc. v. I.O.B. Realty, Inc.

Background

Patsy’s Brand, Inc. and defendants I.O.B. Realty, Inc., Patsy’s Inc., Frank Brija, John Brecevich, and Nick Tsoulos have been involved in a long-running dispute over the use of “Patsy’s” on restaurant and packaged-food products. A prior injunction barred defendants and covered persons from manufacturing, advertising, selling, or offering packaged food bearing Patsy’s Brand’s trademark or trade dress, or confusingly similar variations. It also barred applications for trademark registrations containing “PATSY’S” or “PATSY’S RESTAURANT” for sauces or other packaged food products. The Second Circuit later allowed limited use of “Patsy’s Pizzeria” on qualifying product labels and take-out boxes.

Patsy’s Brand moved to hold I.O.B. Realty and Frank Brija in civil contempt for 13 alleged violations. It sought $1.3 million in monetary sanctions, fees and costs, and additional injunctive relief. The defendants argued that their labels, products, and trademark applications did not violate the injunction and that they relied on advice from their former trademark counsel, Paul Grandinetti and Rebecca Stempien Coyle.

Contempt findings

The court applied the civil-contempt requirements that the injunction be clear and unambiguous, that noncompliance be proven by clear and convincing evidence, and that the alleged contemnor not have made a reasonably diligent effort to comply.

The court found four violations based on Facebook and Instagram posts from October 30, 2018, advertising jarred pizza sauces, and March 28, 2019, advertising pre-packaged frozen pizzas. The posts described the products as available for purchase, and the labels prominently used “Patsy’s” and “Pizzeria” in a design the court found confusingly similar to Patsy’s Brand’s protected mark and trade dress. The court also found that the labels did not satisfy the Second Circuit’s limits on using “Patsy’s Pizzeria”: the words were too large, prominent, differently sized and styled, too similar to Patsy’s Brand’s font, and not used only to identify the maker or distributor.

The court found one additional violation based on defendants’ February 1, 2019, United States application for “PATSY’S PIZZERIA SINCE 1933” in a trademark class covering sauces and other staple foods. The injunction prohibited applying for such a registration; the Second Circuit’s permission to use “Patsy’s Pizzeria” on take-out boxes did not authorize obtaining a trademark registration. The court also concluded that defendants and their former counsel were not reasonably diligent in complying with the injunction. Advice from counsel did not eliminate liability for civil contempt, particularly where defendants had not sought clarification or modification of the injunction.

The court rejected the alleged violations based on the May 2018 JetBlue promotion, the October 3, 2018 delivery of vacuum-sealed pizzas to Patsy’s Brand’s restaurant, and the appearances involving labeled products in an ABC7 News clip and a New York Daily News cover photograph. Patsy’s Brand had not shown those events violated the injunction by clear and convincing evidence. The court also held that the injunction did not apply to the defendants’ four foreign trademark registrations because Patsy’s Brand had not shown a substantial effect on United States commerce, and foreign trademark rights exist under the law of each country.

Sanctions and other relief

The court held that the former counsel could also be sanctioned because the injunction covered attorneys and persons acting in concert with the defendants, and the court found that the former counsel knowingly assisted with the domestic trademark application and the infringing label. The court imposed $100,000 in coercive sanctions: $50,000 against the defendants and $50,000 jointly and severally against the former counsel. The payment was to be made to the Clerk of Court by September 3, 2021, rather than to Patsy’s Brand, because the record did not show compensable injury or actual loss. The court warned that each future violation would result in a $100,000 sanction.

The court also ordered the defendants and former counsel to reimburse Patsy’s Brand for reasonable fees and costs incurred in bringing the contempt motion, with the defendants responsible for half and the former counsel jointly and severally responsible for the other half. The defendants were ordered to take appropriate steps to comply with the opinion, including affirmatively abandoning the United States application for “PATSY’S PIZZERIA SINCE 1933.” Patsy’s Brand’s additional requests for permanent non-monetary relief, and the defendants’ request to increase the permitted font size, were denied without prejudice because they sought an improper modification of the injunction at that stage. The motions in limine were denied as moot, and all other motions and requests were denied.

Disposition

The court granted in part and denied in part Patsy’s Brand’s motion to hold the defendants in civil contempt.