Two Hands IP LLC v. Two Hands America, Inc.

Background

Two Hands IP LLC sued Two Hands America, Inc. and ABC Corps. 1-100 over the defendants’ use of “TWO HANDS” in the names and marks for restaurants specializing in Korean corn dogs. Two Hands IP is described as a holding company for intellectual-property rights relating to Two Hands Group, which operates sit-down restaurants, cafés, and coffee shops using the “Two Hands” name.

The complaint asserted trademark and service-mark infringement under the federal Lanham Act, unfair competition under the Lanham Act, and trademark infringement and unfair competition under New York law. Two Hands IP moved for a preliminary injunction—a temporary court order intended to prevent harm before trial—seeking to stop the defendants from using “TWO HANDS” and similar marks.

Two Hands IP identified instances in which customers went to its locations looking for corn dogs, asked whether it sold corn dogs, posted reviews of the defendants’ restaurants connected to Two Hands IP locations, or mistakenly tagged those locations on social media. Two Hands IP sent a cease-and-desist letter on April 2, 2021, and filed its preliminary-injunction motion on July 26, 2021.

Legal standard

The court explained that a party seeking a preliminary injunction must show likely irreparable harm, either a likelihood of success on the merits or serious legal questions combined with a strongly favorable balance of hardships, and that an injunction would serve the public interest. Because the court found that Two Hands IP had not shown a likelihood of confusion, the federal Trademark Modernization Act’s presumption of irreparable harm did not apply.

For the trademark claims, the court applied the likelihood-of-confusion analysis commonly known as the Polaroid factors. Those factors include the strength and similarity of the marks, the closeness of the parties’ products and markets, possible expansion by the senior user, actual confusion, bad faith, product quality, and consumer sophistication.

Court’s analysis

The court first held that both of Two Hands IP’s marks were protectable. Its registered design mark was entitled to protection because it was registered with the United States Patent and Trademark Office. The word mark “TWO HANDS” was suggestive, rather than descriptive or arbitrary, and therefore qualified for protection without proof that it had acquired a secondary meaning.

The court nevertheless found that Two Hands IP had not shown a likelihood of consumer confusion. For the word mark, the similarity factor favored Two Hands IP because both parties used the identical words “TWO HANDS.” For the design marks, however, the similarity factor favored the defendants: Two Hands IP’s mark used a black circle and stylized white lettering, while the defendants’ mark used smiling corn-dog characters, orange lettering, and the words “SEOUL” and “FRESH CORN DOGS.” The court found that the designs created different overall impressions.

The strength-of-the-mark factor was at most neutral. Although “TWO HANDS” was suggestive, Two Hands IP did not provide enough evidence of marketplace distinctiveness, including evidence of promotional costs, consumer studies, or attempts to copy the mark. The court also noted that the mark had been used since 2014 and that other businesses used “TWO HANDS” or “TWO HAND” in connection with food goods and services.

The proximity factor was neutral. The businesses were geographically close, including locations in New York City and Texas, but their markets were different. Two Hands IP operated sit-down and relatively upscale restaurants serving varied food and beverages, while the defendants operated small fast-food stores serving corn dogs. The court found no sufficient evidence that the restaurants competed for the same customers. The bridging-the-gap factor favored the defendants because Two Hands IP had not expressed an intention to enter the corn-dog fast-food market.

The actual-confusion factor also favored the defendants. The court said that customers looking for the defendants’ corn dogs at Two Hands IP locations, asking about corn dogs, or making mistaken social-media posts did not establish the kind of confusion protected by the Lanham Act. Two Hands IP did not allege that customers bought the defendants’ food believing it came from Two Hands IP, and it did not connect the mistaken posts or inquiries to lost sales, damage to goodwill, or loss of control over its reputation.

The bad-faith factor favored the defendants because awareness of Two Hands IP’s mark did not by itself show an intent to create confusion. The quality factor and consumer-sophistication factor were neutral. Overall, the court concluded that the Polaroid factors did not establish a likelihood of confusion, especially for the design marks.

The court also found no irreparable harm. Two Hands IP waited more than three months after learning of the alleged infringement before seeking the injunction, without providing a persuasive justification for the delay. It also offered insufficient evidence that the alleged confusion caused a loss of control over its reputation or goodwill. The court found that concerns about possible bad reviews and other harms were speculative.

Finally, the court found that the balance of the hardships and the public interest weighed against an injunction. Redesigning the defendants’ logo and changing their name would impose considerable expense and cause them to lose goodwill associated with their current branding, while Two Hands IP had not shown irreparable harm from continued use of the marks.

Disposition

Judge John G. Koeltl denied Two Hands IP LLC’s motion for a preliminary injunction. The opinion did not state that the underlying trademark and unfair-competition claims were finally resolved.