The Fashion Exchange LLC v. Hybrid Promotions, LLC

Background

The Fashion Exchange LLC (TFE) asserted common-law rights in the marks HYBRID and HYBRID & COMPANY through several New York companies owned, operated, and managed by members of the Saadia family. The United States Patent and Trademark Office registered TFE’s HYBRID & COMPANY mark in 2009. TFE had exclusively licensed Fame Fashion House, Inc. to manufacture, market, and sell apparel under the marks, and TFE had stopped selling apparel by 2008.

Hybrid Promotions began using HYBRID on apparel in 1999 and also used variations including HYBRID PROMOTIONS, HYBRID TEES, HYBRID APPAREL, and HYBRID JEM. Hybrid learned of TFE and its registered mark in 2011 after receiving an office action from the trademark office. TFE then brought this action against the Hybrid defendants and more than two dozen retail defendants, asserting trademark infringement and unfair competition and seeking declaratory, injunctive, and monetary relief. The defendants moved for partial summary judgment on TFE’s claims for monetary relief and New York common-law unfair competition.

Summary-judgment standard

Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The court must view the evidence favorably to the party opposing the motion, but that party must offer evidence—not speculation or conclusory allegations—on which a reasonable jury could rule in its favor.

TFE’s damages

The court held that TFE could not obtain its own damages under the Lanham Act without proving either actual consumer confusion or intentional deception that would support a presumption of confusion. Actual confusion had to concern consumers’ purchasing decisions or otherwise show commercial injury, such as diverted sales, damage to goodwill, or loss of control over reputation.

TFE relied on several emails and testimony from Jack Saadia and shareholder Mark Hanono about buyers’ alleged confusion. The court found much of that testimony inadmissible hearsay because the buyers did not testify. It also found that the emails showed, at most, limited general confusion and did not show mistaken purchases or confusion affecting the sale of the goods at issue. The court characterized the evidence as insufficient to establish actual confusion.

The court separately found that TFE offered no evidence that Hybrid intended to deceive consumers. Therefore, TFE was not entitled to a presumption that actual confusion occurred.

TFE also could not recover a reasonable royalty. There was no licensing agreement between TFE and Hybrid, and TFE provided no reliable method for calculating a royalty. The court relied in part on TFE’s unsupported royalty summary, unsigned tax returns, and failure to preserve documents supporting its damages claim. Summary judgment was granted in Hybrid’s favor on the reasonable-royalty issue. The court granted summary judgment to the Retailer Defendants as to TFE’s damages claim as well.

Defendants’ profits

The court also granted summary judgment in favor of the defendants on TFE’s request for the defendants’ profits. Although willfulness is not an absolute requirement for a profits award under the relevant Lanham Act provision, the defendant’s mental state remains an important consideration, along with other equitable factors.

The court found that TFE had not shown that Hybrid or the Retailer Defendants acted willfully, meaning with actual awareness of infringement, reckless disregard, or willful blindness. TFE relied primarily on Hybrid’s failure to investigate existing uses of HYBRID in 1999 and its continued use of the marks after the trademark office rejected Hybrid’s applications. The court held that these facts did not establish bad faith or intentional deception and that TFE had submitted no other sufficient evidence supporting a profits award.

New York common-law unfair competition

The court held that TFE’s New York common-law unfair-competition claim required proof of bad faith or intent. Because TFE had failed to show bad faith by the defendants, the court granted summary judgment in favor of Hybrid and the Retailer Defendants on that claim.

Disposition

The court granted defendants’ motion for partial summary judgment on TFE’s claims for monetary relief and unfair competition. The opinion does not state the disposition of TFE’s other claims or the defendants’ counterclaims.