Al Infinity LLC v. Crown Cell Inc.

Background

AL Infinity, LLC owns the Altec Lansing trademark. In 2016 and 2017, Crown Cell, Inc. purchased two models of Altec Lansing speakers, VS4621 and BXR1220, from third-party defendant Westview Industries, Inc., which had obtained the speakers from Fenda. Crown Cell sold some of the speakers on Amazon.com and Walmart.com. After AL Infinity sent a cease-and-desist letter, Crown Cell removed the Walmart listing and later disposed of the remaining inventory.

AL Infinity asserted five causes of action: federal trademark counterfeiting, federal trademark infringement and false advertising under the Lanham Act, injury to business reputation and New York anti-dilution, deceptive use of a name or address under New York General Business Law § 133, and common-law trademark infringement and unfair competition. The central issue was whether the speakers were counterfeit or genuine goods produced or supplied through an authorized source.

Summary-judgment motions

AL Infinity moved for summary judgment on all five claims. The defendants moved for summary judgment on the federal counterfeiting claim. Summary judgment is appropriate when the evidence shows no genuine dispute over a material fact and the moving party is entitled to judgment as a matter of law.

The court found AL Infinity’s factual submissions deficient under the Southern District of New York’s Local Rule 56.1. Its statement of facts contained unsupported assertions, and many of its responses to the defendants’ factual statements did not identify evidence contradicting those statements. The court said it would disregard unsupported facts and would rely on the defendants’ statements only when the record supported them.

Counterfeiting claim

The court held that AL Infinity failed to establish the basic fact required for its counterfeiting claim: that the speakers were not genuine and contained a counterfeit mark. AL Infinity had never purchased or inspected the speakers, so it could not provide a side-by-side comparison with authentic products. It also did not seek a deposition from Fenda, even though the court had identified information from Fenda as important and had provided additional time for discovery.

AL Infinity principally relied on emails referring to lead times, production, completion of goods, and Fenda’s need to reorder materials. The court found those references insufficient to show what Fenda actually did to produce the speakers or whether that production made the goods counterfeit. The court also agreed that statements by Fenda employees in the emails were hearsay and were not shown to qualify under the evidentiary exceptions proposed by AL Infinity. Even if the emails were considered, they did not resolve whether the goods were counterfeit.

The court further explained that goods produced by an authorized manufacturer are not counterfeit under the relevant Lanham Act provision. The record showed that an affiliate of Fenda had previously had agreements with Altec Lansing predecessors to supply or produce Altec Lansing goods, and that Westview had previously been authorized to solicit orders for Altec Lansing products. The record did not show whether those arrangements had ended or whether Fenda was unauthorized to produce the speakers when the disputed goods were made.

The court therefore denied AL Infinity’s motion for summary judgment on counterfeiting and granted the defendants’ motion for summary judgment on that claim. It also stated that the evidence strongly indicated that any alleged counterfeiting was not willful because Crown Cell relied on Westview and immediately removed the products after receiving the cease-and-desist letter. Because the court granted summary judgment against the counterfeiting claim, it also ruled that AL Infinity could not obtain damages based on that claim.

Remaining claims

The court denied AL Infinity’s motions for summary judgment on the remaining four claims. It reasoned that each claim required AL Infinity to establish that the speakers were inauthentic, and AL Infinity had not done so. The court applied this reasoning to the Lanham Act false-advertising claim, the New York anti-dilution and reputation claim, the New York General Business Law § 133 claim, and the common-law trademark infringement and unfair-competition claims. The court also noted that the common-law unfair-competition claim required bad faith and that the evidence did not show such conduct.

Under Federal Rule of Civil Procedure 56(f), a court may grant summary judgment to a nonmoving party after giving notice and a reasonable opportunity to respond. The court stated that the defendants were entitled to summary judgment on the remaining claims because counterfeiting was a necessary premise for them. But, because the defendants had not moved for summary judgment on those claims, the court gave AL Infinity 14 days to refute the court’s legal reasoning before entering summary judgment for the defendants on all causes of action. The court expressly said that any submission could not reargue its finding that the record failed to establish counterfeiting.

Disposition

The court denied AL Infinity’s motion for summary judgment in its entirety. It granted the defendants’ motion for summary judgment on the counterfeiting claim and stated that it would enter summary judgment for the defendants on the remaining claims unless AL Infinity responded within 14 days. The Clerk was directed to close the pending motions.