Vinci Brands LLC v. Coach Services, Inc.

Background

This opinion addresses cross-motions for preliminary injunctions in two related cases arising from Kate Spade LLC’s termination of its license agreement with Vinci Brands LLC. The agreement covered mobile phone cases and similar products bearing Kate Spade marks. Kate Spade first terminated the agreement on June 14, 2023, and terminated it again on July 18, 2023, based on additional grounds.

Vinci argued that its failure to make payments was excused by the agreement’s force-majeure clause. The court found credible evidence that COVID-19-related conditions, including disruptions at an iPhone factory in Zhengzhou, China, caused shortages and reduced sales of iPhone cases, which in turn caused Vinci’s nonpayment. The court concluded that the force-majeure clause likely prevented the June 14 termination from being valid. The clause did not, however, excuse Vinci’s failure to notify Kate Spade about its default on the Siena loan or its failure to pay Kate Spade after the force-majeure condition had ended.

Kate Spade Defendants’ Motion

The Kate Spade defendants—Coach Services, Inc., Kate Spade LLC, and Tapestry, Inc., referred to together as KSNY—sought to prevent Vinci from using the KATE SPADE marks, claiming that the agreement had been validly terminated. The court held that KSNY showed a clear or substantial likelihood that the July 18 termination was valid. The court relied on Vinci’s failure to provide the contractually required notice of its Siena loan default and on Vinci’s failure to pay amounts due after it was able to pay.

The court found likely success on KSNY’s federal trademark and related claims for conduct occurring after July 18, 2023. It also found likely success on KSNY’s claim that Vinci breached the agreement by failing to pay licensing fees. The court denied injunctive relief based solely on nonpayment because money damages could remedy that breach.

The court found irreparable harm because unauthorized use of the marks could cause confusion and damage Kate Spade’s goodwill and reputation. It also found that the balance of hardships and public interest favored protecting the marks from confusion. The court therefore largely granted KSNY’s preliminary injunction but denied it in part as to in-process orders and as to an injunction against further nonpayment.

Vinci’s Motion

Vinci sought to prevent the defendants and Case-Mate, Inc. from communicating that the agreement had ended, from disclosing or using confidential information, and from interfering with Vinci’s contracts and business relationships. Vinci also sought a letter confirming its authority to suppliers and customers.

The court denied Vinci’s requested injunction concerning reversal of the terminations because KSNY had shown a clear or substantial likelihood that the July 18 termination was valid. The court also denied injunctive relief based on Vinci’s tortious-interference claims. Vinci had not shown a likelihood of proving that Case-Mate intentionally procured a contractual breach, that a third party actually breached a contract with Vinci, or that the defendants used wrongful or improper means.

The court denied Vinci’s requested injunction based on alleged breaches of the agreement’s announcement and confidentiality provisions. Among other reasons, Vinci was unlikely to show that it had adequately performed its own contractual obligations, and the evidence did not sufficiently establish improper disclosure by KSNY or a specific disclosure by Case-Mate of protected information.

The court granted Vinci’s request for relief concerning qualifying in-process orders. Under the agreement, cancelable orders had to be canceled. Vinci could sell inventory covered by written, non-cancelable orders existing on July 18, 2023; other inventory was subject to KSNY’s purchase option. Vinci could complete merchandise that was in process on July 18, including merchandise without such an order, but the completed merchandise remained subject to KSNY’s purchase option. The court found likely success, irreparable harm, and a public interest in enforcing these post-termination procedures.

Order

The court ordered the parties to treat the agreement as terminated under the July 18 Second Termination, without prejudice to claims based on alleged breach, improper termination, or other grounds. It set July 18, 2023, as the termination date for the agreement’s post-termination provisions. Except for those provisions, including the rules concerning in-process merchandise and inventory, Vinci was barred from manufacturing or selling products bearing the KATE SPADE marks, telling others that the agreement remained in effect, or representing that it was authorized to fulfill Kate Spade-branded orders.

The preliminary injunction binds Vinci, the Kate Spade defendants, Case-Mate, and specified persons who receive actual notice. It remains in effect until the trial unless dissolved or modified for good cause. KSNY must post a $100,000 bond. Each side’s request for a temporary restraining order was denied as moot.