Property, intangible

a blog about ownership of intellectual property rights and its licensing

Patsy’s Restaurant Wars

The never-ending saga of competing “Patsy’s” restaurants in New York simmers on. I count 13 decisions in the Westlaw database from at least three separate suits, plus there have been four petitions to cancel filed at the PTO. The latest decision, resolving all outstanding issues between the parties at the trial court level, starts this way:

More than five years ago, the Court of Appeals for the Second Circuit admonished the major parties in this litigation “that henceforth they would be well advised to minimize the risk of confusion by identifying their restaurants by the complete names: ‘Patsy’s Italian Restaurant’ and ‘Patsy’s Pizzeria.’ This lengthy Opinion and Order is written because the parties have largely ignored that admonition. During the intervening years, the parties have instead continued on an oftentimes labyrinthine course of litigation. As noted by the Court of Appeals, one source of this litigation’s “unavoidable confusion” has been the fact that, for over sixty years, the major parties and their predecessors have shared the mark PATSY’S for nearly identical restaurant-related services, both within the same New York City market. Additional confusion occurred during proceedings before the Patent and Trademark Office (the “PTO”) and the Trademark Trial and Appeal Board (the “TTAB”). These proceedings have been alternately described as “protracted and convoluted,” and “a procedural morass,” “tortured” and “resulting in confusion and mistake.” Such was the muddled state of affairs that formed the starting point for this case.

There were three Patsy’s Pizzeria locations involved in the lawsuit, the original location in East Harlem owned by the trademark owner, I.O.B. Realty, and licensees on Staten Island and in Syosset. The latter two were originally named as defendants in separate suits. The suits were consolidated and I.O.B. Realty intervened on the side of the Staten Island and Syosset defendants.  The first use of Patsy’s Pizzeria in East Harlem was senior to the plaintiff’s use of Patsy’s Italian Restaurant, and no infringement was alleged against the East Harlem location. The Staten Island location was open only about a year and Syosset is still in operation.

The decision is long and complex, but of interest to me in particular was the court’s discussion of the naked licensing doctrine, which was spot on. I’ve blogged before that the naked licensing doctrine is not a doctrine unto itself but should be grounded in the law of abandonment.
The court instructed the jury that, as a matter of law, the Staten Island and Syosset defendants had entered into a valid license agreement with I.O.B. Realty that allowed them to use the marks PATSY’S and PATSY’S PIZZERIA in connection with operating a pizzeria. The jury found, though, that the Staten Island and Syosset defendants used the marks PATSY’S and PATSY’S PIZZERIA beyond the scope of their license agreement with I.O.B. Realty (because they offered broader services) and the jury also found that I.O.B Realty abandoned its mark. The court concluded that it was abandonment through naked licensing, since this was the only theory of abandonment presented to the jury. Plaintiff Patsy’s Italian Restaurant argued that the jury’s finding should act as a forfeiture of all rights in PATSY’S and PATSY’S PIZZERIA. 
The court first correctly identified the three bases for abandonment described in the two subsections of the Lanham Act: (1) intentional non-use; (2) actions or omissions that cause the mark to become generic; and (3) actions or omissions that cause the mark to lose its significance. It was the last basis that the court considered relevant here.
Quoting McCarthy, the court said “uncontrolled licensing in some cases may be of such a limited nature that it has little impact of weakening the mark and thus does not result in a loss of all rights.” (emphasis in original). It then held that:

I.O.B. Realty has not engaged in conduct that necessitates a finding of total abandonment of all rights in the marks PATSY’S and PATSY’S PIZZERIA. Most crucially, Plaintiffs have failed to submit any evidence that the marks PATSY’S and PATSY’S PIZZERIA as used by the original East Harlem location have lost their significance as an indicator of the source of Defendants’ pizzeria services. See Lanham Act § 45, 15 U.S.C. § 1127. The Court therefore grants, in part, Defendants’ motion to limit the jury’s finding of abandonment to only the incidents of naked licensing as described above [i.e., at the Staten Island and Syosset locations, but not other locations].
The Court is also persuaded that, to hold otherwise, would turn the marks PATSY’S and PATSY’S PIZZERIA as used for pizzeria services into the public domain, when these marks have been continuously associated with the East Harlem Location for over seventy-five years. This would cause undue hardship to not only Defendants, but also to consumers. Such a result would therefore be egregious and is not supported by the facts presented at trial.
The Syosset location’s use of the mark for restaurant services other than for a pizzeria could not claim the benefit of East Harlem’s senior use because it was outside the scope of the license. Since Syosset’s use was confusing similar to Patsy’s Italian Restaurant’s use, the use of PATSY’S and PATSY’S PIZZERIA for other than a pizzaria by the Syosset defendants was enjoined.
The abandonment finding also rippled through to the petitions to cancel both parties’ trademark registrations. The Patsy’s Pizzeria registration was cancelled because the jury found it was obtained through fraud and because of the naked license, but the loss of the registration was not fatal – the two Patsy’s Italian Restaurant registrations were also cancelled as likely to be confused with the pizzeria’s senior common law, unabandoned trademark.

It’s a complicated case procedurally but the trial court seems to have resolved it all carefully and correctly. Patsy’s Italian Restaurant, Inc. v. Banas, Civ. No. 06-CV-0729 (RER), 06-CV-5857 (RER), 2008 WL 4146212 (E.D.N.Y. Sept. 9, 2008). More blogging on the case here.

© 2008 Pamela Chestek

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