Opinion ID: 75946
Heading Depth: 2
Heading Rank: 1

Heading: ICE's Entitlement to Injunctive Relief

Text: 17 The district court found that ICE established a substantial likelihood of success as to its claim against CLM for breach of contract. The essential elements of an action for breach of contract under New York law are: (1) formation of a contract between the parties; (2) performance by ICE; (3) non-performance by Tancogne and CLM; and (4) resulting damages to ICE. See Terwilliger v. Terwilliger, 206 F.3d 240, 245-46 (2d Cir.2000) (quotation omitted). The evidence supports the finding that there was an Agreement between CLM and ICE, and that ICE made an initial order for approximately $125,000 of product in August of 1999. CLM and ICE agreed that ICE would use its best efforts to sell $250,000 of FAIR & WHITE product within the first year of the Agreement and 20 percent more within the next five years. CLM failed to supply ICE with FAIR & WHITE product, and therefore, breached the Agreement. In addition, the district court concluded that CLM's contract with Gapardis further violated the Agreement, which granted ICE exclusive distribution rights in the United States as well as exclusive ownership of the FAIR & WHITE mark. 18 Even though ICE established a likelihood of success as to its claim for breach, the district court found that ICE could not show irreparable harm to warrant injunctive relief. The district court concluded that ICE also breached the Agreement when it began to manufacture and sell counterfeit FAIR & WHITE product. Moreover, by virtue of both parties' breach of the Agreement, the district court found that the ICE no longer had exclusive distribution rights in the United States and that the FAIR & WHITE mark reverted back to CLM. Reasoning that ICE could be compensated for the distribution period when it was the exclusive distributor of FAIR & WHITE products in the United States, the court determined that an injunction was not warranted. 19 ICE maintains that it exercised the ordinary rights of a trademark owner and of a buyer of goods when it procured substitute goods as cover. It relies on New York Uniform Commercial Code § 2-712, which states that a non-breaching party to a contract is entitled to obtain substitute goods. N.Y. U.C.C. § 2-712 (McKinney 2002). However, § 2-712 defines cover as requiring good faith and a reasonable purchase of goods. Id. There was no evidence that ICE communicated to Tancogne that it was going to secure FAIR & WHITE product from a different source or that CLM was in breach of the Agreement for refusing to ship the product. Moreover, the district court found that [w]hen read in conjunction with paragraph C, it is clear that the `Products' referred to in the [Agreement] are those of CLM, especially when the concern regarding counterfeit products is mentioned in paragraph C. 2 R3-247-28. Therefore, selling non-CLM manufactured FAIR & WHITE product went beyond the scope of the Agreement. If CLM breached the Agreement when it stopped selling FAIR & WHITE product to ICE, ICE's remedy was to sue for breach of contract, not to palm off a different product as the product it could no longer obtain. See Green River Bottling Co. v. Green River Corp., 997 F.2d 359, 362 (7th Cir.1993) ([u]nauthorized use of a trademark is an infringement, and we have held that the infringement of a trademark is not a proper self-help remedy for a breach of a contract.). 20 Additionally, ICE maintains that there was no reversion clause in the Agreement and that it is still the owner of the FAIR & WHITE mark in the United States. The ... agreement controls the rights of the respective parties in the use of the [mark]. Affiliated Hosp. Prods., Inc. v. Merdel Game Mfg. Co., 513 F.2d 1183, 1186 (2d Cir.1975). The apparent intent of the contract is to further CLM and ICE's mutual objective of continuing to develop, market and promote the `FAIR & WHITE' brand name in the United States ... and in furtherance of their mutual desire to ensure the proper and swift policing, enforcement and seizure of counterfeit products bearing the `FAIR & WHITE' brand name in the United States. R1-33-44. Finding that ICE maintained ownership of the trademark after the Agreement was terminated would tend to undermine the Agreement and the operation of the rights sought to be protected by trademark law generally. Use of the mark by the assignee in connection with a different goodwill and different product would result in a fraud on the purchasing public.... Marshak v. Green, 746 F.2d 927, 929 (2d Cir.1984). Since ICE had no right to continue using the FAIR & WHITE mark after losing access to the trademarked product, it also had no right to prevent CLM from using the trademark on the grounds that by doing so would confuse consumers. Any confusion is due to ICE's palming off another product as FAIR & WHITE. 3 Consequently, ownership rights to the FAIR & WHITE mark in the United States reverted back to CLM. Therefore, ICE is not entitled to injunctive relief because it has no longer has a property interest in the trademark.