Opinion ID: 681080
Heading Depth: 4
Heading Rank: 2

Heading: Tortious Interference with a Business Relationship

Text: 134 In Count IV of the Complaint, Babbit alleges that Dynascan has engaged in tortious interference with Commtron, one of Dynascan's domestic distributors and Babbit's suppliers. To recover for tortious interference, Babbit must prove: (1) the existence of a business relationship under which Babbit has legal rights; (2) knowledge by Dynascan of such relationship; (3) an intentional and unjustified interference with such relationship by Dynascan; and (4) damage to Babbit as a result of the breach of the relationship. T. Harris Young & Assoc., Inc. v. Marquette Electronics, Inc., 931 F.2d 816, 825-26 (11th Cir.), cert. denied [--- U.S. ----], 112 S.Ct. 658 [116 L.Ed.2d 749] (1991). 135 The Court concludes that Babbit has failed to demonstrate that Dynascan engaged in tortious interference because any interference in the relationship between Babbit and Commtron was justified by Babbit's breach of contract with Dynascan. The only statements that the Court found that Dynascan made to Commtron concerning Babbit reflected Dynascan's reasonable belief that Babbit breached the Agreement and imported counterfeit goods. See Ethyl Corp. v. Balter, 386 So.2d 1220, 1225 (3rd Fla. DCA 1980), cert. denied, 452 U.S. 955 [101 S.Ct. 3099, 69 L.Ed.2d 965] (1981) (Court held that under Florida law, a party is allowed to interfere in another's business relationship where the party acts in furtherance of its own interests, such as to protect a contract.). In addition, Babbit failed to introduce credible evidence to support its allegation that Dynascan expressly instructed Commtron that it should not deal with Babbit. Consequently, the Court concludes that Babbit has failed to prove by a preponderance of the evidence that Dynascan engaged in tortious interference with Babbit's business relationship with Commtron. B. DYNASCAN'S COUNTERCLAIM 136 Dynascan's counterclaim sets forth a number of allegations, including claims that Babbit engaged in unfair competition, violated a number of federal and state trademark statutes, and breached the Agreement. The Court will initially address the breach of contract issue. The Court will then address Dynascan's trademark infringement claim and counterfeiting claim. Thereafter, the Court turns its attention to Dynascan's unfair competition claim, including the common law claim for unfair competition and the two statutory state law claims. Finally, after a brief analysis of Dynascan's tariff act claim, the Court will conclude with a discussion of the imposition of damages. 1. Breach of Contract 2 137 The express terms of the Agreement between Babbit and Dynascan are contained in the August 16, 1985 letter sent from Dynascan to Babbit. In this Agreement, Dynascan gave Babbit a license to use the Cobra trademark on certain cordless telephone models in Central and South America. A royalty was to be paid to Dynascan through back-to-back letters of credit whereby Babbit would pay a higher unit charge to Dynascan than Dynascan would pay to the manufacturer of the cordless telephones. 138 In July and August, 1989, Babbit ordered and received over ten thousand cordless telephones that it attempted to sell in South America as Cobra products. Babbit, however, in violation of the terms of the Agreement, failed to notify Dynascan about the manufacture and distribution of these products, and Babbit failed to pay Dynascan the standard five percent royalty that was an integral component of the Agreement. Consequently, the Court concludes that Babbit breached its contract with Dynascan by failing to pay a royalty to Dynascan and by failing to order the SA-660s Cobra cordless telephones through Dynascan as required in the Agreement. 2. Trademark Infringement 139 Dynascan's trademark infringement claim, pursuant to 15 U.S.C. Sec. 1114(1)(a), 3 rests on the notion that a particular use of a registered trademark is likely to cause confusion. In this case, the registration of the trademarks is not an issue, because Dynascan presented certificates of registration for each of the Cobra trademarks owned by Dynascan. The Court must therefore determine whether Babbit's use of the Cobra trademark is likely to cause confusion in the minds of potential buyers as to the source, affiliation or sponsorship of the products. Interstate Battery System v. Wright, 811 F.Supp. 237, 241 (N.D.Tex.1993). 140 In determining whether there is a likelihood of confusion, the Court may consider a variety of factors, including similarity of design, similarity of the products, identity of retail outlets and purchasers, similarity of advertising media, the defendant's intent and actual confusion. Jaquar [Jaguar] Cars Ltd. v. Skandrani, 771 F.Supp. 1178, 1183 (S.D.Fla.1991). Application of these elements to the facts of this case compels the conclusion that Babbit's sale of Cobra cordless telephones is likely to confuse the public into believing that Babbit's products are associated with Dynascan or that Dynascan sponsored, licensed or consented to the manufacture and sale of Babbit's products. The marks used by Babbit are identical to the Cobra trademarks owned by Dynascan, and the Model SA-660s telephones sold by Babbit containing a Cobra label are nearly identical to Dynascan's Model SA-620s cordless telephones. 141 In addition, although there is no evidence of actual confusion, 4 this Court has found that Babbit intentionally infringed upon Dynascan's trademark rights and intentionally breached the Agreement. Intent to copy in itself creates a rebuttable presumption of likelihood of confusion. Bauer Lamp Co., Inc. v. Shaffer, 941 F.2d 1165, 1172 (11th Cir.1991), citing, Ambrit [AmBrit], Inc. v. Kraft, Inc., 812 F.2d 1531, 1542 (11th Cir.1986). See also First Brands Corp. v. Fred Meyer, Inc., 809 F.2d 1378, 1385 (9th Cir.1987) (Intent of a defendant in adopting his trade dress is a critical factor, since if the trade dress were adopted with the intent of depriving benefit from the reputation of the plaintiff, that fact alone may be sufficient to justify the inference that there is confusing similarity.). 142 In fact, a likelihood of confusion can be found as a matter of law if the defendant intended to derive benefit from the plaintiff's trademark. Interstate Battery System, 811 F.Supp. at 243, citing, Amstar v. Domino's Pizza, 615 F.2d 252, 263 (5th Cir.1980), cert. denied, 449 U.S. 899 [101 S.Ct. 268, 66 L.Ed.2d 129] (1980). Babbit intended to improve sales of MCE telephones by relabeling them with Cobra labels because Babbit was having difficulty selling MCE telephones. Based on the foregoing discussion, the Court concludes that there has been trademark infringement as determined by the likelihood of confusion analysis. 143 Babbit presents several arguments in opposition to a finding of likelihood of confusion. First, Babbit contends that there cannot be a showing of likelihood of confusion because Babbit's telephone sales did not occur in the same market as Dynascan's telephone sales. Babbit states that when goods travel in unrelated trade channels, no likelihood of confusion exists. (D.E. # 165 at p. 34). This Court concludes, however, that confusion, or the likelihood of confusion, not competition, is the real test of trademark infringement. Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 257-58 (2nd Cir.1987). Direct competition between the parties is not a prerequisite to relief under the Lanham Act. In fact, the Court would not expect to find substantial evidence demonstrating that Dynascan was in competition with Babbit in South America because Babbit was already selling Cobra telephones in that geographic territory with Dynascan's permission. Regardless of Dynascan's activities at the time of the infringement, its name continued to be a marketable commodity and it has the right to use it on other goods or to grant such a license to other companies. Bowmar Instrument Co. v. Continental Microsystems, Inc. [497 F.Supp. 947], 208 U.S.P.Q. 496, 503 (S.D.N.Y.1980). 144 As a corollary to this argument, Babbit contends that United States copyright laws and the Lanham Act do not apply to Babbit's sales of cordless telephones because the sales occurred outside of the United States. This argument is not compelling because this Court has already found that Lanham Act jurisdiction exists because Babbit imported cordless telephones into the United States to a free trade zone before shipping the products to South America. (T.R. at 5). Babbit presses this argument, however, by presenting the Court with Zenger-Miller, Inc. v. Training Team, GmBH [GmBH], 757 F.Supp. 1062 (N.D.Cal.1991). 145 In Zenger-Miller, the court concluded that there was no subject matter jurisdiction over Lanham Act claims where all of the defendant's sales occurred in Germany. A close examination of the underlying rationale of Zenger-Miller, however, clearly supports this Court's conclusion that the Lanham Act can apply where sales occur outside of the United States. Specifically, the Zenger-Miller court found that the defendant was a foreign corporation and all negotiations leading to the contract in that case occurred abroad. In the instant case, Babbit is an American corporation, and the negotiations leading to the Agreement occurred primarily in the United States. In addition, the defendant in Zenger-Miller did not allege that any infringing activity took place in the United States. Babbit, however, imported labels and telephones into a free trade zone in the United States, and Babbit orchestrated sales from a Florida office. 146 In Reebok Internat'l v. American Sales Corp., 11 U.S.P.Q.2d 1229 (E.D.Wash.1989), the court upheld the invocation of Lanham Act jurisdiction where the defendant, a California corporation, imported counterfeit shoes from Taiwan to a free trade zone in Los Angeles and then exported the goods to Belgium. The court noted that the Lanham Act imposes upon this court the duty to protect the entire gamut of purchasers, including non-English speaking purchasers, in various countries throughout the world to which the defendants intend to export their products. Id. at 1231. Consequently, this Court concludes that it has jurisdiction to address the trademark infringement counterclaim, even though Babbit's sales of cordless telephones occurred outside of the United States. See also Ocean Garden, Inc. v. Marktrade Co., Inc., 953 F.2d 500, 505 (9th Cir.1991) (Court held that entry of infringing goods into a foreign trade zone is a sufficient act in commerce to trigger subject matter jurisdiction in federal courts under the Lanham Act.). 147 Babbit also argues that Dynascan has engaged in naked licensing and thereby forfeits all rights to the Cobra mark in the geographic and product markets where use of the mark has not been adequately protected. In this instance, there is substantial evidence that a number of counterfeiters were active in South America during the mid-1980s. The existence of third party infringers, however, does not constitute an abandonment of a mark where the trademark owner does not consent to the use of the mark by these others but rather, vigorously pursues these third party infringers. Visa International v. Bankcard Holders of America, 211 U.S.P.Q. 28, 41 (N.D.Ca. [Cal.]1981). In addition, the party seeking to prove abandonment must prove intent to abandon on the part of the trademark owner. Id. Although Dynascan did not act with particular vigor against third party infringers in South America, failure to institute legal action against an infringer is insufficient to establish abandonment of a trademark. Playboy Enterprises v. P.K. Sorren Export Co., 546 F.Supp. 987, 996 (S.D.Fla.1982). Babbit has utterly failed to prove that Dynascan intentionally abandoned its Cobra mark or ceased use of the Cobra trademark. 148 Finally, Babbit argues that there is no violation of the Lanham Act because the articles that are alleged to be counterfeits are actually genuine goods, produced in the same factory as the approved Cobra telephones. It is true that the unauthorized sale of a genuine trademarked product does not in itself constitute trademark infringement, but Babbit fails to appreciate that identical goods sold in an unauthorized manner are not necessarily genuine for purposes of the Lanham Act. Hunting World, Inc. v. Reboans, Inc., 24 U.S.P.Q.2d 1844, 1849 (N.D.Ca. [Cal.]1992), citing, H.L. Hayden Co. v. Siemens Medical Systems, Inc., 879 F.2d 1005, 1023 (2nd Cir.1989). In this instance, Babbit failed to order the Model SA-660s telephones through Dynascan, and Babbit failed to submit a sample Model SA-660s telephone to Dynascan for approval. In fact, the Model SA-660s cordless telephone, originally a MCE model, is physically different from all other Cobra models. Although there is no evidence suggesting that the Model SA-660s cordless telephones are inferior to authorized Cobra products, inferiority is not a prerequisite to a finding of a Lanham Act violation. Tanning Research Lab. v. Worldwide Import and Export, 803 F.Supp. 606, 609 (E.D.N.Y.1992). Congress hardly intended to step through the looking glass into a world in which valid trademark owners were only protected from inartful counterfeiters. Id.