How Opening a Restaurant in New York Can Constitute Unfair Competition with a Foreign Restaurant with No U.S. Branches
This is a follow up article to last week’s blog post .
In view of the New York Court of Appeal’s decision, the Second Circuit upheld the District Court’s award of summary judgment in favor of the Bukhara Grill, including the unfair competition claim under New York law. Having agreed with the District Court that ITC adduced enough evidence of deliberate copying to satisfy that element of this claim, the Second Circuit focused on the sufficiency of ITC’s showing of secondary meaning.
ITC’s original argument was that proof of secondary meaning was not required “when a New York unfair competition claim is based on intentional copying.” Recognizing that the New York Court of Appeals ruled otherwise, ITC then made the argument that the District Court had erred in applying a stricter standard to its secondary meaning analysis than the Court of Appeals had identified and erroneously concluded that ITC could not establish secondary meaning. ITC submitted that if it had had the benefit of the New York Court of Appeals’ decision, it would have submitted evidence substantial enough to withstand summary judgment.
The Second Circuit made clear that for purposes of determining secondary meaning “in the New York market” both the District Court and the New York Court of Appeals were referring to the same market, that is potential customers for Bukhara Grill’s New York restaurant. “We do not understand the Court of Appeals to have limited the relevant market to persons who had already eaten in Bukhara Grill’s restaurants, nor do we understand the district court to have expanded the relevant market to every New Yorker, whether or not inclined to eat in restaurants generally or Indian restaurants in particular.” ITC Ltd. v. Punchgini, Inc., 373 F. Supp. 2d at 288.
In any event, the Second Circuit held that ITC failed to provide sufficient evidence to create a genuine issue of material fact on whether the Bukhara mark and trade dress used by the Bukhara Grill calls to mind ITC’s goodwill for the Grill’s’ potential customers or that the Grill’s’ customers primarily associate the Bukhara mark and trade dress with ITC.
The Second Circuit also found that the District Court did not hold ITC to an unduly strict standard of secondary meaning, but instead considered the evidence in light of the following six factors traditionally recognized as relevant to secondary meaning:
(1) advertising expenditures
ITC was found not to have provided any evidence that it had advertised its foreign “Bukhara” restaurants in the United States.
(2) consumer studies linking the mark to a source
ITC was found to have failed to make any attempt to show any name recognition or goodwill through consumer studies. The Second Circuit also observed the lack of evidence of any actual overlap between customers of Bukhara Grill’s restaurant and ITC’s Bukhara “aside from ITC’s own inadmissible speculation.” The Court noted that, as a result, a reasonable fact-finder could not conclude that potential customers of Bukhara Grill’s restaurant would primarily associate the Bukhara mark with ITC, especially given that numerous restaurants, with no affiliation to ITC, use the name “Bukhara” in Virginia Washington, Massachusetts and around the world.
(3) unsolicited media coverage of the product
The Second Circuit observed that ITC’s evidence of goodwill came wholly from foreign media sources – ITC did not include any evidence that would permit an inference that such media reports or sources had reached the relevant consumer market in New York.
(4) sales success
The Second Circuit did not discuss this factor, as ITC did not have any sale successes to consider.
(5) attempts to plagiarize the mark
Responding to ITC’s argument that the District Court did not consider the public statement and advertisements which stated or implied a connection with ITC, the Second Circuit observed that the District Court plainly did consider this evidence in concluding that Bukhara Grill had intentionally copied ITC’s mark and trade dress, but found that intentional copying alone was not be enough to demonstrate the necessary “secondary meaning” where the “copying” at issue is prohibited based on the application of the “famous marks” doctrine for marks that have acquired a “secondary meaning.” The Court found this reasoning to be consistent with the New York Court of Appeals’ opinion that a famous foreign mark holder must show more than copying in order to pursue a claim for unfair competition under New York state law. “ITC cannot satisfy this burden simply by pointing to evidence of obvious similarities between defendants' Bukhara Grill and ITC's own Bukhara restaurant, because such evidence is no proof that defendants' potential customers were even aware of the existence of ITC's Bukhara.” id., 164.
(6) length and exclusivity of the mark’s use
The Court rejected the exclusivity argument by finding that a reasonable fact-finder could not conclude that potential customers of Bukhara Grill’s restaurant would primarily associate the Bukhara mark with ITC, especially given that numerous restaurants, with no affiliation to ITC, use the name “Bukhara” in Virginia Washington, Massachusetts and around the world. The Second Circuit noted that ITC had produced no evidence that the goodwill that had been generated by ITC’s former New York and Chicago locations had not endured long enough for defendants’ potential customers to “primarily associate” defendants’ Bukhara restaurant with ITC’s former restaurants.
Conclusion
Taking into account that the evidence failed as a matter of law to raise a triable question of fact on the issue of secondary meaning necessary to establish a New York common law unfair competition claim, the Second Circuit affirmed the District Court’s grant of summary judgment in all respects.
Food for Thought
Under these decisions, it would appear to be perfectly legal for a New York restauranteur to deliberately copy a restaurant that he saw in, say, Mumbai, including taking its name, so long as the Indian restaurant had it acquired “secondary meaning” in the New York market. Does this seem right?