New Sensor Corp. v. CE DISTRIBUTION LLC

367 F. Supp. 2d 283, 2005 U.S. Dist. LEXIS 7087, 2005 WL 949087
CourtDistrict Court, E.D. New York
DecidedApril 26, 2005
Docket1:03-cv-04257
StatusPublished
Cited by2 cases

This text of 367 F. Supp. 2d 283 (New Sensor Corp. v. CE DISTRIBUTION LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New Sensor Corp. v. CE DISTRIBUTION LLC, 367 F. Supp. 2d 283, 2005 U.S. Dist. LEXIS 7087, 2005 WL 949087 (E.D.N.Y. 2005).

Opinion

MEMORANDUM AND ORDER

GLASSER, District Judge.

INTRODUCTION

This Court granted summary judgment to defendant CE Distribution LLC (“CE” or “defendant”) as to the claims filed against it by plaintiff New Sensor Corporation (“New Sensor” or “plaintiff’) for trademark infringement and unfair competition under the Lanham Act, 15 U.S.C. §§ 1051 et seq., and New York State trademark laws, N.Y. Gen. Bus. Law § 360-m, in a memorandum and order, familiarity with which is assumed. New Sensor Corp. v. CE Distribution LLC, 303 F.Supp.2d 304 (E.D.N.Y.2004). The Second Circuit affirmed this decision in a summary order, familiarity with which is also assumed. New Sensor Corp. v. CE Distribution LLC, 121 Fed.Appx. 407 (2d Cir.2004). Pending before the Court is CE’s motion for sanctions under 15 U.S.C. § 1117, 28 U.S.C. § 1927 and the inherent power of the Court. Defendant argues that plaintiffs lawsuit and the prosecution of an appeal from this Court’s decision summarily dismissing the complaint were frivolous. Plaintiff opposes the motion arguing that it initiated this lawsuit in good faith after it conducted a pre-litigation investigation which supported the allegations in the complaint.

For the reasons set forth below, defendant’s motion is granted.

*285 BACKGROUND

Only the facts necessary for a determination of defendant’s motion are restated here. Plaintiff and defendant compete as distributors of vacuum tubes used in electronic equipment. J.S.C. Svetlana (“JSC”) is a Russian corporation located in St. Petersburg that manufactures vacuum tubes. In 1992, JSC entered into a joint venture agreement with Svetlana Electron Distributors (“SED”), pursuant to which SED had the exclusive right to distribute JSC vacuum tubes throughout the world except in the countries that comprised the former Soviet Union. Five years later, in 1997, SED registered certain trademarks, including one consisting of a stylized “S” plus the words SVETLANA ELECTRON DEVICES (the “trademark”), with the United States Patent and Trademark Office.

In 2000, when the joint venture between JSC and SED dissolved, JSC entered into an agreement with PM of America, Inc. (“PMA”) to distribute its tubes in the United States. In July 2001, New Sensor purchased the trademark from SED. According to New Sensor’s President, Michael Matthews (“Matthews”), “as part of the reason for the purchase,” he “believed that consumers in the United States associated the SVETLANA mark” with SED, a belief grounded in his fifteen-years of experience in the vacuum tube industry. (Declaration of Michael Matthews executed on March 1, 2005 (“Matthews Decl.”) ¶ 3). The tubes that New Sensor currently distributes under the SVETLANA mark are manufactured at Xpo-pul, a factory in Saratov, Russia. New Sensor does not sell tubes manufactured by JSC.

In September 2001, JSC and PMA filed an infringement action against New Sensor and SED in the United States District Court of Alabama alleging that New Sensor did not have rights in the SVETLANA mark. (Matthews Decl. ¶ 4). New Sensor counterclaimed, alleging that the plaintiffs were infringing New Sensor’s SVETLA-NA mark by selling vacuum tubes marked with SVETLANA. In January 2003, the parties resolved the Alabama litigation and entered into a settlement agreement with the following terms: New Sensor had the exclusive rights to the SVETLANA mark; in order to avoid confusion with New Sensor’s SVETLANA-brand vacuum tubes, JSC and PMA would not use the SVET-LANA name or mark in connection with the promotion or marketing of vacuum tubes, but would use “SED-SPb,” 1 the name of JSC’s Svetlana factory that manufactured the vacuum tubes; and New Sensor released CE and other customers of JSC and PMA from any claims arising out of the use of the SVETLANA mark in connection with the sale of inventory manufactured by JSC and purchased by CE (and other customers) before March 4, 2003. (Matthews Decl. ¶¶ 5-6). “The purpose of this release was to allow PMA (JSC’s ... U.S. distributor) to dispose of SVETLANA-marked tubes already in its inventory at the time of the agreement.” (Id. ¶ 6). Following the settlement agreement, PMA sent a letter to its customers, approved by New Sensor, which informed them that tubes formerly branded SVET-LANA would now be sold under the Winged-C logo.

In the summer of 2003, CE’s website discussed New Sensor’s acquisition of the SVETLANA mark and compared New Sensor’s SVETLANA vacuum tubes to those sold by CE. (Matthews Decl. ¶ 8). According to Matthews, the website text “presented a negative spin on New Sensor’s acquisition of the SVETLANA mark.” (Id.). “In addition to several misleading statements in the text” of the website, Matthews believed the following three *286 statements were false: (1) “If you want the tubes that you’ve come to know in the past as ‘Svetlana,’ the only way to be sure you’re getting that tube is to look for the [‘Winged-C’] mark.” Matthews believed that this statement was false because the foreign manufacturer of CE’s tubes was not the only manufacturer of tubes previously marketed under the SVETLANA brand, see Matthews Deck ¶ 8(1); (2) “Because of a change in ownership of the former American distributor, JSC Svetlana recently lost its ability to sell vacuum tubes bearing the ‘Svetlana’ name.” Matthews believed that this statement was false because JSC’s inability to use the SVETLANA mark in the United States resulted from New Sensor’s purchase of the trademark and goodwill from SED and the .settlement agreement, not a change in ownership of JSC, see id. ¶ 8(2); and (3) “The Xpo-Pul factory ‘Svetlana’ tubes are not the same Svetlana tubes that you have been accustomed to over the year!” Matthews believed that this statement was false “because it told the consumer that New Sensor’s SVETLANA brand of vacuum tubes is different than the SVETLA-NA brand of vacuum tubes that had been sold by New Sensor’s assignor, [SED], when in fact there always has been only one brand, which New Sensor now owns,” see id. ¶ 8(3). Against this background, New Sensor believed that CE was attempting to trade on the good will associated with the SVETLANA mark “and that CE might have been selling SVETLANA-branded tubes not covered by the Alabama settlement.” (Id. ¶ 9).

After reviewing CE’s website, Matthews sent a letter to CE’s President, Noreen Cravener (“Cravener”), in August 2003, in which he set forth his concerns. (Matthews Deck ¶10). Cravener refused to change the text of the website as requested and “did not offer any explanation for” her denial that CE had violated the Alabama settlement. (Id. ¶ 11). Moreover, CE refused to change its website to refer to JSC’s factory by its correct name, SED-SPb. (Id. ¶ 12)..

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Bluebook (online)
367 F. Supp. 2d 283, 2005 U.S. Dist. LEXIS 7087, 2005 WL 949087, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-sensor-corp-v-ce-distribution-llc-nyed-2005.