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October 27, 2011 / screwvala

Who’s the Patsy Now?

And now, a Battle Ragu.

In one corner, we have the venerable Patsy’s Pizzeria, first opened in East Harlem in 1933.  The original restaurant, including the name, was sold in 1991, and is now a franchise with multiple locations in the New York area.  In the other corner, Patsy’s Italian Restauarant, the noted Italian restaurant on West 56th Street in Manhattan.  For decades, each business co-existed in relative peace.  Patsy’s Pizzeria held a servicemark on “Patsy’s” and “Patsy’s Pizzeria” for restaurant services.  Patsy’s Italian Restaurant held a servicemark on “Patsy’s” and a stylized “Patsy’s PR” for restaurant services except pizzerias and a trademark on “Patsy’s” for sauce.

Let’s talk trademarks for a moment. Trademarks (and servicemarks) are words, symbols, or designs that distinguish the origin of one product or service from another. So long as the trademark is used to provide goods and services, the trademark owner will enjoy certain rights and protections. With trademark, however, comes responsibility. For example, if you stopped using your trademark to sell the goods or services associated with it, you will be held to have abandoned your trademark. Another example, relevant here, is whether you fail to maintain the standard and quality of the mark. This can occur through naked licensing.

Trademarks get licensed all the time, especially through franchising. When licensing a trademark, it is critical for the owner to maintain and assert control over the quality of the goods and services provided by the licensee. The failure to exercise such control can result in abandonment of the mark. See e.g., Barcamerica International U.S.A. Trust v. Tyfield Importers, Inc., 289 F.3d 589 (9th Cir. 2002).

And now, Round 1.  After decades of peaceful, or at least non-litigious peace, Patsy’s Italian Restaurant began to sell jarred sauce at retail. Not to be outdone, Patsy’s Pizzeria followed with its own jarred sauce that it offered for sale at its restaurants. That led to litigation in which each side sought to cancel the servicemarks held by the other. It became apparent to the District Court that Patsy’s Pizzeria falsified evidence about when it began to sell its sauce. Not surprisingly, for this and for other reasons, Patsy’s Italian Restaurant prevailed in the litigation.

Thus began a long and tortured course of litigation between the parties. The final act came when Patsy’s Italian Restaurant sued two licensees of Patsy’s Pizzeria for trademark infringement. A trial resulted in a convoluted jury verdict which determined, among other things, that Patsy’s Pizzeria falsified evidence in connection with one of its trademarks and had abandoned its mark through naked licensing. In giving effect to the jury verdict, the District Court cancelled the marks of both parties, holding that neither restaurant could use the word “Patsy’s” alone. The Second Circuit agreed.

 

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