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American Eagle Outfitters, Inc. v. American Eagle Furniture, Inc.

United States District Court, Seventh Circuit

December 27, 2013

AMERICAN EAGLE OUTFITTERS, INC. and RETAIL ROYALTY COMPANY Plaintiffs,
v.
AMERICAN EAGLE FURNITURE, INC., d/b/a TITANIC FURNITURE; WOODFIELD FURNITURE, INC.; GURNEE MILLS FURNITURE, INC.; TONY ALCHUILITI, JAY NOURI, TAMMAN ABOUSSAF, OUDIE ABOUSSAF, and HOUSSAM ALCHRITI, individually and doing business as AMERICAN EAGLE FURNITURE and TITANIC FURNITURE, Defendants.

MEMORANDUM OPINION AND ORDER

EDMOND E. CHANG, District Judge.

Plaintiffs American Eagle Outfitters and Retail Royalty Company (collectively AE Outfitters) brought this lawsuit against Defendants American Eagle Furniture, two related furniture companies, and five of the companies' owners and employees (collectively AE Furniture or Defendants). AE Outfitters is pursuing eight independent claims against Defendants: (1) federal trademark infringement under section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1); (2) federal unfair competition under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (3) federal dilution of AE Outfitter's mark under section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c); (4) cancellation of the registration of AE Furniture's mark under section 14 of the Lanham Act, 15 U.S.C. § 1064; (5) state-law dilution, 765 ILCS 1036/65; (6) common-law unfair competition; (7) state unfair and deceptive trade practices, 815 ILCS 510/1 to 510/7; and (8) violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2. R. 35, Am. Compl. ¶ 3.[1] Defendant has asserted two affirmative defenses in response: laches and genericness. R. 37, Answer at 35-36. AE Outfitters has moved for summary judgment on the federal and state infringement and unfair-competition claims (Claims 1, 2, 6, and 7), the cancellation claim (Claim 4), as well as Defendants' laches and genericness defenses. R. 48, Pls.' Mot. Summ. J.[2] AE Furniture has filed a cross-motion on the laches defense and a stand-alone summary-judgment motion on the federal dilution claim (Claim 3). R. 58, Defs.' Mot. Summ. J. For the reasons discussed below, AE Outfitters' motion is granted and Defendants' motion is denied.

I. Background

In deciding the parties' cross-motions for summary judgment, the Court views the evidence in the light most favorable to the respective non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Plaintiff AE Outfitters owns and operates a chain of retail stores that offers privately branded apparel and accessories under the registered marks "American Eagle" and "American Eagle Outfitters." PSOF ¶¶ 1, 16; R. 52, Gibbs Decl., Exh. 1; R. 60, Yi Decl., Exh. 10.[3] The company opened its first retail store in 1977 and now operates around 860 stores in the United States, 95% of which are located in shopping malls. DSOF ¶ 45; PSOF ¶ 13. Each month, 30 million customers walk through AE Outfitters' stores, and 20 million customers visit its website. DSOF ¶ 62. And in recent years, the company has generated billions of dollars each year in retail sales. PSOF ¶ 20; see also R. 53, Grover Decl. ¶ 14. AE Outfitters has also launched other retail sub-brands over the years, including Aerie by American Eagle, 77kids by American Eagle, and Martin㤠. PSOF ¶ 15. AE Outfitters primarily targets consumers between the ages of fifteen and twenty-five, but there is ultimately no cap on the age of the consumer to whom it markets. DSOF ¶¶ 35, 71. The company's annual budget for reaching its target market is $52 million. Id. ¶ 69.

Although the company specializes in clothing apparel, jewelry, and accessories, AE Outfitters offered a furniture line known as First Apartment from 2004 to 2005. Id. ¶¶ 23-24, 40, 82-83; PSOF ¶¶ 16, 19. The company did not sell large furniture items such as sofas, but it did sell smaller pieces, including chairs, ottomans, stools, small tables, floor cushions, rugs, laundry baskets, and furniture accessories like pillows, blankets, and frames. DSOF ¶¶ 30-33, 51; PSOF ¶ 19. These items ranged in price from $20 to $50. DSOF ¶ 38. AE Outfitters' management has discussed selling furniture again in the future. Id. ¶¶ 34, 87, 95; PSOF ¶ 17.

Defendants Tamman and Oudie Absoussaf, AE Furniture's owners and principal officers, have operated AE Furniture as a wholesale furniture warehouse under the name "Titanic Furniture" since July 2005. PSOF ¶¶ 34, 38. Through their Titanic wholesale warehouse, catalog, and website (www.titanicfurniture.com), Defendants sell furniture products to over 650 retail stores nationwide. DSOF ¶ 89; PSOF ¶ 35. In 2006, Defendants applied to the United States Patent and Trademark Office (PTO) to register their design mark "American Eagle Furniture Your Home's Best Friend, " which is the phrase that appears in front of an eagle and is superimposed on an American-flag background. See PSOF ¶ 40; R. 55, Hooker Decl., Exh. 32, AEF Application. Significantly, the trademark[4] that was ultimately registered (Reg. No. 3, 428, 434) in 2008 applies only to "wholesale stores featuring furniture." R. 55-3, 30(b)(6) Dep. Exh. 16, AEF Serv. Mark. Yet Defendants do not use their AE Furniture design mark on the signage for the Titanic warehouse or on Titanic's catalog or website. DSOF ¶ 90; PSOF ¶¶ 36, 39, 49. They only use the mark on tags that they directly attach to some of their furniture products. DSOF ¶ 90.

In 2009, the Aboussafs, along with Defendants Jay Nouri, Tony Alchuiliti, and Houssam Alchriti, expanded AE Furniture's operations and opened AE Furniture retail stores in three Chicago-area shopping malls where AE Outfitters already had retail stores. PSOF ¶¶ 50-53, 55. Although they did not use the AE Furniture design mark on their signs, the Defendants used the words "American Eagle Furniture, " in solid capital letters, on the signs above their new retail stores. Id. ¶¶ 49-50, 57-60. The parties' signs are not identical, but they do use similar capitalization and font. See Pls.' Br. at 2 (photos of each of the stores' signs). The stores at the Gurnee Mills and Fox Valley Malls closed in 2011, but the AE Furniture store at the Woodfield Mall is still open. PSOF ¶¶ 4-5, 56, 60. AE Furniture's target retail consumers are between the ages of twenty-five and sixty, and its most significant customer group is people ages thirty to thirty-eight. DSOF ¶ 100.

Since the opening of AE Furniture's retail stores, AE Outfitters has documented many instances of consumer confusion stemming from the similarity between the parties' names, including misdirected deliveries, customers believing that they could redeem AE Outfitters' consumer loyalty program rewards at AE Furniture stores, and consumers stating that they did not know AE Outfitters had furniture stores (this latter category of customers believed, in other words, that the AE Furniture stores were AE Outfitter furniture stores). See PSOF ¶ 68; see also Hooker Decl., Exhs. 12-28. In response, soon after learning about AE Furniture's retail stores in June 2010, AE Outfitters sent demand letters to the owners of each store, requesting that they stop using the "American Eagle Furniture" and "American Eagle" marks for their retail goods and services. DSOF ¶¶ 21-22; PSOF ¶ 65-66. Defendants received these letters, but they did not respond. DSOF ¶ 92; PSOF ¶ 66. AE Outfitters sent two additional rounds of demand letters in July and August 2010, but again, the Defendants did not respond. PSOF ¶ 66. AE Outfitters then filed this lawsuit in April 2011. R. 1.

II. Legal Standard

Courts apply the usual Rule 56 standard when reviewing cross-motions for summary judgment, but must be careful to draw reasonable inferences in the correct direction when evaluating the cross-motions. Int'l Bhd. of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002). Summary judgment must be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating summary-judgment motions, courts must view the facts and draw reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007). The Court may not weigh conflicting evidence or make credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011), and must consider only competent evidence of a type otherwise admissible at trial, Gunville v. Walker, 583 F.3d 979, 985 (7th Cir. 2009). The party seeking summary judgment has the initial burden of showing that there is no genuine dispute and that it is entitled to judgment as a matter of law. Carmichael v. Village of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir. 2008). If this burden is met, the adverse party must then "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256.

III. Analysis

A. Trademark Infringement and Unfair Competition (Claims 1, 2, 6, and 7)

AE Outfitters moves for summary judgment as to liability on its trademark infringement and unfair competition claims under federal and state law. The Seventh Circuit has assumed without deciding that the same standard applies to both the federal and Illinois claims. See Neuros Co. v. KTurbo, Inc., 698 F.3d 514, 523 (7th Cir. 2012); Muzikowski v. Paramount Pictures Corp., 477 F.3d 899, 907 (7th Cir. 2007); cf. also Tarin v. Pellonari, 625 N.E.2d 739, 745-46 (Ill.App.Ct. 1993). To prevail on all of these claims, AE Outfitters "must establish that (1) its mark[s] [are] protectable and (2) [Defendants'] use of the mark is likely to cause confusion among consumers." CAE, Inc. v. Clean Air Eng'g, Inc., 267 F.3d 660, 673-74 (7th Cir. 2001). The parties dispute only the second element of this test: the likelihood of confusion. See Defs.' Resp. Br. at 10 (confining their arguments to the likelihood-of-confusion factors).

Because the Court concludes that AE Outfitters is entitled to summary judgment on the likelihood-of-confusion issue, it is worth explaining, at the outset, the caution with which courts must approach such fact-bound trademark cases. "[A] motion for summary judgment in trademark infringement cases must be approached with great caution." AHP Subsidiary Holding Co. v. Stuart Hale Co., 1 F.3d 611, 616 (7th Cir. 1993). Generally, courts should only resolve the likelihood-of-confusion question on summary judgment "if the evidence is so one-sided that there can be no doubt about how the question should be answered." AutoZone, Inc. v. Strick, 543 F.3d 923, 929 (7th Cir. 2008) (internal quotation marks and citation omitted). Despite this cautionary standard, granting summary judgment for a trademark owner is not an unprecedented anomaly. See, e.g., CAE, 267 F.3d at 664, 687 (affirming summary judgment for the plaintiff); cf. also Packman v. Chi. Tribune Co., 267 F.3d 628, 646 (7th Cir. 2001) (affirming summary judgment for the defendant); Door Sys., Inc. v. Pro-Line Door Sys., Inc., 83 F.3d 169, 173 (7th Cir. 1996) (same). Indeed, as discussed below, the similarities between CAE and this case reinforce the conclusion that granting summary judgment for AE Outfitters is appropriate here.

Courts analyze seven factors to determine whether consumers are likely to be confused:

(1) the similarity between the marks in appearance and suggestion; (2) the similarity of the products; (3) the area and manner of concurrent use; (4) the degree and care likely to be exercised by consumers; (5) the strength of the plaintiff's mark; (6) any actual confusion; and (7) the intent of the defendant to palm off' his product as that of another.

AutoZone, 543 F.3d at 929 (citation omitted). "No single factor is dispositive." Id. But three factors-the similarity of the marks, actual confusion, and the defendant's intent-are "particularly important." Id. The Court analyzes each of these factors in turn.

1. Similarity of the Marks

To determine whether two marks are similar, courts should compare the marks "in light of what happens in the marketplace and not merely by looking at the two marks side-by-side." Id. at 930 (internal quotation marks and citation omitted). Here, the salient portion of both marks-the words "American Eagle"- is identical. See Ty, Inc. v. Jones Grp., Inc., 237 F.3d 891, 898 (7th Cir. 2001) ("[I]f one word or feature of a composite trademark is the salient portion of the mark, it may be given greater weight than the surrounding elements." (internal quotation marks and citation omitted)). The "American Eagle" phrase is the salient part of the marks-the part that matters-because "Outfitters" and "Furniture" are, on their own, generic. Defendants have prominently incorporated "American Eagle" into their store signage. And although their registered-on-paper design mark incorporates an elaborate graphic and a longer word mark ("American Eagle Furniture Your Home's Best Friend"), they do not actually use this design mark on their retail store signs. And, like AE Outfitters' store signs, all of the words on Defendants' signs are also in capital letters, using ...


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