Via Sarah Burstein:
Worldwide Diamond Trademark S, Ltd., v. Blue Nile, Inc., No. 14-cv-03521 (S.D.N.Y. Nov. 6, 2014)
Worldwide sought a preliminary injunction in its patent and trade dress lawsuit against Blue Nile for allegedly copying its Hearts and Arrows trade dress/diamond design. The court declined, citing Worldwide’s failure to show irreparable harm; any lost sales or goodwill could be adequately compensated with damages, since the only record evidence was that Worldwide had lost some business/business opportunities. Other posited harms were speculative and remote.
Worldwide makes cushion-cut diamonds, called the Ideal Cushion, which generate a “hearts and arrows” pattern visible in the presence of light at low magnification. It has a patent for the design of its cushion-shaped diamond and a pending application for “Ideal Cushion with corresponding diamond design.” Worldwide diamonds come from Canada and thus cost more than diamonds from other sources; to maintain its profits, Worldwide charges a premium, and allegedly cultivated a reputation of exclusivity by telling customers that the Ideal Cushion cannot be obtained from any other source. Worldwide only sells its proprietary cuts to brick and mortar retailers. It also has a relationship with De Beers allowing it to obtain high quality rough diamonds, and certifications from Forevermark, the De Beers brand reserved for the most exclusive and reputable diamond manufacturers.
Blue Nile, an online retailer, also sells cushion-cut diamonds that generate a hearts and arrows pattern. Blue Nile also has a patent for its diamonds.
Worldwide sought a preliminary injunction, and irreparable harm is the most important prerequisite. Irreparable injury requires injury that is neither remote nor speculative, but actual and imminent.
The evidence the court discussed was as follows: Worldwide marketed itself as the exclusive provider of cushion-cut diamonds that generate a hearts and arrows pattern, enabling it to charge a premium. But soon after its introduction, Blue Nile began selling the Blue Nile diamond. Worldwide claimed that an unidentified number of its retailers returned an unquantified number of the Ideal Cushion diamonds t because their customers believed that they could purchase similar diamonds directly from Blue Nile. In addition, Worldwide claimed that it lost other opportunities for new business because customers were expressing doubt that Worldwide Diamond was the exclusive provider of cushion-cut diamonds that generate a hearts and arrows pattern. A Malaysian diamond retailer decided to delay a contract with Worldwide and a U.S. based jewelry manufacturer and distributor “withdrew [its] interest” in selling the Ideal Cushion. Worldwide was also concerned that loss of exclusivity could threaten its relationship with Forevermark, De Beers, and two U.S. retailers, which could negatively impact its reputation, sales, and revenues. Finally, Worldwide argued that Blue Nile’s competition would force Worldwide to lower its prices, leading to insolvency.
But the mere possibility of irreparable harm was insufficient. Worldwide only provided speculation about the risk of losing additional customers. It claimed to have suffered returns because of the Blue Nile diamonds, but didn’t produce affidavits, emails, letters, or any other form of correspondence from these retailers or customers to substantiate this claim. A subjective belief in injury was insufficient. Worldwide didn’t offer evidence that sales decreased from prior years or below projections since the Blue Nile diamonds entered the market, and even if it had, it would have needed to show a causal connection.
Nor did Worldwide show evidence that its business relationship with either Forevermark or De Beers was in jeopardy. Neither Forevermark nor De Beers had indicated that these relationships were at risk. As for price erosion, Worldwide hadn’t lowered its prices, and had no expert or other testimony about the likelihood of price erosion, or evidence that retail customers had requested price reductions because of the Blue Nile diamonds.
Moreover, any injury would be compensable with money damages. If Worldwide ultimately prevailed, Worldwide’s sales could be compared against its established track record and its reasonable forecasts to determine the extent of its damages. What about goodwill? Well, when a product has a sales record and its loss wouldn’t affect other aspects of business, damages could generally be proven. “In general, injury resulting from the loss of goodwill is irreparable only when ‘the very viability of the plaintiff’s business, or substantial losses of sales beyond those of the terminated product, have been threatened.’”
Here, however, Worldwide’s history of operation allowed it to calculate money damages for any lost goodwill. Worldwide had sold more than 7,600 diamonds that generate the hearts and arrows pattern, and made at least fifteen different types of proprietary cut diamonds. By contrast, Blue Nile sold a redacted but apparently non-significant number of Blue Nile diamonds; even if every Blue Nile sale constituted a lost sale to Worldwide, the court held, it was “inconceivable” that those losses would completely destroy Worldwide’s business.
At the hearing, Worldwide didn’t identify what percentage of its business was based on sales of the Ideal Cushion or quantify the number of retailers who returned diamonds or how many were returned. Without that, the court wouldn’t speculate that such returns or loss of goodwill would threaten the viability of Worldwide’s overall business. Thus, Worldwide failed to show that any harm resulting from the loss of goodwill was irreparable.
Worldwide’s alleged lost business opportunities with a Malaysian diamond retailer and U.S. manufacturer didn’t come with evidence about the stage of negotiations, the length or term of the contract, or the quantity of products to be provided, so it was “entirely unclear” that Worldwide lost an actual, tangible, business opportunity as a result of the alleged infringement. Moreover, Worldwide failed to establish a causal link between Blue Nile diamonds and its lost opportunities. It also didn’t assert obstacles to calculating damages for these lost business opportunities.
Finally, Blue Nile averred that it could satisfy any damage award in the event liability
Injunctive relief denied.