If the messiah tarries, how long until we find laches?

Vaad L’Hafotzas Sichos, Inc. v. Kehot Publication Society,
— F.Supp.3d —-, 2016 WL 183226, No. 10–CV–4976 (E.D.N.Y. Jan. 14, 2016)
Found this one in another search and was fascinated.  After the death of Rabbi Menachem Mendel
Schneerson (the Rebbe), a religious dispute divided the Chabad Lubavitch
community. Counterclaim defendants Vaad L’Hafotzas Sichos, Inc. (Vaad) and
Zalman Chanin held the belief that the Rebbe is the Messiah and still lives. One
result was a lot of copyright and trademark lawsuits.  The court previously upheld the PTO’s
registration of the Kehot Publication Society logo by Merkos L’Inyonei Chinuch

The court then conducted a bench trial about whether Vaad’s
use of the logo, which it did on all its publications, infringed Merkos’ trademark
rights and caused dilution under New York law. 
Apparently, “Merkos would have no objections if Vaad did not omit the
appellation “of blessed memory” after references to the Rebbe’s name—which is
contained in Merkos’s publications. Vaad does this consistent with its belief
that the Rebbe is the Messiah and still lives.” Merkos didn’t want to be
associated with Vaad’s messianic belief and thus sought an injunction.
Rabbi Joseph I. Schneersohn founded the Kehot Publication
Society, then established Merkos to provide broader educational services to the
Lubavitcher community. In 1942, Merkos took over direction of Kehot, an
unincorporated entity, and affixed the Kehot logo to almost all its
publications. During Joseph I. Schneersohn’s tenure, several entities used the
Kehot logo, some part of Chabad Lubavitch’s umbrella organization and others independent.
All uses of the logo were contingent on Schneersohn’s approval. This practice
continued when the Rebbe succeeded the previous Rebbe in 1951.
Vaad was formed in 1967 to centralize the publication and
distribution of the Sichos (talks or sermons by the Rebbe).  From then through 1994, Vaad submitted its
weekly pamphlets to the Rebbe, upon which Vaad would publish and distribute the
pamphlets under the Kehot logo.  In 1994,
the Rebbe died, but Vaad did not include the “of blessed memory” appellation in
its next publication.  Members of Merkos’
board sent a letter to Vaad chastising it for doing so, and Vaad used the
appellation for about a year, but then resumed publishing without it.  Merkos protested again in 1995, but Vaad did
not stop its practice. 
In 2001, Merkos applied for a registration of the Kehot logo
as a trademark for use on “books, magazines, charts, maps, and photographs on a
variety of aspects of Jewish life.” The TTAB dismissed Vaad’s opposition in 2010.  The court affirmed Merkos’ ownership in a prior
opinion; in a footnote, it noted that, even had it disagreed with the TTAB, B&B v. Hargis would likely have
required it to apply preclusion to the TTAB ruling.
Strength of the mark: Conceptually strong (“an original
image and … thus fanciful and inventive”) but commercially weak, because it was
and continued to be used by numerous entities other than Merkos in the
production of books for sale in the Hasidic community.  Thus, the logo didn’t provide strong source
identification for Merkos. (But apparently strong enough to be more than merely
descriptive?)  Weighed against confusion.
Similarity: the logos were identical, favoring a confusion
finding.  So did the proximity of the products
and their identical quality.  The books
were identical except for the omission of the appellation after the Rebbe’s
name in Vaad’s publications, and Vaad and Merkos targeted the same market, the
Hasidic community.
Actual confusion: Merkos provided emails from prospective
customers to the Kehot customer service email address asking questions related
to books published by Vaad. E.g.: “I’m interested in purchasing the likutei
sichos parshios from you but I don’t see it online do you have it in stock?”  But the authors didn’t testify, and the court
didn’t know why they believed that Merkos published Vaad publications.  It was possible that confusion stemmed from
the logos, but also possible that confusion stemmed from the high similarity of
the parties’ books.  For example, while
Merkos does not offer the Likkutei Sichos organized by parsha (weekly Torah
portion), Merkos does publish the Likkutei Sichos.  Moreover, Rabbi Mendel Sharfstein testified
that individual members of the Hasidic community are “reluctant to interact
with [him] and the activities that [he is] involved in for Merkos,” if they
think Merkos believes the Rebbe is the Messiah. But the internal dispute about
whether the Rebbe is the Messiah “is well-known throughout the Hasidic
community, and it is likely that individuals in the community would inquire as
to Merkos’s beliefs regardless of whether Vaad used the Kehot logo.”  Weighed against confusion.
Bad faith: Vaad’s continued use of the logo after Merkos’ protest
was not in bad faith; the letters indicated that Merkos objected to the
omission of the appelation, but didn’t demand that Vaad cease publishing under
the Kehot logo. “Considering Vaad’s longstanding permission and practice to
publish under the Kehot logo, Vaad’s disregard of Merkos’s instruction to
include the appellation does not necessarily establish that from that point
forward it was intentionally infringing upon Merkos’s trademark.”  Plus, Vaad believed that the Rebbe granted it
permission to use the logo and that Merkos didn’t have the authority to revoke
that permission. While that was wrong as a matter of law, it was not a decision
made in bad faith.
Consumer sophistication: Merkos’ witness “candidly” admitted
that “those who are interested in the Hasidic life” are aware of the present
litigation and that there “are many savvy enough” in the community to recognize
the difference between a Vaad and Merkos publication. Didn’t favor confusion.
On the whole, the multifactor test weighed against finding
likely confusion.  The court weighed the
commercial weakness of the mark—its use by numerous publishing organizations
since the 1940s—heavily, as well as the lack of convincing evidence of actual
confusion despite unauthorized use of the logo for over 20 years.
Even if the court had found likely confusion, it would have
also found laches.  Vaad was entitled to
a presumption of laches (using the analogous limitations period of  New York’s six-year period for fraud claims). Merkos
delayed for 17 years before asserting infringement counterclaims, a delay that
was not reasonable under the circumstances. 
Vaad didn’t change the extent of its alleged infringement by, in 1998,
changing the title page of Vaad publications from “Published and Copyrighted by
‘Kehot’ Publication Society” to “Published and Copyrighted by Vaad L’Hafotzas Sichos.”
 “[I]f anything, clearly identifying a
book as being published by Vaad could only help reduce consumer confusion.”  Nor were occasional
communications/negotiations during the period between the 1995 letter and the
2001 litigation sufficient to excuse the delay. 
Finally, bad faith didn’t disentitle Vaad to laches because Vaad acted
in good faith when it continued to publish under the Kehot logo “in a manner it
believed was consistent with the Rebbe’s directives.”
These findings also doomed Merkos’ unfair competition claims
under New York common law and New York General Business Law § 349 fail.
As for dilution under New York General Business Law § 360–1,
New York applies dilution only to those marks “which are truly of distinctive
quality or which have acquired a secondary meaning in the mind of the public.”
The Second Circuit has held held that the statute “protects only extremely
strong marks.” Here, the numerous entities using the mark prevented the court
from finding that the logo was an extremely strong mark.

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