Marcel Fashions Group, Inc. v. Lucky Brand Dungarees, Inc.

Addressing whether a trademark holder’s victory in a prior lawsuit barred a subsequent action on new acts of infringement, the U. S. Court of Appeals for the Second Circuit overturned a district court’s summary judgment and denial of leave to amend the complaint, finding that the prior judgment could not extinguish claims that did not even exist and that could not have been sued upon in the previous case.  Marcel Fashions Group, Inc. v. Lucky Brand Dungarees, Inc., Case No. 12-4341 (2d Cir., Feb. 25 2015) (Leval, J.).

Marcel and Lucky Brand were parties to prior litigation involving Lucky Brand’s use of Marcel’s “Get Lucky” trademark.  Marcel filed a lawsuit against Lucky Brand in 2001, alleging unfair competition and trademark infringement.  This 2001 action led to a May 2003 settlement, in which Lucky Brand agreed to stop using the “Get Lucky” mark.  However, Lucky Brand later filed suit in 2005 alleging that Marcel had engaged in unfair business practices and that Marcel’s “Get Lucky” trademark infringed Lucky Brand’s marks.  Marcel filed counterclaims alleging infringement through use of the “Get Lucky” mark and breach of the 2003 settlement agreement.  This 2005 action resulted in a jury verdict of trademark infringement by Lucky Brand for use of the “Get Lucky” mark “after May 2003” and an award of compensatory and punitive damages.

In 2011, Marcel filed yet another complaint for trademark infringement, alleging that Lucky Brand was using the “Get Lucky” mark in the identical manner and form and on the same goods for which they were found liable for infringement in the 2005 action.  But the district court granted Lucky Brand’s motion for summary judgment on the grounds that Marcel’s claims were precluded by res judicata because they were essentially the same claims as those in the 2005 action.  The district court also found that Marcel had abandoned injunctive relief claims and that Marcel had been awarded damages for use of the marks “after May 2003,” which the court interpreted as evidence that Marcel had already been compensated for any future infringement.  Marcel appealed.

Relying on the recent decision in TechnoMarine v. Giftports, the 2d Circuit found that res judicata in the form of claim preclusion did not apply.  Claim preclusion requires that the prior action was adjudicated on the merits, involved the same adverse parties and that the asserted claims were or could have been raised in the prior action.  Only the third element of the test was at issue.  As in TechnoMarine, the 2d Circuit found that the prior judgment could not extinguish claims which did not even exist and which could not have been sued upon in the previous case.  To hold that a finding of infringement would immunize a defendant against all lawsuits alleging subsequent infringement of the same trademark would be unacceptable.

Further, the 2d Circuit found that the judgment and damages for Lucky Brand’s use of Marcel’s mark “after May 2003” only specified the infringing uses arising after the May 2003 settlement agreement and was not intended to serve as compensation for all future infringing acts arising after May 2003.  Accordingly, the 2d Circuit concluded that the district court improperly granted summary judgment to Lucky Brand and vacated the order.  For the same reasons, the court found that the distri