The U.S. Court of Appeals for the Second Circuit, in finding an ambiguity as to what fashion designer Joseph Abboud had conveyed in connection with the sale of certain names and marks, vacated a permanent injunction entered against Joseph Abboud and remanded the matter for further proceedings. JA Apparel Corp. v. Abboud, Case No. 08-3181 (2d Cir., June 10, 2009) (Kearse, J).
Abboud and the plaintiff, JA Apparel Corp. (JA), entered into a purchase and sale agreement pursuant to which Abboud sold his right, title and interest to certain names and trademarks, including Joseph Abboud. Upon learning that Abboud intended use his name in advertisements promoting his new clothing label called “jaz,” JA filed suit alleging breach of contract and trademark infringement. The district court found that the agreement unambiguously conveyed all of Abboud’s rights to use his name for commercial purposes and that Abboud’s use of his name in connection with the “jaz” line constituted trademark infringement. Abboud appealed.
On appeal, the Second Circuit found that the purchase and sale agreement was not unambiguous because the meaning of the word “names” as used in the contract was ambiguous. It could reasonably be interpreted as referring to brand names rather than all of Abboud’s rights to use his name for commercial purposes. Therefore, the parties were entitled to submit extrinsic evidence regarding their intent in entering the agreement on remand.
The Second Circuit further held that the district court erred in finding for the plaintiff on its trademark infringement claims because the court did not properly analyze the fair use factors. A determination of fair use turns on whether a given use was other than as a mark, in a descriptive sense and in good faith. The district court found that Abboud’s use had a descriptive component but that Abboud had failed to establish the “good faith” and “other than as a mark” elements. The Second Circuit held that the district court’s finding of a lack of good faith was in error because it was based on two erroneous conclusions: the agreement unambiguously conveyed all rights to use the name Joseph Abboud for commercial purposes to the plaintiff, and despite Abboud’s lack of intent to confuse, consumers would be confused. A finding of lack of good faith must be based on the user’s intent to confuse, not actual confusion. In addition, the Second Circuit found that in order to properly evaluate whether Abboud’s use was “other than as a mark,” the district court should have undertaken an individualized consideration of each of the proposed advertisements introduced as evidence.