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I.M. Wilson, Inc. v. Otvetstvennostyou "Grichko"

United States District Court, E.D. Pennsylvania

July 25, 2019

I.M. WILSON, INC., Plaintiff,
v.
OTVETSTVENNOSTYOU "GRICHKO" et al., Defendants.

          MEMORANDUM

          GENE E.K. PRATTER UNITED STATES DISTRICT JUDGE.

         The defendants in this case-OOO Grichko, Nicolay Grishko, and Grishko S.R.O.[1]-are Russian and Czech entities that manufacture and sell ballet shoes under the name GRISHKO. They own the trademark GRISHKO everywhere in the world, except for the United States. In this country, Plaintiff I.M. Wilson, Inc. owns the GRISHKO trademarks and has since the early 1990s when Mr. Grishko wrote two letters that allowed I.M. Wilson to register the mark.

         For decades, I.M. Wilson was the defendants' exclusive distributor in the United States and, until recently, the parties had an amicable working relationship. In 2016, the defendants terminated the exclusive licensing agreement under which the parties were operating, and the exclusivity of the relationship officially came to an end in March 2018. Around that time, the defendants began selling products directly to U.S. consumers, increasing their sales activities around the holidays. This prompted I.M. Wilson to seek a preliminary injunction to prevent the defendants from infringing on the U.S. GRISHKO trademarks. The defendants countered by filing a motion to dismiss or stay the case pending arbitration and argue that this dispute is covered by an arbitration clause in the parties' 1992 exclusive licensing agreement.

         This Memorandum addresses both motions in the order that they were filed.[2] The Court is prepared to grant I.M. Wilson's Motion for Preliminary Injunction because I.M. Wilson has demonstrated a sufficient likelihood of success on the merits, irreparable harm, and that the equities balance in its favor. The Court does so with some reticence, however, because it is questionable whether a preliminary injunction is in the public interest. Moreover, because it is by no means inevitable that I.M. Wilson will prevail at the next phase of this litigation, the Court will entertain submissions on the issue of the amount of a bond to be posted by I.M. Wilson in connection with issuance of a preliminary injunction. The Court denies the Motion to Dismiss for Failure to State a Claim or, Alternatively, Stay this Action Pending Arbitration because the agreement containing the arbitration clause was terminated, and this dispute does not relate back to that agreement.

         I. M. Wilson's Motion for Preliminary Injunction

         Some nine months after seeing that the defendants were selling ballet shoes in the United States, I.M. Wilson filed a Motion for Preliminary Injunction on December 4, 2018, alleging that the defendants are actively infringing on its GRISHKO trademarks. Since then, there have been numerous rounds of briefing (with and without oral arguments), several days of hearings, post-hearing submissions, and two motions to supplement the record.[3] Upon consideration of all these materials, the Court makes the following findings of fact and conclusions of law.

         I. Findings of Fact

         The Court held three days of hearings on the factual issues underlying this preliminary injunction. Those hearings were held on February 15, February 27, and April 5, 2019.[4]

         A. The Parties

         1. I.M. Wilson is a Pennsylvania corporation with its principal place of business located in King of Prussia, Pennsylvania. I.M. Wilson sells a variety of dance related products, including ballet shoes and pointe shoes. Feb. 15 Hrg. Tr. 36:4-6; 38:2-7.

         2. I.M. Wilson is owned by Irene Wilson, a citizen of the United States. Feb. 15 Hrg. Tr. 34:9-11. Ms. Wilson danced ballet in her youth. Feb 27 Hrg. Tr. 13:20-14:16. She later obtained degrees in Russian and Communications. Feb. 15 Hrg. Tr. 34:12-17.

         3. Defendant Obchtchestvo S Organtichennoy Otvetstvennostyou "Grichko" (OOO Grichko) is a Russian company that manufactures and sells dancewear products, including ballet shoes and pointe shoes. Apr. 5. Hrg. Tr. 143:8-144:3.

         4. Defendant Grishko Dance, S.R.O. is a company organized under the laws of the Czech Republic. Apr. 5 Hrg. Tr. 141:15-23. Grishko Dance obtains GRISHKO-branded products, including ballet and pointe shoes, from 000 Grichko and sells these products through the website grishkoshop.com. Apr. 5 Hrg. Tr. 138:1-22; 141:24-143:7.

         5. Defendant Nicolay Grishko[5] is a 60 percent owner of Defendant 000 Grichko and serves as the company's President and General Director. Apr. 5 Hrg. Tr. 141:9-13. Mr. Grishko is a 100 percent owner of Defendant Grishko Dance and serves as that company's co-administrator. Apr. 5 Hrg. Tr. 141:15-23.

         B. The Parties' Initial Dealings

         6. Mr. Grishko is married to a former Russian professional ballerina, Tamara Grishko. Apr. 5 Hrg. Tr. 45:7-12. Mr. and Mrs. Grishko had friends that profited from selling Russian-made ballet shoes, which inspired Mr. Grishko to manufacture and sell Russian-made ballet shoes. Apr. 5 Hrg. Tr. 46:2-47:20.

         7. In 1988, Mr. Grishko launched a "Kooperativ" (a worker-owned enterprise that differed from the historically state-owned enterprises of the past) because, at that time, the U.S.S.R. did not allow for the formation of private companies or private property ownership. Apr. 5 Hrg. Tr. 44:17-22. He named the Kooperativ "Tanyets" (the Russian word for "dance"). Apr. 5 Hrg. Tr. 48:20-49:16. Kooperativ Tanyets was formed for the purpose of manufacturing ballet and pointe shoes. Apr. 5 Hrg. Tr. 44:9-22; 48:20-25.

         8. Each and every pair of GRISHKO ballet pointe shoes is hand crafted in Russia by skilled cobblers and inspected by quality control specialists who place unique identification numbers inside the fold of the seam within the shoes. Ex. D26.

         9. In the late-1980s, Ms. Wilson wanted to start an import business with the goal of importing goods from Russia. Feb. 27 Hrg. Tr. 15:22-16:13. Ms. Wilson worked with Amtorg, an international company that matches importers with exporters. Feb. 27 Hrg. Tr. 16:18-22.

         10. Ms. Wilson originally considered importing vodka, but Amtorg ultimately connected her with Mr. Grishko to discuss importing his ballet shoes. Feb. 15 Hrg Tr. 54:11-55:3; Feb. 27 Hrg. Tr. 16:18-25. Ms. Wilson made arrangements with Amtorg to travel to Russia in 1990 with the goal of meeting a ballet shoe manufacturer. Feb. 27 Hrg. Tr. 17:13-20.

         11. While in Russia, Ms. Wilson met Mr. Grishko, and the parties agreed that I.M. Wilson would sell Tanyets-manufactured shoes in the United States under the brand name "GRISHKO."[6] Feb. 15Hrg. Tr. 54:11-56:9.

         C. The Trademark License and Distribution Agreements Between the Parties

         12. On April 25, 1990, I.M. Wilson entered into an exclusive trademark license and distribution agreement (ETLDA) with the Tanyets Kooperativ. Ex. D10.

         13. The agreement stated that:

[Grishko] has agreed to sell and [I.M. Wilson] has agreed to buy ballet shoes, toe shoes and such other footwear, athletic equipment or other items as the parties hereto may later agree (the "Goods"), in quantity and assortment, at prices and according to specifications, all as attached hereto in Appendix I, which constitutes an integral part of this Agreement.

Ex. D10 at ¶ I.

         14. The 1990 ETLDA granted I.M. Wilson an exclusive license to sell Grishko products in the United States. Ex. D10 at ¶ XV. In that regard, the agreement stated:

The Seller hereby grants the Buyer an exclusive right, for the duration of this Agreement, to use the name "Grishko" in connection with the sale of the Goods in the United States. In consideration of such right, the Buyer shall pay the Seller a royalty equal to 10% of the value of each shipment of Goods.

Ex. D10 at ¶XV.

         15. The agreement remained in effect for one year and automatically renewed for successive one-year terms unless a party provided notice that it was terminating the agreement at least 90 days prior to the "anniversary of [the] Agreement." Ex. D10 at ¶ XVIII.

         16. The agreement further provided that I.M. Wilson was the exclusive distributor of GRISHKO products in the United States during the pendency of the agreement and for a period of one year after the agreement's termination. Ex. D10 at ¶ XIV.

         17. Any alterations or additions to the agreement were "valid only if in writing and signed by persons duly authorized by both parties." Ex. D10 at ¶ XVIII.

         18. The agreement further provided that:

Any dispute, controversy or claim arising out of or in connection with this Agreement, or the breach, termination of [sic] invalidity thereof, shall be finally settled by arbitration in accordance with the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce. The tarbitral [sic] tribunal shall be composed of three arbitrators the place of the arbitration shall be Stockholm, Sweden. The language(s) to be used in the arbitral proceeding shall be English. This Agreement shall be governed by and construed in accordance with the Laws of the Kingdom of Sweden.

Ex. D10 at ¶ XVII.

         19. On March 1, 1992, the parties entered into an identical agreement that substituted Grishko, Inc. for the Tanyets Kooperativ. Ex. D 11.[7]

         D. Ownership of the GRISHKO Trademark in the United States

         20. The parties agreed that I.M. Wilson should register the trademark in the United States. Feb. 15 Hrg. Tr. 58:20-60:6; Apr. 5 Hrg. Tr. 69:18-70:7.

         21. On July 24, 1992, Ms. Wilson completed a trademark application for "dancing shoes" using the mark "GRISHKO." Ex. D9 at pp. 42-43 of 138. In that application, Ms. Wilson signed a declaration that stated she "declares that she is properly authorized to execute this application on behalf of the applicant; [and] she believes the applicant to be the owner of the trademark sought to be registered" Ex. D9 at 42-43 of 138.

         22. On August 5, 1992, Mr. Grishko signed a letter that stated, "I agree that I.M. Wilson, Inc. is the owner of the Trademark, GRISHKO and its goodwill in the United States of America. I further consent to the use of my name in that trademark." Ex. P2. That letter was signed by Mr. Grishko, typed on OOO Grichko letterhead, and affixed with the 000 Grichko seal. Ex. P2; Apr. 5Hrg. Tr. 98:6-19.

         23. Ms. Wilson did not pay Mr. Grishko anything in return for the rights conveyed by this letter. Feb. 27 Hrg. Tr. 49:20-22.

         24. On October 7, 1992, the U.S. Patent and Trademark Office refused I.M. Wilson's trademark application. Ex. D9 at 35 of 138. The examining attorney refused:

the registration because the mark consists of or comprises matter which may falsely suggest a connection with Nikolai Grishko, a renowned manufacturer of dancing shoes in Russia. . . . While the evidence attached indicates that there may be a connection between the applicant and Mr. Grishko, the application file does not demonstrate this.

Ex. D9 at 35 of 138.

         25. The denial continued:

If the foreign manufacturer does own the mark in a foreign country, the applicant must provide proof of its right to register the mark in the United States. This proof may consist of: (1) a written assignment of rights in the United States by the foreign owner to the applicant, (2) a written consent from the foreign owner to the applicant's registration of the mark in the United States, or (3) a written agreement between the parties designating the applicant as owner in the United States. .. . If the applicant cannot provide this proof, the examining attorney must refuse registration because the applicant is not the owner of the mark.

Ex. D9 at 36 of 138.

         26. On October 27, 1992, I.M. Wilson's counsel, Mr. Maleson, filed a response in which he quoted the August 1992 letter but inadvertently failed to attach a copy of the document. Ex. D9 at 32-34 of 138.

         27. On January 15, 1993, the PTO issued a Final Action again denying the registration. Ex. D9 at 28-30 of 138. The examining attorney concluded that I.M. Wilson's response "cannot be taken as an effectual resolution of the issues raised by the refusal of registration. This is largely because the documents referred to in the response were not submitted." Ex. D9 at 28 of 138.

         28. On January 27, 1993, Mr. Maleson then submitted the August 1992 letter. Ex. D9 at 25-27 of 138.

         29. The PTO reviewed the August 1992 letter and concluded that it was an "incomplete response to the Office action dated January 15, 1993 because it does not include a written consent to the registration of the name 'Grishko.'" Ex. D9 at 22-24 of 13 8 (emphasis in original). Because the omission appeared to be inadvertent, the PTO gave I.M. Wilson time to complete its response.

         30. On March 30, 1993, Mr. Grishko wrote a letter to I.M. Wilson stating "In addition to the consent to I.M. Wilson, Inc. that I previously granted on August 5, 1992, I hereby grant I.[M]. Wilson, Inc. the right to register the trademark GRISHKO in the U.S. patent and trademark office." Ex. P3. This letter was on Grishko letterhead but did not include the Grishko seal. Ex. P3. I.M. Wilson submitted this letter to the PTO. Ex. D9 at 21 of 138. The PTO issued a notice of publication. Ex. D9 at 15 of 138.

         31. Although the August 1992 and March 1993 letters were drafted in English, Mr. Grishko did not translate either into Russian prior to signing them because they were "clear" and he could "understand" them.[8] Apr. 5 Hrg. Tr. 103:24-104:20.

         32. I.M. Wilson's July 1992 trademark application was registered on November 30, 1993 as Registration No. 1, 807, 637 (hereinafter the '637 Registration). Ex. D9 at 7 of 138.

         E. Mr. Grishko Applies for Trademark Registrations

         33. The parties appear to have had an amicable relationship for the next few years. On March 25, 1999, I.M. Wilson faxed a letter to Mr. Grishko in which she stated, "I appreciate your reassurances that no goods will be shipped into the United States or Canada other than those destined for I.M. Wilson, Inc. and certainly your word I trust." Ex. D46. She also attached documents related to the '637 Registration, including the August 1992 letter. Ex. D46.

         34. On May 20, 1999, Mr. Grishko applied to register the marks GRISHKO (the stylized logo) and NIKOLAY GRISHKO (standard character) in connection with "clothing, namely, knitwear, underclothing, leotards and shaping; headgear, shoes, pointe footwear, and slippers for use in modern, jazz, folk and character dancing; and footwear for gymnastics." Ex. D29 at 511-13.

         35. The PTO denied the application because the "mark, when used on or in connection with the identified goods, so resembles" the '637 Registration. Ex. D30 at 501. The applications were deemed abandoned on March 8, 2000 and May 23, 2000. Exs. D33 and 38.

         F. I.M. Wilson's 2007 Federal Trademark Registration

         36. The '637 Registration lapsed in 2003 and the PTO deemed the mark abandoned.[9] Ex. D9; Feb. 15 Hrg. Tr. 64:5-8; Feb. 27 Hrg. Tr. 70:13-71:2.

         37. I.M. Wilson re-filed its trademark application for GRISHKO on March 30, 2007. Ex. P1.

         38. The PTO denied the application because it needed a "substitute specimen," inquired as to the significance of the mark, and noted that if "the name shown in the mark identifies a particular living individual, the applicant must submit a written consent from that individual, authorizing the applicant to register the name." Ex. D13 at 199-201.

         39. I.M. Wilson, via its attorney Mr. Maleson, submitted follow-up materials. Ex. D13 at 194- 98. The PTO again denied the application because the follow-up materials did not address whether the mark was associated with the name of an individual or the significance of the mark. Ex. D13 at 190-91.

         40. On August 13, 2008, a new attorney for I.M. Wilson, Jennifer L. Dean, submitted a request for reconsideration after final action and submitted the August 1992 and ...


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