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From Intellectual Property Law Daily, January 4, 2019

Models unable to state false endorsement claims against strip clubs

By Jody Coultas, J.D.

Models, actresses, and/or businesswomen were unable to state false endorsement claims against Manhattan-based gentlemen’s clubs that used their images in advertisements and promotions for special events at the clubs, according to the federal district court in New York City. Eleven models, including actress Carmen Electra, filed suit alleging that the clubs used their images without permission. Most of the models could not show that they had a strong mark, and thus consumers would not be confused as to their connection to the clubs. However, the clubs were permanently enjoined from using Electra's image in any of their promotional material without Electra's permission. The court found that Electra was recognizable and thus there was a likelihood of consumer confusion with respect to her promotion of the clubs (Toth v. 59 Murray Enterprises, Inc., January 3, 2019, Buchwald, N.).

The clubs entered into agreements with third-parties to create and maintain their respective websites and social media accounts and alleged that those parties advised the clubs that they had secured permission to use the images at issue. The models claimed that the clubs were on a "faith basis" with the website and advertising creator and never saw or requested any written confirmation of the rights to use any of the images. There was no evidence that the clubs were aware prior to the commencement of this action that their contractors were posting images without properly securing the rights to those images.

The models filed suit for false endorsement, misappropriation of likeness for advertising purposes under New York Civil Rights Law (NYCRL), deceptive trade practices under New York General Business Law (NYGBL), defamation, negligence, conversion, unjust enrichment, and quantum merit.

False endorsement. Section 43 of the Lanham Act prohibits the use of a protected mark in a way that is likely to cause consumer confusion "as to the origin, sponsorship, or approval of [defendants’] goods." In order to establish a claim for false endorsement, plaintiffs must prove that defendants made a false or misleading representation of fact that is likely to cause consumer confusion as to the origin, sponsorship, or approval of the goods or services. Consumer confusion is determined based on (1) strength of the trademark; (2) evidence of actual consumer confusion; (3) evidence that the imitative mark was adopted in bad faith; (4) similarity of the marks; (5) proximity of the products and their competitiveness with one another; and (6) sophistication of consumers in the relevant market.

Because the parties do not dispute that models never endorsed or agreed to be associated with the clubs, the use of those images in the clubs’ advertising constituted false or misleading representations of fact for purposes of a false endorsement claim. Thus, the issue was whether the club advertising caused consumer confusion. While Electra was famous, the remaining ten plaintiffs failed to adduce evidence of a strong mark given that none of them actually garnered recognition for any of their public appearances. Absent some level of recognition, there is no basis for inferring consumer confusion regarding the sponsorship or approval of the clubs’ goods and services. Therefore, the strength of the mark weighed in favor of Electra, but not the other ten plaintiffs.

The actual confusion and bad faith factors also strongly favored defendants, according to the court. A self-administered Internet questionnaire submitted by the plaintiffs, which asked a sample of adult male New York residents who had patronized a gentlemen’s club in the previous two years a series of closed- and open-ended questions relating to three of the images at issue in this litigation, was rejected as evidence of actual confusion. In terms of bad faith, it was undisputed that the clubs never specifically requested the use of any of the images in their promotional material and did not intend to capitalize on plaintiffs’ good will. Moreover, the models failed to offer evidence as to whether the clubs knew or had reason to know that their third-party contractors did not have the rights to use the images at issue. The similarity of the marks, proximity of the products and their competitiveness with one another, and sophistication of consumers in the relevant market weighed in favor of the models, according to the court.

In balancing the relevant factors of likelihood of confusion, the court granted the clubs cross-motion for summary judgment with respect to the Lanham Act claims of each of the plaintiffs except Electra. The ten non-famous models were unable to demonstrate sufficiently strong marks and no reasonable juror could find that the use of their images in the clubs’ advertisements was likely to cause consumer confusion. Because Electra was recognizable and had a strong mark, the court granted her summary judgment. The court permanently enjoined the clubs from using Electra’s image in any of their promotional content without Electra’s permission.

NYCRL. The NYCRL provides that any person whose image is used within the state of New York for advertising purposes without their written consent may maintain an action for equitable relief, actual damages, and exemplary damages. The clubs alleged that some of the claims were barred by the one-year statute of limitations, that plaintiffs waived their NYCRL § 51 claims when they signed unlimited releases in connection with the images at issue, and that plaintiffs cannot prove damages.

Images published more than one year prior to the filing date were barred by the one-year statute of limitations, according to the court. Also, because the models expressly disclaimed their right to pursue claims relating to these images and gave releasees the authority to allow third-parties like the clubs to use their images in any form and for any purpose whatsoever, without limitation, the claims were dismissed. The models also failed as a matter of law to prove damages. The models negotiated with a willing buyer and were paid the fair market value for any and all rights to the images. To allow them to be compensated a second time would be a clear windfall, the court said.

NYGBL. Most New York courts have held that "the general variety of consumer confusion that is the gravamen of [a false endorsement] claim" is an insufficient harm to the public interest for purposes of NYGBL. Because the models could not show an injury to the public interest, the NYBGL claim was dismissed.

Defamation. The court also dismissed the defamation claim based on a lack of bad faith on the part of the clubs in using the models’ images in their advertisements. While the clubs failed to investigate whether their contractors had the rights to use the plaintiffs’ images, that was insufficient as a matter of law to prove actual malice.

The case is No. 1:15-cv-08028-NRB.

Attorneys: John Vincent Golaszewski (Orans, Elsen, Lupert & Brown LLP) for Carmen Electra, Tiffany Toth, Gemma Lee and Jessa Hinton. Jeffrey Yehuda Aria Spiegel (Lewis Brisbois Bisgaard & Smith LLP) for 59 Murray Enterprises, Inc. d/b/a New York Dolls Gentlemen's Club, Jay-Jay Cabaret, Inc. d/b/a FlashDancers Gentlemen's Club and AAM Holding Corp. d/b/a Private Eyes Gentlemen's Club.

Companies: 59 Murray Enterprises, Inc.; Jay-Jay Cabaret, Inc.; AAM Holding Corp.

MainStory: TopStory PublicityRights Trademark NewYorkNews

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