CALABRESI, Circuit Judge.
When faced with the claim that two products are confusingly similar, a person's natural reaction is to place the two products side-by-side, and then, looking back and forth at them, to ascertain how comparable the two goods are. This process of simultaneous observation is, without doubt, an efficient way of identifying similarities and differences between products. One can understand, then, why district courts would engage in such a process as part of their resolution of trademark infringement suits under the Lanham Act, 15 U.S.C. § 1051 et seq. However, while simultaneous comparison may be a useful heuristic means of identifying the similarities and differences between two products, the ultimate conclusion as to whether a substantial number of consumers are likely to be confused by the similarities must be reached with a focus on actual market conditions and the type of confusion alleged. Where products in the relevant market are not typically displayed in the same locations, centering on whether they are likely to be distinguished when viewed simultaneously is incorrect, and will result in a faulty likelihood-of-confusion analysis.
In this case, it appears that the district court (Berman, J.) denied a preliminary injunction, at least in part on the basis of an inappropriate focus on the likelihood that consumers would be confused when viewing the products side by side. We therefore vacate the judgment and remand for further proceedings.
Plaintiff-Appellant Louis Vuitton Malletier ("LVM") is a famous French fashion design firm engaged in the business of designing, manufacturing, importing, advertising, selling and distributing designer luggage, handbags, travel leather accessories, high fashion apparel and accessories. LVM owns the federally registered Louis Vuitton Toile Monogram Designs ("Toile marks"), its flagship handbag design, which was first introduced in France in the spring of 1896. LVM also owns the unregistered Louis Vuitton Monogram Multicolore Designs ("Multicolore mark"), developed in 2002 by New York fashion designer Marc Jacobs and Tokyo-based artist Takashi Murakami and introduced in the spring of 2003. The Multicolore marks are updated versions of the traditional Toile marks, slightly rearranged and printed in a variety of colors on white or black leather surfaces. Since their introduction two years ago, they have been very successful, and (despite a selling price of between $400 and $4,000 per Multicolore bag) production has not kept up with demand.
LVM's Toile marks consist of eight trademarks registered with the U.S. Patent and Trademark Office ("PTO"). Three of those marks are "incontestable" under 15 U.S.C. § 1065, which provides that a registered mark in continuous use for a
In October 2002, Louis Vuitton introduced four new collections of "multicolored patterns and styles of handbag and accessory designs based upon [the Toile marks]," one of which featured the Multicolore mark. The Multicolore mark consists of the Louis Vuitton Toile Monogram pattern in 33 colors on either a white or black background and includes the four-leafed flower inset and the positive and negative of the curved diamond with a four-point star inset. As previously mentioned, the Multicolore mark, which includes visual elements of LVM's registered Toile trademarks (including the "four-leafed flower inset"), has become "extremely popular," but is currently unregistered.
In the United States, both the Toile and the Multicolore LVM handbags are sold in more than 90 Louis Vuitton stores, as well as through LVM's affiliated website, www.eluxury.com. LVM bags are also available at "exclusive department and specialty retail stores" such as Neiman Marcus, Macy's, Bloomingdale's, and Saks Fifth Avenue. To date, LVM has sold over 47,000 of its Multicolore bags in the United States, with sales totaling over $25 million.
Defendant-Appellant Burlington Coat Factory ("BCF") is a discount clothing and accessory retail chain with 341 retail stores in 42 states. BCF also conducts extensive commerce through its website, www.bcfdirect.com. Burlington has become famous for selling name-brand fashions and accessories at discount prices. At the time relevant to this lawsuit, BCF's website claimed to sell "the very best designer and famous label fashions, 20%—60% off department store prices." See www.bcfdirect.com (via www.archive.org capture, October 2003). But despite the presence of other famous fashion brands, LVM has never sold its Toile or Multicolore bags in BCF's stores or on BCF's website.
On October 10, 2003, Burlington began offering for sale a line of beaded handbags ("BCF bags") with colorful designs reminiscent of the LVM Multicolore bags. Specifically, the BCF bags are " beaded on their entire exterior surface;  decorated with the letters `NY' standing for `New York;' and  also decorated with an assortment of shapes, including circles, diamonds and flowers," on a white or black background. These bags, manufactured by Four Seasons under the "Pengyuan" name, were sold by BCF using the sales code and style number "LVTN" (apparently shorthand for "Louis Vuitton") at a price of $29.98 per bag. Id. BCF sold approximately 1,700 such bags before this litigation began.
BCF's buyer, Clare Larson, testified that, when she purchased the bags at issue, she was immediately aware that they would remind consumers of LVM's popular Multicolore bags. In Larson's words:
BCF, in its brief to this Court, states that the bags were purchased, in part, because of their resemblance to LVM's bags, and that, in addition to Larson, "others at BCF were aware that the pattern of the [BCF bags] might call to mind handbags offered by other manufacturers, including (but not only) [LVM]." But it also asserts that other factors were important in the purchasing decision, including price and the bag's unique beaded fabric.
Upon learning of the BCF "Pengyuan" bags in January 2004, LVM started an investigation into their origin. On February 20, 2004, LVM issued to BCF a cease-and-desist letter specifically addressing the BCF bags. BCF and LVM then began negotiations that ran through March 2004. The negotiations broke down on April 6, 2004, when BCF sent LVM a letter, confirming its refusal to stop selling the BCF bag.
The next day, LVM brought suit against BCF, the Four Seasons Handbag Company ("Four Seasons") and John Does 1-10. In its complaint, LVM claimed trademark infringement and counterfeiting under 15 U.S.C. §§ 1114, 1116, unfair competition and false designation of origin under 15 U.S.C § 1125(a), trade dress infringement under 15 U.S.C. § 1125(c), and trademark dilution under 15 U.S.C. § 1125(c). It also asserted related claims of unfair competition and trademark dilution under state law, including N.Y. General Business Law § 360-1 and the general common law of New York. LVM sought, inter alia, disgorgement of profits, treble and punitive damages, costs, and attorney's fees, along with injunctive relief barring BCF's continued sale of the allegedly infringing handbags.
On May 6, 2004, the district court (Berman, J.) held oral argument on LVM's motion for a preliminary injunction. At that hearing, BCF presented a consumer survey conducted by Walter McCullough, president of Monroe Mendelsohn Research, Inc. The McCullogh study purported to demonstrate that the BCF handbags were not likely to create point-of-sale confusion with LVM's handbags. McCullough's report concluded that "[t]otal likely confusion [equaled] [l]ess than 10%" among women 18 and older.
In rebuttal, LVM presented the testimony of Dr. Robert C. Sorensen, who took issue with the methodology and conclusions of the McCullough report. Sorensen contended that the sampling methodology for the McCullough report, as well as the order in which products were displayed and questions were asked, systematically lowered the incidence of point-of-sale confusion. If these errors were corrected, Sorensen asserted, consumer confusion would equal at least 18%, and perhaps much more if only self-identified "fashion-conscious" consumers were sampled. LVM did not, however, submit its own survey evidence on the issue of confusion.
On May 24, 2004, the court denied LVM's request for a preliminary injunction. The court determined that, because point-of-sale confusion was unlikely, LVM had not established a sufficient probability of success on the merits of its trademark infringement claims. For related reasons, it rejected the state and federal dilution claims and the state unfair competition claims as a basis for a preliminary injunction. Upon making that finding, the court also — at BCF's request — dissolved the standing temporary restraining order ("TRO").
Vuitton filed a timely notice of appeal. It also moved for a stay of judgment pending
We review for abuse of discretion a district court's decision to deny a motion for a preliminary injunction. See, e.g., Brennan's, Inc. v. Brennan's Restaurant, L.L.C., 360 F.3d 125, 129 (2d Cir.2004). To constitute an abuse of discretion, the district court's decision must have rested on an error of law or a clearly erroneous finding of fact. See Green Party of New York State v. New York State Bd. of Elections, 389 F.3d 411, 418 (2d Cir.2004). To identify the presence or absence of confusion under the Lanham Act, we first look to the factors our court set out in Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir.1961).
To obtain a preliminary injunction, a plaintiff must establish: "(1) the likelihood of irreparable injury in the absence of such an injunction, and (2) either (a) likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation plus a balance of hardships tipping decidedly" in its favor. Federal Express Corp. v. Federal Espresso, Inc., 201 F.3d 168, 173 (2d Cir.2000). In trademark disputes, "a showing of likelihood of confusion establishes both a likelihood of success on the merits and irreparable harm." Hasbro, Inc. v. Lanard Toys, Ltd., 858 F.2d 70, 73 (2d Cir.1988) (citation omitted).
Of salient importance among the Polaroid factors is the "similarity of the marks" test, which attempts to discern "whether the similarity of the marks is likely to cause confusion among potential customers." Arrow Fastener Co., Inc. v. Stanley Works, 59 F.3d 384, 394 (2d Cir. 1995). To apply this factor, courts must analyze the mark's overall impression on a consumer, considering the context in which the marks are displayed and "the totality of factors that could cause confusion among prospective purchasers." Gruner + Jahr USA Pub. v. Meredith Corp., 991 F.2d 1072, 1078 (2d Cir.1993).
The district court found that the BCF and LVM bags "project a wholly different impression" so that customers are likely to view them as dissimilar and therefore unlikely to be confused by their similarities. However, the district court's analysis of the similarity factor appeared to display an inappropriate focus on the likelihood that customers would be confused when viewing the bags simultaneously, whereas serial viewing is the appropriate focus given the market conditions and LVM's claims of initial-interest and post-sale confusion. Thus, the district court stated that:
While a district court's simultaneous comparison of two products is not an inappropriate heuristic means of investigating similarities and differences in their respective designs on the way to an ultimate conclusion as to whether the products are likely to leave similar impressions on consumers, district courts must be careful to maintain a focus on the ultimate issue of the likelihood of consumer confusion.
Accordingly, a court that seeks to discern confusion without regard to the marketplace frustrates (however unintentionally) Congress's intent. Though two products may be readily differentiated when carefully viewed simultaneously, those same products may still be confusingly similar in the eyes of ordinary consumers encountering the products individually under typical purchasing conditions, and that "real world" confusion is the confusion that the Act seeks to eliminate.
In the case before us, the district court's finding that no likelihood of confusion existed appears to have been the result, at least in part, of an inappropriate focus on the effect on consumers of simultaneous viewing of the handbags. The parties concede that, in the actual marketplace, these products are not sold side-by-side, and are instead sold in different stores and on different websites. Under the circumstances, a focus on the likely effect of simultaneous viewing on consumers was legally erroneous. We therefore vacate the district court's denial of a preliminary injunction that LVM sought on the basis of its Lanham Act claims. On remand, the court should give particular weight to any evidence submitted by the parties addressing the overall impression that consumers are likely to have of the handbags when they are viewed sequentially, and in different settings, rather than simultaneously.
The district court's denial of LVM's request for a preliminary injunction is VACATED, and the case REMANDED for further proceedings not inconsistent with this opinion.
For similar reasons, we remand LVM's claim for dilution under New York law. Under New York General Business Law § 360-1 (McKinney Cum.Supp.2004), a plaintiff may receive an injunction against dilutive harms, including trademark "blurring," upon demonstrating a likelihood of dilution. See, e.g., Hormel Foods Corp. v. Jim Henson Prod., Inc., 73 F.3d 497, 506 (2d Cir.1996). We have held that this "likelihood of dilution" must be determined using a multi-factored test, part of which requires a court to discern the "similarity of the marks" in the same manner as one would under the Lanham Act. See Sports Auth., Inc. v. Prime Hospitality Corp., 89 F.3d 955, 966 (2d Cir.1996). In view of our disposition of the Lanham Act claims, we also remand, for further consideration, LVM's claim of dilution under New York law.