Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: October 1, 2016

Lanham Act/GBL Causes of Action Based on False Claim of Having Founded Company Dismissed

On September 13, 2016, Justice Oing of the New York County Commercial Division issued a decision in Dorfman v. Reffkin, 2016 NY Slip Op. 31719(U), dismissing Lanham Act and General Business Law counterclaims based on allegations that the defendant had falsely claimed to have been a company’s founder.

In Dorfman, the Plaintiffs asserted claims against the defendants relating to “contributions” the individual plaintiff allegedly made “toward the founding of” defendant Compass. The defendants asserted counterclaims against the individual plaintiff for falsely claiming that he was one of Compass’s founders. The court dismissed those counterclaims, explaining:

Section 1125(a) of the Lanham Act creates two bases for liability: (1) false association under section 1125(a)(1)(A) and (2) false advertising under section 1125(a)(1)(B). Defendants are proceeding under a false association theory. . . .

Dorfman’s statements regarding his role in the founding of Compass, contained on his Linkedin page and resume, are neither “in commerce” nor made “in connection with goods or services.” The term “in commerce” is defined in the statute as “the bona fide use of a mark in the ordinary course of trade” (15 USC § 1127). Non-commercial use of a mark, such as in this case, is not actionable under the Lanham Act. Instead, the provision of the Lanham Act invoked by defendants is intended to protect consumers. Nothing about Dorfman’s actions, even if this Court accepts every allegation in the counterclaim as true, is aimed at consumers and/or the general public: the Lanham Act counterclaim is, accordingly, dismissed. . .

GBL § 360-1 provides that:

Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name shall be a ground for injunctive relief in cases of infringement of a mark registered or not registered or in cases of unfair competition, notwithstanding the absence of competition between the parties or the absence of confusion as to the source of the goods or services.

. . .

Section 360-1 goes beyond infringement and unfair competition laws to protect the distinctiveness of an owner’s trademark from being undercut by another’s similar use. To succeed on a section 360-1 claim, among other things, defendants must allege that their mark is either of a truly distinctive quality or has acquired a secondary meaning and that there is a likelihood of dilution. here, defendants have failed to meet either part of this pleading requirement. To begin, the counterclaim does not allege, beyond boilerplate and conclusory language, that Compass as a mark is either of truly distinctive quality or has acquired a secondary meaning. Nor is there any allegation that Dorfman is using Compass’s mark in commerce as defendants claims. . . .

Finally, defendants fail to allege any injury or damages from Dorfman’s claiming to be a co-founder. . . .

To sustain a claim for unfair competition, defendants must allege that Dorfman misappropriated their labors, skills, expenditures, or good will and displayed some element of bad faith in doing so. Defendants’ conclusory allegations with respect to this counterclaim do not meet this standard.

(Internal quotations and citations omitted).

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