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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND GRUPPO ESSENZIERO ITALIANO, S.p.A. v. AROMI D'ITALIA, INC. : : : : : Civil Action No. CCB-08-065 : ...o0o... MEMORANDUM Now pending before the court is a motion for a preliminary injunction filed by plaintiff Gruppo Essenziero Italiano, S.p.A. ("GEI"), an Italian company, against defendant Aromi d'Italia, Inc. ("ADI"). GEI seeks to enjoin ADI from using the registered trademark "Aromi d'Italia" in the wholesale market for gelato products, including gelato mix sold under the "Berzaci" brand name. The issues in this case have been fully briefed and a hearing was held on May 16, 2008. Because GEI has not made a strong showing that the balance of hardships weighs in its favor or that it is clearly likely to prevail on the merits, the motion for a preliminary injunction will be denied. BACKGROUND The factual underpinning of GEI's lawsuit against ADI centers around an Exclusive Distributor Agreement signed by the parties on April 22, 2000 that provided for ADI to become the exclusive distributor of GEI's gelato mix and ingredient products in the United States. ADI had the option to sell GEI's gelato ingredients under GEI's "Aromitalia" brand name or under its own registered "Aromi d'Italia" trademark. At some point over the course of this seven-year business relationship, disputes began to arise concerning, in part, credits and adjustments allegedly due to ADI and unpaid invoices allegedly owed to GEI. On July 2, 2007, GEI issued a 1

letter in which it formally stated it was "terminating" the Agreement. Following this termination, ADI began distributing gelato products from manufacturers other than GEI, but continued using the name brand Aromi d'Italia and product codes similar to those used by GEI. Recently, ADI began distributing "Berzaci" brand gelato products. It appears that ADI either entirely, or at least partially, owns the Berzaci manufacturing plant located in West Virginia. Although the Berzaci packaging originally contained small print in the lower corner of the label noting that the brand is distributed by Aromi d'Italia, it now appears that ADI has voluntarily removed this text. ADI does plan, however, to divide booth space at gelato trade shows between its Aromi d'Italia finished gelato products and Berzaci gelato ingredients. Also related to this preliminary injunction request, GEI has narrowed its product code infringement claim to ADI's use of the "BF" product code, which applies to fruit base gelato mix; GEI apparently uses the letters "DBF" to refer to its fruit bases. In response, ADI argues that the Italian words "base frutta" mean fruit base, and thus are the basis of the "BF" product code designation.1 Finally, GEI seeks to enjoin ADI's use of the website www.aromiditalia.com as it is used to market and advertise in the wholesale market for gelato products. Relevant to this preliminary injunction hearing is the disputed background concerning the application and registration of both GEI's Aromitalia and ADI's Aromi d'Italia trademarks. According to GEI, both GEI and ADI, which were represented by the same law firm in 1998, essentially agreed to divide between themselves the wholesale and retail markets for gelato and

The product code issue was mentioned by GEI only in passing during the hearing. While it may be prudent for ADI to avoid the issue by further differentiating its fruit base product codes from GEI's, this narrowed issue does not materially affect the court's preliminary injunction analysis. 2

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related products in the U.S. GEI would manufacture gelato ingredients and ADI would distribute those ingredients as well as focus on retail aspects of the gelato industry. ADI and GEI waived any objection to the conflict of interest in their legal representation, and were advised that problems could arise if the relationship between the companies soured. More specifically, ADI and GEI were warned that the validity and priority of their respective trademarks could depend on "the order in which the [trademark] applications are filed." (Pl.'s Mem. at Exs. 2, 3.) Both companies were advised that because of the similarity between the Aromitalia and Aromi d'Italia names, the best course of action would be to register both names under one company, and license the use of the names to the other. (Id. at Ex. 3.) Despite this prudent advice, ADI and GEI chose to register their marks independently. As noted in the ADI and GEI trademark applications, which were filed simultaneously with the USPTO, the Aromitalia trade name was intended to cover gelato base and other ice cream ingredients, while the Aromi d'Italia brand was to be used for "pastry, coffee, ice cream, bread, panini, salads, soup, pasta, cups, hats and T-shirts." (Id. at Exs. 4, 5, 6, USPTO Filings.) Although these products may be related, GEI argues that the trademark applications demonstrate that GEI was securing the wholesale market for gelato products and ADI the retail market. GEI does not now challenge the Aromi d'Italia brand name as used by ADI in the retail market, but rather only in the wholesale market. ADI refutes GEI's assertion that the parties had agreed to effectively divide markets into retail and wholesale sectors in 1998. Instead, ADI argues that it intended to develop the broader gelato industry in the U.S., while GEI would serve as the manufacturer of one component of that industry, the gelato ingredients. Moreover, under the terms of the Agreement, GEI authorized

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ADI to use GEI's trade name Aromitalia or to use ADI's trade names, including Aromi d'Italia, with respect to GEI's gelato products. It appears that GEI's gelato products were sold in the U.S. by ADI under either an Aromitalia or Aromi d'Italia package label, depending on the specific order and whether ADI added additional ingredients. Furthermore, although GEI consented to ADI's use of the Aromitalia name, there is nothing in the Agreement that demonstrates GEI's alleged understanding that it had consented to the viability of the Aromi d'Italia trade name only within the confines of the Agreement. Instead, the Agreement appears to recognize both trade names as valid, and does not limit their coverage or use. Nothing in the Agreement explicitly precludes ADI from using its Aromi d'Italia name in the event the Agreement is terminated. Over the next seven years, ADI used its Aromi d'Italia name brand in its retail endeavors, in serving as GEI's exclusive distributor of gelato ingredients, and in its related promotional activities in the industry. ANALYSIS In determining whether to grant a preliminary injunction a court must consider: "(1) the likelihood of irreparable harm to the plaintiff if the preliminary injunction is denied, (2) the likelihood of harm to the defendant if the requested relief is granted, (3) the likelihood that the plaintiff will succeed on the merits, and (4) the public interest." The Scotts Co. v. United Indus. Corp., 315 F.3d 264, 271 (4th Cir. 2002) (quoting Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 812 (4th Cir. 1991)). In cases where the balance of hardships tips decidedly in favor of the plaintiff, the plaintiff's burden in demonstrating likely success on the merits decreases accordingly. Id. "But if the balance of hardships is substantially equal as between the plaintiff and defendant, then `the probability of success begins to assume real significance, and

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interim relief is more likely to require a clear showing of a likelihood of success.'" Id. (quoting Direx, 952 F.2d at 808)); see also Microstrategy Inc. v. Motorola, Inc., 245 F.3d 335, 340 (4th Cir. 2001) (noting that where the balance of hardships appears equal, a plaintiff's burden may be even greater in trademark cases). Finally, the Fourth Circuit has cautioned that "preliminary injunctions are extraordinary remedies involving the exercise of very far-reaching power to be granted only sparingly and in limited circumstances." Microstrategy, 245 F.3d at 339 (quoting Direx, 952 F.2d at 816)). A. Irreparable Harm to GEI GEI argues that ADI's use of its Aromi d'Italia trademark is causing irreparable harm to GEI that is presumed by the law. In order to make this argument, GEI attempts to frame this dispute as one arising from the termination of a typical licensor-licensee relationship. GEI notes that some circuits have adopted a presumption of irreparable harm in trademark infringement cases between a terminated licensee and former licensor, or when a clear prima facie showing of infringement can be made. In this context, GEI cites to a case from this district, Fairbanks Capital Corp. v. Kenney, 303 F. Supp. 2d 583, 590 (D. Md. 2003), which applied a presumption of harm where an infringement was obvious. Despite ADI's argument to the contrary, the Fourth Circuit has indicated that, in some circumstances, a presumption of harm may be applied if a plaintiff can make a showing of infringement and a likelihood of confusion. See Scotts Co., 315 F.3d at 273-74; Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 939 (4th Cir. 1995). Regardless of whether a presumption of irreparable harm applies to trademark disputes between licensors and licensees, however, a plaintiff would not be entitled to such a presumption

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unless he could show that the previous relationship with the defendant was in fact one of a licensor-licensee, and that the defendant's use of the plaintiff's trademark therefore constitutes prima facie infringement rather than the valid use of a registered mark. See generally Scotts Co., 315 F.3d at 274. Here, GEI can do neither. At least in the context of the trademarks, there is nothing in the Agreement that can be construed as a licensing arrangement between GEI and ADI concerning the Aromi d'Italia trademark, even if it does establish ADI as GEI's sole exclusive distributor of gelato products in the U.S. The relevant section of the Agreement provides that: [GEI] consents to permitting [ADI] to use the name "AROMITALIA" exclusively in the Territory and also consents to have [ADI] register the Gelato Products that it will be selling and distributing in the Territory under its own tradenames or trademarks of "AROMI D'ITALIA" and/or "AROMI" and/or "BORDAVI". . . and [ADI] shall have the exclusive right to register any or all of these names in the United States and Canadian Patent Offices as its exclusive property. Nothing in this Agreement shall give [ADI] any ownership interest in [GEI's] tradename "AROMITALIA" except the right to use it in connection with the sale of the Gelato Products within the Territory. (Pl.'s Mem. at Ex. 7, Agreement at

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