33 F. Supp. 3d 359
S.D.N.Y.2014Background
- TKRC (The KatiRoll Company, Inc.) operates kati-roll takeout restaurants using a distinctive orange-and-white color scheme, open-glass front, limited front seating, open kitchen, wood counter finishes, employee uniforms bearing the mark, and proprietary recipes/processes guarded by NDAs and employee training.
- Kati Junction opened a takeout kati-roll restaurant three blocks from a TKRC location, using similar orange-and-white signage, an open-front layout, similar uniforms, near-identical menu names/pricing (including a “2-for” discount), and similar flavor/texture profiles.
- Kati Junction hired multiple current or former TKRC employees; TKRC alleges those employees disclosed proprietary recipes/techniques and contributed to Kati Junction’s copying.
- TKRC sued for (inter alia) federal service-mark infringement, trade dress infringement, Lanham Act unfair competition, state statutory/common-law unfair competition, breach of duty of loyalty (employees), breach of contract (two employees for NDAs), and misappropriation of trade secrets.
- Defendants moved to dismiss counts 2–8; the Court denied the motion in full, finding TKRC’s pleadings sufficient at the Rule 12(b)(6) stage to state plausible claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Trade dress infringement (Lanham Act) | TKRC: alleges a specific combination of nonfunctional elements (color scheme, layout, menu/price, uniforms, unique food) that has secondary meaning and causes consumer confusion | Defs: elements are generic/common to fast-food and pleaded trade dress is not described with sufficient specificity | Denied — complaint pleads specific elements, nonfunctionality and plausible secondary meaning; factual issues premature at dismissal stage |
| Individual liability under Lanham Act and state law | TKRC: individual employees personally engaged in infringing acts and some were managerial/knowledgeable about TKRC secrets | Defs: individuals are low-level, hired after opening, and not the moving/active force behind infringement; affidavits show lack of personal wrongdoing | Denied — court may not consider affidavits on Rule 12(b)(6); allegations permit plausible inference of individual participation/knowledge |
| Common-law unfair competition / bad faith | TKRC: copying, close proximity, and employee transfers show intent to reap TKRC’s goodwill and sow confusion | Defs: imitation to compete is not bad faith; copying alone insufficient | Denied — factual similarity and proximity make bad-faith inference plausible at pleading stage |
| Duty of loyalty / breach of NDA / trade-secret misappropriation | TKRC: employees used confidential knowledge and violated NDAs; Kati Junction used those secrets to replicate flavors/textures | Defs: recipes are industry-common/available; timing and use contradicted by affidavits | Denied — pleadings allege proprietary, developed recipes, NDAs, and plausible misuse; factual disputes inappropriate for dismissal |
Key Cases Cited
- Two Pesos v. Taco Cabana, 505 U.S. 763 (1992) (trade dress protects the total image of a business)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard and two-pronged plausibility review)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility requirement for complaints)
- TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (2001) (functionality doctrine in trade dress law)
- Bigio v. Coca-Cola Co., 675 F.3d 163 (2d Cir. 2012) (applying Iqbal/Twombly in pleading review)