GRIESA, Chief Judge.
In September 1993, plaintiffs, Polo Ralph Lauren Corporation, Rolex Watch
U.S.A., Inc., and Louis Vuitton, filed this action alleging trademark infringement,
false designation of origin, unfair competition and contributory infringement.
Plaintiffs sued three "retailer defendants," Wen Hao Tang, Dao
Mau, and Siu Wong Cheng, for selling infringing goods. Plaintiffs also
sued four "landlord defendants," Jolania Properties, Inc., Melvin
Rauch, Charles Rauch and Tenn Sun Realty Corporation, who leased premises
to the retailer defendants.
Jolania now moves, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the complaint
for failure to state a claim, and, pursuant to Fed.R.Civ.P. 12(b)(1), to
dismiss for lack of subject matter jurisdiction. The motion is denied.
JOLANIA'S CLAIMS
Jolania owns a building at 12 Mott Street in New York City. Jolania leased
the building to Wen Hao Tang, one of the retailer defendants named in this
action. Plaintiffs allege that Tang used the premises to sell goods that
infringed their validly held trademarks. Plaintiffs further allege that
Jolania was aware that its tenant was selling counterfeit goods on the premises,
and did nothing to prevent the activity.
The complaint asserts two causes of action against Jolania and the three
other landlord defendants. Count X charges that the landlords are contributorily
liable under the Trademark Act of 1946, 15 U.S.C. s 1051, et seq., for knowingly
failing to prevent the sale of counterfeit goods on their property. Count
XI charges that the landlords are liable to plaintiffs under New York Real
Property Law s 231(2), which provides: The owner of real property, knowingly
leasing or giving possession of the same to be used or occupied, wholly
or partly for any unlawful trade, manufacture or business, or knowingly
permitting the same to be used, is liable severally, and also jointly with
one or more of the tenants or occupants thereof, for any damage resulting
from such unlawful use, occupancy, trade, manufacture or business.
On February 16, 1994, the court entered a default judgment against the
retailer defendants. At present, the only defendants in the action are
the four landlord defendants including Jolania, who makes this motion to
dismiss.
DISCUSSION
In arguing that Count X does not state a claim under the Trademark Act,
Jolania urges that the act is directed against trademark infringers, not
their landlords. For example, the remedies section of the Trademark Act
targets violators who "use", "reproduce, counterfeit, copy
or colorably imitate" registered marks without permission. 15 U.S.C.
s 1114(1). According to Jolania, the statute does not provide a cause of
action for damages against someone who indirectly aids the violation of
the statute.
The court disagrees. Although there is no explicit language in 15 U.S.C.
s 1114(1), there is judicial precedent that interprets the statute as including
a cause of action for contributory infringement of trademarks. In Inwood
Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 102 S.Ct. 2182,
72 L.Ed.2d 606 (1982), the Court considered whether a drug manufacturer
could be held liable for the infringing actions of pharmacists who purchased
its products. The Court ruled that the drug manufacturer could be held
liable if one of two situations occurred. First, the drug company could
be liable if it suggested, directly or indirectly, that the pharmacists
should mislabel its products. Id. at 851, 102 S.Ct. at 2187. Second, the
company could be liable if it sold its products "to retailers whom
they knew or had reason to know were engaging in infringing practices."
Id. at 852, 102 S.Ct. at 2187. A manufacturer who follows either course
will be "contributorily responsible for any harm done as a result of
the deceit." Id. at 854, 102 S.Ct. at 2188.
The theory of contributory infringement has not been asserted widely outside
of the manufacturer/distributor context. However, there are cases in which
the concept has been applied to landlords. In Hard Rock Cafe Licensing
Corporation v. Concession Services, Inc., 955 F.2d 1143 (7th Cir.1992),
the court of appeals agreed with a district court holding that the contributory
infringement test in Inwood Laboratories applied to a flea market operator
who leased stalls to retailers selling infringing goods. The court reversed
on the facts, however, because the evidence on the record did not support
a finding of contributory infringement.
Based on these authorities, this court holds that plaintiff has pleaded
a legally sufficient cause of action against Jolania in Count X for contributory
infringement. Whether the evidence supports the claim remains to be seen.
Jolania next argues that the court should not exercise supplemental jurisdiction
over the state law claim in Count XI.
A federal court may exercise supplemental jurisdiction over state law claims
"that are so related to claims in the action with ... original jurisdiction
that they form part of the same case or controversy." 28 U.S.C. s
1367(a). A court may decline to exercise supplemental jurisdiction if the
state law claim raises novel or complicated issues of state law. 28 U.S.C.
s 1367(c)(1).
As described earlier, Count XI is based on New York Real Property Law s
231(2). Jolania argues that supplemental jurisdiction over the s 231(2)
claim is improper because this case presents an issue of first impression
under state law--whether or not a landlord will be liable for trademark
infringement carried out by his tenants. Jolania finds indications that
the New York courts may intend to limit the statute's reach to "penal
law violations directly related to the premises ... [like] prostitution,
gambling or narcotics." Friends of Yelverton, Inc. v. 163rd St. Improvement
Council, Inc., 135 Misc.2d 275, 514 N.Y.S.2d 841, 844 (N.Y. City Civ.Ct.1986).
Plaintiffs argue that s 231(2) merely codified the preexisting duty of
a landlord to prevent a known illegality on his premises, and that therefore
the present case does not present a novel issue of law. Plaintiffs also
point out that s 231(2) has been applied to violations outside the criminal
sphere, contrary to the suggestion in Yelverton. For example, in State
v. Rock, 147 Misc.2d 231, 555 N.Y.S.2d 584 (Sup.Ct. Saratoga Cnty.1990),
the court held a landowner liable for an illegal solid waste management
facility operated by the lessee with his knowledge. Plaintiffs argue that
supplemental jurisdiction is proper.
The court is of the view that exercising supplemental jurisdiction over
Count XI is appropriate. The federal and state causes of action relate
to the exact same set of facts. To litigate them in two separate actions
would be an unwarranted waste of time and judicial resources. The legal
issue is not sufficiently complicated to warrant declining jurisdiction.
CONCLUSION
The court denies Jolania's motion to dismiss Counts X and XI.