2
`
`«J—
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`llllllllllllllll|||||l|lli|||ll|llll||
`
`EXPRESS MAIL MAILING LABEL
`
`
`NUMBER #Ug
`DATE OF DEPOSIT i I; (:01
`
`nited States Postal Service "EXPRESS MAIL POST OFFICE TO
`i hereby certify that this paper or fee is being deposited with t
`ADDRESSEE" service under 37 C.F.R. § 1.10 on November _, 2002 and is addressed to: Commissioner for Trademarks. 2900
`Crystal Drive, Arlington, VA 22202-3513.
`‘
`.
`
`11-05-2002
`
`u_s. Patent&TMOtcITM Mail t’-‘(optDt. #30
`
`
`Signature
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`TRADEMARK TRIAL AND APPEAL BOARD
`
`Registration No. I, 664, 665
`Mark: VILLA D’ESTE and design.
`Registered: November 19, 1991
`
`
`
`
`OWNERS ASSOCIATION, INC.,
`
`Petitioner,
`
`C.)
`
`‘
`
`_
`
`Cancellation No. 40,923
`
`'
`
`g
`I
`3
`'
`
`O
`K;‘:‘!
`
`33
`
`; ,
`
`VILLA D’ESTE CONDOMINIUM
`
`
`
`V.
`
`VILLA D’ESTE, S.p.A.,
`
`Registrant.
`
`REPLY IN FURTHER SUPPORT OF REGISTRANT’S MOTION TO SUSPEND
`
`PROCEEDINGS PENDING OUTCOME OF FEDERAL COURT LITIGATION
`
`Registrant Villa d’Este S.p.A. (“Registrant”) hereby respectfully submits this reply
`
`in further support of its motion, pursuant to 37 C.F.R. § 2.117(a) and TBMP § 510.02, to
`
`suspend this cancellation proceeding, pending resolution of ongoing Federal court
`
`litigation between the parties concerning the registration at issue in this proceeding.
`
`H: 505625(@%S50 1 moc)
`
`

`
`ARGUMENT
`
`Petitioner’s Opposition Brief does not attempt to argue that the federal trademark
`
`action will not “have a bearing on [this] case.” See 37 C.F.R. § 2.117(a). Nor could
`
`Petitioner do so, in light of Petitioner’s failure to even attempt to refute any of the
`
`following facts:
`
`(1) that Petitioner is involved in a trademark infringement lawsuit with Registrant
`in Federal District Court;
`
`(2) that in the Federal trademark action Registrant claims that Petitioner infringes
`and dilutes the ’665 Registration;
`
`(3) that in its Answer to Registrant’s Counterclaims in the Federal trademark action,
`Petitioner has specifically asserted an affirmative defense that Registrant’s U.S.
`trademarks and service marks (including the ’665 Registration) are void and
`unenforceable, and not otherwise protected by law; or
`
`(4) that in the Joint Discovery/Case Management Plan Under Rule 26(fl Federal
`Rules of Civil Procedure filed by the parties in the Federal trademark action,
`Petitioner specifically told the Court that it anticipated filing dispositive
`motions “that the federally-registered trademarks of [Registrant] are subject to
`cancellation .
`.
`. because [Registrant] has not offered or sold goods and/or
`services in the United States under the alleged marks, as required by U.S.
`trademark law”;
`
`Even more significantly, Petitioner fails to disclose to the Board that it has taken
`
`additional steps to have the Federal District Court address the same alleged invalidity
`
`issue Petitioner asserts in this proceeding. Specifically, Petitioner has recently filed a
`
`motion to “bifurcate” discovery in the Federal trademark action. In that motion,
`
`Petitioner represented to the District Court that it plans to file a “dispositive motion” on
`
`its alleged non-use/validity defense—the same issue in this cancellation proceeding——
`
`before the end ofthis year (see Exh. A, Pl. Motion to Bifurcate Discovery at p. [11]), in
`
`H: 505625(@%S50l l DOC)
`
`

`
`order to seek a “speedy resolution of [the federal trademark] suit.” (Id. at [9].) Instead of
`
`forthrightly disclosing this recent additional step to have the Federal District Court rule
`
`on Petitioner’s alleged invalidity argument early in the case, Petitioner misleadingly
`
`suggests to the Board that the District Court will not address the issue of alleged
`
`invalidity and cancellation until sometime after November 2003. (See Pet. Opp. at 1]] 10-
`
`12.)
`
`Petitioner further advances the novel argument that suspension is “premature”
`
`because “Petitioner has not [yet] specifically sought to cancel the registration in the
`
`district court and has not [yet] filed any dispositive motions in the civil litigation.” (See
`
`id. at 1] 6) (bracketed material added). Petitioner carefully chooses its words here to
`
`avoid revealing to the Board that Petitioner has already announced in the District Court
`
`that it will place the cancellation issue squarely before the District Court “by the end of
`
`this year.” (see Exh. A, Pl. Motion to Bifurcate Discovery at p. [11]).
`
`It is therefore apparent that what Petitioner wants is to simultaneously pursue
`
`cancellation in both the Federal District Court and the TTAB. Essentially, Petitioner
`
`seeks to double its chances of a favorable ruling, and to double the litigation costs it can
`
`impose on Registrant. Such wasteful and expensive tactical ploys are plainly contrary to
`
`37 C.F.R. § 2.1 l7(a) and the Board’s rules and precedents applying that regulation.
`
`Indeed, none of the purported authorities cited by Petitioner even suggests that the
`
`Board should permit such gamesmanship. In Harod v. Sage Products, Inc., 188 F. Supp.
`
`2d 1369 (S.D. Ga. 2002), the district court mentioned, without elaborating, that the
`
`TTAB had previously, in an unpublished opinion, denied a motion to suspend. See id. at
`
`H: 505625(@%550) LDOC)
`
`

`
`1373. Neither the decision nor Petitioner explains why the Board denied suspension in
`
`that case and what, if anything, that decision has to do with the instant case. And in Sea-
`
`Roy Corp. v. Parts R Parts, Inc., No. 1:94CV00059, 1997 WL 1046282 (M.D.N.C. Dec.
`
`2, 1997), the Court noted that the Board had in fact suspended the related cancellation
`
`proceeding. That case, therefore, provides no support for Petitioner.‘
`
`CONCLUSION
`
`It is undisputed that the legal basis for suspension—that the Federal trademark
`
`action “may have a bearing” on this case——is present in this case. Petitioner’s efforts to
`
`rationalize why it should be allowed to litigate the same issue against the same party in
`
`both the Federal District Court and the TTAB amount to a transparent effort on the part
`
`of Petitioner to double its odds of winning and double the costs it can impose on
`
`Registrant. For the reasons set forth above and in Registrant’s original motion, the Board
`
`should not countenance such unfair tactics at the expense of the Board’s valuable judicial
`
`resources. The motion to suspend should be granted.
`
`Petitioner also cites the nonprecedential decision of the Board in E. & J. Gallo Winery v.
`‘
`Kendall-Jackson Winery, Ltd., Cancellation No. 25,965, 2000 TTAB Lexis 150 (March 16,
`2000). Citation of nonprecedential decisions of the Board is improper, even if a copy is
`provided, which Petitioner did not do. See, e.g., Trademark Board Manual of Procedure
`§ 101.03; General Mills Inc. v. Health Valley Foods, 24 USPQ2d (BNA) 1270, 1275 n.9 (TTAB
`1992). If the Board wishes to consider nonprecedential opinions in this case, Registrant would
`request leave to file a supplemental brief citing unpublished Board decisions ordering suspension
`despite arguments that the issue before the TTAB was not squarely raised in a concurrent Federal
`district court action.
`
`H: S05625(@‘/n5501!.DOC)
`
`

`
`S
`
`.
`
`Respectfully submitted,
`
`Dated: November E 2002
`
`HOWRE SIMON ARNOLD
`
`& WHITE, LLP
`750 Bering Drive
`Houston, TX 77057
`(713) 787-1400
`
`Attorneysfor Registrant Villa d 'Este S.p.A.
`
`CERTIFICATE OF SERVICE
`
`I hereby certify that a true and correct copy of the foregoing REPLY IN
`
`FURTHER SUPPORT OF REGISTRANT’S MOTION TO SUSPEND PROCEEDINGS
`
`PENDING OUTCOME OF FEDERAL ‘COURT LITIGATION has been served on
`/
`November E, 2002, by first class mail, postage prepaid, on:
`
`Martin Wickliff, Jr.
`Epstein Becker Green Wickliff & Hall, PC.
`1000 Louisiana, Suite 5400
`Houston, TX 77002-5013
`
`
`
`H: 505625(@%5S0l LDOC)
`
`

`
`.....‘...._.
`
`llllllllllllllllllllllIlllllllllllllllllllllllllll
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`TRADEMARK TRIAL AND APPEAL BOARD
`
`11-05-2002
`
`U.S. Patent 8: TMOfclTM Mail Ficpt Dt. #30
`
`Registration No. I, 664, 665
`Mark: VILLA D’ESTE and design.
`Registered: November 19, 1991
`
`VILLA D’ESTE CONDOMINIUM
`
`OWNERS ASSOCIATION, INC.
`
`
`
`
`
`
`Petitioner,
`
`Cancellation No. 40,923
`
`v.
`
`VILLA D’ESTE, S.p.A.,
`
`Registrant.
`
`DECLARATION OF THOMAS L. CASAGRANDE, ESQ.
`
`I, THOMAS L. CASAGRANDE, pursuant to 28 U.S.C. § 1746, hereby declare as
`
`follows:
`
`1.
`
`I am a partner in the law firm of Howrey Simon Arnold & White, LLP, 750 Bering Drive,
`
`Houston, TX 77057, and counsel for Defendant/Counterclaimant Villa d’Este S.p.A. in the
`
`above-captioned case. I make this declaration based upon my own personal knowledge.
`
`2. Exhibit A is a true and correct copy of Plaintiffs’ Motion to Bifurcate Discovery filed on
`
`August 21, 2002 in Interfin Corp. et al. v. Villa d’Este, S.p.A., Civ. No. H-01-4130, In the
`
`United States District Court for the Southern District of Texas, Houston Division. For the
`
`Board’s convenience, it has been modified by the insertion of hand-written page numbers.
`
`I declare under penalty of perjury that
`
`the foregoing is
`
`true and correct.
`
`Dated:
`
`Z1101;
`
`,3 @2309
`
`Thomas
`
`.
`
`a
`
`de
`
`H: 505372(@%CO0ll.DOC)
`
`

`
`IIlllllIllllllllllllllllllllllllllllllllllllllllll
`
`1 1-05-2002
`u.s. Patent& TMOfc/TM Man RcptDt. #30
`
`CIVIL ACTION NO. H—0 I -4130
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
`
`‘
`
`INTERFIN CORPORATION AND
`VILLA D’ESTE CONDOMINIUM
`OWNERS ASSOCIATION, INC.,
`
`Plaintiffs,
`
`v.
`
`VILLA D’ESTE S.P.A.,
`
`Defendant/Counterclaimant
`
`V.
`
`INTERFIN CORPORATION, VILLA
`D’ESTE CONDOMINIUM
`
`DEVELOPMENT L.P. (f/k/a VILLA
`D’ESTE LIMITED PARTNERSHIP and
`f/k/a VILLA D’ESTE DEVELOPMENT
`
`L._P.)_, VILLA D’ESTE CONDOMINIUM
`OWNERS ASSOCIATION, INC..
`GIORGIO M. BORLENGHI, STAN
`DAUGHERTY, BARRY H. MARGOLIS,
`KYLE O. STILES, and JOHN DOES 1-10,
`
`Counterclaim Defendants
`
`aoacancouancoacoacasaaanaanoacoanoacawcaacaacoacoaaonoaooarozaoaaoanosaaacoa
`
`PLAINTIFFS’ MOTION TO BIFURCATE DISCOVERY
`
`Pursuant to Federal Rules 26 and 16, Plaintiffs Interfin Corporation (“Interfin”) and Villa
`
`d’Este Condominium Owners Association,
`
`Inc. (“Owners Association,” and together with
`
`Interfin, “Plaintiffs”) jointly move the Court to bifurcate the issues of liability and damages in
`
`this trademark infringement case.
`
`

`
`1.
`
`OVERVIEW
`
`A. Nature and Stage of the Proceeding
`
`Plaintiffs filed this lawsuit in November 2001 seeking a declaratory judgment that their
`
`use of the name “Villa d’Este” in connection with a high—rise residential condominium located in
`
`Houston does not infringe any rights that the Defendant may have in the name “Villa d’Este" in
`
`connection with hotel services.
`
`In early June, Defendant answered the lawsuit and asserted
`
`various counterclaims against
`
`the Plaintiffs and several
`
`individuals.
`
`The Counterclaims
`
`included, inter alia, a federal law claim for trademark infringement of Defendant’s registered
`
`trademarks; federal and state law claims of dilution of Defendant's registered trademarks; federal
`
`and state law claims of unfair competition; and a claim of unjust enrichment.
`
`The Owners Association and Third-Party Defendant Giorgio Borlenghi (who has not yet
`
`been served in this action) filed proceedings in the Trademark Trial and Appeal Board (“TTAB”)
`
`to cancel three federal registrations owned by the Defendant. The cancellation proceedings were
`instituted because it appears that Defendant only sells its goods and services in Italy. To
`
`maintainlthese registrations, there must be “use in commerce." Defendant merely advertises
`
`those goods and services in the United States.
`
`In the parties’ Joint Discovery/Case Management Plan and the recent scheduling
`
`conference with the Court, Plaintiffs requested that discovery in this case be bifurcated.
`
`B. Standard of Review
`
`The Court has broad discretion over discovery matters. See Scroggins v. Air Cargo, Inc.,
`
`534 F.2d H24, 1133 (5th Cir. l976). Rule 26(c) authorizes the Court to stay or limit discovery
`
`when justice requires. See Fed. R. Civ. P. 26(c)(4). Further, Rule l6(c)(6) provides that the
`
`HOUSTON 2S998lv4 4l289—0O0l IUSTP
`
`

`
`Court may'take appropriate action in “the control and scheduling of discovery, including orders
`
`affecting disclosures and discovery pursuant to rule 26. .." Fed. R. Civ. P. »16(c)(6).
`
`C. Summary of the Argument
`
`Plaintiffs and Counterclaim Defendants believe that Defendant’s federally registered
`
`marks are subject to cancellation because there has been no use “in commerce" of the marks
`
`required to maintain the registrations. Further, Defendant has no common-law rights in the name
`
`“Villa d’Este” because Defendant has not offered or sold goods and/or services in the United
`
`States or even in Texas under the alleged marks, as required by United States trademark law
`
`and Texas state trademark law. This case is unique because in most trademark infringement
`
`cases, actual use of the subject marks by the mark holder in the United States is not disputed.
`
`In
`
`this suit, however, the Defendant, an Italian company, has submitted specimens of alleged use to’
`
`the U.S. Trademark Office that do not show on their face that Defendant has actually offered for
`
`sale or sold hotel services and related goods in the United States. Moreover, in its pleadings,
`
`Defendant has stated that it has only one location where it currently offers its hotel services and
`
`related goods, i.e., Lake Como, Italy. If Defendant has not used its marks in the United States, it
`
`cannot have any trademark rights in those marks, and, consequently,
`
`there can be no
`
`infringement, dilution, or unjust enrichment. Accordingly, two-phase discovery is appropriate to
`
`address the threshold issue of Defendant’s U.S. rights, if any, in the marks.
`
`Many courts bifurcate liability and damages issues in trademark infringement cases.
`
`Bifurcation of discovery is appropriate in this case because the dispositive question of actual use
`
`in the United States is factually distinct from other trial
`
`issues. Not
`
`only is bifurcation
`
`convenient,
`
`it also will conserve judicial and litigant resources by avoiding the expenses
`
`associated with damages during both discovery and trial, unless Plaintiffs are found liable (an
`
`HOUSTON 25998lv4 41 289000! l USTP
`
`

`
`unlikely event considering. Defendant's lack of use of the marks in the United States).
`
`In
`
`addition, after conducting expeditious and focused discovery on this use issue, Plaintiffs and
`
`Counterclaim Defendants anticipate filing dispositive motions on liability.
`
`II.
`
`THE COURT SHOULD BIFURCATE DISCOVERY
`
`Because of the unique nature of this case, Plaintiffs propose a limited bifurcation of
`
`discovery. Plaintiffs maintain that Defendant has not used its alleged marks in the United States
`
`at all, even though actual use of a mark in the United States is a fundamental requirement for
`
`ownership of a mark under U.S. trademark law. There is a strong likelihood that this dispute
`
`should ‘end quickly if the Court determines that Defendant has no rights in its alleged marks.
`
`Bifurcation of discovery, as proposed, will help limit time and expenses involved in litigating
`
`liability.
`
`It is entirely appropriate for the Court to “limit early discovery to matters necessary to
`
`support a ruling on one or two early motions .
`
`.
`
`. [and to] flit a date for filing a relatively early
`
`motion for summary judgement .
`
`.
`
`.”
`
`3 Moore’s Federal Practice § 16.36[3][g][v] '(Matthew
`
`Bender 3d ed.).
`0
`A. Legal Standard
`
`The Court's broad discretion over discovery matters are reviewed under an abuse of
`
`discretion standard. Scroggins v. Air Cargo, Inc., 534 F.2d 1124, 1133 (5th Cir. 1976). Rule
`
`26(c) authorizes this Court to stay or limit discovery when justice requires. The rule provides in
`
`part:
`
`. may make any order which justice
`.
`. the court .
`.
`Upon motion by a party .
`requires to protect a party or person from annoyance, embarrassment, oppression,
`or undue burden or expense, including .
`.
`.
`
`(4) that certain matters not be inquired into, or that the scope of the
`disclosure or discovery be limited to certain matters .
`.
`.
`
`HOUSTON 25998lv4 41289-0001 IUSTP
`
`

`
`Fed. R. Civ. P. 26(c)(4).
`
`In addition, Rule 16(c)(6) states that the Court can take appropriate
`
`action in “the control and scheduling of discovery, including orders affecting disclosures and
`
`discovery pursuant to rule 26”. Fed. R. Civ. P. 16(c)(6).
`
`B. As it Appears that Defendant Does Not Use its Mark in the United States, this
`Case is Suitable for Bifurcation
`
`This trademark suit
`
`is unusual because Plaintiffs maintain that Defendant does not
`
`provide goods or services in the United States in connection with its alleged marks. In order to
`
`prevail on its trademark infringement claim, Defendant must prove: (I) ownership of a
`
`protectable mark; and (2) another’s use of the same or similar mark that is likely to confuse
`
`consumers. See, e.g., Soweco, Inc. v. Shell Oil Co., 617 F.2d 1178, 1185 (5th Cir. 1980).
`
`It
`
`is a basic principle that “[o]wnership of a mark requires a combination of bothI
`
`appropriation and use in trade.” Blue Bell, Inc. v. Farah Mfg. Ca., 508 F.2d 1260, 1264-65 (5th
`
`Cir. 1975) (citations omitted) (emphasis added).
`
`In this regard, “neither conception of the mark,
`
`‘ nor advertising alone establishes trademark rights at‘ common‘ law. Rather, ownership of a
`
`trademark accrues when goods bearing the mark are placed on the market.” Id. (internal citations
`
`omitted).
`
`Perhaps most important to this suit is the concept that a trademark owner provide its
`
`goods or services in United States commerce before any rights ensue in the particular mark
`
`under U.S. trademark law. See, e.g., Butt’ v. Perosa, S.R.L., 139 F.3d 98, 102-104 (2d Cir. 1998)
`
`(holding that mere advertising of restaurant services in United States under “FASHION CAFE”
`
`mark did not satisfy “use in commerce” requirement under U.S. law where restaurant services
`
`were actually performed in Italy and no mark owner provided no services in U.S.). Advertising
`
`in the United States of services performed in a foreign country does not confer any trademark
`
`rights on the foreign entity providing such services. See id.
`
`HOUSTON 25998lv4 4l 289-0001 I USTP
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`

`
`Accordingly, the threshold issue of Defendant’s trademark infringement claim is likely
`
`completely dispositive of this case: if there is no protectable mark under US. trademark law
`
`(because Defendant does not use the mark “in commerce” in the U.S.),
`
`there can be no
`
`infringement, and the Court will not need to consider the second element of a trademark
`
`infringement claim (likelihood of confusion). As such, the proposed two—phase discovery will
`
`not cause any overlap or waste any time; but,
`
`in fact, will focus on the critical
`
`issue of
`
`Defendant's U.S.-based use of the subject marks in connection with Defendant’s hotel services
`
`and related goods.
`
`On the other hand, in order for the Defendant to prove its alleged damages, “the parties
`
`will need testimony on information such as gross sales, returns, net sales, cost of goods, net
`
`profits, and overhead from financial experts.” Giro Sport Design, Inc. v. Pro-Tec, Inc., 10
`
`U.S.P.Q.2d 1863, 1864 (N.D.Cal. 1989) (copy provided). Accordingly, it would be an undue
`
`burden on the parties (and perhaps on the Court, as well) to deal with expensive and
`
`comprehensive discovery when the suit is likely to be resolved on one simple factual issue:
`
`whether Defendant provides any goods or services “in commerce” in the United States under the
`
`alleged marks.
`
`Defendant’s other causes of action will also fail if Defendant cannot establish that it owns
`
`a protectable mark in the United States. See, e.g., Marathon Mfg. Co. v. Enerlite Prods. Corp..
`
`767 F.2d 214, 217 (5th Cir. 1985) (generally, same facts that would support
`
`trademark
`
`infringement support action for unfair competition); Horseshoe Bay Resort Sales Co. v. Lake
`
`Lyndon B. Johnson Improvement Corp., 53 S.W.3d 799, 806 n.3 (Tex.App.———Austin 2001, pet.
`
`refd), quoting Zapata Corp. v. Zapata Trading Int 'I., Inc., 841 S.W.2d 45, 47 (Tex.App.———
`
`Houston [14th Dist.) 1992, no writ) (“trademark infringement and unfair competition actions
`
`HOUSTON 25998 l V4 41289-O00l l USTP
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`

`
`under Texas common law present essentially ‘no difference in issues than those under federal
`
`trademark infringement actions.’”). The elements of unfair competition under both federal and
`
`Texas law are indistinguishable from the elements necessary to prove trademark infringement
`
`under the Lanham Act. Thus, a decision on Defendant’s alleged marks will likely also resolve
`
`Defendant’s claims of unfair competition under both federal law and state law.
`
`Regarding its causes of action for trademark dilution under federal and Texas law,
`
`Defendant must show: (1) ownership of a famous mark under federal law or a distinctive mark
`
`under Texas law; and (2) a likelihood of dilution. See, e.g., 15 U.S.C. § ll25(c); Pebble Beach
`
`Co. v. Tour 18 I, Ltd., 942 F. Supp. 1514, 1564 (S.D. Tex. 1996), ajf as modified, 155 F.3d 526
`
`(5th Cir. 1998). As noted above, in order to “own” a mark, one must use the mark “in
`
`commerce.” Once again, evidence that Defendant does not use (and has not used) the subject
`
`marks in United States commerce will
`
`likely resolve liability in this suit.
`
`In any event,
`
`demonstration of liability for dilution, under either Texas or federal law, does not involve any
`
`discovery on damages.
`
`Finally, to establish liability on Defendant’s unjust enrichment cause of action, Defendant
`
`must demonstrate that Plaintiffs used the goodwill and reputation of the Defendant for the
`
`Plaintiffs’ own goods or services. See Texas Pig Stands, Inc. v. Hard Rock Café Int '1, Inc., 951
`
`F.2d 694-95 (5th Cir. 1992). As the factors for unjust enrichment almost completely overlap
`
`with the test for federal trademark infringement, courts typically find that non liability on federal
`
`trademark infringement also disposes of the trademark holder’s unjust enrichment claims. See.
`
`e.g., Cathey Assocs., Inc. v. Beougher, 95 F.Supp.2d 643, 656 (N.D. Tex. 2000) (holding that
`
`because plaintiffs could not prove federal or common-law trademark infringement, plaintiffs’
`
`unjust enrichment claim also failed).
`
`HOUSTON 25998lv4 4l2B9~000l I USTP
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`

`
`C. This Court has Broad Discretion to Bifurcate Discovery
`
`It is well within this Court’s discretion to manage the scope and procedure of discovery
`
`pursuant to Fed. R. Civ. P. 16. See Acuna v. Brown & Root Inc., 200 F.3d 335, 340 (5th Cir.
`
`2000). Many courts have bifurcated the issues of liability and damages, in trademark and trade
`
`dress disputes. See, e.g., Roulo v. Russ Berrie & Co., 886 F.2d 931 (7th Cir. 1989) (bifurcating
`
`trade dress trial); Hain Pure Food Co. v. Sona Food Products Co., 618 F.2d 521 (9th Cir. 1980);
`
`St. Charles Mfg._Co. v. Mercer, 737 F.2d 891 (11th Cir. 1983); Planet Hollywood (Region IV).
`
`Inc. v. Hollywood Casino Carp., 80 F. Supp. 2d 815 (ND. Ill. 1999); WWW. Pharmaceutical
`
`Co. v. Gillette Co., 808 F. Supp. 1013 (S.D.N.Y. 1992); Selchow & Righter Co. v. Declpher.
`
`Inc., 598 F. Supp. 1489, (ED. Va. 1984); Raco Car Wash Systems, Inc. v. Smith, 730 F. Supp.
`
`695 (D.S.C. 1989); Brooks Shoe Mfg. Co. v. Suave Shae Corp., 533 F. Supp. 75 (S.D. Fla.’
`
`1981); Waples-Platter Cos. v. General Foods Corp, 439 F. Supp. 551 (N.D. Tex. 1977)._
`As the Fifih Circuit has stated, a trial court may properly eirercise its discretion to stay
`
`discovery pending a decision on a dispositive motion, particularly when it “would be wasteful to
`allow discovery on all issues raised in a broad complaint...” Corwin v. Marney, Orton Inv., 843
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`F.2d 194, 200 (5th Cir. 1988).
`
`In Corwin, the Fifth Circuit affirmed the district court’s order
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`restricting discovery on issues relating to a motion to dismiss.
`
`Similarly, the Fifth Circuit found no abuse of discretion “in [an] order staying general
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`discovery until the court could determine whether the case would be resolved at the summary
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`judgement stage.” Scroggins, 534 F.2d at 1133 (affirming trial court’s protective order that
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`limited discovery to matters raised in defendant’s motion for summary judgment). Plaintiffs
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`seek a similar discovery limitation in this suit. Namely, Plaintiffs request a short period of
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`concise discovery directed to protectability of Defendant's marks and alleged liability in
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`contemplation of a speedy resolution of this suit.
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`D. Bifurcation Will Conserve Judicial and Litigant Resources and Promote
`Efficiency
`‘
`
`The Court and the parties can potentially save a tremendous amount of time and expense
`
`through the proposed bifurcation. For example, another court in this District made the following
`
`observation:
`
`The trial of the damages question in such a suit is often difficult and expensive,
`while being easily severed from the trial of the questions of validity and
`infringement of the patent. A preliminary finding on the question of liability may
`well make unnecessary the damages inquiry, and thus result in substantial saving
`of time of the Court and counsel and reduction of expense to the parties.
`Moreover, separate trial of the issue of liability may present counsel
`the
`opportunity to obtain final settlement of that issue on appeal without having
`reached the ofien time—consuming and difficult damages question.
`
`'
`
`Swojford v. B&W, Inc., 34 F.R.D. 15, 20 (SD. Tex. 1963), afl”d, 336 F.2d 406 (5th Cir. 1964).
`
`‘Although the Swoflord case dealt with patent litigation, the issues are similar to this suit.
`
`In either a patent or a trademark case, validity (z'.e., use in a trademark suit) and
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`infringement are often pointedly distinct from damages. Because of the two-tiered nature of
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`many patent and trademark lawsuits, they are ofien bifurcated. The bifurcation fits smoothly
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`with the natural flow of the case such that neither the court nor the parties lose anything through
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`bifurcation. Plaintiffs are not requesting that the Court bifurcate the trial, because Plaintiffs
`
`recognize that this case, while complex, is not as involved as some patent infringement lawsuits.
`
`In this regard, Plaintiffs only seek a short period during which limited discovery can be
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`conducted in anticipation of filing a dispositive motion. Any attendant risks associated with
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`bifurcation (i.e., delay) are only a fraction of what they would be in a bifurcated trial.
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`E. ‘Bifurcation Will Eliminate Prejudice Against Plaintiffs and Will Not Cause
`Prejudice Against Defendant
`
`Although Plaintiffs perceive the determination of liability will be straightforward on
`Defendant’s rights to the subject marks in the United States, the determination of alleged
`
`damages will be more complex and expensive. At this point, it would prejudice Plaintiffs to
`divulge financial information about their businesses to a company that has no justifiable interest
`
`in viewing such proprietary information (if, in fact, Defendant has no rights in its U.S. marks).
`
`Moreover, Defendant will not be prejudiced by two-phase discovery. First, Defendant
`
`has no need of Plaintiffs’ and Counter-Defendants’
`
`financial
`
`information because such
`
`information has no relation to any liability determination. Second, any delay that the bifurcation
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`introduces to this suit will be minimal, if not non-existent. As discussed, Plaintiffs contemplate
`
`moving for summary judgment on liability afier limited discovery. If the Court enters summary
`
`judgment for Plaintiffs, the case will end;
`If the Court-denies Plaintiffs’ dispositive motion,
`-Plaintiffs anticipate that full discovery would then be. appropriate. Given that the Scheduling
`Order allows the parties to conduct discovery until August 2003,
`is ample time to conduct
`initial discovery as Plaintiffs propose, file a dispositive motion on liability, and then,
`if
`necessary, carry out full discovery without deviating from the Court's Scheduling Order.
`
`Finally, any potential minimal delay, which is clearly outweighed by the potential
`
`benefits, cannot prejudice Defendant because, as mentioned, Defendant has not taken any actions
`
`that demonstrate that it has been or would be harmed by Plaintiffs’ and Counter—Defendants‘
`
`activities. For example, Defendant did not file a lawsuit against Plaintiffs and Counter-
`
`Defendants when it learned of Plaintiffs’ and Counter-Defendants’ use of the name “Villa
`
`d’Este.” After Plaintiffs and Counter-Defendants filed their declaratory judgment
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`lawsuit,
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`Defendant ‘chose to forgo a quick method of local service,‘ instead requiring Plaintiffs to serve
`
`the Italian Defendant
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`in Italy, a process which added months to the litigation timetable.
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`Moreover, once it finally answered the lawsuit and alleged counterclaimis against Plaintiffs and
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`Counter-Defendants, Defendant did not seek a temporary restraining order or a preliminary
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`injunction against Plaintiffs and Counter-Defendants relating to their use of “Villa d’Este” in
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`connection with a high—rise condominium.
`
`III.
`
`CONCLUSION
`
`Because the threshold issue of Defendants’ alleged use of the subject marks in the United
`
`States is likely to dispose of this case, Plaintiffs respectfully ask the Court to order that the
`
`parties conduct discovery in two phases in this case: (1) initial discovery on liability only; and
`
`(2) remaining discovery, only as necessary following the Court’s ruling on Plaintiffs’ summary
`
`judgment motion on liability. Plaintiffs anticipate that they will likely file a dispositive motion
`
`by the end of this year.
`
`' After requiring Plaintiffs to incur the expensive and timely process of international service, Defendant eventually
`capitulated, and advised Plaintiffs that it had changed its mind and would waive official service. Thereafter,
`Defendant filed its counterclaims without formal service of process.
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`//
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`Respectfully submitted,
`
`Respectfully submitted,
`
`EPSTEIN BECKER GREEN
`
`WICKLIFF & HALL, P.C.
`
`JENKENS & GILCHRIST,
`A Professional Cozporation
`
`A. Martin Wickliff, Jri
`
`2
`
`Attorney-in-Charge
`Federal ID 3466
`Texas Bar No. 21419900
`
`WICKLIFF & HALL, P.C.
`Wells Fargo Plaza
`1000 Louisiana, Suite 5400
`Houston, Texas 77002
`
`Telephone: 713/750-3100
`Facsimile: 713/750-3101
`
`ATTORNEYS FOR VILLA D’ESTE
`CONDOMINIUM OWNERS
`ASSOCIATION, INC.
`
`0%; /J 11:?’A
`
`Lisa H. Meyerhoff
`Attomey-in-Charge
`Federal ID 18693
`Texas Bar No. 14000255
`
`JENKENS & GILCHRIST,
`A Professional Corporation
`1100 Louisiana, Suite 1800
`Houston, Texas 77002
`Telephone: 713/951-3300
`Facsimile: 713/951-#3314
`
`ATTORNEYS FOR’ WTERFIN
`CORPORATION '
`
`or COUNSEL:
`
`OF COUNSEL:
`
`Ruth M. Willars
`Texas Bar No. 24003175
`
`EPSTEIN BECKER GREEN
`
`WICKLIFF & HALL, P.C.
`Wells Fargo Plaza
`1000 Louisiana, Suite 5400
`Houston, Texas 77002
`Telephone: 713/750-3100
`Facsimile: 713/750-3101
`
`Margaret A. Boulware
`Texas Bar No. 061 17700
`
`Joseph M. Beauchamp
`Texas Bar No. 24012266
`
`JENKENS & GILCHRIST,
`A Professional Corporation
`1100 Louisiana, Suite 1800
`Houston, Texas 77002
`Telephone: 713/951-3300
`Facsimile: 713/951-3314
`
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`CERTIFICATE OF SERVICE
`
`I hereby certify that, on the j iodciay of August 2002, a true and correct copy of the
`
`foregoing “P1aintiffs’ Motion to Bifurcate Discovery” was served by United States Mail, First
`Class, postage prepaid, on:
`
`Alessandro Saracino
`Pavia & Harcourt LLP
`600 Madison Avenue
`
`New York, New York 10022
`
`Thomas L. Casagrande
`Howrey, Simon, Arnold & White, LLP
`750 Bering Drive
`Houston, Texas 77057~2198
`
`/J
`
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