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March 30, 1998


The opinion of the court was delivered by: TRUMP


 BARRY, District Judge

 This matter comes before the court on the application of defendants, Dr. Ing. h.c.F. Porsche AG ("Porsche AG") and Porsche Cars North America, Inc. ("Porsche Cars N.A.") (collectively as "Porsche") for a preliminary injunction to enjoin plaintiff Liquid Glass Enterprises, Inc. ("Liquid Glass") from infringing and diluting Porsche's trademarks and trade dress. For the reasons which follow, a preliminary injunction will issue.


 Liquid Glass is a New Jersey corporation which sells car care products, primarily car cleaners and polishes. Compl. at PP 4,7. Porsche AG is a German company which has manufactured motor vehicles, parts and accessories since 1952. Verif. Countercl. at P 3. Porsche Cars N.A. is a Delaware corporation with exclusive authority to import and sell Porsche vehicles and related products in the United States. Id. at P 2.

 Porsche AG owns registered trademarks for the underlined word PORSCHE (stylized) for use with automobiles and parts, for the stylized word PORSCHE on various products, and for the Porsche crest. Id. at Exh. A. Porsche contends that it also holds ownership rights in the distinctive shape or trade dress of certain Porsche automobiles, namely the Porsche 911, 356 and 959. Id. at P 7-8; Exh. F.

 At issue in this case is Liquid Glass's use of the Porsche trademarks and trade dress in its advertisements for car polish. Porsche has submitted two examples of allegedly infringing and diluting Liquid Glass advertisements, namely, an ad appearing in the May 1997 issue of a national car magazine, Motor Trend, which portrays a provocatively-dressed woman applying Liquid Glass car polish to a Porsche 911 with the trademark "PORSCHE" prominently displayed on the car (Id. at Exh. B), and a ten-minute video for use at trade shows. Id. at Exh. D. The video opens with a Porsche 911 (with the Porsche crest plainly visible) accelerating down a highway. Immediately following, the video cuts to a woman who is undressing and taking a shower. Thereafter, the video cuts alternately between a car (not a Porsche) being washed and polished and a woman showering, putting on her makeup and getting dressed. The video then illustrates Liquid Glass's uses on numerous expensive cars and ends with a shot of the Porsche 911 speeding down the road. *fn1"

 Porsche first became aware in 1991 that Liquid Glass was running advertisements using a Porsche 911. Verif. Countercl. at P 19. On December 2, 1991, a cease and desist letter was sent to Liquid Glass, objecting to its unauthorized use of the Porsche trademarks and trade dress. Porsche Reply Mem. at Exh. A. No further unauthorized uses were detected until the July 1993 issue of Road & Track included a Liquid Glass advertisement picturing a provocatively-clad woman polishing a Porsche 911. Again, Porsche responded with a cease and desist letter, further admonishing that "the tenor of this advertisement is not consistent with Porsche policy; we find the suggestion that Porsche cars condones this advertising approach objectionable." June 11, 1993 Letter, Id. at Exh. B. In response, Liquid Glass asserted that the Porsche depicted in the advertisement belonged to the President of Liquid Class and, therefore, its use was "fair usage and not Trademark or TradeDress infringement." June 24, 1993 Letter, Id. at Exh. C. Nonetheless, Liquid Glass offered to update the advertisement with a disclaimer that Porsche and Liquid Glass were affiliated in any way. Id. Porsche disagreed that a disclaimer was sufficient, or that use of an individual's privately owned automobile in an advertisement constituted "fair use." July 2, 1993 Letter, Id. at Exh, D. Apparently understanding the matter to be resolved, however, no further correspondence between the parties occurred until 1996.

 In October 1996, Porsche discovered another Liquid Glass advertisement in Motor Trend depicting the Porsche 911 and using the Porsche trademarks and trade dress. Verif. Countercl. at P 20. Porsche sent cease and desist letters to Liquid Glass on December 19, 1996 and February 24, 1997 stating that if such unauthorized usage continued, "Porsche Cars N.A. will be compelled to pursue its legal remedies." Id., Exhs. F, G. Liquid Glass did not respond to either letter and Porsche informed Liquid Glass by letter of June 24, 1997 that its advertisements were willful violations of the trademark laws. Porsche again requested that Liquid Glass cease and desist, threatening a lawsuit if it did not do so. Id. at Exh. H. On July 16, 1997, Liquid Glass responded that it would immediately stop featuring any Porsche in its national advertising campaign, but that the 5,000 sales sheets which depict the Porsche would continue to be used until they were exhausted by year's end. Id. at Exh. I. Porsche replied that the continued use of the 5,000 sales sheets was unacceptable, and supplied Liquid Glass with a copy of a Verified Complaint which it was prepared to file if Liquid Glass did not discontinue use of the sales sheets immediately. August 8, 1997 Letter, Id. at Exh. J.

 Liquid Glass responded, without conceding liability, that it would discontinue the advertisements but that it could not guarantee that the sales sheets which had been circulated would not appear in the market in the future. Id. at Exh. K. In addition, Liquid Glass voiced concerns about the costs associated with reshooting the video used in trade shows, suggesting that either a disclaimer be added or the video be reshot at Porsche's expense. Id. Porsche immediately requested a copy of the video. August 12, 1997 Letter, Porsche Reply Mem. at Exh. E. After viewing the video, Porsche objected to its use of the Porsche automobile and Porsche crest, refused to pay for a reshooting, and disagreed that a disclaimer would be sufficient. August 20, 1997 Letter, Verif. Countercl. at Exh. L. Porsche demanded that use of the video be discontinued, that Liquid Glass cease distributing the sales sheets, and that it "take all reasonable steps to recall undistributed advertisements from its retailers who may have quantities on hand...." Id.

 Porsche also enclosed a proposed settlement agreement for Liquid Glass's signature. Id. Liquid Glass refused to sign the agreement unless it was modified to include a release of liability. September 16, 1997 Letter, Id. at Exh. M. Porsche revised the settlement agreement, as agreed upon by the parties in a telephone conference, to include a disclaimer of liability as to Liquid Glass's past advertisements and resubmitted it to Liquid Glass on September 18, 1997. Id., Exh. N at P 3. Having received no response, Porsche followed up on October 7, 1997, stating that if the settlement agreement was not executed by October 13, 1997, Porsche would take "appropriate action." Id. at Exh. 0.

 On October 9, 1997, Liquid Glass rejected the settlement agreement as "overreaching." Id. at Exh. P. Porsche then informed Liquid Glass that any alternative language or provisions would be welcome, but if no agreement was reached by October 17, 1997, the complaint would be filed. Id. at Exh. Q. Liquid Glass, stating that it was "still hopeful that this matter [could] be resolved without having to resort to a Court deciding this matter for us," but meanwhile having filed the instant action for a declaratory judgment just three days earlier, responded on October 17, 1997 that it would be willing to draft a settlement agreement with appropriate language. Id. at Exh. R. On October 29, 1997, it informed Porsche that it had "ceased using and distributing any advertisements, [or] sales sheets that portray Porsche marks" and that it was "in the process of phasing out the use of the video." Id. at Exh. 5. On November 3, 1997, however, Liquid Glass told Porsche that while it "had already pulled all ads which show a Porsche mark or automobile," the sales sheets would not be replaced until a new ad was produced ("by the end of this year, at the latest"), and a "few dozen copies" of the video would be distributed to the general public in 1998. Id. at Exh. T. On January 6, 1998, Porsche informed Liquid Glass that the matter was not resolved because the video was still being used, no confirmation was provided that the sales sheets were definitely discontinued, and a settlement agreement had not yet been signed. Id. at Exh. W.

 On January 13, 1998, Liquid Glass served Porsche with the complaint in this action. Liquid Glass seeks declaratory judgment of non-infringement or dilution, and asserts claims for tortious interference with current and prospective advertisers, tortious interference with current and future sales, lack of consumer confusion and "discrimination." Porsche filed a counterclaim alleging trademark and trade dress dilution under Section 43(c) of the Lanham Act, trademark Infringement under Section 32(1), false designation of origin or sponsorship and trade dress infringement under Section 43 (a), as well as a claim for common law trademark infringement. Porsche now petitions this court to preliminarily enjoin the allegedly infringing and diluting Liquid Glass advertisements and video.


 A preliminary injunction may be granted if the moving party demonstrates that it is likely to succeed on the merits and, in the absence of an injunction, it will be irreparably harmed. Furthermore, the court should consider the harm to the party to be enjoined and, if appropriate, the public interest. Opticians Ass'n of America v. Independent Opticians of America, 920 F.2d 187, 191-92 (3d Cir. 1990) .

 A. Probability of Success

 This court finds that Porsche is likely to prevail on the merits of its counterclaim. To prevail on a claim of trademark infringement under Section 32(1) of the Lanham Act, Porsche must show that Liquid Glass (1) used in commerce any reproduction or copy of a "registered mark" in connection with the advertising of any goods (2) which is "likely to cause confusion, or to cause mistake, or to deceive[.]" 15 U.S.C. § 1114(1) (a). The elements of trade dress infringement under Section 43(a) of the Lanham Act are similar: in terms of this case, the shape of the automobile must be distinctive (defined as either inherently distinctive or having acquired distinctiveness through secondary meaning), nonfunctional and a likelihood of confusion must exist from its use by Liquid Glass. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 769, 120 L. Ed. 2d 615, 112 S. Ct. 2753 (1992). And, finally, a claim for false designation of origin or sponsorship requires Porsche to show that Liquid Glass (1) used in commerce any false designation of origin which is (2) likely to cause ...

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