Second Circuit Rebukes District Court in Two-Decade Old Patsy’s Pizza Litigation

On August 17, in the case of I.O.B. Realty, Inc. v. Patsy’s Brand, Inc., the United States Court of Appeals for the Second Circuit ordered that the June 4, 2020 judgment of the United States District Court for the Southern District of New York be vacated for not complying with the Second Circuit’s mandate, with judgment being entered for Patsy’s Brand and the case dismissed. The decision is related to two decades of litigation. As court documents have described, the case has been protracted, highly contentious, and, at times, even scandalous.

The trademark disputes are between two New York City restaurants, Patsy’s Pizzeria (I.O.B.), which was established in 1933, and Patsy’s Italian Restaurant (Patsy’s Brand), which was established in 1944.  Neither party challenged the other party’s mark until after each party entered the sauce market – Patsy’s Brand in 1993 and I.O.B. sometime thereafter.

The Patsy’s Saga

The Second Circuit, in a 2003 decision, initially upheld a district court’s award of attorney’s fees to Patsy’s Brand, Inc. related to misconduct by I.O.B. in presenting fraudulent documents during the course of litigation. Then, in 2008, the United States District Court for the Eastern District of New York issued a decision related to a 2006 complaint filed by Patsy’s Brand against I.O.B., stating:

[T]he Court of Appeals for the Second Circuit admonished the major parties in this litigation … This lengthy Opinion and Order is written because the parties have largely ignored that admonition. During the intervening years, the parties have instead continued on an oftentimes labyrinthine course of litigation… These [TTAB] proceedings have been alternately described as “protracted and convoluted,” … and “a procedural morass,” “tortured” and “resulting in confusion and mistake.“

Twelve years later, on May 6, 2020, the Second Circuit stated in its Order, “Over eighteen years ago, the Honorable John S. Martin of the Southern District of New York Court wrote that a ‘relatively mundane trademark litigation’ between two restaurants who called themselves Patsy’s had turned ‘into a minor legal epic.’”

The trademark challenges began in 1998, when I.O.B. filed a petition with the Trademark Trial and Appeal Board (TTAB) of the U.S. Patent and Trademark Office (USPTO) seeking to have the Patsy’s Brand 1995 registration for its sauce label cancelled (i.e. Patsy’s PR Since 1944). In response, Patsy’s Brand initiated a proceeding seeking cancellation of I.O.B.’s registration of its restaurant service marks (i.e. Patsy’s Pizzeria and Patsy’s). The TTAB proceedings were suspended in June 2000, pending disposition of the complaint filed by Patsy’s Brand in the Southern District of New York against I.O.B. for, amongst other claims, trademark infringement in 1999, which resulted in the district court judge granting a summary judgment to Patsy’s Brand on its claims of trademark infringement, entering an injunction, awarding attorney’s fees, and imposing sanctions. The decision was appealed to the United States Court of Appeals for the Second Circuit, which concluded the injunction was somewhat overbroad and must be modified, but that attorney’s fees and sanctions were properly awarded. Again, this was only the beginning of the parties’ ongoing disputes, which the United States District Court for the Eastern District of New York referred to in its January 12, 2016 order as “the Sauce Litigation.”

Fast forward to 2016, when I.O.B. filed a complaint in the U.S. District Court for the Southern District of New York, with Judge Louis Stanton presiding, claiming trademark infringement. Patsy’s Brand filed a Motion to Dismiss and, in 2018, both parties filed a Motion for Summary Judgment. On July 2, 2018, Judge Stanton disposed of the cross-motions for summary judgment by ordering the USPTO to grant I.O.B.’s pending trademark applications. Patsy’s Brand thus appealed the decision to the Second Circuit.

On May 6, 2020, the Second Circuit stated in its Order:

Significantly, neither the judgment nor the district court’s docket entries note how the district court disposed of the cross-motions on summary judgment … we vacate and remand to the district court with instructions to explain its disposition. In particular, the district court should state whether it is granting or denying the motions for summary judgment, and should explain the basis for its authority to order the PTO to grant I.O.B. Realty’s pending trademark applications and to register the PATSY’S PIZZERIA marks.

Judge Stanton’s June 4, 2020. Response to Order of Remand was appealed by Patsy’s Brand to the Second Circuit, bringing us to the present day.

Failure to Follow the Mandate

The August 17, 2021 Second Circuit opinion opened with, “We are presented with a puzzling situation at the end of a vexing chapter in the ‘minor legal epic’ between Patsy’s Pizzeria (“I.O.B.”) and Patsy’s Italian Restaurant (“Patsy’s Brand”).” What the court found puzzling was the district court’s response to the remand, which stated in part, “[t]he judgment granted full relief to the parties, and there was no purpose, even an academic one, in separately addressing the summary judgment motions,” – i.e. the district court judge issued the same judgment and did not respond to the Second Circuit’s May 2020 order. The appeals court’s concern in its 2020 order was that “rather than applying the law within the strictures of the Federal Rules of Civil Procedure, Judge Stanton crafted a remedy that he concluded would address the ‘reality’ of the situation.”

As the Order indicated, the undisputed facts in the record permitted the Second Circuit to enter summary judgment, eliminating the need to send the case back to the district court a second time. The Second Circuit explained:

The present judgment stands in contravention of this Court’s mandate because it fails to state “whether it is granting or denying” each of the summary judgment motions. For the latter reason at the very least, we vacate the judgment dated June 4, 2020, including the district court’s order to the PTO to register the PATSY’S PIZZERIA mark therein.

The appeals court held that I.O.B. had failed to present evidence showing that there is a disputed factual issue as to whether there is a likelihood of confusion between the marks PATSY’S PIZZERIA and PATSY’S OF NEW YORK and therefore vacated the district court’s judgment, finding in favor of Patsy’s Brand.

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