The Plaza lawsuit resolved

From Liz Benston at the Las Vegas Sun:

The Plaza trademark infringement lawsuit wasn’t, from a legal standpoint, about whether the famed Plaza Hotel in New York is more popular than or superior to the Plaza in downtown Las Vegas.

Yet in a broader sense, that’s what it was all about. Tamares Las Vegas Properties’ lawsuit against El-Ad Group again confirmed a Las Vegas truism — that buzz, reputation and name recognition are all-important.

Tamares didn’t want its casino property to end up being known as “the cheap Plaza.”

The jury, which deliberated for nearly two days, on Monday affirmed El-Ad Group’s right to use the Plaza name for its proposed $5 billion-plus replica of the New York landmark on the Strip, defeating Tamares’ attempt to block El-Ad’s use of the name. (El-Ad has delayed construction of the resort until early 2010.)

Jurors also rejected Tamares’ claim that the dispute had set back plans to redevelop the downtown property by at least a year, resulting in $29.4 million in damages.

“We are obviously disappointed in the jury’s decision,” said Kenneth Landfield, Tamares U.S. Real Estate’s chief operating officer. “We are currently exploring our legal options in this case.”

The jury never got around to considering another aspect of the case that appeared to be the most contentious of all: whether confused consumers would think a superluxury Plaza hotel on the Strip could come from the same company that runs the downtown property.

Companies often file trademark lawsuits to protect their brands against potential infringers with less sophisticated products and services. Second-class products often attempt to trade on the popularity of major brands. In this case, the high-end brand was playing defense.

The high-stakes showdown between two Israeli billionaires — El-Ad’s Yitzhak Tshuva and Tamares’ Poju Zabludowicz — began less than three months after El-Ad announced plans last year to purchase the New Frontier from Phil Ruffin and build a Plaza Las Vegas megaresort on the land. Weeks before Tamares filed suit against El-Ad, in August 2007, the company filed trademark applications to protect what the company believed were its exclusive rights to use the Plaza name for hotels in Nevada.

Tamares claimed the name has been used to brand the property since it opened in 1971. (Tamares bought four downtown hotels, including the Plaza, from Jackie Gaughan in 2004.)

The downtown Plaza, known for its cheap booze and buffet, has seen better days in spite of its status as a local landmark.

The problem for the property isn’t that people wouldn’t notice the obvious differences between it and a multibillion-dollar megaresort on the Strip. The problem, according to Tamares attorney Dennis Kennedy, is that the tourist at the airport who asks to go to the Plaza might instead end up at the Strip property.

In court last week, Kennedy said El-Ad is usurping a homegrown brand with widespread name recognition.

“You don’t win this case by saying ... our customers are richer than yours,” he said.

And yet, that distinction is important to Tamares executives as well. In court, Landfield admitted he didn’t want the downtown property to be known as “the cheap Plaza” compared with a Strip resort with the same name.

Attempting to establish the company’s claims, Tamares’ attorneys showed publicity photos with signs featuring the Plaza name, including banners hung outside the property.

El-Ad, using testimony by gaming experts, argued that the property was officially known as the Union Plaza until at least the early 1990s, when Gaughan took sole control of it and phased out “union” from the name. Moreover, El-Ad has a federal trademark on the Plaza name for hotels dating to 1986. The trademark applies nationally and has been used since the New York hotel opened on Fifth Avenue more than a century ago.

Tamares argued in court that the dispute had put a planned $100 million overhaul of the Plaza at risk and said a legal victory would kick-start development.

El-Ad attorney Steve Morris said spending that kind of money in a declining downtown market, amid a tanking economy, “defies common sense.”

“There’s no evidence (the company) is interested in redeveloping the property other than keeping it alive,” he said.

El-Ad’s attorneys produced letters addressed to Tamares from Larry Woolf, who ended his management company’s contract to run the Plaza and Tamares’ other downtown properties in summer 2007. In the letters, Woolf indicated money for basic repairs and upgrades to the property wasn’t forthcoming and that Tamares “seemed to enjoy making us ask for money.”

The Plaza needs “substantial” redevelopment with a joint venture partner to improve its prospects rather than a “band aid approach,” one letter read. “Improvements needed to bring this property into the 21st Century haven’t been made.”

Unfortunately for Tamares, its lawsuit, by establishing the superiority of El-Ad’s rights to the Plaza name, could end up bringing legal trouble to Tamares, should the company eventually upgrade the downtown Plaza.

If El-Ad believes the downtown property, in going upscale, is trying to trade on the name of the Strip resort, the company could sue Tamares or future owners for trademark infringement.