Sugar Busters LLC v. Brennan

• Citation: 177 F.3d 258
• Decision Date: 25 May 1999
• Docket Number: No. 98-31063,98-31063
• Parties: SUGAR BUSTERS LLC, Plaintiff-Appellee, v. Ellen C. BRENNAN; Theodore M. Brennan; Shamrock Publishing Inc., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 258

177 F.3d 258

50 U.S.P.Q.2d 1821

SUGAR BUSTERS LLC, Plaintiff-Appellee, v. Ellen C. BRENNAN; Theodore M. Brennan; Shamrock Publishing

Inc., Defendants-Appellants.

No. 98-31063.

United States Court of Appeals, Fifth Circuit.

May 25, 1999.

Lloyd N. Shields, Daniel Lund, III, Stuart Glen Richeson, Shields Mott Lund, New Orleans, LA, for Plaintiff-Appellee.

Alan H. Goodman, George Frazier, Lemle & Kelleher, New Orleans, LA, for Defendants-Appellants.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before KING, Chief Judge, and POLITZ and BENAVIDES, Circuit Judges.

KING, Chief Judge:

This appeal challenges the district court's grant of a preliminary injunction prohibiting defendants-appellants from selling or distributing a book entitled "SUGAR BUST For Life!" as infringing plaintiff-appellee's federally registered service mark, "SUGARBUSTERS." Plaintiff-appellee is an assignee of a registered "SUGARBUSTERS" service mark and the author of a best-selling diet book entitled "SUGAR BUSTERS! Cut Sugar to Trim Fat." We determine that the assignment of the registered "SUGARBUSTERS" service mark to plaintiff-appellee was in gross and was therefore invalid, and we vacate the injunction. However, because plaintiff-appellee might still obtain protection for its book title from unfair competition under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), we remand to the district court to consider plaintiff-appellee's unfair competition claims.

I. FACTUAL AND PROCEDURAL HISTORY

Plaintiff-appellee Sugar Busters, L.L.C. (plaintiff) is a limited liability company organized by three doctors and H. Leighton Steward, a former chief executive officer of a large energy corporation, who co-authored and published a book entitled "SUGAR BUSTERS! Cut Sugar to Trim Fat" in 1995. In "SUGAR BUSTERS! Cut Sugar to Trim Fat," the authors recommend a diet plan based on the role of insulin in obesity and cardiovascular disease. The authors' premise is that reduced consumption of insulin-producing food, such as carbohydrates and other sugars, leads to weight loss and a more healthy lifestyle. The 1995 publication of "SUGAR BUSTERS! Cut Sugar to Trim Fat" sold over 210,000 copies, and in May 1998 a second edition was released. The second edition has sold over 800,000 copies and remains a bestseller.

Defendant-appellant Ellen Brennan was an independent consultant employed by plaintiff to assist with the sales, publishing, and marketing of the 1995 edition. In addition, Ellen Brennan wrote a foreword in the 1995 edition endorsing the diet plan, stating that the plan "has proven to be an effective and easy means of weight loss" for herself and for her friends and family. During her employment with plaintiff, Ellen Brennan and Steward agreed to co-author a cookbook based on the "SUGAR BUSTERS!" lifestyle. Steward had obtained plaintiff's permission to independently produce such a cookbook, which he proposed entitling "Sugar Busting is Easy." Plaintiff reconsidered its decision in December 1997, however, and determined that its partners should not engage in independent projects. Steward then encouraged Ellen Brennan to proceed with the cookbook on her own, and told her that she could "snuggle up next to our book, because you can rightly claim you were a consultant to Sugar Busters!"

Ellen Brennan and defendant-appellant Theodore Brennan then co-authored "SUGAR BUST For Life!," which was published by defendant-appellant Shamrock Publishing, Inc. in May 1998. "SUGAR BUST For Life" states on its cover that it is a "cookbook and companion guide by the famous family of good food," and that Ellen Brennan was "Consultant, Editor, Publisher, [and] Sales and Marketing Director for the original, best-selling 'Sugar Busters! TM Cut Sugar to Trim Fat.' " The cover states that the book contains over 400 recipes for "weight loss, energy, diabetes and cholesterol control and an easy, healthful lifestyle." Approximately 110,000 copies of "SUGAR BUST For Life!" were sold between its release and September 1998.

Plaintiff filed this suit in the United States District Court for the Eastern District of Louisiana on May 26, 1998, asserting causes of action for trademark infringement and dilution under 15 U.S.C. §§ 1114 and 1125(c), unfair competition and trade dress infringement under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and trademark dilution, misrepresentation, unfair competition and misappropriation of trade secrets under Louisiana state law. Plaintiff sought to enjoin defendants-appellants Ellen Brennan, Theodore Brennan and Shamrock Publishing, Inc. (collectively, defendants) from selling, displaying, advertising or distributing "SUGAR BUST For Life!," to destroy all copies of the cookbook, and to recover damages and any profits derived from the cookbook.

The mark that is the subject of plaintiff's infringement claim is a service mark that was registered in 1992 by Sugarbusters, Inc., an Indiana corporation operating a retail store named "Sugarbusters" in Indianapolis that provides products and information for diabetics. The "SUGARBUSTERS" service mark, registration number 1,684,769, is for "retail store services featuring products and supplies for diabetic people; namely, medical supplies, medical equipment, food products, informational literature and wearing apparel featuring a message regarding diabetes." Sugarbusters, Inc. sold "any and all rights to the mark" to Thornton-Sahoo, Inc. on December 19, 1997, and Thornton-Sahoo, Inc. sold these rights to Elliott Company, Inc. (Elliott) on January 9, 1998. Plaintiff obtained the service mark from Elliott pursuant to a "servicemark purchase agreement" dated January 26, 1998. Under the terms of that agreement, plaintiff purchased "all the interests [Elliott] owns" in the mark and "the goodwill of all business connected with the use of and symbolized by" the mark. Furthermore, Elliott agreed that it "will cease all use of the [m]ark, [n]ame and [t]rademark [i]nterests within one hundred eighty (180) days."

In support of its request for a preliminary injunction, plaintiff argued to the district court that the recipes in the cookbook did not comport with the "SUGAR BUSTERS!" lifestyle and that consumers were being misled into believing that defendants' cookbook was affiliated with, or otherwise approved by, plaintiff. Plaintiff asserted that even if its purported service mark is found invalid, plaintiff is still entitled to a preliminary injunction under § 43(a) of the Lanham Act because its title "SUGAR BUSTERS! Cut Sugar to Trim Fat!" has developed a "secondary meaning" in the minds of customers, plaintiff has developed a common law service mark through the seminars it holds regarding the "SUGAR BUSTERS!" lifestyle, and defendants infringed plaintiff's trade dress.

Defendants argued to the district court that plaintiff's service mark is invalid because: (1) it was purchased "in gross," (2) the term "SUGARBUSTERS" has become generic through third-party use, and (3) plaintiff abandoned the mark by licensing it back to Elliott without any supervision or control over the retail store in Indiana that continues to operate under the "Sugarbusters" name. Defendants argued that, even if the service mark is valid, their cookbook could not infringe it because the mark is limited to a retail store and a trademark may not be obtained for a book title. Finally, defendants asserted that their use of the title was a "fair use" and that plaintiff is not entitled to an injunction under equitable principles because Stewart breached his agreement with Ellen Brennan and invited her to write the cookbook that is now the subject of this case.

The district court heard evidence relating to the preliminary injunction for three days beginning on June 30, 1998 and entered a preliminary injunction on September 22, 1998 that prohibits defendants from engaging in the sale and distribution of their cookbook, "SUGAR BUST For Life!" See Sugar Busters, L.L.C. v. Brennan, 48 U.S.P.Q.2d 1511, 1512 (E.D.La.1998). The district court found that plaintiff is the owner of the registered service mark, "SUGARBUSTERS," and that the mark is registered in International Class 16, "information, literature, and books." Id. at 1514. The district court found that the mark is valid and that the transfer of the mark to plaintiff was not "in gross" because

[t]he plaintiff has used the trademark to disseminate information through its books, seminars, the Internet, and the cover of plaintiff's recent book, which reads "Help Treat Diabetes and Other Diseases." Moreover, the plaintiff is moving forward to market and sell its own products and services, which comport with the products and services sold by the Indiana corporation. There has been a full and complete transfer of the good will related to the mark, and the plaintiff has licensed the Indiana corporation to use the mark for only six months to enable it to wind down its operations.

Id. The district court then considered whether defendants' use of the mark " 'creates a likelihood of confusion in the minds of potential customers as to the source, affiliation, or sponsorship' " of the cookbook using the factors we outlined in Elvis Presley Enterprises, Inc. v. Capece, 141 F.3d 188, 194 (5th Cir.1998). ¹ Sugar Busters, 48 U.S.P.Q.2d at 1513 (quoting Elvis Presley Enters., 141 F.3d at 193).

The district court found that "plaintiff has established that there is a likelihood of confusion in the minds of customers," that there is a substantial threat plaintiff will suffer irreparable injury without a preliminary injunction, that this threatened injury outweighs any damage that an injunction may cause defendants, and that an injunction will not disserve the public interest. Id. at 1516. The court refused to consider defendants' fair-use argument because it was raised for the first time in defendants' post-hearing brief, found defendants' equitable argument...