586 F.3d 487 (7th Cir. 2009), 07-3288, Sunstar, Inc. v. Alberto-Culver Co.

Docket Nº:07-3288, 07-3289, 08-3835, 08-3836, 08-3931, 08-3936
Citation:586 F.3d 487
Opinion Judge:POSNER, Circuit Judge.
Party Name:SUNSTAR, INC., Plaintiff-Appellant, Defendant-Appellant/Cross-Appellee, v. ALBERTO-CULVER COMPANY, Defendant-Appellee, Plaintiff-Appellee/Cross-Appellant, and BANK ONE CORPORATION, Defendant-Appellee. KANEDA, KOSAN, KABUSHIKI KAISHA, Defendant-Appellant/Cross-Appellee
Attorney:For SUNSTAR, INCORPORATED, Plaintiff - Appellant: Philip S. Beck, Attorney, BARTLIT, BECK, HERMAN, PALENCHAR & SCOTT, Chicago, IL; Bryan W. Leach, BARTLIT, BECK, HERMAN, PALENCHAR & SCOTT, Denver, CO. For ALBERTO-CULVER COMPANY, Defendant - Appellee: Craig S. Fochler, Attorney, FOLEY & LARDNER, L...
Judge Panel:Before POSNER, MANION, and EVANS, Circuit Judges.
Case Date:October 28, 2009
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 487

586 F.3d 487 (7th Cir. 2009)

SUNSTAR, INC., Plaintiff-Appellant, Defendant-Appellant/Cross-Appellee,

v.

ALBERTO-CULVER COMPANY, Defendant-Appellee, Plaintiff-Appellee/Cross-Appellant,

and

BANK ONE CORPORATION, Defendant-Appellee.

KANEDA, KOSAN, KABUSHIKI KAISHA, Defendant-Appellant/Cross-Appellee

Nos. 07-3288, 07-3289, 08-3835, 08-3836, 08-3931, 08-3936

United States Court of Appeals, Seventh Circuit

October 28, 2009

Argued September 17, 2009

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[Copyrighted Material Omitted]

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Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 01 C 736, 01 CV 5825--Ronald A. Guzman, Judge.

For SUNSTAR, INCORPORATED, Plaintiff - Appellant: Philip S. Beck, Attorney, BARTLIT, BECK, HERMAN, PALENCHAR & SCOTT, Chicago, IL; Bryan W. Leach, BARTLIT, BECK, HERMAN, PALENCHAR & SCOTT, Denver, CO.

For ALBERTO-CULVER COMPANY, Defendant - Appellee: Craig S. Fochler, Attorney, FOLEY & LARDNER, LLP, Chicago, IL.

For BANK ONE CORPORATION, formerly known as FIRST NATIONAL BANK OF CHICAGO, Defendant - Appellee: John Bostjancich, Attorney, SMART & BOSTJANCICH, Chicago, IL.

Before POSNER, MANION, and EVANS, Circuit Judges.

OPINION

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POSNER, Circuit Judge.

This is an immense, unwieldy, complex, multiparty commercial case, now in its ninth year and on its second district judge. The case has been protracted unduly and should probably have been resolved on summary judgment years ago.

The principal issues concern the interpretation of a trademark licensing agreement and Japanese trademark law. In 1980, Alberto-Culver, a major U.S. producer of hair-care and skin-care products (its home page, under hair-care brands, states that " Alberto VO5--the company's flagship brand after 53 years remains a favorite of millions of women and men throughout the world, offering solutions from daily hair care to innovative styling products" ), sold Japanese trademark registrations, covering 13 trademarks. The buyer was a Japanese manufacturer of such products named Sunstar (plus an affiliate, Kaneda, Kosan, Kabushiki Kaisha, that need not be discussed separately; we pass over other immaterial facts as well). Most of the trademarks are forms or variants of " VO5" ; those that are not have no bearing on the litigation. The forms or variants, as presented in appendices to the license agreement, are as follows:

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The agreement of sale provided that upon receiving the trademarks Sunstar would transfer them to Bank One Corporation to hold in trust for 99 years, to license their use during this period to Sunstar, and at the end of the period to return them to Sunstar. If at any time while the trust was in force the trustee had a " reasonable ground" for thinking Sunstar had committed an act that created " a danger to the value or validity of LICENSOR's [i.e., Bank One's] ownership and title in Licensed Trademarks," Sunstar would have to stop using the endangered trademarks until the trustee " reasonably determined" that the danger had passed. In the event of an actual breach of the license by Sunstar, the trustee was to rescind the license and return the trademarks to Alberto-Culver.

The license agreement (the terms of which were negotiated by Sunstar and Alberto-Culver, Bank One's duties being limited to enforcement) calls the license

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granted Sunstar a senyoshiyoken, which in English means " exclusive-use right." The holder of a senyoshiyoken not only has an exclusive right to use the licensed trademarks within the geographical scope of the license (see next paragraph) but can sue infringers of the trademarks in its own name. The grantor of the license--in this case the trustee--cannot use the trademarks while the license is in force. Japanese Trademark Act, arts. 25, 30(2), 36(1), 38, 71(1)(iii).

Sunstar, for its part, was forbidden by the agreement to export any products bearing the licensed trademarks to countries in which Alberto-Culver was selling products under any of the trademarks, had granted an exclusive license to a third party to sell such products, or had registered or applied to register any of the trademarks licensed to Sunstar. Although the agreement forbids Sunstar to register (except for the purpose of defending the licensed trademarks) " any new trademarks containing the names Alberto, Alberto VO5 or VO5 or any of the names or marks set forth in [the appendices to the agreement]," Sunstar is not forbidden to use new trademarks in Japan.

All the products sold under the license are made by Sunstar; as far as the record shows, Alberto-Culver sells no hair-care products--maybe no products, period--in Japan. The agreement does not require Sunstar to pay royalties for using the licensed trademarks; the entire compensation to Alberto-Culver for the license consisted of lump-sum payments (totaling more than $ 10 million) by Sunstar made in 1980 when the license agreement was made.

The difference between obtaining a 99-year exclusive trademark license with no royalty obligation and buying trademarks outright is small. Sunstar had wanted to buy the trademarks outright but Alberto-Culver had balked because it wanted to restrict Sunstar's ability to use the trademarks in countries in which Alberto-Culver used or might want to use them (these restrictions take up more space in the license agreement than any other subject), and doubtless also because it wanted to be able to recapture and then relicense the use of the trademarks in Japan should Sunstar for some reason stop using them.

In 1989 Sunstar asked Alberto-Culver for permission to license this new variant of the VO5 trademark:

(Image Omitted)

Alberto-Culver refused. Sunstar used the variant anyway, contending that it did not violate the license. But the trustee said it did. Negotiations between Alberto-Culver and Sunstar ensued, and ultimately Sunstar agreed to pay $ 10 million for the right to add the variant to the list of licensed trademarks and register it, and for some trade secrets.

Ten years later, Sunstar started using a further variant, consisting mainly of a different typeface for " VO5," but also adding a black background and a vertical bar (rather than a space) between the " O" and the " 5" :

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Sunstar describes this as a " modernized" version of the licensed VO5 trademarks, which we assume means alluring to modern Japanese consumers. Alberto-Culver refused to amend the agreement to permit Sunstar to use the modernized version, and, as before, the trustee commanded Sunstar to desist--which it refused to do, instead filing this suit in 2001 against both Alberto-Culver and Bank One. The suit, which invokes federal jurisdiction under 28 U.S.C. § 1332(a)(2) because it is between a foreign citizen (Sunstar) and two U.S. citizens (Alberto-Culver and Bank One), seeks a declaration that Sunstar's use of the mark is permitted by the license. Sunstar sought other relief as well, including damages from Bank One, but has abandoned the additional claims. Alberto-Culver, as a third-party beneficiary of the license agreement, filed a mirror-image suit against Sunstar, seeking damages and injunctive relief, including an order that the license be rescinded and the trademarks returned to Alberto-Culver. The suits were consolidated, and tried to a jury.

The agreement is in English and states that disputes arising under it are to be resolved in accordance with the law of Illinois. But we cannot look to Illinois law to define senyoshiyoken, a term the meaning of which is given by Japanese law. Illinois law will not tell us whether the holder of a senyoshiyoken can use variants of its licensed trademarks. Alberto-Culver has taken the position that the parties used the term merely to indicate that Sunstar could register the license with the Japanese trademark office, and not to confer on Sunstar the rights that a senyoshiyoken confers on the holder under Japanese law. The district judge agreed, and refused to instruct the jury on the legal meaning of the Japanese term. Under Rule 44.1 of the civil rules, the judge decides the meaning of relevant foreign law and instructs the jury on that meaning, just as it would do in the case of issues of domestic law. The parties had submitted affidavits from experts on Japanese law concerning that meaning, but the judge, thinking the Japanese legal meaning irrelevant, did not try to determine it. Alberto-Culver argues that Sunstar forfeited any challenge to the judge's ruling by failing to ask him to instruct the jury on the legal meaning of senyoshiyoken. But he had made his position clear and Sunstar's lawyers' were not required to ask him to reconsider it.

In the course of its deliberations, the jury sent a note to the judge asking: " What exclusive rights does the Senyoshiyoken license give Sunstar PLEASE BE EXPLICIT!" The judge declined to answer, and the jury then returned a verdict for Alberto-Culver, except that it awarded no damages--for the excellent reason that there were none. The judge then enjoined Sunstar from using the variant mark--and also ordered the license agreement terminated because of Sunstar's breach and all the licensed trademarks therefore returned to Alberto-Culver. Alberto-Culver's cross-appeal is from the judge's refusal to grant a broader injunction; we

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shall not have to consider the merits of the cross-appeal.

We cannot find any basis for the proposition embraced by the district judge that the term senyoshiyoken bears a private meaning in the contract. Only if Sunstar was the holder of a senyoshiyoken within the meaning that Japanese law assigns to that term, rather than in some idiosyncratic sense that the parties assigned to it (nor did they say they were doing that), was it authorized to register the license agreement, as Alberto-Culver concedes Sunstar was authorized to do, and to sue in...

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