Mercado-Salinas v. Bart Enters. Int'l, Ltd.

• Decision Date: 20 December 2011
• Docket Number: No. 10–2359.,10–2359.
• Citation: 101 U.S.P.Q.2d 1053,671 F.3d 12
• Parties: Walter MERCADO–SALINAS; Astromundo, Inc., Plaintiffs, Appellants, v. BART ENTERPRISES INTERNATIONAL, LTD.; Walter International Productions, Inc.; Waltervision Productions, Inc.; Walter Mercado Radio Productions, Inc.; Walter Mercado Enterprises Corp.; Guillermo Bakula; Arcane Creative, LLC; Watervision, Inc., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

101 U.S.P.Q.2d 1053

671 F.3d 12

Walter MERCADO–SALINAS; Astromundo, Inc., Plaintiffs, Appellants,

v.BART ENTERPRISES INTERNATIONAL, LTD.; Walter International Productions, Inc.; Waltervision Productions, Inc.; Walter Mercado Radio Productions, Inc.; Walter Mercado Enterprises Corp.; Guillermo Bakula; Arcane Creative, LLC; Watervision, Inc., Defendants, Appellees.

No. 10–2359.

United States Court of Appeals, First Circuit.

Heard Nov. 8, 2011.Decided Dec. 20, 2011.

María D. Bertólez and María D. Trelles–Hernández, with whom Néstor M. Méndez–Gómez, Pietrantoni Méndez & Alvarez LLP, John F. Nevares, Pedro Quiñones Suárez, and John F. Nevares and Associates PSC were on brief, for appellants.

Laura Beléndez–Ferrero, with whom Cristina Arenas Solís, and Ferraiuoli LLC were on brief, for appellees.

Before LYNCH, Chief Judge, TORRUELLA and STAHL, Circuit Judges.

LYNCH, Chief Judge.

In 1995, Walter Mercado–Salinas, a popular psychic and astrologer, and Bart Enterprises entered into a contract (the “Agreement”) for the production and distribution of materials featuring Mercado's psychic and astrological services. Under the Agreement, Mercado granted Bart the right to use the “Walter Mercado” trademark, as well as Mercado's name and likeness.

In 2006, however, a dispute arose when Mercado ceased providing services and Bart ceased to pay Mercado's monthly compensation. This led to litigation in federal court in Florida in which a jury, inter alia, rejected Mercado's claim that he had validly terminated the Agreement, found that he had violated the Agreement, and found that Bart owed Mercado no compensation.

In 2009, both parties sought injunctive relief from the U.S. District Court for the District of Puerto Rico to prevent the other party from using the “Walter Mercado” trademark. Finding that Mercado assigned Bart the rights to the trademark in perpetuity and that Mercado had not validly terminated the Agreement, the district court denied Mercado's request for preliminary injunctive relief and granted preliminary injunctive relief to Bart. Mercado–Salinas v. Bart Enters. Int'l, Ltd., 747 F.Supp.2d 265 (D.P.R.2010).

We conclude that the district court did not abuse its discretion in doing so. We affirm.

I.

A. The Agreement

On August 4, 1995, Mercado and Bart signed the Agreement, under which Bart would develop and distribute materials and products related to Mercado's psychic and astrological services. As part of the Agreement, Mercado granted Bart several rights “during the Term and throughout the Territory” of the Agreement. The Agreement defines “Territory” as the universe. See Agreement § 4, at 5. It defines “Term” to mean “in perpetuity,” subject to a termination provision which, inter alia, allows Mercado to terminate the Agreement after fifteen days' written notice if Bart fails to pay Mercado any agreed compensation within sixty days of the due date.¹ Id. § 5, at 5; § 12(a)(iii), at 13–14.

First, Mercado “irrevocably assign[ed] to Bart throughout the Territory during the Term, all right, title and interest, including all copyrights” in certain “Preexisting Materials” that Mercado had previously created for the business entity Jamie Shoop & Associates Inc. See id. § 1(a), at 2.

Second, Mercado “grant[ed] to Bart the exclusive right and license during the Term and throughout the Territory to develop, produce, distribute and copyright in its own name new materials, in any language, relating to Mercado's psychic and astrological services” (the “New Materials”). Id. § 1(b), at 3.

Most pertinently, the parties to the Agreement “acknowledge[d] that the mark ‘Walter Mercado’ has ... attained the status of a common law trademark and service mark” by virtue of its “use and associat[ion] with the Preexisting Materials.” Id. § 2(a), at 3. The Agreement then states:

Mercado hereby irrevocably assigns to Bart throughout the Territory during the Term, all right, title and interest in and to the Mark, together with that part of the goodwill of Mercado's business connected with and symbolized by said Mark, for use in connection with the Pre-existing Materials and the New Materials, if any. Such assignment includes but is not limited to the right to use the Mark in connection with Preexisting Materials and the New Materials in any and all media now known or hereafter developed ..., the right to merchandise and the right to utilize the Mark in all advertising, promotion and publicity created in connection therewith.

Id. § 2(b), at 4. Additionally, the Agreement provides:

Bart shall have all rights in the Mark which are afforded to owners of trademarks and service marks, including but not limited to the right to seek and obtain trademark protection and/or registration of the Mark in its name, and the right to enforce or defend Bart's rights against third parties. ²

Id. § 2(c), at 4.

Mercado also “grant[ed] to Bart the right and license during the Term and throughout the Territory to use Mercado's performance, name, signature, photographs, voice, picture, likeness, or other indicia of his identity ... subject, however, to Mercado's right to prior approve any such use.” Id. § 3(b), at 5. The parties agreed that “such approval [is] not to be unreasonably withheld” and that “[i]f such approval is not communicated to Bart within forty-eight (48) hours of Mercado's receipt of the materials, such right of approval shall be deemed waived.” Id.

Finally, Mercado agreed to provide psychic and astrological services for the creation of the New Materials during an “Additional Services Period,” a ten-year term to be “automatically extended for additional two (2) year periods at the option of Bart.” Id. § 6(b)(i)-(ii), at 6. “The parties agree[d] that any and all New Materials or parts thereof created or supplied by Mercado shall be deemed works made for hire as such term is defined pursuant to the United States Copyright Law ... or relevant jurisdiction copyright law....” Id. § 6(b)(iii), at 7. United States copyright law, in turn, provides that the copyright in a “work made for hire” vests in the employer rather than the employee. 17 U.S.C. § 201(b). The parties further agreed that “[i]n the event that any of the results of Mercado's services are not copyrightable ... or for any reason are deemed not to be works made for hire, then ... Mercado hereby assigns all right, title and interest in and to the results of his services to Bart.” Agreement § 6(b)(iii), at 7.

In return, “Bart agree[d] to pay to Mercado, in consideration of all services rendered by Mercado and the use of the results thereof and all rights granted by Mercado to Bart,” compensation consisting of a $25,000 base salary per month, $5,000 per month for costumes, $2,000 per month for up to twenty-five three-minute segments per month, and additional fees contingent upon gross income from sales in foreign countries. Id. § 6(c), at 7–8.

At the same time, the parties agreed that Mercado “shall be in no way hereunder prohibited or restricted, for his personal benefit, from conducting his present business endeavors consisting of radio, newspaper, magazines and personal consultation related to psychic activities.” Id. § 6(c)(v), at 8.

Finally, the Agreement provides that “all grants granted or assigned by this agreement shall be irrevocable under all or any circumstances, and shall not be subject to rescission, termination or injunction. In the case of breach of this agreement by Bart, Mercado's sole remedy shall be limited to an action at law for damages.” Id. § 13, at 15–16. The parties further agreed that any disputes under the Agreement would be governed by Puerto Rico law. Id. § 20(d), at 19.

B. The Florida litigation

In the fall of 2006, Mercado ceased to provide services for new materials as provided under the Agreement and failed to appear for scheduled appearances. In November 2006, Bart halted its compensation payments to Mercado. Mercado formally attempted to terminate the Agreement by a letter dated November 22, 2006, citing Bart's failure to pay compensation. Mercado's company, Astromundo, Inc., also filed with the U.S. Patent and Trademark Office an application for the “Walter Mercado” trademark. See U.S. Trademark Application Serial No. 77–047157 (filed Nov. 17, 2006). This is one of the activities which ultimately caused Bart to seek injunctive relief against Mercado.

On January 17, 2007, Bart filed suit against Mercado in the federal court for the Southern District of Florida, alleging breach of contract and tortious interference with Bart's third-party contracts. Mercado counterclaimed for breach of contract, breach of fiduciary duty, breach of the covenant of good faith, violation of copyright and trademark laws, unjust enrichment, and requested injunctive relief and a declaratory judgment that the Agreement was invalid because its term was “in perpetuity.”

In the meantime, on February 8, 2007, Mercado filed suit against Bart in the federal court for the District of Puerto Rico. Mercado again alleged violation of copyright and trademark laws, and sought injunctive relief and a declaration that the Agreement was invalid. In October 2008, the Puerto Rico case was transferred to the Florida district court, and on November 18, 2008, the two cases were consolidated.

On cross-motions for summary judgment, the Florida district court held that the Agreement was valid. See Walter Int'l Prods., Inc. v. Mercado Salinas, No. 07–cv–20136, slip op. at 6–8 (S.D.Fla. Nov. 24, 2008). Importantly, the district court determined that the Agreement contains two different durational terms: (1) the term for which Mercado was obligated to provide services to Bart (the “Additional Services Term”), consisting of ten years plus optional two-year extensions; and (2) the term applicable to the assignment of the trademark and other rights (the “Term”), which is in perpetuity or until termination of the Agreement. Id. at 7. The district court then determined that because the...