Yellowbook Inc. v. Brandeberry

• Decision Date: 27 February 2013
• Docket Number: No. 11–4267.,11–4267.
• Citation: 708 F.3d 837
• Parties: YELLOWBOOK INC., Plaintiff–Appellant, v. Steven M. BRANDEBERRY; American Telephone Directories, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

708 F.3d 837

YELLOWBOOK INC., Plaintiff–Appellant,

v.Steven M. BRANDEBERRY; American Telephone Directories, Inc., Defendants–Appellees.

No. 11–4267.

United States Court of Appeals,Sixth Circuit.

Argued: Jan. 15, 2013.

Decided and Filed: Feb. 27, 2013.

ARGUED:Bryce A. Lenox, Thompson Hine LLP, Cincinnati, OH, for Appellant. Darrell L. Heckman, Harris, Meyer, Heckman & Denkewalter, LLC, Urbana, OH, for Appellees. ON BRIEF:Bryce A. Lenox, Thompson Hine LLP, Cincinnati, OH, for Appellant. Darrell L. Heckman, Harris, Meyer, Heckman & Denkewalter, LLC, Urbana, OH, for Appellees.

Before: BOGGS, ROGERS, and STRANCH, Circuit Judges.

OPINION

BOGGS, Circuit Judge.

This case involves a trademark dispute over the right to use the “AMTEL” name and marks for phonebooks in various Ohio counties. In 2002, Defendant Steven Brandeberry sold his phonebook business, operated under the name AMTEL, to Barney White, who in turn sold the business to Yellowbook, a national publisher of yellow-pages directories. In 2009, Brandeberry decided to start a rival phonebook under the AMTEL name. Yellowbook brought this trademark-infringement suit; we must decide whether exclusive rights to AMTEL were transferred in the sale to White (and thus to Yellowbook). The district court found that when Brandeberry initially purchased the rights to the AMTEL mark the rights were transferred to both him individually and his corporation, American Telephone Directories, Inc. (“American Telephone”). The court then reasoned that since the sale to White did not involve Brandeberry in an individual capacity, Brandeberry retained his individual rights, and White received only a non-exclusive right to use the mark. Yellowbook argues that the contract should be read to have transferred the entire ownership of the mark and that in any case Brandeberry abandoned his right to the mark. However, the initial contract cannot be read to create joint ownership, and trademark law would not permit joint ownership under the facts in this case. As a result, the contract with White transferred exclusive ownership of the mark and, even if it did not, Brandeberry's rights were abandoned. Therefore, the judgment of the district court is reversed and remanded for grant of injunctive relief and determination of damages. In addition, the district court's decision to deny attorney's fees to Yellowbook is reversed and remanded for at least a partial grant of fees, because the deficiencies in Yellowbook's motion are not sufficiently egregious to warrant complete denial.

I

A. Brandeberry acquires the AM/TEL name

The trademark at issue in this case was originally created by Herb Burkhalter, who used the name “AM/TEL Directories” (a contraction of the corporate name “Area Marketing Telephone Directories”) to publish a phonebook in Champaign County, Ohio. In 1994, Burkhalter approached Brandeberry about buying his business and they worked out a deal to sell the phonebook. The deal involved several contracts, including a “Corporate Asset Purchase Agreement,” a covenant not to compete, and a “License Agreement.” The “Corporate Asset Purchase Agreement” provided for the sale of the customer lists, sales records, and goodwill of Area Marketing Telephone Directories, in exchange for a down payment, monthly payments on a schedule, a share of revenues, and various security pledges. Brandeberry signed the contract in his corporate capacity as president of American Telephone Directories, Inc., as a guarantor, and in his individual capacity. The “License Agreement” provided for the exclusive licensing of the name, insignia, and logo of AM/TEL, in exchange for $50,000. The agreement was made “by and between American Telephone Directories, Inc. and Steve M. Brandeberry (Licensee) and Herbert E. Burkhalter” and signed by Brandeberry as president and individually. Throughout the agreement, the singular term “licensee” is used to refer jointly to Brandeberry and American Telephone. Under the terms of the agreement, once all of the monthly payments were made, full ownership of the mark would be transferred to “licensee”; in case of default the license would expire. The agreement noted that the AM/TEL marks were not registered.

After the purchase, Brandeberry removed the slash from the AM/TEL name, marketing the directory as AMTEL. Brandeberry, through his corporation American Telephone, continued to market the Champaign County directory and expanded his business into three more counties by 2002. It does not appear he ever registered the AMTEL mark during this period.

B. Brandeberry sells his business to White

In 2002, Brandeberry's phonebook business began to develop cash-flow problems, and he began negotiations with William “Barney” White, an Urbana businessman who had previously provided consulting services to American Telephone. Brandeberry drew up a “wish list” of terms for the sale, including a right to repurchase within 5 years, employment as executive Vice President of Sales and Marketing, and profit-sharing. White apparently agreed to some but not all of these provisionsand had his lawyer draft three agreements: an asset-purchase agreement, a repurchase agreement, and an employment contract. The asset-purchase agreement was signed by Brandeberry and White, but allegedly White then refused to sign the other two agreements he had drafted. Brandeberry took White to court for this alleged “double crossing”; although Brandeberry claims he won this suit, there are no further details on the record and nothing to suggest that the asset-purchase agreement was invalidated or modified.

The asset-purchase agreement—the only contract signed, and the only contract on the record—provides in relevant part:

Due to economic necessity, the Directors and Officers of AM–TEL ¹ DIRECTORIES, INC. have voted to sell the assets of the business.... [I]t is hereby agreed by AMTEL DIRECTORIES, INC. and P.B.J. WHITE DIRECTORIES, LLC., as follows:

(1) P.B.J. WHITE DIRECTORIES, LLC. will acquire the assets, in their entirety, as set forth on the attached Exhibit “A”, of AM–TEL DIRECTORIES, INC. and the right to use the name AM–TEL DIRECTORIES ...

(a) The purchase price shall be ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($100,000.00) plus the assumption of the specified indebtedness....

Exhibit “A” refers to a printout of American Telephone's balance sheet; one of the line items is a $50,000 entry labeled “Intan. Asset License Agrmnt,” presumably referring to the trademark rights originally purchased from Burkhalter. After briefly reviewing the contract, Brandeberry signed the contract without any revisions, in his corporate capacity.

Initially, business continued as usual, with Brandeberry returning to work and White simply becoming the formal owner. But about a year later, White fired Brandeberry as a result of their continuing dispute about the unsigned repurchase agreement. The next month, White registered the AMTEL mark with the State of Ohio. White continued to market the four county directories, making some cosmetic changes to the AMTEL logo, and ultimately sold the business in its entirety to Yellowbook in 2007. It is undisputed that Yellowbook legitimately purchased all of the rights from White, and that Yellowbook continued to use the AMTEL mark in publishing its directories.

C. Brandeberry infringes and Yellowbook sues

In 2009, Brandeberry—having noticed that White's registration had expired in 2008 and was not renewed—registered the AMTEL mark for his corporation American Telephone. He then decided to “revive” the “original” AMTEL phonebook to compete with Yellowbook in Champaign County, sending letters to businesses to gauge interest and then actively soliciting customers. In 2010, Brandeberry and American Telephone published a competing phonebook, “The Original Champaign County Telephone Directory & Guide Book,” using the AMTEL name and marks throughout.

Yellowbook filed suit against Brandeberry and American Telephone, alleging trademark infringement, interference with business relations, misappropriation of trade secrets, and unjust enrichment. Brandeberry counterclaimed for defamation. On summary judgment, the district court found for Brandeberry with respect to the trademark-infringement and tortious-interferenceclaims against him personally and the trademark-infringement claim against his corporation. The district court reasoned that on the initial transfer of the AMTEL mark from Burkhalter both Brandeberry and American Telephone received rights to use the mark. As a result, American Telephone could not convey an exclusive right to White: Brandeberry retained his personal interest and Yellowbook could not prevent him from using the mark. Because Yellowbook did not have “the exclusive right” to use the AMTEL mark, the district court found that Yellowbook “cannot sustain a trademark infringement action against American Telephone either.” Further, the district court rejected Yellowbook's abandonment argument, reasoning that abandonment can only be used as a defense to an infringement action, not to enforce rights against a senior user.

However, the district court found for Yellowbook with respect to tortious interference by Brandeberry's corporation, reasoning that since American Telephone had given up its right to use the AMTEL name, its interference with Yellowbook's business could not be justified. The question of damages for tortious interference went to trial, along with Brandeberry's defamation counterclaim; Yellowbook dropped its misappropriation and unjust-enrichment claims before trial.

The jury assessed $104,069 in compensatory damages and $10,406.90 in punitive damages against American Telephone for the tortious-interference claim, and awarded Brandeberry $10 in nominal damages for his defamation counterclaim. Ohio law permits recovery of attorney's fees where punitive damages are awarded, and the jury found that Yellowbook was entitled to such fees. Nevertheless, the district court...