Cornaby's LLC v. Carnet, LLC
| Decision Date | 15 August 2017 |
| Docket Number | Case No. 2:14-cv-00462-JNP-DBP |
| Parties | CORNABY'S LLC, Plaintiff/Counterdefendant, v. CARNET, LLC and CARMA CHRISTENSEN; Defendants/Counterclaimants. |
| Court | U.S. District Court — District of Utah |
MEMORADUM DECISION AND ORDER GRANTING IN PART AND DENTING IN PART MOTIONS FOR SUMMARY JUDGMENT
This case is centered on a dispute among siblings over the ownership of a trademark. Cornaby's LLC, a company formed by Janet Stocks and her brother David Cornaby, claims ownership of the Ultra Gel trademark. Janet and David's sister, Carma Christensen, and her company Carnet, LLC (collectively, Carnet, LLC) also claims to own the trademark. Cornaby's sued Carnet, LLC for trademark infringement and other causes of action. Carnet, LLC has also filed a number of counterclaims against Cornaby's, including a counterclaim for trademark infringement. As detailed below, both Cornaby's and Carnet, LLC have filed various motions for summary judgment, motions to exclude evidence, and motions to strike defenses that are now before the court.
Carma Christensen, who lived in Boise, Idaho, and her sister Janet Stocks, who lived in Provo, Utah, created an informal partnership to promote and sell a modified food starch that could be used as a thickening agent in home baking and cooking. The product was sold under the Ultra Gel trademark.
The partnership formed by Carma and Janet was named Carnet—a portmanteau of the first names of the two sisters. There is a dispute as to when the partnership was formed. Carma has produced evidence that the partnership was formed in late 1992 or early 1993. But it is undisputed that the partnership was in place by May 1993, when Carma and Janet each placed money into a bank account that was used to pay for partnership expenses.
Janet made some limited uses of the Ultra Gel trademark in the Provo area between February and April 1993. In January 1993, Janet acquired 50 pounds of the modified food starch that she began to call Ultra Gel. Around late January, she introduced the product to her community education cooking class of about 15 students held in the Lehi Junior High School. She acquired some jars and tubs from a local packaging company in early February 1993. Soon thereafter, she filled the jars and tubs with the product and taped homemade Ultra Gel labels to them. She sold the jars and tubs to some of the students in her community education cooking class, to existing customers to whom she had sold other thickening agents in the past, and to local customers whom she met when she did cooking demonstrations at local businesses or church events. She also sold the product to a local pastry shop and to two other local businesses for resale. By April, 1993, Janet's Ultra Gel sales had grown to about $400.
In early 1993, Janet contacted local grocery chains to see if they would carry the Ultra Gel product. Managers told her that they would carry the product if she would professionally package it. Purchasing professional labels and packaging required a significant capital investment, so Carma and Janet decided to pool their resources and work together. In May, 1993, Carma and Janet each agreed to deposit money into an Idaho bank account dedicated to the joint venture. Carma and Janet both worked on the design for the professional labels. On May 21,1993, Janet picked up the professionally packaged Ultra Gel product and delivered it to several grocery stores in the Provo area.
Over the next five years, Carma and Janet worked together as partners to promote and sell Ultra Gel. Carma did the bookkeeping and concentrated on marketing and selling Ultra Gel in Idaho. Janet was in charge of operations and focused on marketing and selling the product in Utah. From 1993 through the end of 1997, most of the Carnet partnership's sales of the Ultra Gel product were concentrated in Idaho and Utah. In 1996 and 1997, Carnet also sustained a modest level of sales in a few western states, such as Arizona, Nevada, Oregon, and Washington. [Docket 59-4].
In 1993, Carma retained a lawyer to register the Ultra Gel trademark. Carma applied for a registration on July 12, 1993, and the United States Patent and Trademark Office (USPTO) registered the trademark on April 12, 1994. Carma's lawyer told her that because Carnet was a partnership, it could not hold property. Carma, therefore, registered the trademark in her own name. Janet knew that Carma had registered the trademark, but she did not know that the registration listed only Carma as the owner.
Janet decided to leave the Carnet partnership in early 1998. Janet received a sum of money for her interest in the partnership. It is unclear whether this money represented a division of the assets of the Carnet partnership or whether Carma had purchased Janet's interest in the partnership. [Janet Depo. 45, 47-48; Carma Depo. 173]. Carma and Janet made an oral agreement when they separated their business relationship, but the precise terms of this agreement are now in dispute. Janet testified that the sisters agreed that Carma would "take Idaho" and she would "take Utah" and that "wherever else we go, we go from there." [Janet Depo. 51-54]. Thus, under Janet's version of the agreement, Carma had the exclusive right tosell in Idaho, Janet had the exclusive right to sell in Utah, and customers in the other 48 states were fair game to either sister. Carma, on the other hand, testified that the agreement was that Janet would take all of the existing customers in Utah and that Carma would take the existing customers in Idaho and the other 48 states. [Carma Depo. 173-76; Emory Depo. 18-19].
After the partnership ended, Carma continued to do business under the Carnet name and formed Carnet, LLC. In October, 1998, Carnet, LLC created a website that it used to promote and sell Ultra Gel online. [Docket 61-4]. Carnet, LLC also placed an ad in a national magazine, "Taste of Home." [Carma Depo. 178-79] These efforts greatly expanded Carnet, LLC's nationwide sales. In 1999, Carnet, LLC sold Ultra Gel in all 50 states. [Docket 59-4]. Thereafter, it continued to sell the product throughout the United States. [Carma decl. ¶¶ 2, 17].
After she left the partnership, Janet continued to sell Ultra Gel in Utah. [Docket 58, p. x; Janet Depo 22-23]. Around 2008, Janet went into business with her and Carma's brother, David Cornaby. [Cornaby Depo. 30-31; Docket 61-6]. In 2009, Janet and David formed Cornaby's, LLC, which inherited Janet's trademark rights and continued to market and sell Ultra Gel. [Docket 61-7]. Cornaby's does not point to any evidence that Janet, David, or Cornaby's sold the product outside of Utah.
In 2005, the USPTO cancelled Carma's registration of the Ultra Gel trademark because she failed to renew the registration. But Carnet, LLC continued to use the circle-R symbol (®) in its advertising and promotional materials after the registration was cancelled.
In 2012 or 2013, David called Carma to discuss a potential joint response to a competitor that was using a trademark that was similar to the Ultra Gel trademark. During this conversation, David informed Carma that he had discovered that the Ultra Gel trademark registration had beencanceled.1 [Carma Decl. ¶ 18]. Carma responded that she had been concerned that the registration might have been canceled and that she would find a lawyer to renew the registration. Carma expressed her concern about the cost of hiring an attorney because she had a bad experience when a lawyer charged her $200 for a ten-minute phone conversation. David stated that he had a son-in-law who was a patent attorney and that he could handle it for less money. Carma agreed that David's son-in-law could take care of the Ultra Gel registration and offered to split the legal costs. From this conversation, Carma believed that David would act to protect both of their interests in the Ultra Gel trademark. [Carma Decl. ¶ 18].
On August 8, 2012, Cornaby's filed an application for the Ultra Gel trademark. The application listed Cornaby's as the sole owner of the trademark. As part of the application, David certified that he believed Cornaby's "to be the owner of the trademark/service mark sought to be registered." He also certified that to the best of his knowledge, "no other person, firm, corporation or association has the right to use the mark in commerce." The USPTO registered the Ultra Gel trademark to Cornaby's on November 12, 2013.
In November, 2013, David began to discuss with Carma the possibility of purchasing Carnet, LLC. In January, 2014, David made an offer to buy the business. Carma rejected the offer because she did not think it was reasonable. David then informed Carma that the Ultra Gel trademark had been registered in Cornaby's name only. He threatened to contact Walmart, one of Carnet, LLC's major customers, and demand that it cease selling Ultra Gel supplied by Carnet, LCC due to trademark infringement.
On March 17, 2014 David sent an email to Carma, which stated in part:
We need to resolve the Ultra Gel Trademark situation so that our respective rights in the Ultra Gel mark are not lost. . . . The family has "manufactured" and distributed modified food starch under the name Ultra Gel since about 1993. About 1998, the business was split up into two separate businesses with you selling the starches in Idaho and Janet selling in Utah. . . . Recently you started to offer Ultra Gel food starch in areas outside of Idaho in regions where Cornaby's has been selling Ultra Gel. . . . If this situation continues where both of our companies are marketing the same product in the same territories, then the trademark laws make it clear that rights in the mark "Ultra Gel" may be lost. For these reasons, Cornaby's has no other choice but to require that Carnet Foods stop all sales of modified food starch under the name Ultra Gel outside of Idaho. If you do not agree to stop the infringing and confusing uses outside of...
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