Earthgrains Baking Cos. v. Sycamore

• Decision Date: 10 October 2017
• Docket Number: No. 15-4145,15-4145
• Parties: EARTHGRAINS BAKING COMPANIES, INC., Plaintiff - Appellee v. LELAND SYCAMORE, Defendant - Appellant, and SYCAMORE FAMILY BAKERY, INC., Defendant.
• Court: U.S. Court of Appeals — Tenth Circuit

EARTHGRAINS BAKING COMPANIES, INC., Plaintiff - Appellee v. LELAND SYCAMORE, Defendant - Appellant,andSYCAMORE FAMILY BAKERY, INC., Defendant.

No. 15-4145

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

October 10, 2017

(D.C. No. 2:09-CV-00523-DAK)

(D. Utah)

ORDER AND JUDGMENT^*

Before HOLMES, SEYMOUR, and MORITZ, Circuit Judges.

Appellant Leland Sycamore appeals from the district court's amended order and judgment terminating his trademark license rights under a Trademark License Agreement ("TLA") and permanently enjoining him from using the licensed mark. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm the district court's amended judgment in favor of EarthGrains.

I

This is the second time this dispute is before us. See EarthGrains Baking Cos. v. Sycamore Family Bakery, Inc. (Sycamore I), 573 F. App'x 676 (10th Cir. 2014) (unpublished). Therefore, we limit our description of the factual and procedural background to only those matters relevant to the instant appeal.

A

In 1979, Mr. Sycamore developed a commercial brand of bread known as "Grandma Sycamore's Home Maid Bread" at his business in Salt Lake City called Aaron Bakery, Inc. In 1992, Mr. Sycamore obtained federal trademark registrations for the mark "Grandma Sycamore's Home Maid Bread" and the mark "Grandma Sycamore's Home Maid Bread Design" for use with bread, rolls, and bakery products. In 1998, Mr. Sycamore and the Metz Baking Company ("Metz") executed an Asset Purchase Agreement ("Purchase Agreement") in which Mr. Sycamore sold the marks and Aaron Bakery's other assets to Metz. The Sara Lee Corporation eventually acquired Metz's interest in the Aaron Bakery's assets, including the Sycamore marks. During the litigation from which this appeal arises, EarthGrains Baking Companies, Inc. ("EarthGrains") acquired Sara Lee's interest in the Sycamore marks and Sara Lee's other rights and interests in the Aaron Bakery's assets. See Sycamore I, 573 F. App'x at 678.

The Purchase Agreement conveyed from Aaron Bakery and Mr. Sycamore to Metz, without limitation, "[a]ll registered, unregistered and common law trademarks, service marks, logos, trade names, trade dress and other trademark rights, including without limitation all Grandma Sycamore's trademarks," "all registered and unregistered copyrights," "[a]ll goodwill of the [bakery business]," and "[a]ll of [Aaron Bakery's] right, title and interest in and to all assignable licenses, license applications, approvals and permits of the [bakery business]." Aplt.'s App., Vol. II, pt. 1, at 112 (Asset Purchase Agreement, dated Nov. 21, 1998). The Purchase Agreement also contained a cross-reference to a TLA that Metz and Mr. Sycamore entered into at the time of the sale.

The TLA granted Mr. Sycamore a "perpetual, royalty free, exclusive license" to use the Sycamore marks in Arizona, Nevada, and Southern California, with certain cities within those states expressly excluded, as listed in an attachment to the TLA. Aplt.'s App., Vol. I, pt. 1, at 263. Under the TLA, Mr. Sycamore was not permitted to "assign, license, sublicense, or otherwise convey all or any part of [his] rights . . . without the prior written consent of Metz." Id. The TLA also contained a "Nonuse Forfeiture" clause,¹ as well as a separate section designating remedies.

B

Following the execution of the Purchase Agreement and the TLA, two events occurred that gave rise to the underlying litigation. First, without obtaining permission, Mr. Sycamore entered into an agreement with Holsum Bakery in March 2005 to "sublicense" his right to use the marks in the three states designated under the TLA. Aplt.'s App., Vol. I, pt. 2, at 101 (Agreement, Mar. 15, 2005). Sara Lee did not grant Mr. Sycamore permission under the TLA's terms to enter into such a sublicensing agreement. Holsum nevertheless exercised its purported rights under the sublicensing agreement and sold bread using the Sycamore marks in Nevada, Arizona, and the region designated as "Southern California" under the TLA. Id. By mid-October 2009, Mr. Sycamore terminated the sublicensing agreement with Holsum based on his legal counsel's advice. By January 2010, Holsum had ceased selling bread using the Sycamore marks in Nevada, Arizona, and California.

Second, in December 2008, Mr. Sycamore purchased the Coeur d'Alene French Baking Company in Salt Lake City and renamed it "Sycamore Family Bakery." Aplt.'s App., Vol. II, pt. 2, at 62. Over the ensuing five months, Sara Lee—Metz's successor-in-interest and EarthGrains's predecessor-in-interest—sent Mr. Sycamore several letters demanding that he refrain from using the "Sycamore" name, except as expressly permitted by license from Sara Lee. Rather than refraining from use of the "Sycamore" name, in May 2009, Mr. Sycamore registered the trademark, "Sycamore Family Bakery & Design," with the State of Utah and registered the domain names, "sycamorefamilybakery.com" and "grandmasycamoreshomemaidbread.com." Id. Meanwhile, Sara Lee had been marketing and selling its own Sycamore brand of bread in Utah. After registering the "Sycamore Family Bakery" trademark, Mr. Sycamore began selling bread in Utah under the same name and with similar packaging as Sara Lee's brand, even though Utah was not one of the states in which he was licensed under the TLA to use the Sycamore trademark. Id.

C

Sara Lee sued Mr. Sycamore for, inter alia, trademark infringement, unfair competition, cybersquatting, and breach of contract. EarthGrains eventually took Sara Lee's place in the lawsuit. The district court ultimately granted summary judgment in favor of EarthGrains, finding that Mr. Sycamore committed: (1) trademark infringement in violation of 15 U.S.C. § 1114; (2) unfair competition in violation of 15 U.S.C. § 1125(a); and (3) common law trademark infringement and unfair competition. The court also found that Mr. Sycamore had forfeited his licensed right to use the Sycamore marks pursuant to the Nonuse Forfeiture Clause of the TLA. In the same summary judgment order, the district court permanently enjoined Mr. Sycamore from using the Sycamore marks—including in the licensed territories of Arizona, Nevada, and Southern California—in order to protect EarthGrains "against any potential future infringement" and "prevent[] consumers from being misled or confused." Aplt.'s App., Vol. II, pt. 2, at 70; Aplt.'s Supp. App. at 136.

A jury trial was held regarding only the question of damages. The jury found that both Mr. Sycamore and Sycamore Family Bakery "intentionally infringed the Grandma Sycamore trademarks, knowing it was infringement," and awarded damages based on the entirety of the unlawful conduct, which the district court doubled against Mr. Sycamore and tripled against Sycamore Family Bakery under the authority of the Lanham Act. See Sycamore I, 573 F. App'x at 679 (citing 15 U.S.C. § 1117(a)). Mr. Sycamore alone appealed the damages award and the district court's interpretation of the Nonuse Forfeiture Clause, and a panel of this court reversed and remanded only as to "the district court's holding that Sycamore forfeited his license in Arizona and Nevada." Id. at 681.

On remand, Mr. Sycamore offered a proposed amended judgment to reflect our mandate. The proposed judgment provided that (1) Mr. Sycamore had forfeited his rights only in Southern California; (2) Mr. Sycamore had trademark rights in Arizona and Nevada under the TLA; and (3) the injunction allowed for his use of the Sycamore marks in Nevada and Arizona consistent with his TLA rights. EarthGrains agreed that, consistent with our mandate, Mr. Sycamore had forfeited his rights under the TLA only in California. However, EarthGrains objected to Mr. Sycamore's other proposed changes.

The district court revised the judgment to indicate that Mr. Sycamore had forfeited his rights only in California but did not alter the scope of the injunction. Specifically, the district court found that the nationwide injunction was independently supported by (1) Mr. Sycamore's violations of the Lanham Act and common law trademark infringement and unfair competition, and (2) Mr. Sycamore's material breaches of the TLA. The district court also refused to amend the judgment to affirmatively provide that Mr. Sycamore maintained his licensed rights to use the mark in Nevada and Arizona. The court found that, in spite of our holding that Mr. Sycamore had not lost his license rights by operation of the Nonuse Forfeiture Clause, his material breaches of the TLA and his Lanham Act violations constituted alternative, independent grounds for upholding the court's termination of his license rights under the TLA. Mr. Sycamore now challenges the termination of his rights under the TLA and the scope of the permanent injunction.

II

On appeal, Mr. Sycamore focuses almost exclusively on the district court's finding on remand that his material breaches of the TLA supported the equitable relief granted to EarthGrains—i.e., the termination of his rights under the TLA and the permanent nationwide injunction. In short, he argues that he retains the full extent of his rights under the TLA to use the Sycamore mark in Arizona and Nevada, and that the nationwide injunction cannot be upheld in light of those rights.

Here we offer an overview of our analysis and, more specifically, our response to Mr. Sycamore's arguments. In brief, Mr. Sycamore's arguments rest on fundamentally flawed bases: that the district court's original order and judgment predicated its grant of equitable relief solely on the finding that Mr. Sycamore forfeited his rights pursuant to the TLA's Nonuse Forfeiture Clause, and that the district court's amended order and judgment based that same equitable relief solely on its finding that Mr. Sycamore materially breached the TLA. Mr. Sycamore is incorrect on both fronts. In fact, the court's nationwide injunction was always premised primarily on Mr. Sycamore's intentional acts of infringement and unfair competition in violation of the ...