Henry v. Originals

• Decision Date: 17 March 2010
• Docket Number: No. 08-CV-138-J.,08-CV-138-J.
• Citation: 698 F.Supp.2d 1279
• Parties: Patrick HENRY, Dinah Henry, The United Israel Church, UIC, The Ceres Trust, and Borne Investments, Plaintiffs,v.PRO 10 ORIGINALS, LLC and Gerald Doerr, Defendants.
• Court: U.S. District Court — District of Wyoming

698 F.Supp.2d 1279

Patrick HENRY, Dinah Henry, The United Israel Church, UIC, The Ceres Trust, and Borne Investments, Plaintiffs,v.PRO 10 ORIGINALS, LLC and Gerald Doerr, Defendants.

No. 08-CV-138-J.

United States District Court,

D. Wyoming.

March 17, 2010.

COPYRIGHT MATERIAL OMITTED

Timothy C. Kingston, Graves Miller & Kingston, Cheyenne, WY, for Plaintiffs.

John W. Davis, Worland, WY, John A. Coppede, Hickey & Evans, Cheyenne, WY, for Defendants.

OPINION STATING FINDINGS OF FACT AND CONCLUSIONS OF LAW

ALAN B. JOHNSON, District Judge.

THE ABOVE CAPTIONED MATTER came before the Court commencing June 3, 2009 for a non-jury trial. Counsel at trial for plaintiffs was Timothy C. Kingston of Cheyenne, Wyoming; counsel at trial for defendants was John C. Coppede of Cheyenne, Wyoming. The Court, having duly tried the issues and being fully advised in the premises, FINDS and CONCLUDES as follows:

1. This is an action for trademark infringement brought pursuant to 15 U.S.C. § 1125(a).¹ The following facts are not controverted:

(a) Pro 10 Originals LLC is a Wyoming Limited Liability Company, and was organized on or about June 7, 2001. Since that date it has manufactured, distributed and sold certain products under the mark “UNKER'S.”

(b) Gerald Doerr is the owner of Pro 10 Originals, LLC, and has been since it was organized on or about June 7, 2001.

(c) Unkers International was a Nevada limited liability company that was organized by Jerry Doerr.

(d) The trustees of “Ceres Trust” and “Borne Investments” have not been joined as parties to this action even though the alleged trust entities themselves are named as plaintiffs.

(e) The plaintiffs have used the mark Unker's or UNKER'S for approximately 18 years prior to the defendants' first use of the mark.

(f) The Unker's or UNKER'S mark is fanciful and arbitrary.

(g) The defendants have used the Unker's or UNKER'S mark in connection with the sale of goods.

(h) There is a likelihood of confusion between the parties due to the defendants' use of the mark.

(i) There have been at least several instances of actual confusion between the parties due to the defendants' use of the mark.

2. Title 15 U.S.C. § 1125(a) provides:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services or commercial activities by another person, * * *

shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act.

3. In order to prevail on a common law trademark infringement claim brought under Section 1125(a), a party must prove three things. A plaintiff:

must [first] show that the mark is protectable. In addition, [the plaintiff] must demonstrate that Defendants used the trademark “in connection with any goods or services.” Finally, [the plaintiff] must establish that Defendants' use “is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services or commercial activities of another person.”

Utah Lighthouse Ministry v. Foundation for Apologetic Information and Research, 527 F.3d 1045, 1050 (10th Cir.2008) (citations omitted).

4. In addition, the plaintiffs must prove that they are senior users of the mark, senior to any use by the defendants or others. First Savings Bank, FSB v. U.S. Bancorp, 117 F.Supp.2d 1061, 1070 (D.Kan.2000) (“the trademark rights of the senior user trump those of the junior user”) (quoting Laurel Capital Group, Inc. v. BT Financial Corp., 45 F.Supp.2d 469, 481 (W.D.Pa.1999)). The senior user is typically the first to use the mark and “in the ordinary case of parties competing under the same mark in the same market, it is correct to say that prior appropriation settles the question, and that the trademark rights of the senior user trump those of the junior user.” ACCU Personnel, Inc. v. AccuStaff, Inc., 846 F.Supp. 1191, 1204-05 (D.Del.1994) (citing Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 415, 36 S.Ct. 357, 60 L.Ed. 713 (1916)). The parties have also stipulated that “the plaintiffs have used the mark Unker's or UNKER'S for approximately 18 years prior to the defendants' first use of the mark.” See Final Pretrial Order, “Incontroverted Facts,” page 21, ¶ (e).

5. Based on these several stipulations, the plaintiffs have met their burden of proof with regard to their Section 1125(a) trademark infringement claim. At the trial of this case, with regard to their common law infringement claim, the plaintiffs rested except with regard to the damages they claimed for the infringement. The defendants then proceeded to present their evidence on their several affirmative defenses. If proven, the defendants' affirmative defenses would defeat the plaintiffs' infringement claim.

6. In their affirmative defenses, the defendants allege:

A. That the plaintiffs do not hold a registered trademark in the name “linker's” or “UNKER'S” and, therefore, they cannot maintain their claim under 15 U.S.C. § 1114.

B. That the plaintiffs' interest in the mark was foreclosed on, sold, conveyed or transferred prior to 2002.

C. That the plaintiffs have failed to join essential parties to this case.

D. That the plaintiffs have not continuously made and manufactured products using the mark since 1982.

7. Because the plaintiffs did not proceed with their Section 1114 claim, the Court need not consider the defendants' first affirmative defense set forth above.

8. The defendants' second and fourth affirmative defenses raise two basic factual and legal claims: (1) that the plaintiffs' gave a “naked license” in the mark either to the person named Mose Miller for the period from 1995 to 2000, or they gave a “naked license” to the defendants from 2000 to April 10, 2001, and (2) that the plaintiffs irrevocably transferred to the defendants the plaintiffs' entire business relating to the manufacture and sale of products with the Unker's name and that transfer included the name “Unker's” or “UNKER'S.”

9. With regard to the defendants' “naked license” affirmative defense, the Court finds and holds as follows. Many trademark owners or holders license to third parties the manufacture and/or sale of their products with an associated trademarked name. At trial, the plaintiffs presented the uncontradicted testimony of their expert Ken Shirley, a contract manufacturer, who described in detail how such licensing processes often work in the personal care industry. See Transcript, Vol. I at 31-51 and 55-86. Under certain circumstances, a license may constitute a “naked” license to a third party when the licensor exercises little or no quality control over the products or services marketed by the licensee. Stanfield v. Osborne Indus., Inc., 52 F.3d 867, 871 (10th Cir.1995) cert. denied, 516 U.S. 920, 116 S.Ct. 314, 133 L.Ed.2d 217 (1995) (citing Dawn Donut Co. v. Hart's Food Stores, Inc., 267 F.2d 358, 367 (2d Cir.1959)). The “naked license” doctrine was developed by the courts in order to protect consumers who believe that because they buy a product or service under a certain name that the products or goods they receive have a certain quality associated with the trademark. 3 J. McCarthy, McCarthy on Trademarks and Unfair Competition § 18:48 (2008). In order to protect consumers, the trademark owner has the duty to exercise a certain modicum of control over the quality of the goods or services provided by its licensee. Dawn Donut, 267 F.2d at 367; Stanfield, 52 F.3d at 871.

10. Naked licensing can result in “abandonment” or forfeiture of a mark. 3 J. McCarthy, McCarthy on Trademarks and Unfair Competition § 18:48, 18-104 (2008); Stanfield, 52 F.3d at 871. Because a finding of naked licensing may be harsh-the loss of a trademark-the amount of quality control necessary to find that naked licensing has not occurred is minimal. Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368, 387 (5th Cir.1977) (“Retention of a trademark requires only minimal quality control, for in this context we do not sit to assess the quality of products sold on the open market. We must determine whether Kentucky Fried has abandoned quality control”); Westco Group, Inc. v. K.B. and Assocs., Inc., 128 F.Supp.2d 1082, 1091 (N.D.Ohio 2001); Hurricane Fence Co. v. A-1 Hurricane Fence Co., 468 F.Supp. 975, 988-89 (S.D.Ala.1979) (only “minimal quality control” ought to be required); see also Stanfield, 52 F.3d at 871 (when a trademark owner engages in naked licensing, without any quality control, he may lose rights in mark).

11. Evidence of control may be found in both the contractual arrangements between the parties, as well as actual evidence of control. See Stanfield, 52 F.3d at 871. The Tenth Circuit has held that “[b]ecause a finding of insufficient control results in the forfeiture of a mark, a party asserting insufficient control by a licensor must meet a high burden of proof.” Stanfield, 52 F.3d at 867 (citing Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1017 (9th Cir.1985)). In this case, therefore, the defendants carry a heavy evidentiary burden to establish that the plaintiffs exercised little or no control over the manufacture and sale of the Unker's products by either Mose Miller or the defendants and thereby conferred a naked license on either of them.

12. The Tenth Circuit has also held that a “naked license” defense may not raise facts showing lack of quality control that occurred during the term of the license. Rather, only...