Huthwaite, Inc. v. Sunrise Assisted Living, Inc.

• Decision Date: 25 April 2003
• Docket Number: No. CIV.A.02-1478-A.,CIV.A.02-1478-A.
• Citation: 261 F.Supp.2d 502
• Parties: HUTHWAITE, INC., Plaintiff, v. SUNRISE ASSISTED LIVING, INC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

261 F.Supp.2d 502

HUTHWAITE, INC., Plaintiff, v. SUNRISE ASSISTED LIVING, INC., Defendant.

No. CIV.A.02-1478-A.

United States District Court, E.D. Virginia, Alexandria Division.

April 25, 2003.

COPYRIGHT MATERIAL OMITTED

William F. Dolan, Melissa Masiello, Noelle J. Quinn, Bell, Boyd & Lloyd, LLC, Chicago, IL, Robert J. Sciaroni, Andrew N. Cook, Bell, Boyd & Lloyd, PLLC, Washington, DC, for Plaintiffs.

Howard J. Shire, Kenyon & Kenyon, New York City, William Merone, T. Cy Walker, Ronald L. Sigworth, Kenyon & Kenyon, Washington, DC, for Defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

The three potentially dispositive questions presented on summary judgment in this copyright and trademark action are

(i) whether, in an action for copyright infringement, a copyright owner may satisfy the Copyright Act registration requirement, 17 U.S.C. § 411(a), by relying on an exclusive licensee's copyright registration that inaccurately identifies the licensee as the copyright "claimant,"

(ii) whether defendant's alleged use of plaintiff's trademark in connection with defendant's internal sales training program meets the Lanham Act requirement of use "in connection with the sale, offering for sale, distribution, or advertising of goods and services," for trademark infringement and unfair competition claims, 15 U.S.C. §§ 1114, 1125(a), and

(iii) whether defendant's alleged use of plaintiffs trademark meets the Federal Trademark Dilution Act requirement of "commercial use" for trademark dilution claims, 15 U.S.C. § 1125(c).

I.

Plaintiff Huthwaite, Inc. ("Huthwaite") is a Delaware corporation with its principal place of business in Sterling, Virginia. It is a leading provider of sales training seminars and related publications to individual and corporate customers nationwide.

Defendant Sunrise Assisted Living, Inc. ("Sunrise") is also a Delaware corporation and, like Huthwaite, its principal place of business is located in Northern Virginia— McLean, Virginia. Sunrise is a major provider of assisted living services to seniors at numerous facilities across the country that it either owns or manages for others. At the end of 2001, Sunrise reported that it operated approximately 181 facilities in 24 states and the District of Columbia, as well as five non-U.S. facilities, with a total capacity of 14,700 residents. Of these facilities, more than half (97) are wholly owned by Sunrise, approximately one-third (65) are partly owned by Sunrise, and the remainder (24) are managed by Sunrise for third parties.

With respect to Huthwaite's copyright claim, the central work at issue on this summary judgment motion is a book entitled SPIN Selling, authored by Neil Rackham, Huthwaite's founder and its owner until May 2000. SPIN Selling is a best-selling book on the subject of sales training and effectiveness; it discusses Mr. Rackham's research on this subject and advocates the "SPIN Selling" approach to sales. The book was published by McGraw-Hill, Inc. in 1988 pursuant to a May 15, 1987 Publishing Agreement between Rackham and McGraw-Hill. In the Publishing Agreement, as amended on June 30, 1987, Rackham granted McGraw-Hill "the exclusive right to reproduce and distribute" the work in North America, but he retained "all exclusive rights to the Work not expressly granted herein," including the right to translate, serialize, or prepare video, audio, electronic, or database versions of the work. Although the Publishing Agreement originally granted McGraw-Hill the full bundle of copyright rights to the book, this provision was eliminated in a subsequent June 30, 1987 amendment. In lieu thereof, a provision was inserted limiting McGraw-Hill's rights to the exclusive right to reproduce and distribute the book in English in North America. A sentence appointing McGraw-Hill "as [Rackham]'s attorney-in-fact to execute any documents [McGraw-Hill] deems necessary to record any of these grants with the United States Copyright Office or elsewhere" was left unchanged in the Publishing Agreement.

On July, 28, 1988, McGraw-Hill registered SPIN Selling with the United States Copyright Office. See U.S. Reg. No. TX 2-365-674. Although this registration correctly identifies Neil Rackham as the author of the work, it incorrectly lists McGraw-Hill as the copyright "claimant" and states that McGraw-Hill obtained ownership of the copyright "[b]y assignment from the author." See U.S. Reg. No. TX 2-365-674; Def. Reply Ex. C. Thereafter, in May of 2000, Rackham assigned to Huthwaite all of his retained rights in the SPIN Selling copyright.

This dispute is not limited to copyright claims relating to the SPIN Selling book; also involved are trademark claims relating to trademarks for SPIN and SPIN SELLING. Specifically, Huthwaite owns two federally registered trademarks at issue here: SPIN, Reg. No. 1,481,588 (registered March 22, 1988), and SPIN SELLING, Reg. No. 2,413,866 (registered December 19, 2000). The marks are registered for "training and questionnaire booklets and manuals" and other materials in the field of sales training development and for "educational services— namely, providing sales training programs and seminars." See Reg. Nos. 1,481,558 & 2,413,866.

During the summer of 2000, Sunrise contacted Huthwaite and expressed an interest in purchasing sales force training services from Huthwaite. The parties discussed a possible contract for sales training services, but in the end Sunrise declined to purchase Huthwaite's sales training services. Thereafter, in May 2001, Sunrise hired Mark Hannan as its Senior Vice President of Sales. Beginning in the summer of 2001, Sunrise, under Hannan's supervision, launched a "major sales transformation" that included the training of its sales staff using the SPIN Selling approach. Each student in the training program was provided a copy of SPIN Selling and the SPIN Selling Fieldbook, both authored by Rackham. In connection with this training program, Sunrise developed and used training guides and training materials, including the works entitled "Selling Skills Facilitator's Guide," "Selling Skills Student Guide," "Sales Transformation Launch Facilitator's Guide," "Sales Transformation Launch Student Guide," and "Excellence in Selling," all of which Huthwaite claims violate its retained rights to the copyright relating to SPIN Selling, as well as Huthwaite's rights under other SPIN related copyrighted works.¹ Although the record evidence is not complete with regard to the degree of similarity between Huthwaite's copyrighted works and the Sunrise materials, the existing record discloses that the Sunrise materials employ some phrases, metaphors, and diagrams similar or identical to those used in Huthwaite copyrighted works as a group, and to SPIN Selling in particular, the work at issue on this motion.²

The current record also discloses that four Sunrise employees have been identified as the authors of the allegedly infringing Sunrise training materials: Hannan, Marty Ramseck, Anne Kelly, and Eileen Spinella.³ Three of these—Hannan, Ramseck and Kelly—were exposed to Huthwaite's training seminars and materials in their previous employment. Hannan, the selfdescribed principal author of the Sunrise materials, is very familiar with Rackham's books and theories; he had access to Huthwaite's training seminars and training materials in his previous position at CIGNA, where he advocated the use of the SPIN Selling method and retained Huthwaite to teach the method to CIGNA employees.

On the trademark side of the ledger, it is undisputed that Sunrise used the SPIN and SPIN SELLING marks in connection with its sales training program. Specifically, Sunrise provided SPIN Selling training to a significant number of its employees in several different states, some of whom have now left Sunrise for other employment.⁴ Sunrise's sales training materials use the SPIN and SPIN SELLING marks to advocate and teach the SPIN Selling sales method. Furthermore, the record indicates that the classes themselves were referred to internally at Sunrise alternatively as "SPIN Selling" or "Selling Skills" classes. Some or all of the Sunrise SPIN Selling training seminars are conducted at public facilities. In fact, the record contains evidence of one instance of confusion on the part of a Huthwaite customer when Sunrise and Huthwaite both conducted SPIN Selling training at the same time and conference center in Illinois. In addition, the record reflects that Sunrise's internal sales force typically experiences high turnover, as much as 60% in a given year.

Huthwaite agrees that the current summary judgment record discloses this much, but contends that it discloses more, as well. Specifically, Huthwaite claims that it is likely that Sunrise has trained non-employees, namely the employees of those facilities Sunrise operates and manages for third party owners. While Huthwaite concedes there is yet no direct evidence that Sunrise has trained anyone other than its own employees, it notes that an inference to this effect is invited by the record fact that Sunrise receives a commission from third party owners for providing services that include marketing and training of third party owners' employees. Yet, because Sunrise currently disputes that it trains any other entities' employees, the analysis here proceeds on the premise that Sunrise used the SPIN SELLING and SPIN marks only internally, not in connection with its sale of assisted living services to its customers or in connection with its provision of management services to third-party owned facilities.

Huthwaite filed this action on October 14, 2002, alleging that Sunrise's sales training programs and materials violated Huthwaite's rights under federal copyright and trademark laws. Specifically, Huthwaite claims copyright infringement, pursuant to 17 U.S.C. § 501, and trademark infringement, false designation of origin, and trademark dilution, pursuant to 15 U.S.C. § 1114 and §...