Jim Mullen Charitable v. World Ability Fed., 1-07-2505.

• Decision Date: 23 October 2009
• Docket Number: No. 1-07-2505.,1-07-2505.
• Citation: 335 Ill.Dec. 34,917 N.E.2d 1098
• Parties: The JIM MULLEN CHARITABLE FOUNDATION, a Not-for-Profit Illinois Corporation, Plaintiff-Appellant, v. WORLD ABILITY FEDERATION, NFP, a Not-for-Profit Illinois Corporation, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

917 N.E.2d 1098

335 Ill.Dec. 34

The JIM MULLEN CHARITABLE FOUNDATION, a Not-for-Profit Illinois Corporation, Plaintiff-Appellant, v. WORLD ABILITY FEDERATION, NFP, a Not-for-Profit Illinois Corporation, Defendant-Appellee.

No. 1-07-2505.

Appellate Court of Illinois, First District, Fifth Division.

October 23, 2009.

David R. Bennett, Russell J. Hoover, Raymond N. Nimrod, Paul D. Margolis and Angela M. Terry, Jenner & Block LLP, of Chicago, for Appellant.

Richard C. Gering, Arnstein & Lehr LLP, of Chicago, for Appellee.

Justice HOWSE delivered the opinion of the court:

On June 21, 2004, plaintiff Jim Mullen Foundation (JMF) filed a lawsuit against defendant World Ability Federation (WAF), alleging trademark mark infringement, trademark dilution, false designation of origin, unfair competition, interference with prospective economic advantage, trespass, and conversion. The circuit court granted summary judgment in defendant's favor on all but one of JMF's counts.

JMF appeals, contending: (1) the circuit court erred in considering defendant's jus tertii defense, contending defendant improperly argued the Department of Labor's alleged rights in the trademark precluded JMF from having any enforceable rights in the mark; (2) a genuine issue of material fact existed as to whether the Department of Labor had an interest in the mark; (3) a genuine issue of material fact existed as to whether JMF acquiesced to defendant's use of the mark; and (4) summary judgment was improper on counts III through V the complaint because the claims did not rely on JMF's alleged trademark rights to establish liability. We reverse the circuit court's order and remand the cause for further proceedings.¹

BACKGROUND

JMF is a nonprofit organization formed for the purpose of acquiring and delivering computers to applicants with disabilities. In February 2001, Jim Mullen, a member of JMF's board of directors, attended the announcement of President George W. Bush's "New Freedom Initiative" to help the disabled. In 2002, the JMF board decided to present a "New Freedom Awards" ceremony in Chicago to recognize people and companies that develop products for people with disabilities.

In June 2002, the United States Department of Labor (the Department) announced its solicitation of nominations in the Federal Register—a nationally distributed publication—for an awards program called the "Inaugural New Freedom Awards" (sometimes referred to as the Inaugural New Freedom Initiative Awards) to be held in Washington, D.C. The Department has presented the awards program each year in Washington, D.C., since 2002 to the time of this appeal.

In October 2002, JMF launched the "New Freedom Awards" project in Chicago with a public event that received local television and press coverage. Over the following nine months, John Chmela, JMF's director of operations, and William Smith, JMF's executive director, led the planning for the New Freedom Awards. Chmela and Smith solicited nominees, planned the ceremony, and conducted extensive fundraising—raising hundreds of thousands of dollars in donations toward the awards program. On July 22, 2003, JMF presented the inaugural New Freedom Awards at the Navy Pier Grand Ballroom. Smith and Chmela acted as the masters of ceremonies during the awards show. President Bush sent a letter congratulating JMF on its presentation of the New Freedom Awards.

In September 2003, while still holding positions at JMF, Chmela and Smith formed a new nonprofit corporation named the New Freedom Foundation (NFF), with the intention of presenting a New Freedom Awards show in 2004 without JMF's involvement. Chmela and Smith allegedly solicited cash donations on NFF's behalf for "the second annual New Freedom Awards Gala" while still employed by JMF. In his affidavit, Smith said no one from JMF ever objected to defendant's use of the "New Freedom" mark prior to the filing of JMF's complaint.

When IBM donated 10 IBM Web servers to JMF in September 2003, Smith wrote IBM a letter saying the servers should be sent to NFF for use in conducting the 2004 New Freedom Awards. Smith signed the letter as the executive director of JMF. The NFF's Web site displayed a disclaimer saying NFF and its programs were not affiliated with the Jim Mullen Charitable Foundation. NFF's planning of the 2004 New Freedom Awards included sending out promotional material claiming it had presented the Inaugural New Freedom Awards and planned to present a "second annual" New Freedom Awards in July 2004. In an affidavit, James Mullen said JMF had not given NFF permission to use the alleged New Freedom Awards mark, solicit JMF donors, or present a second New Freedom Awards show. Mullen said JMF learned of NFF's existence around mid-November 2003 when NFF continued to occupy the downtown office space JMF had recently vacated.

After performing a search of the United States Patent and Trademark database to see if relevant registrations for "New Freedom" existed, JMF filed trademark applications in Illinois to register the "New Freedom" mark. On April 20, 2004, JMF received three certificates of registration from the Office of the Illinois Secretary of State, which registered the "New Freedom Awards" servicemark in the State of Illinois for a five-year period. The certificates noted the servicemark was first used on October 15, 2002, and first used in the State of Illinois on October 15, 2002. Registration number 092146 applied to mark's use in Illinois for "entertainment & education services, namely, conducting an awards program"; number 092147 applied to the mark's use for "promoting public awareness of the need for creating products & media, establishing community programs, funding research and providing services that enhance the lives of people with disabilities"; and number 092145 applied to the mark's use for "charitable fundraising services."

JMF also filed a federal service mark application for New Freedom Awards" with the United States Patent and Trademark Office on March 8, 2004. During the application's prosecution, the Department contacted JMF to discuss the Department's New Freedom Initiative, which included an awards ceremony in Washington, D.C. On June 15, 2005, JMF assigned all "right, title, and interest in the United States" to the New Freedom Awards trademark to the Department in exchange for an agreement "to grant JMF an exclusive license" to use the trademark for, in relevant part:

"entertainment and education services, namely, conducting an awards program to provide recognition to individuals and companies for creating products and media and media, establishing community programs, funding research, and providing services that enhance the lives of people with disabilities (Services)."

The terms of the agreement noted JMF:

"shall have the right to use the Mark to provide the Services in Minnesota, Wisconsin, Illinois, Missouri, Indiana, Michigan, Iowa, Kentucky, and Ohio (collectively Geographic Area), U.S.A. (Rights), unless rights to provide the Services in other geographic areas are granted in writing to the License by an authorized Licensor, and subject to the

following express reservation of the continued right to use: the Licensor retains the right to exercise its rights in its NEW FREEDOM INITIATIVE AWARD trademark * * * in any geographic place, but agree to refrain from granting further licenses of the Rights to any third parties during the term of the Agreement." (Emphasis in original.)

The agreement also noted the right to use the trademark did "not extend to any former employee/s, former board member/s, and/or former executive/s of the Licensee." Under the agreement, JMF maintained "all rights to pursue and obtain relief for such causes of action" in the lawsuit against defendant. The Department, through its agreement with JMF, expressly disclaimed any interest in the lawsuit and claimed no interest in any relief granted as a result of the suit. The Department also agreed it did not need to be a party to the lawsuit.

In April 2004, NFF submitted a federal trademark application to the United States Patent and Trademark Office in order to trademark its name. Smith was contacted by the Department of Labor. The Department expressed opposition to the application because it believed it had established a prior right to the phrase "New Freedom." In response, NFF withdrew its application and changed its name to the World Ability Foundation (WAF) on May 5, 2004. Defendant stopped referring to its planned 2004 awards show as the second annual New Freedom Awards, instead referring to the show as the New Ability Awards. In an affidavit, Smith said defendant had not used the phrase "New Freedom Awards" or "New Freedom" since 2004. Defendant held a second awards ceremony on July 30, 2004, using the name "New Ability Awards."

On June 21, 2004, plaintiff filed suit against defendant, alleging service mark infringement, trademark dilution, false designation of origin, unfair competition, interference with prospective economic advantage, trespass, and conversion. On April 4, 2007, defendant moved for summary judgment on counts I through V of plaintiff's complaint, alleging it did not infringe JMF's alleged mark because: (1) JMF did not have rights to enforce the New Freedom Awards mark; and (2) JMF, even if it did have rights, acquiesced to defendant's use of the mark or its separate awards ceremony.

Defendant alleged in its motion that JMF had not acquired enforceable rights to the phrase "New Freedom Awards" because the Department of Labor was the first to use the phrase "New Freedom" in relation to an awards show. In support of its allegation, defendant noted the Department of Labor "advertised" the solicitation of nominees for its "New Freedom Initiative" awards show in the Federal Register —a national publication distributed in Illinois—prior to JMF's use of the phrase. Defendant alleged that since the Department's publication in the Federal...