Ready Capital Corp. v. Ready Capital Corp.
| Decision Date | 20 April 2021 |
| Docket Number | Case Number 19-13536 |
| Parties | READY CAPITAL CORPORATION, READYCAP COMMERCIAL, LLC, and READYCAP HOLDINGS, LLC, Plaintiffs and Counter-defendants, v. READY CAPITAL CORPORATION, NATIONS HOME LOAN CORPORATION, MPD, LLC, and MARK BACKONEN, Defendants and Counter-plaintiffs. |
| Court | U.S. District Court — Eastern District of Michigan |
Honorable David M. Lawson
The business of both the plaintiffs and the defendants is commercial lending, and they both market their services using the same name: Ready Capital. The plaintiffs registered the mark with the U.S. Patent and Trademark Office (PTO), but the defendants presented evidence of earlier use of the mark in commerce, at least within Michigan. The parties have sued each other for trademark infringement. The defendants raise a laches defense and seek cancellation of the plaintiffs' federal trademark registration, alleging that the plaintiffs made fraudulent statements to obtain it. And both sides have moved for summary judgment on their respective claims and defenses. Aside from the issue of likelihood of confusion, which is obvious, the record presents genuine fact questions that preclude summary judgment in full for either side. However, the defendants have presented sufficient unrebutted evidence to establish their innocent user defense as a matter of law, which limits the temporal and geographic scope of the plaintiffs' federal and common law infringement and false designation claims. The plaintiffs have offered sufficient evidence to rebut the defendants' claim to cancel the mark, demonstrating that the defendants cannot meet their evidentiary burden as a matter of law; and the undisputed evidence in the record defeats the laches defense. But the plaintiffs have not established as a matter of law that they are entitled to nationwide priority for the use of the mark before January 2017, and fact questions remain as to the precise boundaries of the defendants' prior use carveout. The motions for summary judgment will be granted in part and denied in part.
According to the amended complaint, plaintiff Ready Capital Corporation began its corporate life as Sutherland Asset Management in 2011. It is a private lender that operates nationally, along with several affiliates, providing commercial real estate loans. Defendant Ready Capital Corp. is a Michigan corporation formed in 2015 and operated by its sole employee and president, Mark Backonen. Both companies are part of the financial services industry and are involved in originating, structuring and marketing commercial loans.
In addition to Ready Capital Corporation, the plaintiffs include its subsidiaries, ReadyCap Commercial, LLC, and ReadyCap Holdings, LLC. Anuj Gupta has been President of Ready Capital Corp. since February 2014. Together, the affiliated entities (referred to collectively by the plaintiffs as "Ready Capital") employ more than 400 people and have provided more than $3 billion in commercial capital lending to investors and small businesses in various states around the country. Ready Capital Corp. has been listed on the New York Stock Exchange since November 2016.
Until at least February 2014, when Gupta took the helm, Ready Capital Corp. officially operated under its original corporate moniker, Sutherland Asset Management. However, on February 6, 2013, the firm had issued a press release announcing the "nationwide debut" of its ReadyCap Commercial subsidiary, which prominently featured the name "ReadyCapCommercial," with an associated logo. The firm boasted that it would offer "bridge loans" and loans for rehabilitation of commercial properties, tailored to clients who could not meet the financial requirements to obtain conventional commercial loans from other lenders such as banks. On March 11, 2013, ReadyCap Commercial closed its first loan on a property in Dallas, Texas.
On July 17, 2014, the firm issued another press release announcing that it had qualified to begin issuing loans under the authority of the United States Small Business Administration's section 7(a) lending program. The ReadyCap Lending subsidiary subsequently was assigned all lending authority and lien rights relating to the SBA loans that were issued by Ready Capital Corp. Through the end of 2014, ReadyCap Lending closed 150 SBA-backed loans totaling more than $426 million, which were issued to commercial clients in 20 states. Gupta provided a summary of some of those loans, all but two of which were issued to clients in Illinois. One loan was issued to an Indiana entity, and another, for $1.37 million, was issued to "Telegraph 9 Plaza, LLC," in Romulus, Michigan.
Gupta attested that, by the end of 2014, Sutherland Asset Management and its subsidiaries publicly were operating exclusively under the moniker "Ready Cap," which the firm regarded as a short form of "Ready Capital," similar to the colloquial connotation "Chevy" for "Chevrolet." However, the firm realized certain problems with that nickname, including when it discovered that a company that made camera lenses already had registered the internet domain name readycap.com, rendering it unavailable for the plaintiffs' use. As a result, the firm decided in early 2015 to adopt the full form "Ready Capital" as its public brand to avoid customer confusion and brand conflict stemming from the abbreviated moniker. The rebranding campaign, however, took more than three years fully to be realized. Finally, on September 24, 2018, the firm issued a pressrelease announcing that Sutherland Asset Management officially had changed its name to Ready Capital Corporation. The release included exemplars of the firm's new "Ready Capital" logo.
Gupta says, however, that long before the official announcement of the corporate renaming, the firm had adopted "Ready Capital" as the designated "house brand" for all of its subsidiaries, and it had begun using the name "Ready Capital" as a moniker for its loan securitization filings. In April and May 2015, the firm registered the assumed names "Ready Capital" and "Ready Capital Structured Finance" (the identifier for a new subsidiary formed in 2015) with secretaries of state in New York, California, and South Dakota. Also, on April 6, 2015, the firm procured a trademark search from Corporation Service Company for the name "Ready Capital" as used in the context of "financial services, namely loan origination services." That report, Gupta says, did not disclose any hint of the defendants' competing use of the brand.
In May 2015, the firm engaged an advertising consultant to create a logo and other materials for the "Ready Capital" brand, which were featured in a press release that was posted to a new website, rclending.com. The press release was posted publicly on November 1, 2015, and Gupta attested that rclending.com then became the firm's "primary website." The press release also included information about qualifications for issuance of new loans. Materials featuring the logo and information for prospective borrowers were distributed by lending agents in various venues, by email, during client meetings, and at conferences. On May 8, 2015, the initial press release announcing the "Ready Capital" brand was published via PRNewsWire, which featured it on more than 190 websites with a "potential audience" of more than 20 million viewers. The press release also was picked up by various business publications. By the end of 2015, Ready Capital Structured Finance had closed deals on 11 loans totaling more than $88 million, which were issuedto clients in California, New York, Ohio, Florida, and Texas. The firm issued more press releases in November and December 2015 promoting its success at closing several of those lending deals.
In April 2015, the firm bid unsuccessfully on an auction for the existing internet domain name "readycapital.com," which was owned by a Canadian entity. When it was unable to obtain that domain, it elected to centralize its entire internet presence and consolidate its email communications under the "rclending.com" domain. The overhauled website, which was rolled out by November 21, 2015, featured promotional materials for ReadyCap Commercial, ReadyCap Lending, and Ready Capital Structured Finance, all of which were identified as "Ready Capital Lending Divisions." Between May and July 2015, promotion of the new website through various means including "email blasts" to potential clients generated more than 7,100 page views by more than 5,700 unique visitors. Between May and December 2015, the three lending divisions closed deals on 135 loans totaling more than $325 million, which "included 22 loan transactions totaling $48,736,000 in the states of Michigan, Ohio, Indiana, and Illinois." All of these 2015 loans were made, and the deals were promoted, using the new "Ready Capital" brand. The earliest transaction identified under the Ready Capital brand was a loan issued to a client in Jacksonville, Florida, on May 13, 2015. Among the 22 loans issued in the Midwest was an October 9, 2015 loan of $2.29 million on the County Line Plaza property in Sterling Heights, Michigan.
In November 2015, the firm issued a mortgage backed security instrument that securitized many of its 2015 loan issuances as a retail investment vehicle, and that security was issued under the name "Ready Capital Mortgage Trust 2015-2." The security was registered to a newly formed Delaware LLC, which acted as the "depositor" for the security and which was named "Ready Capital Mortgage Depositor." The underlying mortgages were backed by collateral in the form of the commercial properties against which they were issued, including one property in Michigan.The new investment vehicle was marketed to "investors across the country both in person and remotely beginning in early October" 2015, via the circulation of a preliminary offering memorandum.
Throughout 2016 through 2018, the...
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