Securacomm Consulting, Inc. v. Securacom Inc.

• Decision Date: 21 November 1997
• Docket Number: Civil Action No. 95-5393(DRD).
• Citation: 984 F.Supp. 286
• Parties: SECURACOMM CONSULTING, INC., Plaintiff, v. SECURACOM INCORPORATED, Kuwam Corporation and Wirt D. Walker, III, Defendants/Third-Party Plaintiffs, v. Ronald S. LIBENGOOD, Third-Party Defendant.
• Court: U.S. District Court — District of New Jersey

984 F.Supp. 286

SECURACOMM CONSULTING, INC., Plaintiff, v. SECURACOM INCORPORATED, Kuwam Corporation and Wirt D. Walker, III, Defendants/Third-Party Plaintiffs, v. Ronald S. LIBENGOOD, Third-Party Defendant.

Civil Action No. 95-5393(DRD).

United States District Court, D. New Jersey.

November 21, 1997.

COPYRIGHT MATERIAL OMITTED

Lackenbach Siegel Marzullo Aronson & Greenspan, P.C. by Howard N. Aronson, Robert B. Golden, Scarsdale, NY, for Plaintiff, Securacomm Consulting, Inc. and Third Party Defendant Ronald S. Libengood.

Peckar & Abramson, P.C. by Charles E. Williams III, River Edge, NJ, for Defendants/Third Party Plaintiffs Securacom Incorporated, Kuwam Corporation and Wirt D. Walker, III.

OPINION

DEBEVOISE, Senior District Judge.

This action in one of its aspects is for trademark infringement and unfair competition brought under the Lanham Act and the statutes and common law of the State of New Jersey. In another disturbing aspect, this action is part of the ruthless abuse of the litigation process by an arrogant venture capitalist and his investment vehicle to prevent a trademark claimant from seeking to pursue his rights under his trademark.

The action was tried without a jury. This opinion constitutes my findings of fact and conclusions of law.

A. THE FACTS

The plaintiff in the action is SecuraComm Consulting, Inc., a Pennsylvania corporation ("SCI"). The defendants and third-party plaintiffs are SecuraCom, Incorporated, a Delaware Corporation having its principal place of business in New Jersey ("SCNJ"), Kuwam Corporation ("Kuwam"), a Delaware corporation having its principal place of business in Washington, D.C., and Wirt D. Walker, III ("Walker"). Ronald S. Libengood ("Libengood") is third-party defendant.

Libengood is an electrical engineer. Upon graduation from college he worked for a time for the Argonne National Laboratory. He then went to work for Westinghouse Electric Corporation ("Westinghouse") where he was engaged in its security systems work, that is, providing physical security for plants and equipment and providing security for proprietary information.

In 1980 as part of a downsizing program, Westinghouse gave up its security systems work, and Libengood left its employ. He thereupon formed his own security systems consulting firm. The firm limited its work to security systems and systems engineering, that is, consulting with clients, surveying their facilities, designing security systems for use by the clients, managing their projects, reviewing bids and evaluations, developing training programs and presenting security-related workshops. It deliberately did not become an integrated firm, a firm which arranged for the purchase and installation of equipment and provided maintenance and technical support. Many clients insist on the separation of consulting services from installation and support services so that the advice given to them will not be subject to possible conflicts of interest.

When Libengood formed his firm, he devised the name "SecuraComm", drawing from the two words "security" and "communications". At the time he coined this word he was unaware of any other use of the word and justifiably believed he was the creator. From 1980 until 1992 he conducted his unincorporated business under the name SecuraComm Associates. At the outset Westinghouse was his principal client, but he soon developed many other clients in many states and Puerto Rico. These clients included manufacturing plants, residences of chief executive officers, museums, banks, hospitals, universities, government agencies, office buildings and airports. All brochures, letters, invoices and correspondence bore the name SecuraComm Associates, with "SecuraComm" usually receiving pronounced emphasis.

SecuraComm Associates was listed as such in the various professional directories. A number of articles appeared featuring Libengood or written by him. Libengood lectured and participated in seminars at association meetings and conventions. He was identified as the principal of SecuraComm Associates. He and his relatively small firm were well known and respected in the security field.

In 1992 Westinghouse resumed providing security services and therefore no longer needed to retain SecuraComm Associates. This represented a significant loss of business to Libengood. To meet the new situation he decided to expand his capabilities, hiring additional technical and marketing personnel. He decided to increase the size of his customer base. He changed the form in which he did business from a proprietorship to a corporation. He incorporated SecuraComm Consulting, Inc. ("SCI") and continued his business through the corporation.

Libengood is the President and majority shareholder of SCI. He is a Certified Protection Professional, a designation given by the American Society of Industrial Security ("ASIS"). He has also served as Membership Chairman and on the Board of Directors of the International Association of Professional Security Consultants.

SCI used the mark "SecuraComm" in the same manner as SecuraComm Associates had used it, obviously with Libengood's permission. A formal licensing agreement was entered into between Libengood and SCI on January 1, 1995.

On May 18, 1993 Libengood applied for registration of the word "SECURACOMM" without reference to specific capitalization or stylization. The application was abandoned on March 16, 1994 but was reinstated, and a registration issued on May 20, 1997. The registration proceedings reflected a first use on January 31, 1980 and a first use in interstate commerce on September 3, 1981. The record in the present case fully supports these facts and demonstrated continued, extensive nationwide use of the word since those dates.

Libengood first became aware of the use by another entity of the name "SecuraCom" (with one "M") in 1987 at an ASIS conference in Washington, D.C. Libengood observed that Sebastian E. Cassetta ("Cassetta"), President of Burns & Roe Enterprises, Inc. ("Burns & Roe") was using a business card having on it the name "Burns & Roe Securacom". Libengood immediately confronted Cassetta and inquired about his company's use of the name. Cassetta confirmed that he had been aware of Libengood's firm and its name. Preceded by the well-known name "Burns & Roe", use of "Securacom" was less likely to cause confusion with "SecuraComm Associates". Further, As Cassetta explained, Burns & Roe Securacom, which had been incorporated in 1985, while performing work similar to that of SecuraComm Associates, served a different mix of clients. It engaged in upgrading security at overseas embassies and performed work in the nuclear field, activities in which SecuraComm Associates was not involved. Under these circumstances, Libengood decided that he need not press the matter further.

SCNJ began its operations in 1987 in association with Burns & Roe. The formal relationship of Walker and Kuwam to SCNJ is disclosed both in an October 1, 1997 SCNJ prospectus and in the other evidence in this case. The working relationship between these entities is disclosed by the conduct of the parties.

In 1992 SCNJ became independent of Burns & Roe. It received a large capital infusion from entities in which Walker had a substantial and controlling interest, namely, Kuwam, Special Situation Investment Holdings, Ltd., ("S S") and Special Selection Investment Holdings, II ("S S, II"). Walker is Chairman of the Board of Directors and a shareholder of SCNJ. He is the managing director and a member of the Board of Directors of Kuwam. He is a limited partner of S S. Kuwam is the managing partner of S S and S S, II. S S and S S II share an address, offices and staff with Kuwam.

Prior to a recent public offering, Kuwam, S S and Walker had beneficial interests in SCNJ (determined in accordance with the Rules of the Securities and Exchange Commission) as follows: Kuwam 59.1%, S S 55.6%, and Walker 66.2%. Until very recently, SCNJ's corporate seal, minute book and other corporate records were kept at Kuwam's offices in Washington, D.C.

As stated in SCNJ's recent SEC registration statement:

... approximately 34.7% of the outstanding shares of the Common Stock will be owned by two limited partnerships, the general partner of which is Kuwam Corporation ("Kuwam"). Wirt D. Walker, III, the Company's [SCNJ] Chairman, is the Managing Director of Kuwam. Accordingly, Mr. Walker, acting through these partnerships, may have the ability to Control the Company's Board of Directors and, therefore the business, policies and affairs of the Company.

In 1992 in addition to disassociating itself from Burns & Roe, SCNJ started expanding its activities into the full range of security services with the objective of becoming a fully integrated company seeking clients throughout the United States in all the fields in which SCI then engaged in work.

SCNJ hired Ronald P. Thomas in 1992. He is a degreed (not licensed) engineer with wide experience in the security field. He was initially Executive Vice-President and Chief Executive Officer reporting to the Board. He ran the company on a day-to-day basis, supervising its technical operations and marketing. He was responsible for the continuing expansion of SCNJ. However, it is abundantly clear that Walker as Chairman of the Board was the person who directed and made all final decisions with respect to financing and legal matters.

By 1992 SCNJ was well aware of the existence of SecuraComm Associates and that it was engaged in consulting and engineering services. It was aware that SecuraComm Associates was already serving and competing for clients which SCNJ proposed to seek pursuant to its plan of reorganization.

Nevertheless, SCNJ took steps to appropriate for itself the Securacomm word. On October 13, 1992 it filed in the Delaware Secretary of State's Office a certificate of amendment signed by Walker which recited that Burns & Roe Securacom, Inc. had changed its name to...