Silverstar Enterprises, Inc. v. Aday

• Citation: 537 F. Supp. 236
• Decision Date: 31 March 1982
• Docket Number: No. 82 Civ. 1835 (DNE).,82 Civ. 1835 (DNE).
• Parties: SILVERSTAR ENTERPRISES, INC., Plaintiff, v. Marvin Lee ADAY, known professionally as "Meat Loaf", Meat Loaf Enterprises, Inc., Robert Ellis, R.T.C. Management, Inc. and various John Does, Jane Does and XYZ Company, Defendants.
• Court: U.S. District Court — Southern District of New York

537 F. Supp. 236

SILVERSTAR ENTERPRISES, INC., Plaintiff, v. Marvin Lee ADAY, known professionally as "Meat Loaf", Meat Loaf Enterprises, Inc., Robert Ellis, R.T.C. Management, Inc. and various John Does, Jane Does and XYZ Company, Defendants.

No. 82 Civ. 1835 (DNE).

United States District Court, S. D. New York.

March 31, 1982.

Patrick J. Monaghan, Jr., Hackensack, N. J., for plaintiff.

Franklin, Weinrib, Rudell & Vassallo, P. C., New York City; John Vassallo, Neil J. Rosini, New York City, of counsel, for defendant Meat Loaf Enterprises, Inc.

OPINION AND ORDER

EDELSTEIN, District Judge:

This is an action for trademark infringement, unfair competition, and certain violations of a licensing agreement brought under the Lanham Act, 15 U.S.C. § 1051 et seq., and principles of pendent jurisdiction. Plaintiff also seeks a declaratory judgment pursuant to 28 U.S.C. § 2201. Plaintiff alleges that jurisdiction exists under 15 U.S.C. § 1051 et seq. and 28 U.S.C. § 1338.

FACTUAL BACKGROUND

Plaintiff Silverstar Enterprises, Inc. ("Silverstar") is a Delaware corporation with its principal place of business in New York. Defendant Marvin Lee Aday, known professionally as "Meat Loaf", is an internationally known performing and recording artist, and is a citizen and resident of Connecticut. Defendant Meatloaf Enterprises, Inc. ("MLE") is a New York corporation, with its principal place of business in New York. The stock of MLE is principally owned by Meat Loaf. Defendant Robert Ellis ("Ellis") is alleged to be a citizen and resident of New York and a principal of defendant R.T.C. Management, Inc., a New York corporation with an office in New York.

On September 30, 1981, Silverstar entered into a license agreement (the "License") with Meat Loaf and MLE in which Silverstar was granted for a five year period the exclusive world-wide license to use the name and registered trademark MEAT LOAF and various representations thereof, and to market clothing and other articles bearing these names and characters. Pursuant to the License, Silverstar, with Meat Loaf's and MLE's consent, has manufactured and marketed MEAT LOAF products throughout the United States.

The instant proceedings arise out of arrangements for a Meat Loaf concert tour in Europe scheduled to commence on April 1, 1982. In connection with the promotion of this tour, on November 23, 1981, Silverstar entered into a sub-licensing agreement with Bravado Merchandising Services, Inc., ("Bravado") to manufacture T-shirts, jerseys, buttons, hats, scarves and a tour book bearing the MEAT LOAF trademark for sale at the concert halls on the tour. Pursuant to Paragraph 10 of the License, Silverstar does not have the right to grant sub-licenses except upon the prior written approval of the Licensor. Silverstar does not contend that it received prior written approval of the sub-licensing agreement. It does, however, contend that certain actions on the part of Meat Loaf constitute a waiver or should act as an estoppel with respect to the written consent provision of the license.

On March 9, 1982 by telephonic communication, and followed on March 13, 1982 by written notification, Meat Loaf and MLE informed Silverstar that they objected to the sub-licensing agreement with Bravado. Silverstar alleges that on or about these dates MLE and Meat Loaf, contrary to the terms of the License, engaged another party to provide merchandising services for the tour.¹ On March 23, 1982, Silverstar filed the complaint in this matter and, by order to show cause, applied to this court for a preliminary injunction enjoining defendants from manufacturing and selling MEAT LOAF items and from interfering with Silverstar's duties under the License agreement. Silverstar also sought ex parte a temporary restraining order pending the hearing on the preliminary injunction. Silverstar contends that defendants' actions violate Silverstar's exclusive trademark license and will cause Silverstar irreparable injury.

The court denied the ex parte application for the temporary restraining order and scheduled a hearing on the restraining order for the following day. At the hearing, counsel for MLE advised that his client's position is that Silverstar had breached the licensing agreement, and that the License is no longer in force. Counsel for MLE further represented that MLE had engaged Bravado to provide merchandising services in connection with the upcoming European tour. Silverstar, in response, argued that the terms of the License provided an opportunity to cure any breach, and thus that MLE's action was in violation of the License agreement.² After the hearing, the court denied the application for the order, and instructed the parties to provide the court with memoranda on the issues of jurisdiction and standing under the Lanham Act.

DISCUSSION

Silverstar brings this action pursuant to the Lanham Act, 15 U.S.C. § 1051 et seq., and predicates this court's jurisdiction on 15 U.S.C. § 1121 and 28 U.S.C. § 1338. Silverstar concedes that no diversity jurisdiction exists. Further, it is undisputed that Silverstar's claims arise from the License agreement entered into by Silverstar, Meat Loaf and MLE.

Silverstar contends that as the exclusive licensee of the trademark MEAT LOAF it has standing under the Lanham Act to bring an action for trademark infringement, 15 U.S.C. § 1114, and for unfair competition, 15 U.S.C. § 1125(a).³ Although there is case law discussing the standing of an exclusive licensee to bring an action under the Lanham Act, there does not appear to be any reported decision as to whether such an action may be brought by the licensee against the registrant/licensor of the trademark.

A. Section 1114

Section 1114 provides that any person infringing a registered trademark "shall be liable in a civil action by the registrant for the remedies hereinafter provided ..." Although the language of § 1114 speaks of an action by the "registrant," § 1127 further defines that term to include the legal representatives, predecessors, successors and assigns of the registrant. As Silverstar concedes, an assignment of a trademark is a transfer of the entire interest while a license, which Silverstar has, confers only the right to use the trademark. See 3 Callmann, Unfair Competition, Trademarks and Monopolies, § 78.2 at 452-53 (3d ed. 1969).

The Second Circuit, in DEP Corp. v. Interstate Cigar Co., 622 F.2d 621 (2d Cir. 1980), held that an exclusive distributor in the United States of a particular soap lacked standing to maintain an infringement action under § 1114 against other corporations selling the soap in the United States. The contract granting the plaintiff, DEP Corp., exclusive distribution rights stated that DEP Corp. was to notify the licensor of an infringement of the licensed trademarks, and that DEP Corp. had no rights in the trademarks. The court first observed that the license agreement did not constitute an assignment of any of the rights in the trademarks, and that DEP Corp. did not fall within the class expressly authorized to sue under § 1114.

The Second Circuit then proceeded to analyze many of the same cases that have been cited here by Silverstar as supporting standing under the Lanham Act. The first case relied upon by DEP Corp. and Silverstar, G. H. Mumm Champagne v. Eastern Wine Corp., 142 F.2d 499 (2d Cir.), cert. denied, 323 U.S. 715, 65 S.Ct. 41, 89 L.Ed. 575 (1944), held that the exclusive distributor in the eastern part of the United States of a French company's trademarked champagne had standing to bring a trademark infringement action against another domestic corporation which had imitated the foreign producer's trademark. The Second Circuit in DEP Corp. distinguished G. H. Mumm on the following grounds: (1) G. H. Mumm was decided before the Lanham Act became effective and was not subject to the explicit standing requirements for a trademark infringement action; (2) 53% of the common stock of the plaintiff was owned by the French Company whose trademark was in dispute, and the French Company was not a party to the action because of its enemy alien status in World War II; (3) the plaintiff had been designated as the party upon whom process might be served; and (4) the plaintiff's contract did not contain a clause asserting that the plaintiff had no right or interest in the mark.

The second case relied upon by the plaintiff here and the plaintiff in DEP Corp., Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 159 (1st Cir. 1977) states that "trademark infringement suits may be maintained by exclusive distributors and sellers of trademarked goods, i.e. `exclusive licensees' who had a right by agreement with the owner of the trademark to exclude even him from selling in their territory." (Emphasis in original.) The Second Circuit, in DEP Corp., both distinguished and criticized this statement in Quabaug. Noting that the Quabaug statement was dictum, the court stated that the cases relied upon to support the dictum are inapposite:

The cases cited for this proposition in Quabaug Rubber Co. are inapposite. G. H. Mumm Champagne v. Eastern Wine Corp., supra, we have already distinguished. Alfred Dunhill of London, Inc. v. Kasser Distillers Products Corp., 350 F.Supp. 1341 (E.D.Pa.1972), aff'd per curiam, 480 F.2d 917 (3rd Cir. 1973) involved a plaintiff who was not only a sole user of a British company's mark in the United States on some products, but was also a wholly-owned subsidiary of the British company. (See 15 U.S.C. § 1055). In Browne-Vintners Co., Inc. v. National Distillers and Chemical Corp., 151 F.Supp. 595 (S.D.N.Y.1957), while the court did state that an exclusive distributor had a sufficient interest of its own in the marks to entitle it to register them in its name, we note that the registered trademark owner and a related company (15 U.S.C. § 1055) were also parties plaintiff. There is nothing in the opinion to indicate that the distribution agreement

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