Stanfield v. Osborne Industries, Inc., 94-3020

• Decision Date: 11 April 1995
• Docket Number: No. 94-3020,94-3020
• Parties: Phillip W. STANFIELD, Plaintiff-Appellant, v. OSBORNE INDUSTRIES, INC., Stanley M. Thibault, Ronald Thibault, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 867

52 F.3d 867

34 U.S.P.Q.2d 1456

Phillip W. STANFIELD, Plaintiff-Appellant, v. OSBORNE INDUSTRIES, INC., Stanley M. Thibault, Ronald Thibault, Defendants-Appellees.

No. 94-3020.

United States Court of Appeals Tenth Circuit.

April 11, 1995.

Dorsey L. Baker, Lubbock, TX (Don W. Noah, Noah & Harrison, P.A., Beloit, Kansas, with him on the briefs), for appellant.

James D. Oliver (John J. Murphy, with him on the briefs), Foulston & Siefkin, Wichita, KS, for appellees.

Before ANDERSON and TACHA, Circuit Judges, and CAMPOS, ^* Senior District Judge.

TACHA, Circuit Judge.

Plaintiff Phillip W. Stanfield brought this action against defendants Osborne Industries, Inc. (OII), Stanley M. Thibault, and Ronald M. Thibault alleging two claims under the Lanham Act, 15 U.S.C Secs. 1051-1128, and various state common law claims. Plaintiff's claims arise from OII's use of two trademarks containing the word "Stanfield." The district court granted defendants' motion for summary judgment as to the Lanham Act claims and declined to exercise supplemental jurisdiction over the remaining state law claims. Stanfield v. Osborne Indus., Inc., 839 F.Supp. 1499, 1508 (D.Kan.1993). Plaintiff appeals the district court's order to this court. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291 and affirm.

I. Background

In 1972, plaintiff developed several agricultural products including a fiberglass heating pad for newborn hogs. ¹ He presented these ideas in a letter to the president of First State Bank in Osborne, Kansas. Although plaintiff was not in the business of manufacturing these products at the time of his letter, he indicated that he would call his business "Stanfield Products" if he went into business. Osborne community leaders subsequently created defendant OII to manufacture plaintiff's products. OII was incorporated in May 1973.

The organizers of OII approached defendant Stanley M. Thibault in March 1973 In April 1974, defendant Ronald Thibault, Stanley's brother, undertook several special design projects for OII. Ronald became a full-time employee of OII in April 1975 when he took the position of vice president in charge of marketing and engineering. Ronald decided that OII needed to reduce its dependence on the company that distributed OII's products and develop its own markets. He concluded that OII would need its own trademark to foster its independence. When plaintiff learned of OII's plan to develop a trademark, he insisted that OII use the word "Stanfield" in its mark. OII agreed, and the parties entered into the following agreement (the 1975 agreement):

about becoming involved with OII. Stanley Thibault moved to Osborne in September 1973 to become president of OII. In that same month, plaintiff agreed to allow OII to manufacture the products he had developed in exchange for royalties on sales (the 1973 agreement). Plaintiff simultaneously became an employee of OII.

LICENSE AGREEMENT

THIS AGREEMENT, made and entered into as of this 5th day of July, 1975, by and between Phillip W. Stanfield, of the County of Osborne, State of Kansas, hereinafter referred to as First Party, and Osborne Industries, Inc., hereinafter referred to as Second Party:

WITNESSETH THAT:

WHEREAS, Second Party is manufacturing certain products of which First Party is the inventor as enumerated in a certain License Agreement by and between said parties dated the 3rd day of October, 1973, and

WHEREAS, Second Party is manufacturing certain products other than invented by First Party, and

WHEREAS, Second Party desires to use the name "Stanfield" on all or part of the products manufactured by Second Party whether or not the same be invented by First Party, as a distinctive mark on said products in conjunction with the name of said products, and

WHEREAS, Second Party desires to use the name "Stanfield" as a distinctive mark on all or part of its products manufactured, at its discretion for a period of Fifteen (15) years from the date of this agreement and that said design of the distinctive mark bearing the name "Stanfield" shall be at the sole discretion of said party of the Second Part as to the design of the same, and

WHEREAS, both parties agree that all products manufactured by Second Party shall bear a distinctive mark and shall bear all marks required by the patent laws pertaining to and in conjunction with a License Agreement between the parties entered into on the 3rd day of October, 1973, and in the event that any of those distinctive marks referring specifically to "Stanfield" products or used in connection with "Stanfield" products shall be registered as a trademark, Second Party will be entitled to use said trademark in connection with the License Agreement dated the 3rd day of October, 1973 by and between the parties and shall use said mark in accordance with the trademark laws.

WHEREAS, in consideration of the use of the name "Stanfield" as above described in this Agreement in regard to any or all products manufactured by Second Party, the sum of $75.00 shall be paid to First Party by Second Party for the use of said name as above described.

This Agreement shall inure to the benefit of and be binding upon the Parties hereto, their respective heirs, legal representatives, successors and assigns.

IN WITNESS WHEREOF, the parties have hereunto executed this Agreement as of the day and year first above written.

OII commissioned an artist to design two trademarks. One mark consisted of the word "Stanfield"; the other mark was a circle design incorporating the word "Stanfield." By September 1976 OII was using both trademarks. OII applied for registration of these trademarks in March 1977. The United States Patent and Trademark Office registered the circle design mark on the principal register of trademarks on January 24, 1978.

Meanwhile, plaintiff had become ill and grown disenchanted with OII. He resigned from OII on September 23, 1975. Since his resignation, plaintiff has had no involvement with OII. In February 1976, the Patent and Trademark Office rejected plaintiff's application for a patent on the hog heating pad. OII stopped paying royalties to plaintiff on the sale of heating pads in December 1976.

Plaintiff filed his first lawsuit against OII in Kansas state court in February 1977, claiming that OII had breached the 1973 agreement by discontinuing the payment of royalties. In that lawsuit, plaintiff alleged that OII's use of the word "Stanfield" was conditioned upon the payment of royalties. Although the jury returned a verdict in plaintiff's favor, the Kansas Supreme Court ultimately overturned that verdict. Stanfield v. Osborne Indus. Inc., 232 Kan. 197, 654 P.2d 917 (1982). The court held that, under the terms of the parties' contract, OII was not obligated to pay royalties to plaintiff after the Patent and Trademark Office denied plaintiff's patent application. Id. 654 P.2d at 922.

In connection with the state court case, defendant informed plaintiff that OII considered the July 1975 agreement a release of plaintiff's rights in the word "Stanfield," and that OII had registered its "Stanfield" trademark. OII has continuously used its trademarks in commerce since 1976. In 1983, OII filed declarations with the Patent and Trademark Office to obtain incontestability status.

In September 1991, plaintiff requested that OII discontinue use of the Stanfield trademark, basing his request on his understanding that the 1975 license agreement had expired. OII continued using the trademark, and plaintiff filed this action alleging (1) that defendant's use of the Stanfield trademark violated 15 U.S.C. Sec. 1125, (2) that defendant fraudulently procured the registration of the trademark, and (3) that defendants were liable to plaintiff under several state law theories.

II. Discussion

A. Standard of Review

"We review the grant of summary judgment de novo, using the same standard applied by the district court." Universal Money Ctrs. v. AT & T, 22 F.3d 1527, 1529 (10th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 655, 130 L.Ed.2d 558 (1994). Summary judgment should be granted by the district court "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "When applying this standard, we examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment." Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990).

"[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The initial burden is on the moving party to show "that there is an absence of evidence to support the nonmoving party's case." Id. at 325, 106 S.Ct. at 2554. The moving party may meet this burden by identifying "those portions of the record which demonstrate the absence of a genuine issue of material fact." Manders v. Oklahoma ex rel Dept. of Mental Health, 875 F.2d 263, 265 (10th Cir.1989). The burden then shifts to the nonmoving party to "designate 'specific facts showing that there is a genuine issue for trial.' " Celotex, 477 U.S. at 324, 106 S.Ct. at 2553 (quoting Fed.R.Civ.P. 56(e)). The party resisting summary judgment "may not rest upon the mere allegations or denials of his pleading." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (internal quotation marks omitted). The nonmoving party must, instead, "set forth specific facts showing...