U.S. Playing Card Co. v. The Bicycle Club

• Citation: 119 Ohio App.3d 597,695 N.E.2d 1197
• Decision Date: 21 May 1997
• Docket Number: No. C-960265,C-960265
• Parties: UNITED STATES PLAYING CARD COMPANY, Plaintiff-Appellant, v. THE BICYCLE CLUB, Defendant-Appellee.
• Court: Ohio Court of Appeals

Page 597

119 Ohio App.3d 597

695 N.E.2d 1197

UNITED STATES PLAYING CARD COMPANY, Plaintiff-Appellant, v. THE BICYCLE CLUB, Defendant-Appellee.

No. C-960265.

Court of Appeals of Ohio,

First District, Hamilton County.

Decided May 21, 1997.

Dinsmore & Shohl, Lynda E. Roesch, Lawrence R. Elleman and Patricia B. Hogan, Cincinnati, for appellant.

Frost & Jacobs, and David E. Schmit, Cincinnati, for appellee.

PAINTER, Presiding Judge.

The United States Playing Card Company ("USPC"), headquartered in Norwood, Ohio, has made "Bicycle" brand playing cards for over a century. USPC has one of the oldest registered trademarks in the United States--the Bicycle name.

The Bicycle Club ("the Club") is a card casino, established in 1984, located in Bell Gardens, California. The Club registered its name on the principal register in the United States Patent and Trademark Office on February 17, 1987. The Club is permitted under California law to play certain types of card games involving skill. The casino does not take the usual "house" position, but instead provides facilities for a time-based or per-hand fee, and the players compete among themselves for the "pot." With over one hundred and twenty tables at the time it opened, the Club billed itself as the largest card club casino in the world.

Before the opening of the Club in November 1984, either USPC President Lee Racey or Whitney Miller, in charge of retail sales at USPC, sent sales representative Herbert Craig to this new card casino. Craig visited George Hardie, then a partner and general manager of the Club, to attempt to sell cards to the Club. Hardie asked Craig if there would be a problem with the name of the Club. When Craig brought the issue up with USPC President Racey, Racey told Craig that the Club's name was an excellent way to promote the Bicycle name. Prior to the filing of this lawsuit in 1987, USPC never complained about the use of the Club's name. Further, Hardie testified, as Craig did, that he was told by a USPC representative that USPC's lawyers said the word "bicycle" was generic, and thus that USPC had no problem with the Club's name. USPC denies that its lawyers would label the Bicycle name generic, and claims that it tacitly gave the Club an "implied license" to use its name. In spite of this alleged sub silentio grant of an "implied license," at that time the Club bought its cards from a different supplier.

The Club spent $200,000 on a large sign bearing its name, $250,000 on its first order of poker chips, embossed with its name, and placed its name on various gift shop items, such as T-shirts, hats, coffee mugs, and the like. The Club advertised its casino services in numerous magazines and newspapers. Findings from a study commissioned by the Club, in preparation for this litigation, showed that thirty-eight percent of Los Angeles area residents recognized the Bicycle Club name and which services it provided. Though evidence was presented of possible confusion on the part of some survey participants because of the Bombay Bicycle Club and the Bicycle Cafe, both restaurants in Los Angeles (and presumably not sued by USPC), undoubtedly the casino was recognized by a great number of people in the Los Angeles area.

In 1986, the Club decided to try USPC's cards, and the parties negotiated a contract, under which USPC would provide special decks of "pan" cards, used in panguinne, similar to gin rummy, and super pan nine, a popular Asian card game. These cards bore the logo "Bicycle Club." After receiving only about one-third of the cards, the Club complained of defective cards and card shortages, seemingly related to a labor strike then occurring at USPC. On July 29, 1987, Hardie wrote a letter to USPC repudiating the remainder of the contract because of problems with card quality. On October 7, 1987, USPC brought this suit claiming breach of contract, and violation of its statutory and common-law rights in the Bicycle trademark.

In 1990, the federal government took a majority interest in the general partner of the limited partnership comprising the Club, a joint venture, in a forfeiture proceeding after several principals in the partnership were convicted of violations of the Racketeer Influenced and Corrupt Organizations ("RICO") statute. USPC wished to introduce, under a trademark-dilution theory, evidence of adverse publicity about the Club during this time, including articles and letters in The Wall Street Journal and The Los Angeles Times, and stories on the Dallas Morning News, CBS Evening News, and NBC Sunrise, as proof of tarnishment of the Bicycle trademark. Prior to trial, the trial court, without written explanation, granted the Club's motions to exclude the evidence regarding its reported unlawful activities. During trial, the trial court denied USPC's motion for reconsideration concerning the admissibility of this evidence, finding its prejudicial effect outweighed its probative value under Evid.R. 403.

After over eight years of delay, the case was heard on January 16, 1996. Apparently by sheer coincidence, the first day of trial was the day that the Federal Trademark Dilution Act of 1995 ("FTDA") went into effect. However, neither side mentioned this statute at trial. On appeal, the Club contends that this statute is a bar to USPC's claim of trademark dilution.

The trial court used an advisory jury for the contract claim and, after rejecting the jury's initial verdict, accepted its second, which awarded $8,218 to USPC. The advisory jury's first verdict in favor of USPC was for $15,643.92 in damages, but it also ordered USPC to give the Club its inventory of finished pan cards. Rather than force USPC to perform, the trial court correctly had the jury further deliberate and convert its original verdict into a purely monetary award. However the trial court refused to award prejudgment interest on the breach-of-contract award. Further, the trial court ruled against USPC on "all issues involving common law and statutory trademark infringement, dilution and unfair competition," and declined to enjoin the Club's use of its name.

USPC brings two assignments of error, challenging (1) the trial court's refusal to admit reputation evidence bearing on trademark dilution, and (2) the trial court's denial of prejudgment interest on the breach-of-contract award.

I. Immunity

Before reaching USPC's assignments, we first reject the Club's assertion that it is immune from this lawsuit because the United States government has a partnership interest in it. Upon receiving its partnership interest from a RICO forfeiture action, the United States became an owner of this gaming establishment. Bizarre perhaps, but no more so than the federal government's acquisition of an interest in the Mustang Ranch, a legal brothel in Nevada. See Conforte v. United States (D.Nev.1991), 125 B.R. 287. ¹ However, the United States does not receive sovereign immunity when acting in such a capacity; granting the United States immunity as a casino (or brothel) operator would be ludicrous.

Although the United States allegedly acquired its interest in 1990, no immunity claim was made in the trial court. No United States Attorney has appeared, and we are not certain that the United States Government even claims immunity. Be that as it may, we do not believe that governmental immunity applies in this case.

To determine whether the government is entitled to sovereign immunity, the threshold question is whether the suit is one against the United States as sovereign. Florida Dept. of Business Regulation v. United States Dept. of Interior (C.A.11, 1985), 768 F.2d 1248. "When the United States enters into commercial business it abandons its sovereign capacity and is to be treated like any other corporation." Salas v. United States (C.A.2, 1916), 234 F. 842, 844, citing Bank of United States v. Planters' Bank of Georgia (1824), 22 U.S. (9 Wheat.) 904, 6 L.Ed. 244. ² The suit against the Club is not a suit against the United States in its sovereign capacity. ³ Therefore, we retain jurisdiction over this action against the Club.

II. Trademark Dilution

In USPC's first assignment of error, it claims that the trial court erred by excluding evidence of the Club's reputation to support USPC's claim for dilution of the Bicycle trademark. After considering issues of laches and estoppel, we hold that USPC cannot assert trademark dilution against the Club. Therefore, any possible error by the trial court in excluding evidence in a trademark-dilution action is moot. The first assignment is overruled.

USPC's cause of action is brought under a theory of trademark dilution, grounded in Ohio common law. Trademark dilution is "the 'gradual whittling away' of a trademark's distinctiveness through use by third parties on nonconfusing, noncompeting products." Schechter, The Rational Basis of Trademark Protection (1927), 40 Harv.L.Rev. 813, 825. ⁴ Trademark dilution protects a trademark owner against the diminution of a trademark's "commercial magnetism" or selling power by a junior user's unauthorized use of the same or substantially similar mark. See Pattishall, Dawning Acceptance of the Dilution Rationale for Trademark-Trade Identity Protection (1984), 74 Trademark Rep. 289, 290. ⁵

Estoppel by Laches and Acquiescence

In a trademark dilution or infringement context, estoppel is closely related to laches. Professor McCarthy refers to "estoppel by laches" and "estoppel by acquiescence" in his treatise on trademarks. 4 McCarthy on Trademarks and Unfair Competition (3 Ed.1996), 30.01-30.03. Keeping this nexus in mind, we analyze laches and estoppel as they apply to this case.

The equitable doctrine of laches requires "(1) unreasonable delay or lapse of time in asserting a right, (2) absence of an excuse for such delay, (3) knowledge, actual or constructive, of the injury or wrong, and (4) prejudice to the other party." State ex rel. Meyers v. Columbus (1995), 71 Ohio St.3d 603, 605, 646...