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Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc.

United States District Court, D. South Dakota, Western Division

December 11, 2019

STURGIS MOTORCYCLE RALLY, INC., Plaintiff,
v.
RUSHMORE PHOTO & GIFTS, INC.; JRE, INC., CAROL NIEMANN; PAUL A. NIEMANN; BRIAN M. NIEMANN, and WAL-MART STORES, INC., Defendants, AND RUSHMORE PHOTO & GIFTS, INC.; JRE, INC., CAROL NIEMANN; PAUL A. NIEMANN; and BRIAN M. NIEMANN, Counterclaimants,
v.
STURGIS MOTORCYCLE RALLY, INC., Counterclaim Defendant.

          ORDER

          JEFFREY L VIKEN CHIEF JUDGE

         INTRODUCTION

         By an amended order dated February 15, 2019, the court confirmed "that the U.S. Registration No. 3, 923, 284 for STURGIS is invalid and may be subject to cancellation. . . . and that the U.S. Registration No. 4, 440, 406 for STURGIS is invalid and may be subject to cancellation." (Docket 489 at p. 8). The court noted that prior to the entry of the order "[n]o motion for cancellation [had] been made." Id. at p. 8 n.2 & n.3. On the same day, consistent with the amended order, the court issued an amended preliminary injunction. (Docket 490).

         On February 22, 2019, the defendants filed a motion to cancel the Sturgis registrations, together with a supporting brief, an affidavit and two exhibits. (Dockets 492-94, 494-1 & 494-2). Defendants subsequently filed a motion asking the court to take judicial notice of "SMRI's February 22, 2019 Status Report filing before the Trademark Trial and Appeal Board [.]"[1] (Docket 496). Accompanying defendants' motion were an affidavit and exhibit. (Dockets 497 85 497-1).

         Plaintiff filed a response in resistance to defendants' motion to cancel the Sturgis registrations. (Docket 500). Plaintiff also filed a motion and supporting brief asking the court to reconsider its February 15, 2019, order and the accompanying amended preliminary injunction. (Dockets 501-02). Plaintiff filed an objection to defendants' motion for judicial notice. (Docket 506).

         Defendants filed a reply brief in support of their motion to cancel the Sturgis registrations, together with an affidavit and two exhibits. (Docket 503, 504, 504-1 8s 504-2). Defendants also filed a brief in opposition to plaintiff's motion for reconsideration, together with a supporting brief, five affidavits and four exhibits. (Dockets 506, 507, 507-1, 507-2, 508, 508-1 85 509-11).

         For the reasons stated below, plaintiff's motion for reconsideration (Docket 501) is denied, defendants' motion for judicial notice (Docket 496) is granted and defendants' motion to cancel the Sturgis trademark registrations (Docket 492) is granted.[2]

         ANALYSIS

         In both its motion for reconsideration and brief in opposition to defendants' motion, plaintiff asserts the court erred on several issues. (Dockets 500-502). Because plaintiffs arguments are the same in each submission, the court will cite to plaintiffs brief in opposition to cancellation of the STURGIS mark. (Docket 500). SMRI's remaining claims seeking reconsideration of the court's amended order and amended preliminary injunction of February 15, 2019, will be addressed in a later section of this order.

         CANCELLATION OF REGISTRATIONS

         Defendants' motion seeks an order of cancellation of the STURGIS Registrations No. 3, 923, 284 and No. 4, 440, 406 (jointly "the STURGIS Registrations") pursuant to 15 U.S.C. § 1119. (Docket 493 at p. 1). Because the court "invalidated the STURGIS Registrations," defendants argue "allowing them to live on in the Patent and Trademark Office will only confuse the public." Id. at p. 2. "To avoid any public confusion" and using its authority under § 1119, defendants submit "the Court should order cancelation of the STURGIS Registrations." Id.

         Defendants contend "Section 1119's plain language gives this Court broad discretion to order cancelation of the STURGIS Registrations." Id. at p. 3 (referencing 15 U.S.C. § 1119 and B & B Hardware, Inc. v. Hargis Industries, Inc., __U.S.__, 135 S.Ct. 1293, 1307 (2015)). Defendants submit "[t]he Eighth Circuit held that the jury's STURGIS validity finding cannot stand for goods and services in any context. . . . This Court then invalidated the STURGIS Registrations and mark. . . . Invalid marks are neither protectable nor registrable." Id. (referencing Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., 908 F.3d 313, 333 (8th Cir. 2018) ("SMRI v. RP&G") Docket 489 at pp. 7-8; Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863, 875 (8th Cir. 1994) (other references omitted). Defendants argue "[u]ntil the public record is corrected consistent with the holdings of this Court and the Eighth Circuit Court of Appeals, the public will remain[] confused about the STURGIS mark. 15 U.S.C. § 1119 is intended to prevent this exact kind of confusion." Id. at p. 6.

         In addition to seeking cancellation of the STURGIS Registrations, defendants ask the court to notify the United States Patent and Trademark Office ("USPTO") of proceedings before the Trademark Trial and Appeal Board ("TTAB") involving the STURGIS registrations. Id. Defendants contend there are two known proceedings:

1. Concerned Citizens for Sturgis, Inc., v. Sturgis Motorcycle Rally Inc., Cancellation No. 92054714; and
2. Sturgis Motorcycle Rally, Inc., v. Sturgis Black Hills Rally S.D., LLC, Opposition No. 91202965.

Id. at p. 7.

         Plaintiff opposes defendants' motion for cancellation of the STURGIS Registrations. (Docket 500). SMRI contends defendants' "motion [is] neither required nor endorsed by the Eighth Circuit opinion, and ... it would be in error for the Court to order the cancellation of the registrations, one of which was not even pled in Plaintiff s Amended Complaint." Id. at p. 1. SMRI submits:

[It] does not consent and has not consented to trying the issue of cancellation of its U.S. registrations, including one that it did not even assert in its operative complaint, and Plaintiff does not consent to any amendment of the Defendants' pleadings to assert such new claims.

Id. at p. 2.

         Plaintiff acknowledges that during the jury trial "SMRI needed to prove . . . the [STURGIS] mark had attained secondary meaning." Id. Plaintiff argues:

The jury accepted SMRI's proof of secondary meaning, finding the STURGIS mark to be a valid, protectable mark . . . and rejected Defendants' defenses of fraud and genericness. While the Eighth Circuit Court of Appeals in [SMRI v. RP&G] vacated the portion of the jury verdict finding validity because SMRI did not meet its burden of proof, it did not disagree with the jury's refutation of Defendants' invalidity (genericness and fraud) defenses.

Id. In furtherance of this argument, SMRI contends that at trial defendants "never presented, in jury instructions or in the jury verdict form, any instructions about the findings necessary to obtain cancellation of Plaintiffs pleaded registrations." Id. Had defendants done so, SMRI declares "Plaintiff would have objected." Id.

         Plaintiff argues the court's declaration that the STURGIS mark is invalid is wrong because the court "misreads the Eighth Circuit's [decision] by relying on it to make such declaration, as the Eighth Circuit merely cited Plaintiff for its failure to offer sufficient proof of validity, without going so far as to declare the mark invalid." (Docket 500 at p. 3). To the contrary, plaintiff contends "[t]he Eighth Circuit did not find that the STURGIS® mark is invalid, just that Plaintiff failed to put on evidence sufficient to prove the validity element in the present case." Id. In other words, plaintiff argues it only "failed to sustain its burden of proof against the Defendants in this case." Id.

         As an extension of its argument regarding the decision in SMRI v. RP&G, plaintiff contends:

It is entirely possible . . . that SMRI may be able to prove that the STURGIS mark is a valid trademark, and enforceable against a junior user, in another case, against another infringer. SMRI will have to establish, through presumption or evidence, that it has a valid STURGIS mark, but nothing in the Eighth Circuit's opinion forecloses SMRI's ability to do so. In such a future case, SMRI may rely on survey evidence to prove secondary meaning, or other "direct" and indirect testimony.
Accordingly, while it was appropriate for the Court, following the Eighth Circuit's guidelines on remand, to vacate the jury's special jury finding that the STURGIS mark was proven to be valid, the District Court errs to go further by holding the mark to be invalid.

Id. at p. 4.

         Plaintiff submits it "did not rely on U.S. Reg. No. 4, 440, 406 for the STURGIS mark in its Amended Complaint nor did it rely on the registration at trial. . . . Thus, SMRI's Reg. No. 4, 440, 406 for the STURGIS mark was not at issue at trial." Id. at p. 5. SMRI proposed defendants "have not asserted any counterclaim to cancel [U.S. Reg. No. 4, 440, 406]. It would be a manifest error for the Court to order the cancellation of a U.S. trademark registration not pleaded in the operative pleadings, not subject to a counterclaim for cancellation, and not made [an] issue at trial." Id. at pp. 5-6. In support of this position, SMRI argues "[cancellation counterclaims are compulsory before the U.S. Trademark Trial and Appeal Board." Id. at p. 6 (referencing 37 C.F.R. §§ 2.106(b) & 2.114(b); 5 McCarthy on Trademarks and Unfair Competition 30:112 (5th ed.); OBX-Stock, Inc. v. Bicast Inc., 558 F.3d 334, 342 (4th Cir. 2009)).

As its final argument on this issue, SMRI submits:
[I]n the event the Court is inclined to grant Defendants' motion, Plaintiff respectfully requests that the Court certify for appeal to the Eighth Circuit Court of Appeals the question of cancellation of Plaintiffs federal registrations, before providing any direction to the USPTO, so as to avoid additional complications in other proceedings at the USPTO before this matter is finally decided.

Id. at p. 7.

         In response to plaintiffs arguments, defendants counter that SMRI "offered both STURGIS Registrations as trial exhibits and also does not dispute it cited them as evidence of secondary meaning to survive summary judgment of invalidity." (Docket 503 at p. 2) (referencing Trial Exhibits 16 & 17; Dockets 121 at p. 9, 122-3 & 122-4). Defendants contend "SMRI admits that the parties tried secondary meaning to the jury. . . . The Court instructed the jury on secondary meaning. . . . The jury even asked for further explanation on it." Id. at p. 3 (internal references omitted). Defendants argue that during the settlement of jury instructions and the interrogatory style verdict form, SMRI acknowledged "invalidity for lack of ...


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