SUSAN WEBBER WRIGHT, District Judge.
Plaintiffs Star Buffet, Inc. ("Star Buffet") and Southern Barns, Inc.,
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). As a prerequisite to summary judgment, a moving party must demonstrate "an absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has properly supported its motion for summary judgment, the non-moving party must "do more than simply show there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)
The non-moving party may not rest on mere allegations or denials of his pleading but must come forward with `specific facts showing a genuine issue for trial. Id. at 587. "[A] genuine issue of material fact exists if: (1) there is a dispute of fact; (2) the disputed fact is material to the outcome of the case; and (3) the dispute is genuine, that is, a reasonable jury could return a verdict for either party." RSBI Aerospace, Inc. v. Affiliated FM Ins. Co., 49 F.3d 399, 401 (8th Cir. 1995).
In 1991, Defendant Steven Barnhill opened the first Barnhill's restaurant in Florida through his company, Barnhill's Country Buffet, Inc. ("BCB"). BCB used various service marks in connection with the restaurant that featured the word "Barnhill's" as the dominate feature. BCB's enterprise quickly grew to include seven restaurants.
In 1993, BCB granted Charles Barnhill, Steven Barnhill's father, permission to use Barnhill's service marks in connection with a restaurant in Nacogdoches, Texas, called "Barnhill's Steaks & Buffet." From that time until the present, Charles has used Barnhill's marks at the Nacogdoches restaurant.
In 1995, Lovett's Buffet, Inc. ("Lovett's") purchased BCB, and Steven Barnhill stayed on as an employee. After the purchase, Lovett's changed its name to Barnhill's Buffet, Inc. ("BBI") and expanded the business to include 45 restaurants, in several states, that used the Barnhill's service marks. From 1999 through 2006, BBI obtained five federal trademark registrations for the Barnhill's name and logos ("the BBI marks").
On December 2, 2007, BBI and Star Buffet Management, Inc. ("SBM"), a wholly-owned subsidiary of Star Buffet, entered an agreement whereby SBM would purchase Barnhill's restaurants from BBI. The next day, BBI filed a voluntary petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Middle District of Tennessee.
According to a motion filed on December 4, 2007 in the bankruptcy case, BBI was then operating 29 buffet style restaurants under the name "Barnhill's Buffet."
On February 4, 2008, BBI sought permission to sell four of its remaining restaurants to Starlite Holdings, Inc., another wholly-owned Star Buffet subsidiary, for the sum of $1 million.
The approved asset purchase agreements by which Star Buffet's wholly-owned subsidiaries purchased a total 20 restaurants from BBI contained the following provision:
There is no indication in the record that the seller retained any right to control the licensee or that the buyer had exclusive rights to use the marks.
On April 28, 2008, BBI voluntarily converted the Chapter 11 proceeding to Chapter 7.
On April 21, 2014, Star Buffet's wholly-owned subsidiary, CC Starts, Inc. ("CC Starts"), submitted an application in the United States Patent and Trademark Office ("PTO") to register the service mark BARNHILL'S SALADS BUFFET DESSERTS. On December 9, 2014, the mark was registered as United States Trademark Registration No. 4,652,229, and on August 8, 2017, CC Starts assigned the registration to Star Buffet.
Star Buffet has continuously used the BARNHILL'S SALADS BUFFET DESSERTS mark on signs, menus, and other materials at the Barnhill's Country Buffet in Jonesboro, Arkansas, one of the restaurants it purchased from BBI in 2008. Defendants Steven Barnhill and TGB operate Barnhill's Steaks Buffet, a restaurant located in Jacksonville, Arkansas that opened for business in 2017. Defendants promote their Jacksonville restaurant with the service mark BARNHILL'S STEAKS BUFFET, which Plaintiffs contend is confusingly like BARNHILL'S SALADS BUFFET DESSERTS. After making unsuccessful demands that Defendants cease alleged trademark infringement, Plaintiffs commenced this action charging willful infringement of a trademark, trademark infringement and false designation of origin, and unfair competition.
Defendants counterclaimed, seeking (1) a declaration that Defendants do not violate Plaintiffs' rights by using the service mark BARNHILL'S STEAKS BUFFET service mark and (2) cancellation of Star Buffet's trademark registration for BARNHILL'S SALADS BUFFET DESSERTS. Defendants assert that pursuant to the 2008 asset purchase agreements, Star Buffet acquired only a license to use the BBI Barnhill's service marks and that BBI retained ownership of the marks. Defendants further assert that pursuant to the bill of sale entered in BBI's Chapter 7 proceeding on January 7, 2010, Defendant Steven Barnhill is the owner of the mark BARNHILL'S SALADS BUFFET DESSERTS. In answer to the counterclaim, Plaintiffs assert, among other things, Defendants' abandonment of all rights in any mark relevant to this case.
Defendants move for summary judgment, claiming they have superior rights in the mark BARNHILL'S SALADS BUFFET DESSERTS based on prior use. Specifically, Defendants argue that (1) Star Buffet used the BBI marks in the capacity of a licensee and such use inured to the benefit of the licensor, BBI, and then to Steven Barnhill after he purchased the BBI marks from the bankruptcy trustee, (2) Star Buffet, as a licensee, is estopped from making any adverse claims against Defendants, (3) the continued use of Barnhill's marks by Steven Barnhill's father, Charles Barnhill, inured to the benefit of Steven Barnhill, and (4) Star Buffet's PTO registration for the BARNHILL'S SALADS BUFFET DESSERTS marks should be cancelled.
The Court finds that this motion must be denied because there are material questions of fact. First and foremost is the question whether the Defendants lost priority in their marks when their registrations were cancelled or when defendants failed to use them following the purchase agreements approved by the bankruptcy court. The Lanham Act provides that a mark shall be deemed to be "abandoned" if either of the following occurs:
15 U.S.C.A. § 1127.
A party claiming abandonment under § 1127(1),
Plaintiffs point to the following statement by the bankruptcy trustee appointed in BBI's Chapter 7 case: "Following the closing of the sale . . . on February 29, 2008, the Debtor was no longer operating any restaurants."
Plaintiffs contend that the bankruptcy trustee abandoned the BBI marks and that Stephen Barnhill's nonuse of the marks between 2011 and 2017 creates a rebuttable presumption that he abandoned the marks before Star Buffet's 2014 trademark registration. Defendants counter that the "bankruptcy trustee entered into perpetual licenses with Plaintiffs' related companies[,]" and "the licensee's use inures to the benefit of the trademark owner."
Defendants claim that Charles Barnhill's use of the marks shows that they never abandoned their use, but the record is unclear concerning the nature of Charles's license and how the operation of his business in Texas was sufficient to overcome Defendants' non-use of the marks, registrations for which were all cancelled prior to the time Plaintiffs registered their marks in 2014. "A trademark owner may grant a license and remain protected, provided [that] quality control of the goods and services sold under the trademark by the licensee is maintained." Moore Bus. Forms, Inc. v. Ryu, 960 F.2d 486, 489 (5th Cir. 1992). However, "uncontrolled" or "naked" licensing, which occurs when an owner licenses a mark and fails to control the type or quality of the licensee's goods or services, may result in abandonment of the mark.
A related question of fact is whether the bankruptcy trustee's sale of the marks to Steven Barnhill in 2010 was a transfer in gross. Plaintiffs contend that the bankruptcy trustee conveyed Barnhill's marks to Steven Barnhill in the abstract, without an association to assets used to generate goodwill. The Lanham Act provides that a registered mark shall be assignable with the goodwill of the business in which the mark is used. See 15 U.S.C. § 1060(a)(1). This requirement recognizes that "[t]here is no such thing as property in a trademark except as a right appurtenant to an established business or trade in connection with which the mark is employed." United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97, 39 S.Ct. 48, 50-51 (1918); see also Mid-List Press v. Nora, 374 F.3d 690, 693 (8th Cir. 2004)(noting that property in a trade name exists only when associated with an ongoing business). The transfer of a trademark without its associated goodwill is an "assignment in gross" that gives the assignee no rights in the mark. PepsiCo, Inc. v. Grapette Co., 416 F.2d 285, 288 (8th Cir. 1969).
If the finder of fact should determine that Defendants did not lose rights to the marks, Defendants contend that Plaintiffs, as licensees, are estopped from asserting that their rights in the marks have priority over the Defendants' rights. Under Eighth Circuit precedent, the existence of a present and valid licensing agreement makes operative that "`long settled principle of law that a licensee of a trademark . . . may not set up any adverse claim in it as against its licensor.'" Seven-Up Bottling Co. v. Seven-Up Co., 561 F.2d 1275, 1279-80 (8th Cir. 1977)(quoting Pacific Supply Cooperative v. Farmers Union Central Exchange, 318 F.2d 894, 908-9 (9th Cir. 1963)); see also John C. Flood of Virginia, Inc. v. John C. Flood, Inc., 642 F.3d 1105, 1111 (D.C. Cir. 2011). Plaintiffs might be estopped as well from claiming that the Defendants lost their rights by failing to control the licensee during the term of the license. See Seven-Up Bottling Co., 561 F.2d 1275, 1279-80 (8th Cir. 1977)("The establishment of an existing licensor-licensee relationship . . . effectively constitutes an insuperable bar to recovery . . . with regard to its trademark claims.").
Defendants' counterclaim for cancellation of Star Buffet's registration mark will fail if the finder of fact determines that Defendants have lost their claim that their marks have priority. The issues concerning whether the Plaintiffs' registration is void, including whether CC Starts was an improper registrant, and whether the registration was obtained by fraud, present questions of fact that remain outstanding.
With Defendants' second motion for summary judgment, they assert that Plaintiffs have no evidence to establish a likelihood of confusion, entitlement to injunctive relief, or damages. Defendants also contend that they are entitled to attorney's fees. Plaintiffs respond that (1) Defendants have made a binding judicial admission that there is a likelihood of confusion between Defendants' accused mark and Star Buffet's registered mark, (2) genuine issues of fact preclude summary judgment as to likelihood of confusion and entitlement to monetary relief, and (3) Defendants' requires for attorney's fees, prior to the entry of judgment, is premature.
The Court first considers Plaintiffs' argument that Defendants have made a binding, judicial admission regarding likelihood of confusion. "A judicial admission is a formal admission before a court that "acts as a substitute for evidence in that it does away with the need for evidence [as to] the subject matter of the judicial admission." Warner Bros. Entm't v. X One X Prods., 840 F.3d 971, 978 (8th Cir. 2016)(citing State Farm Mut. Auto. Ins. Co. v. Worthington, 405 F.2d 683, 686 (8th Cir. 1968)). Plaintiffs correctly note that Defendants seek cancellation of Star Buffet's registration under alternative theories, including prior use, which requires proof of a likelihood of confusion. See 15 U.S.C. § 1052(d). However, the Court finds no allegation, stipulation or admission by Defendants that specifically admits likelihood of confusion. Defendants' assertion of prior use, without more, does not amount to a formal admission regarding a likelihood of confusion.
The crucial question at this point is whether genuine issues exist for trial. To succeed with claims for trademark infringement, false designation of origin, and unfair competition, Plaintiffs must demonstrate that a likelihood of confusion exists as result of Defendants' use of the accused mark. To determine the likelihood of confusion, six factors are relevant: (1) the strength of the owner's mark; (2) the similarity between the owner's mark and the alleged infringer's mark; (3) the competitive proximity of the parties' products; (4) the alleged infringer's intent to confuse the public; (5) incidents of actual confusion; and (6) whether the kind of product, its cost, and the conditions of purchase can eliminate the likelihood of confusion that would otherwise exist. SquirtCo. v. Seven-Up Co., 628 F.2d 1086, 1089 (8th Cir. 1980). The Eighth Circuit has explained: "These factors do not operate in a mathematically precise formula; rather, we use them at the summary judgment stage as a guide to determine whether a reasonable jury could find a likelihood of confusion." Frosty Treats Inc. v. Sony Computer Entm't Am. Inc., 426 F.3d 1001, 1008 (8th Cir. 2005)(quoting Duluth News-Tribune v. Mesabi Publ'g Co., 84 F.3d 1093, 1096 (8th Cir.1996)). "Factual disputes regarding a single factor are insufficient to support the reversal of summary judgment unless they tilt the entire balance in favor of such a finding." Id.
Defendants argue that the service mark BARNHILL'S SALADS BUFFET DESSERTS is primarily a surname and conceptually weak. However, as depicted below, Star Buffet displays the words BARNHILL'S SALADS BUFFET DESSERTS with a logo that features a farmhouse barn and a rooster.
Considering the service mark as actually used, the word Barnhill's arguably denotes a farmhouse barn rather than a surname and suggests the qualities or characteristics of Plaintiffs' country buffet restaurant. The Court finds that where the mark falls on the distinctiveness spectrum is a question of fact for trial. See Anheuser-Busch Inc. v. Stroh Brewery Co., 750 F.2d 631, 635 (8th Cir.1984)("These categories are like colors in a spectrum, and tend to blur at the edges and merge together. . . . The correct categorization . . . is a question of fact.").
As for commercial strength, Star Buffet presents evidence of significant advertising expenditures and revenue for the Jonesboro Barnhill's restaurant from 2009 through 2018. Defendants correctly note that Star Buffet offers no evidence showing a direct link between advertising expenditures and public recognition of the Barnhill's mark. Although the record is sparse on the question of commercial strength, the likelihood of confusion "does not hinge on a single factor but requires a consideration of numerous factors to determine whether under all the circumstances, there is a likelihood of confusion." SquirtCo v. The Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir.1980) (citation omitted).
Defendants acknowledge that the marks are similar, but they argue that this fact cannot benefit Star Buffet because "it would reward Plaintiffs' wrongful conduct."
Relief from trademark infringement is available in the absence of direct competition. "Confusion, or the likelihood of confusion, not competition, is the real test of trademark infringement. Whether or not direct competition exists is but one of the elements to be considered in determining whether there is or will be a likelihood of confusion." Cont'l Motors Corp. v. Cont'l Aviation Corp., 375 F.2d 857, 861 (5th Cir. 1967). Furthermore, "[w]here products are related, . . . it is reasonable for consumers to think that the products come from the same source, and confusion, therefore, is more likely." Kemp v. Bumble Bee Seafoods, Inc., 398 F.3d 1049, 1056 (8th Cir. 2005) (citation omitted).
Plaintiffs assert that given the high degree of similarity between the Jonesboro and Jacksonville restaurants, "[a] customer who has patronized Plaintiffs' buffet restaurant in Jonesboro, Arkansas would almost certainly be confused when it came upon Defendants' restaurant less than two hours away in the Little Rock suburb of Jacksonville."
Plaintiffs argue that Defendants set out to copy Star Buffet's Jonesboro restaurant when they opened their Jacksonville restaurant in 2017. It is undisputed that before Stephen Barnhill opened the Jacksonville restaurant, he was well familiar with the Jonesboro restaurant. By affidavit, Barnhill acknowledges that when he worked for Lovetts, which became BBI, he was personally involved in converting the Jonesboro restaurant into a Barnhill's restaurant. Additionally, Star Buffet presents evidence that Defendants copied Star Buffet's mark and "even the look and feel of Plaintiff's restaurant."
Here, the parties offer moderately-priced food at buffet-style restaurants—the type of product or service associated with a relatively low degree of consumer care in purchase decisions. This factor weighs in Plaintiffs' favor. Based on the foregoing analysis of relevant factors, the Court finds that the likelihood of confusion remains a genuine issue of fact.
Defendants argue that because Plaintiffs have no "market penetration in Defendants' market," Plaintiffs cannot obtain an injunction enjoining Defendants from using a Barnhill's mark. The Eighth Circuit has held that "to enjoin a geographically remote infringer, the registered owner must prove that its trademarked products and the infringing products are being sold in the same geographic area, or that or that the owner has concrete plans to expand into the infringer's trade area." Minnesota Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41 F.3d 1242, 1246 (8th Cir.1994). For reasons previously stated, it remains a question for trial whether the parties operate in distinctly separate geographic markets.
Injunctive relief is generally the preferred remedy to resolve a trademark dispute, but the Lanham Act also permits an accounting of profits as a remedy for unfair infringement. See Masters v. UHS of Del., Inc., 631 F.3d 464, 471 (8th Cir. 2011). "A circuit split exists concerning whether a Lanham Act plaintiff must prove willful infringement, rather than mere infringement, to be eligible for monetary damages under 15 U.S.C. § 1125(a)[,]" id. at 472, and the Eighth Circuit has "assume[d] without deciding, that willful infringement is a prerequisite of monetary relief "for trademark infringement under 15 U.S.C. § 1117(a). Id. at 472 n.2. Willful infringement may be found with evidence that raises a reasonable inference that the defendant knowingly infringed the mark in question. Id. at 471-72.
Defendants assert that Plaintiffs are unable to show willfulness because Steven Barnhill purchased the Barnhill's marks from a bankruptcy trustee, which they contend makes it "impossible for Plaintiffs to prove willful infringement when Defendants obtained permission to use the Barnhill's marks from another federal court."
Defendants charge that Plaintiffs' behavior in this case warrants that the Court award Defendants attorney's fees and costs. Defendants' prejudgment request for attorney's fees is denied as premature. See Fed. R. Civ. P. 54(d)(2)(B).
For the reasons stated, Defendants' motions for summary judgment [ECF Nos. 17 & 30] are DENIED.