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Eat BBQ LLC v. Walters

United States District Court, E.D. Kentucky, Central Division

September 18, 2014

EAT BBQ LLC, et al., Plaintiff,
v.
THOMAS C. WALTERS, Defendant

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For Eat Bbq LLC, doing business as Staxx BBQ, Daniel M. Liebman, Plaintiffs: Christopher L. Thacker, LEAD ATTORNEY, Steven Brian Loy, Stoll Keenon Ogden, PLLC - Lexington, Lexington, KY USA; James Dean Liebman, LEAD ATTORNEY, Liebman & Liebman, Frankfort, KY USA; Paul Christopher Harnice, LEAD ATTORNEY, Stoll Keenon Ogden - Frankfort, Frankfort, KY USA; Susan K. Knoll, LEAD ATTORNEY, PRO HAC VICE, Wong, Cabello, Lutsch, Rutherford & Brucculeri, LLP, Houston, TX USA.

For Thomas C. Walters, Defendant: Daniel D. Brock, Jr., Lexington, KY USA.

For Thomas C. Walters, Counter Claimant: Daniel D. Brock, Jr., Lexington, KY USA.

For Eat Bbq LLC, Daniel M. Liebman, Counter Defendants: Christopher L. Thacker, LEAD ATTORNEY, Steven Brian Loy, Stoll Keenon Ogden, PLLC - Lexington, Lexington, KY USA; James Dean Liebman, LEAD ATTORNEY, Liebman & Liebman, Frankfort, KY USA; Paul Christopher Harnice, LEAD ATTORNEY, Stoll Keenon Ogden - Frankfort, Frankfort, KY USA; Susan K. Knoll, LEAD ATTORNEY, Wong, Cabello, Lutsch, Rutherford & Brucculeri, LLP, Houston, TX USA.

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MEMORANDUM OPINION & ORDER

Gregory F. Van Tatenhove, United States District Judge.

Daniel Liebman and Tommie Walters had an idea and began implementing that idea as, at least in the most fundamental sense of the word, partners. Sadly, their collaboration ceased and disputes relating to its disbanding are now before the Court. More specifically, Liebman obtained trademarks that he now claims Walters infringed upon and Walters argues that he is owed a percentage of the value of the enterprise they created.

I

In November 2010, Daniel Liebman and Tommie Walters opened their first restaurant together in Louisville, Kentucky. The financial support came, with the help of a few investors, from Liebman. Walters contributed his experience in the restaurant industry and the idea for the STAXX name. Before partnering with Liebman, Walters had used the STAXX moniker in limited circumstances, but had not registered it with the United States Patent and Trademark Office (Trademark Office). The restaurant in Louisville, STAXX Roadhouse, was short-lived, closing by August of 2011. Prior to its closing, however, Liebman and Walters opened a second restaurant, STAXX BBQ in Frankfort, Kentucky. This location is still open.

After adopting STAXX as the identifying mark of the restaurants, Liebman applied for protected use of the moniker in two forms, STAXX and STAXX BBQ. Walters knew of the applications to the Trademark Office but did not file an objection as he did not want to " rock the boat." [R. 37 at 3.] Instead, he emailed Liebman and Susan Knoll, an investor, and encouraged them to add him as an owner of the trademarks. [R. 37-2, at 26 (Email dated 8/24/2011).] Knoll explained to Walters that he was " not an owner of the marks as defined by the U.S. Trademark Statute." [ Id. at 27 (Email dated 8/24/2011).] The marks were subsequently approved by, and registered with, the Trademark Office. As of September 4, 2012, Liebman has been the owner of U.S. Registration No. 4,201,038 which protects his service mark " STAXX BBQ" and, as of October 2, 2012, Liebman has owned U.S. Registration No. 4,216,466 which protects the " STAXX" mark. [R. 31-2; R. 31-3.] Plaintiffs use these marks to advertise and promote STAXX BBQ.

Liebman and Walters severed ties in May 2012. [R. 31-4 at 10-11.] After parting ways with Liebman, Walters continued to cater and provide food services and used the marks registered in Liebman's name to promote and advertise his business. [R. 4-7; R. 31-7.] Plaintiffs became aware of the alleged infringement which led to the present litigation.

Plaintiffs filed a motion for injunctive relief contemporaneously with the Complaint. After holding an evidentiary hearing and receiving briefing on the issue, this Court granted a preliminary injunction on November 16, 2011, that prohibited Walters from using the disputed marks pending ultimate resolution of this dispute. [R. 4.] On November 1, 2012, along with his answer, Walters asserted counterclaims seeking (1) declaratory relief, (2) cancellation of the STAXX mark, (3) cancellation of the STAXX BBQ mark and also alleging (4) contempt. [R. 13.] In their first amended complaint, Plaintiffs assert claims for trademark infringement and

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false designation under the Lanham Act, 15 U.S.C. § 1051, et seq., § 1125(a), unfair competition under Kentucky's common-law, conversion and tortious interference with prospective business relations. [R. 29.] Walters' first amended answer denies liability and alleges a single counterclaim for declaratory relief on the question of his partnership interest. [R. 32.] Currently pending before the Court are Plaintiffs' partial motion for summary judgment [R. 31] and Walters' late-filed motion seeking to join indispensable parties.[1] For the reasons set forth below, Plaintiffs' motion for partial summary judgment will be GRANTED in part and DENIED in part. [R. 31.]

II

Summary judgment is appropriate where " the pleadings, discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)(2); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). " A genuine dispute exists on a material fact, and thus summary judgment is improper, if the evidence shows 'that a reasonable jury could return a verdict for the nonmoving party.'" Olinger v. Corp. of the President of the Church, 521 F.Supp.2d 577, 582 (E.D. Ky. 2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

In deciding a motion for summary judgment, the Court must review the facts and draw all reasonable inferences in favor of the non-moving party. Logan v. Denny's, Inc., 259 F.3d 558, 566 (6th Cir. 2001) (citing Liberty Lobby, 477 U.S. at 255). In terms of burden shifting, the moving party has the initial burden of demonstrating the basis for its motion and identifying those parts of the record that establish the absence of a genuine issue of material fact. Chao v. Hall Holding Co., Inc., 285 F.3d 415, 424 (6th Cir. 2002). The movant may satisfy its burden by showing " that there is an absence of evidence to support the non-moving party's case." Celotex., 477 U.S. at 325. Once the movant has satisfied this burden, the non-moving party must go beyond the pleadings and come forward with specific facts to demonstrate there is a genuine issue. Hall Holding, 285 F.3d at 424 (citing Celotex, 477 U.S. at 324.) Moreover, " the nonmoving party must do more than show there is some metaphysical doubt as to the material fact. It must present significant probative evidence in support of its opposition to the motion for summary judgment." Id. (internal citations omitted).

The trial court is under no duty to " search the entire record to establish that it is bereft of a genuine issue of material fact." In re Morris, 260 F.3d 654, 655 (6th Cir. 2001) (citing Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989)). Instead, " the nonmoving party has an affirmative duty to direct the

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court's attention to those specific portions of the record upon which it seeks to rely to create a genuine issue of material fact." In re Morris, 260 F.3d at 655. Particularly relevant here, " to avoid summary judgment in a Lanham Act case alleging violations of § 32 (15 U.S.C. § 1114), and § 43 (15 U.S.C. § 1125), the nonmoving party must establish that genuine factual disputes exist concerning those factors that are material to whether confusion is likely in the marketplace as a result of the alleged infringement." Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619, 622-23 (6th Cir. 1996) (citing Homeowners Group, Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1107 (6th Cir. 1991)); see also Therma-Scan, Inc. v. Thermoscan, Inc., 295 F.3d 623, 630 (6th Cir. 2002).

A

The Lanham Act, codified at 15 U.S.C. § 1051 et seq., protects the trademark rights of businesses and individuals. See 15 U.S.C. § 1114. " The purpose of the trademark statutes is to protect the trademark holder's quasi-property interest in the mark and prevent consumer confusion about the actual source of goods using the mark." Maker's Mark Distillery, Inc. v. Diageo N. Am., Inc., 703 F.Supp.2d 671, 687 (W.D. Ky. 2010) aff'd, 679 F.3d 410 (6th Cir. 2012) (citing Ameritech, Inc. v. American Information Technologies Corp., 811 F.2d 960, 964 (6th Cir. 1987)).

Section 32 of the Lanham Act provides that a person is liable for trademark infringement when he, without consent of the registrant, does " use in commerce any ... copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion..." 15 U.S.C.A. § 1114(1)(a). Thus, to succeed, a Plaintiff must show (1) they had a registered trademark, (2) it was used without consent and (3) its use was likely to cause confusion. Id.

Section 43(a) of the Lanham Act creates a federal cause of action for trademark infringement claims. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 780, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992) (citing 1 J. Gilson, Trademark Protection and Practice § 2.13, p. 2-178 (1991)). That Section provides that:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which--(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods...or commercial activities by another person.... shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C.A. § 1125(a)(1) (emphasis added).

Assuming the Plaintiffs have a valid, registered trademark and the use is non-consensual, the test is the same under both Section 32 and 43(a); " Whether we call the violation infringement, unfair competition or false designation of origin, the test is identical--is there a 'likelihood of confusion?'" Two Pesos, Inc., 505 U.S. at 780 (quoting New West Corp. v. NYM Co. of California, Inc., 595 F.2d 1194, 1201 (CA9 1979) (footnote omitted)). Furthermore, federal trademark infringement analysis is identical to Kentucky's common law unfair competition analysis. See Maker's Mark Distillery,

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Inc., 703 F.Supp.2d at 688 FN17 (citing Winchester Federal Savings Bank v. Winchester Bank, Inc., 359 F.Supp.2d 561, 564 (E.D. Ky. 2004) (" Once the plaintiffs establish that the marks are valid and protectable, they must establish that the defendant's service mark is likely to cause confusion among consumers in the marketplace in order to prevail on all of the state and federal claims." )(additional citations omitted). Thus, to prove trademark infringement, false designation and unfair competition, Plaintiffs must show that (1) they held the trademarks, (2) they did not consent to Walters' use of those marks and (3) Walters' use of the marks was likely to cause confusion among relevant consumers.

1

The Court must first confront the question of whether Liebman's trademark rights are superior to the rights of Walters. As discussed earlier, Liebman has registered both the " STAXX" and " STAXX BBQ" marks with the Trademark Office. [R. 31-2; R. 31-3.] Walters argues, although not all that forcibly, that his use of the STAXX marks preceded Plaintiffs' use and that, as a result, he has superior rights. [R. 37 at 2.]

" One of the bedrock principles of trademark law is that trademark or 'service mark ownership is not acquired by federal or state registration. Rather, ownership rights flow only from prior appropriation and actual use in the market.'" Allard Enterprises, Inc. v. Advanced Programming Res., Inc., 146 F.3d 350, 356 (6th Cir. 1998) ( Allard I ) (quoting Homeowners Group, Inc., 931 F.2d at 1105.) Put another way, registering a trademark with the Trademark Office does not " create rights and priority over others who have previously used the mark in commerce," 15 U.S.C. § 1057(b), because " [t]he territorial rights of a holder of a federally registered trademark are always subject to any superior common law rights acquired by another party through actual use prior to the registrant's constructive use." Allard Enterprises, Inc. v. Advanced Programming Res., Inc., 249 F.3d 564, 572 (6th Cir. 2001) ( Allard II). Registration does, however, serve as prima facie evidence of the validity of that mark. 15 U.S.C. ยง 1115(a). " The effect of the ...


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