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

FILEDUNITED STATES DISTRICT COURT
MAY 2 9 2014
DISTRICT OF SOUTH DAKOTA
~4.;;	WESTERN DIVISION
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*
STURGIS MOTORCYCLE RALLY, INC, 	* 	CIV. 11-5052
*
Plaintiff, 	*
* 	REPORT AND RECOMMENDATION
vs. 	* 	RE: SECOND MOTION FOR
* 	SUMMARY JUDGMENT
RUSHMORE PHOTO & GIFTS, INC.; 	* 	(DOC. 114)
JRE, INC.; CAROL NIEMANN; 	*
PAUL A. NIEMANN; 	*
BRIAN M. NIEMANN; and 	*
WAL-MART STORES, INC., 	*
*
Defendants. 	*
*
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Pending is the second summary judgment motion filed by the defendants. I
JURISDICTION
This case is pending before the Honorable Jeffrey L. Viken who referred the pending motion
for a report and recommendation under 28 U.S.c. § 636.2
BACKGROUND
Defendants (collectively Rushmore) jointly move to dismiss with prejudice all of Sturgis
Motorcycle Rally, Inc.' s (SMRI) claims and request an Order holding, as a matter of law, that:
(a) 	SMRI is not entitled to any presumption of secondary meaning on the Sturgis
Registration (Reg. No. 3,923,284);
IDoc.114.
2Doc. 117.
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(b) 	the Sturgis Registration (Reg. No. 3,923,284) and all of SMRI's other
asserted "Sturgis" marks are invalid for being descriptive with the lack of the
requisite secondary meaning;
(c) 	the Sturgis Registration (Reg. No.3 ,923,284) be cancel ed based on invalidity,
(d) 	none of the Defendants infringe any of SMRI's alleged "Sturgis" marks
because they are invalid ....3
Previously Rushmore's first motion for summary judgment was denied as was SMRI's motion for
summary judgment.4 Judge Viken concluded a fact question remains for trial about SMRI's false
representation of exclusive use of "Sturgis"
[w]hile the court may surmise the submission fraudulently intended to overcome the
Patent and Trademark Office's earlier rejection of the STURGIS mark registration,
the defendants' evidence does not rise to the standard of clear and convincing
evidence required to make such a determination during the summary judgment
analysis. 	The 	court 	rejects 	the 	defendants' 	invitation 	to 	make 	this 	factual
determination without the benefit of a jury's verdict. 5
Rushmore's current argument is that summary judgment is nonetheless appropriate because
Rushmore used STURGIS on its merchandise long before the application for the
STURGIS mark was even filed. Indeed, the Court made factual findings as to
Rushmore's use prior to the effective registration date of the STURGIS mark, which
prevents Sturgis Motorcycle Rally, Inc. ("SMRI") from obtaining any presumption
of secondary meaning as a matter oflaw. Also, in view of the Court's factual finding
that hundreds of others used STURGIS before and during the time the Sturgis Area
Chamber of Commerce ("Chamber") asserted its own exclusive use, SMRI cannot
make the necessary showing of secondary meaning which requires (i) STURGIS to
denote in the consumer's mind a single thing coming from a single source, and (ii)
the existence of secondary meaning prior to Rushmore's use.
Needless to say SMRI resists the motion.
3Doc. 114, p. 1.
4Doc. 113, p. 47.
5Doc. 113, p. 46.
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RECOMMENDATION
It is respectfully RECOMMENDED that the defendants' joint motion for summary
judgment be DENIED.
UNDISPUTED FACTS
In January 2001, the Sturgis Chamber of Commerce filed an intent-to-use trademark
application to register STURGIS for rally related goods and services. STURGIS was first rejected
for registration by the Patent and Trademark Office ("PTa"), but later the Chamber of Commerce
filed a § 2(t) assertion that STURGIS had acquired secondary meaning. The Chamber of Commerce
amended the goods descriptions to clarify that its rights pertained to goods "relating to the STURGIS
Motorcycle Rally," and made a claim of acquired distinctiveness pertaining to the STURGIS®
promotional, sponsorship, and economic development services of the Chamber. After wrangling
parties agreed to pull together, SMRI on February 22,2011, obtained registration for the STURGIS
mark.
DISCUSSION
1. 	Summary Judgment Standard.
The summary judgment standard is stated well by District Judge J. Shaw:
The standards applicable to summary judgment motions are well settled. Pursuant to
Federal Rule of Civil Procedure 56(c), a court may grant a motion for summary
judgment if all of the information before the court shows "there is no genuine issue
of material fact and the moving party is entitled to judgment as a matter of law."
The initial burden is placed on the moving party. The moving party has the burden
of clearly establishing the non-existence of any genuine issue of fact that is material
to a judgment in its favor. Once this burden is discharged, if the record shows that
no genuine dispute exists, the burden then shifts to the non-moving party who must
set forth affirmative evidence and specific facts showing there is a genuine dispute
on a material factual issue.
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Once the burden shifts, the non-moving party may not rest on the allegations in its
pleadings, but by affidavit and other evidence must set forth specific facts showing
that a genuine issue of material fact exists. 	A dispute about a material fact is
"genuine" only "if the evidence is such that a reasonable jury could return a verdict
for the nonmoving party."
In reviewing a motion for summary judgment, this Court is required to view the facts
in a light most favorable to the non-moving party and to give the non-moving party
the benefit of any inferences that can logically be drawn from those facts. Moreover,
this Court is required to resolve all conflicts in favor of the non-moving party.
Nonetheless, "Self-serving, conclusory statements without support are not sufficient
to defeat summary judgment.6
2. 	Analysis.
Rushmore urges that in resolving the earlier summary judgment motion the court found as
fact that STURGIS has been used by Rushmore and by hundreds of other vendors even before the
Chamber first filed its intent to use trademark application on January 30, 2001, and even longer
before February 22, 2011, when the PTO accepted SMRI's registration. 	Rushmore asserts it is
therefore impossible as a matter oflaw for SMRI to enjoy a presumption of secondary meaning for
STURGIS or to prove a secondary meaning for STURGIS. 7 SMRI parries this compelling argument
by disputing that Sturgis Motor Classic merchandise has been a major part of Rushmore's business
6Council of Better Bus. Bureaus, Inc. v. Bailey & Associates, Inc., 197 F. Supp. 2d 1197,
1202 (E.D. Mo. 2002) (internal citations and parenthesis omitted, punctuation altered).
7Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863,869 (8th Cir. 1994).
Rushmore relies on Aromatique to assert "The § 2(f) submission is a concession that
STURGIS is not inherently distinctive. . .. But under Eighth Circuit precedent, a registered mark
may be presumed to have acquired distinctiveness as of its effective registration date as a result
of secondary meaning. Aromatique, 28 F.3d at 870." (Doc. 115, p. 4 internal quotation marks
omitted).
4
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since the mid-1980s.8 SMRI asserts "[ s ]poradic or de minimis use does not preclude Mr. Martin
from having submitted a truthful Section 2(t) affidavit of acquired distinctiveness based on
substantially exclusive use.,,9
I adhere to my earlier conclusions about the existence of questions of fact for a jury to decide:
Fraud on the PTO presents a fact question to be decided by a jury. Contrary to the
representation Plaintiff Sturgis made to the PTO about its exclusive use of
STURGIS, the term was commonly used by hundreds of others during the time
plaintiff represented its exclusive use of STURGIS. But there is a fact question for
a jury to decide- was it the intention of Plaintiff Sturgis to defraud the PTO?
There is a fact question to identify into which category of distinctiveness STURGIS
falls. There is also a fact question whether STURGIS has acquired distinctiveness
as a result of secondary meaning, and if so, whether the distinctiveness identifies
plaintiff Sturgis as the source of products or whether the secondary meaning of
STURGIS is the event itself. to
After my Recommendation addressing the earlier motions for summary judgment was filed, the
Eighth Circuit Court of Appeals issued an opinion which makes it even more clear there are fact
issues for jury resolution about secondary meaning despite the widespread common use of STURGIS
before SMRI gained registration. II 	Lovely Skin is factually similar because the case is a 2(t)
registration case in which the defense tried to cancel plaintiffs registration by proving the
declaration of substantially exclusive use was false. 	Lovely Skin is a road map for resolving this
summary judgment motion and a road map for the parties and the court when the STURGIS case
is presented to a jury.
8Doc. 121, p. 2, ~ 4.
9Doc. 121, pp. 3-4, ~ 8.
toDoc. 107, pp. 8-9.
IILovely Skin, Inc. v Ishtar Skin Care Products, LLC, 745 F.3d 877 (8th Cir. 2014).
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"A trademark is any word, name, symbol, or device, or any combination thereof-used by
a person ... to identifY and distinguish his or her goods, including a unique product, from those
manufactured or sold by others and to indicate the source of the goods, even if that source is
unknown.,,12 The owner of a trademark has a statutory right to apply to register the trademark. But
trademarks which are merely descriptive cannot be registered unless the mark has become distinctive
of those particular goods in commerce. l3
That's the first set of fact questions- whether STURGIS distinguishes SMRI's goods from
those of others and indicates that SMRI is the source ofthe goods. Does STURGIS make people
think of SMRI's goods? Does STURGIS make people think of something entirely different from
goods, like the motorcycle event itself? " ... [T]he chief inquiry is whether in the consumer's mind
the mark has become associated with a particular source.,,14
As here, under 2(t) a merely descriptive trademark can be registered if it has become
distinctive as used in commerce in connection with the applicant's goods. The PTO can accept as
prima facie evidence that the mark has become distinctive proof of substantially exclusive and
continuous use as a mark by the applicant in commerce for five years before the date on which the
claim of distinctiveness is made. There is a strong presumption that a registered mark is valid at the
time of its registration. IS
12Lovely Skin at 882 (internal quotation marks omitted).
l3Id.
14Lovely Skin at 882 ..
15Lovely Skin at 882, citing Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863, 870 (8th Cir.
1994).
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There are two avenues of affinnative defense available to a party charged with infringement
of a registered trademark. "First, the alleged infringer may prove any legal or equitable defense or
defect ... which might have been asserted if such mark had not been registered. Second, the alleged
infringer may seek cancellation of the registrant's trademark registration either as a counterclaim in
the infringement suit or as a separate and independent action. Ifthe cancellation action is filed within
five years ofthe registration ofthe mark sought to be canceled, as it was here, any ground that would
have prevented registration in the first place qualifies as a valid ground for cancellation.,,16
Because SMRI's STURGIS mark was registered under 2( f) " lack of acquired distinctiveness
at the time of registration is a valid ground for cancellation.,,17 	The next set of fact questions,
therefore, addresses Rushmore's claim that SMRI did not have "substantially exclusive" use of
STURGIS for five years before the date on which SMRI claimed distinctiveness. It has already been
found as fact that Rushmore and hundreds ofvendors used STURGIS before both January 30,2001,
(application date) and February 22, 2011 (registration date). But SMRI's registration carries a strong
presumption of validity at the time of its registration.
Due to a registered mark's presumption of validity, the burden of persuasion in a
cancellation proceeding rests on the party seeking to cancel the registration. Thus,
a party seeking to cancel a registration has the burden of persuasion to rebut the
trademark's presumption of validity by a preponderance of the evidence. Initially, the
party seeking cancellation also bears the burden to establish a prima facie case that
the registration is invalid. 	In a § 2(f) case, this means that the party seeking
cancellation must establish a prima facie case of no acquired distinctiveness. If the
party seeking cancellation establishes a prima facie showing of invalidity, the burden
of producing additional evidence or argument in defense of registration ... shifts to
the registrant. The court then must decide whether the party seeking cancellation has
satisfied its ultimate burden of persuasion, based on all the evidence made of record
16Lovely Skin at 883 (internal quotation marks, citations and brackets omitted).
17Jd. (internal citation omitted).
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during prosecution and any additional evidence introduced in the cancellation
proceeding. 18
Both the ultimate burden of persuasion to rebut the presumption of validity of SMRI' s STURGIS
mark and the initial burden to prove a prima facie case of no acquired distinctiveness, i.e. no
secondary meaning, rest with Rushmore. That they and hundreds of vendors have used STURGIS
when SMRI represented to the PTa that SMRI had "substantially exclusive" use of STURGIS goes
a long way toward satisfying Rushmore's burden to establish a prima facie case of no secondary
meaning, but not all the way. 	Because SMRI challenged Rushmore's claim that Sturgis Motor
Classic merchandise has been a major part of Rushmore's business since the mid-1980s and asserts
merely sporadic or de minimis use, there is a fact issue for jury resolution. Rushmore must prove
to the jury that Rushmore's and other vendors' uses of STURGIS were substantial enough so that
SMRI did not have "substantially exclusive" use of STURGIS and STURGIS had in fact not
acquired a distinctive meaning when SMRI represented to the PTa that STURGIS had acquired a
distinctive meaning because SMRI had been using it "substantially exclusively." Those are classic
fact issues for a jury to hear and decide, i.e. judging credibility of witnesses and evaluating evidence.
If Rushmore is able to satisty its burden to establish a prima facie case, then the burden shifts
to SMRI to produce additional evidence or argument to defend its registration of STURGIS. SMRI
no doubt will try to prove STURGIS acquired a distinctive meaning associated with SMRI's
products and promotions by showing its volume of sales, sales growth, advertising expenditures and
other evidence to show that consumers identity and distinguish STURGIS as SMRI's goods from
those manufactured or sold by others and to indicate SMRI is the source of the goods, even if
18Lovely Skin, at 883 (internal citations, quotation marks and brackets omitted).
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consumers don't recognize SMRI as the source. Resolution ofthese issues as well involves judging
the credibility of witnesses and evaluating evidence.
RECOMMENDA TION
It is respectfully recommended to the District Court that the defendants' joint motion for
summary judgment (Doc. 114) be DENIED because there are fact questions to be resolved19,
namely:
1. 	to determine whether PlaintiffSMRI intended to defraud the PTO;
2. 	to identity of the category of distinctiveness to which STURGIS
belongs;
3. 	to determine whether STURGIS has acquired distinctiveness and, if so,
whether the distinctiveness identifies and distinguishes SMRI's goods from
those manufactured or sold by others and to indicates the source of the goods,
even if that source is unknown;
4. 	To determine whether the use of STURGIS by Rushmore and hundreds of
other vendors was 	sufficiently 	substantial 	to 	render false SMRI's
representation of substantially exclusive use for five years before the date on
which SMRI claimed distinctiveness;
5. 	In the event Rushmore satisfies its burden of persuasion to establish a prima
facie case of no acquired distinctiveness for STURGIS, then there are fact
issues to resolve surrounding SMRI's burden to defend the validity of its
STURGIS registration, including whether SMRI's use was substantially
exclusive despite Rushmore having established a prima facie case of no
acquired distinctiveness for lack of substantially exclusive use for the
required five year period.
19These identified issues of fact are intended as examples of fact issues sufficient to defeat
entry of summary judgment as a matter of law rather than as an exclusive list of fact issues for
resolution by a jury, so there may be other fact issues for jury resolution not identified here but
which are identified by the district court or the parties.
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NOTICE TO PARTIES
The parties have fourteen (14) days after service ofthis Report and Recommendation to file
written objections pursuant to 28 U .S.C. § 636(b)(1), unless an extension of time for good cause is
obtained. Failure to file timely objections will result in the waiver of the right to appeal questions
of fact. Objections must be timely and specific in order to require de novo review by the District
Court. Thompson v. Nix, 897 F .2d 356 (8th Cir. 1990); Nash v. Black, 781 F .2d 665 (8th Cir. 1986).
Dated May 29,2014.
BY THE COURT:
States Magistrate Judge
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