Opinion
Case No. 5:19-cv-01601
2022-03-18
GERLACH, INC., Plaintiff, v. GERLACH MASCHINENBAU GMBH, et al., Defendants.
Joseph M. Pritchard, IV, Surge IP, Wexford, PA, for Plaintiff. Andrew J. Wolf, Hahn, Loeser & Parks, Cleveland, OH, Edmund J. Ferdinand, III, Law Office of Ferdinand, New York, NY, for Defendants Gerlach Maschinenbau GmbH, Troester Machinery Ltd. Katrin Lewertoff, Law Office of Ferdinand, New York, NY, Steven E. Seasly, Hahn, Loeser & Parks, Cleveland, OH, for Defendants.
Joseph M. Pritchard, IV, Surge IP, Wexford, PA, for Plaintiff.
Andrew J. Wolf, Hahn, Loeser & Parks, Cleveland, OH, Edmund J. Ferdinand, III, Law Office of Ferdinand, New York, NY, for Defendants Gerlach Maschinenbau GmbH, Troester Machinery Ltd.
Katrin Lewertoff, Law Office of Ferdinand, New York, NY, Steven E. Seasly, Hahn, Loeser & Parks, Cleveland, OH, for Defendants.
OPINION AND ORDER
J. Philip Calabrese, United States District Judge
This case involves a dispute over a trademark used on rubber curing machines. The parties are involved in the business of designing, marketing, selling, and installing the machines throughout the United States. Plaintiff Gerlach, Inc. filed suit against Defendants Gerlach Maschinenbau GmbH ("GMG"), Troester Machinery Ltd., and Gerlach Machinery Corp. ("GMC") alleging ownership rights to the GERLACH mark. Defendants move for summary judgment on Counts 1 through 3 of Plaintiff's first amended complaint. (ECF No. 89.) For the following reasons, the Court GRANTS Defendants’ motion. STATEMENT OF FACTS
At this stage of the proceedings, the record establishes the following facts, which, in the current procedural posture, the Court construes in the light most favorable to Plaintiff as the non-movant.
A. Formation of the Gerlach Firm
In 1971, Juergen Gerlach, a citizen of Germany, founded the firm Gerlach, later known as Gerlach GmbH (Erkelenz). (ECF No. 38, ¶¶ 26–27, PageID #417; ECF No. 42, ¶¶ 26–27, PageID #470.) The company engaged in the "design, manufactur[ing], market[ing], [sale], install[ation], and servic[ing of] equipment for the manufacture and curing of rubber products and seals." (ECF No. 38, ¶ 26, PageID #417; ECF No. 42, ¶ 26, PageID #470.) Mr. Gerlach "owned a controlling interest in Gerlach GmbH (Erkelenz)" and "was a managing director thereof" giving him "authority to act on its behalf." (ECF No. 38, ¶ 28, Page ID #417; ECF No. 42, ¶ 28, PageID #1143.) By 1983, Gerlach GmbH (Erkelenz) began selling equipment bearing the GERLACH mark in the United States. (ECF No. 38, ¶ 30, PageID #418; ECF No. 42, ¶ 30, PageID #470.)
B. Gerlach, Inc. and Gerlach GmbH (Erkelenz)’s Relationship
In the mid-1980's, Mr. Gerlach began a business relationship with Gary Hall. (ECF No. 38, ¶ 31, PageID #418.) A few years later, in 1987, Mr. Gerlach and Mr. Hall entered into an agreement for Mr. Hall to form a company "to act as Gerlach GmbH (Erkelenz)’s agent for the sale[ ], installation, and service of Gerlach GmbH (Erkelenz)’s GERLACH-branded machines in ... the United States." (ECF No. 38, ¶ 32, PageID #418; ECF No. 42, ¶ 32, PageID #471.) Pursuant to the agreement, "Mr. Gerlach granted Mr. Hall permission on behalf of Gerlach GmbH (Erkelenz) to use the name ‘Gerlach Inc.’ as the name of Mr. Hall's new company." (ECF No. 38, ¶ 33, PageID #418; see also ECF No. 93-6, PageID #1237–38.) Later, Mr. Hall incorporated Gerlach, Inc. in Ohio in early 1988. (ECF No. 38, ¶ 34, PageID #418; ECF No. 93-1, ¶ 8, PageID #1182.)
Between 1988 and 2000, Gerlach, Inc. "identified customers and sold, installed, and serviced ... GERLACH-branded machines ... [and] necessary components of the machines[ ]" while "paying royalties to Gerlach GmbH (Erkelenz)." (ECF No. 38, ¶ 35, PageID #418; ECF No. 42, ¶ 35, PageID #471.) Then, in early 2000, Gerlach, Inc. and Gerlach GmbH (Erkelenz) entered into a license agreement. (ECF No. 38, ¶ 36, PageID #419; ECF No. 42, ¶36, PageID #471.) Under the license agreement, Gerlach, Inc. "used the GERLACH Mark to make machines." (ECF No. 38, ¶ 36, PageID #419.) In addition, Gerlach GmbH (Erkelenz) "used the GERLACH Mark in the United States itself in connection with selling its machines." (ECF No. 76, PageID #1005; ECF No. 76-1, PageID #1007.) The license agreement continued until its termination in late 2005 or early 2006. (ECF No. 38, ¶ 37, PageID #419–20; ECF No. 93-5, PageID #1234.)
C. The Sale of Gerlach GmbH (Erkelenz)
On September 30, 2006, Gerlach GmbH (Erkelenz) sold its assets to Gerlach GmbH (Alsdorf). (ECF No. 75, PageID #833; ECF No. 75-1, PageID #838–58; ECF No. 75-2, PageID #860–80.) On the same day, Mr. Gerlach also "sold all intellectual property rights associated with the business of GmbH Gerlach (Erkelenz)—including, specifically, trademark rights—to Frings Elektrotechnik + Anlagenbau GmbH ("Frings")"—the parent company of Gerlach GmbH (Alsdorf). (ECF No. 75, PageID #834; ECF No. 75-3, PageID #882–89; ECF No. 75-4, PageID #891–98.) However, Frings "was not informed about any assignment of rights to Gerlach, Inc." (ECF No. 75-18, ¶ 5, PageID #983.) And Mr. Gerlach represented that he "has not awarded any licenses ... to third parties other than Gerlach GmbH." (ECF No. 75-4, PageID #895.)
From 2006 through 2010, Gerlach GmbH (Alsdorf), as a subsidiary of Frings, "continuously used the GERLACH Mark in connection with the sale of rubber processing machine goods and services in the United States." (ECF No. 76, PageID #1004.)
On or about September 8, 2011, Gerlach GmbH (Alsdorf) and Frings sold all assets to GMG. (ECF No. 75, PageID #834–35; ECF No. 75-9, PageID #914–28; ECF No. 75-10, PageID #930–44.) "This sale specifically included transfer of all intellectual property rights owned by each of Gerlach GmbH (Alsdorf) and Frings to GMG." (ECF No. 75, PageID #834–35; ECF No. 75-9, PageID #917; ECF No. 75-10, PageID #933.)
GMG then formed GMC in late 2014 to advance GMG's commercial interests in the United States. (ECF No. 38, ¶¶ 59–60 PageID #423; ECF No. 42, ¶¶ 59–60, PageID #476.) To promote the marketing and sale of GMG's products and services in the United States, "GMC entered into a cooperative business relationship with Defendant Troester." (ECF No. 38, ¶ 61, PageID #423; ECF No. 42, ¶ 61, PageID #1147.)
D. Mr. Gerlach's Declarations
On June 12, 2018, Mr. Gerlach signed a declaration, stating:
The commercial relationship between Gerlach [GmbH (Erkelenz)] and Gerlach Inc. continued as described until at least 2005 or 2006. At that time, I decided to curtail my professional activities and to divest my interest in Gerlach [GmbH (Erkelenz)]. As part of that decision, and on behalf of Gerlach [GmbH], I granted to Gerlach Inc. all rights, title and interest in and to all of the aforementioned intangible information and property necessary for Gerlach Inc. to continue its activities in North America and Central America. This grant specifically included the trademark GERLACH (stylized or otherwise) and the goodwill associated therewith in North and Central America, specifically including the United States.
(ECF No. 75, PageID #835; ECF No. 75-17, ¶ 10, PageID #978–79.) In sum, Gerlach GmbH (Erkelenz) "granted to Gerlach, Inc." the trademark GERLACH in the United States. (Id. )
On December 2, 2020, Mr. Gerlach signed a declaration in this case addressing the trademark rights at issue, stating:
I did not assign to Gerlach, Inc. any rights regarding development, production, maintenance, service and distribution of machines for the U.S., Canada and Central America, neither in 2005 nor 2006 nor anytime else.
In particular, I did not assign or otherwise transfer to Gerlach, Inc. any rights with respect to any trademarks or "goodwill" regarding the "Gerlach" mark (word or word & design) for the U.S., Canada and Centra America (no. 10 of the declaration dated June 12, 2018).
There was no assignment aimed at granting Gerlach, Inc. any rights for the marketing and sale of machines in the U.S.A, Canada and Central America, or aimed at excluding Gerlach GmbH or its successors in title from these markets (no 12 of the declaration dated June 12, 2018)....
The Statements revoked under no. 1 to 4 were based on a misunderstanding of the scope and content of the declaration dated June 12, 2018 and I will therefore not repeat them.
(ECF No. 75, PageID #836; ECF No. 75-18, ¶¶ 2–4, 6, PageID #982, #983.)
Mr. Gerlach then sent a letter to GMG on May 3, 2020, stating: "If I had assigned something to Mr. Hall, then this would certainly have been done in writing." (ECF No. 75, PageID #836; ECF No. 75-19, PageID #985; ECF No. 75-20, PageID #987.)
STATEMENT OF THE CASE
Plaintiff brings suit against Defendants alleging four counts: (1) false designation of origin and unfair competition in violation of the Lanham Act; (2) common-law trademark infringement and unfair competition; (3) deceptive trade practices; and (4) cancellation of GMG's U.S. Supplemental Trademark Registration Number 5,667,018 for GERLACH, U.S. Trademark Registration Number 5,842,136 for GERLACH, and U.S. Trademark Registration 5,887,479 for Gerlach and Design. (See generally ECF No. 38.) Defendants move for summary judgment on Counts 1, 2, and 3. Alternatively, Defendants seek a summary judgment that Plaintiff may not recover money damages based on application of the doctrine of laches. (ECF No. 89.)
REQUEST FOR ORAL ARGUMENT
After the close of briefing on the motion for summary judgment, Plaintiff filed a letter requesting oral argument on the motion. (ECF No. 100.) In response to this request, the Court makes three brief points.
First , the request appears substantively to be an effort to file a surreply to make additional arguments already addressed in the parties’ respective summary judgment briefs. As the letter notes, the Court's Civil Standing Order provides that leave to file a surreply will be granted only rarely and for good cause. Additional argument does not constitute good cause. The Court assures counsel that, even without a surreply or its letter which functions as one, it is capable of appreciating the characterizations and arguments Defendants made in reply for what they are.
Second , contrary to Plaintiff's claim, the Court's Civil Standing Order does in fact address requests for oral arguments on pending motions. The Court's Civil Standing Order states that it will grant oral argument as of right to a party who certifies that a less experienced lawyer will make the argument. No such request was received in this case. Such requests, unfortunately, are made too rarely and represent a lost opportunity for litigants and counsel alike.
Third , upon review of the record and the parties’ briefs, the Court finds that oral argument is not necessary for resolution of the pending motion. The parties’ respective briefs were thorough and helpful, and oral argument would not provide sufficient benefits in clarification of the facts, the law, or the parties’ arguments that outweigh the various costs of oral argument.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate "if 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). On a motion for summary judgment, "the judge's function is not [ ] to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "The party seeking summary judgment has the initial burden of informing the court of the basis for its motion" and identifying the portions of the record "which it believes demonstrate the absence of a genuine issue of material fact." Tokmenko v. MetroHealth Sys. , 488 F. Supp. 3d 571, 576 (N.D. Ohio 2020) (citing Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). The non-moving party must then "set forth specific facts showing there is a genuine issue for trial." Id. (citing Anderson , 477 U.S. at 250, 106 S.Ct. 2505 ).
"When the moving party has carried its burden under Rule 56(c), its opponent must do more than show there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The Court, instead, determines "whether the evidence presents a sufficient disagreement to require submission to a jury" or whether the evidence "is so one-sided that one party must prevail as a matter of law." Id. at 251–52, 106 S.Ct. 2505. The Court, in doing so, must view the evidence in the light most favorable to the non-moving party. Kirilenko-Ison v. Board of Educ. of Danville Indep. Schs. , 974 F.3d 652, 660 (6th Cir. 2020) (citing Matsushita Elec. Indus. Co. , 475 U.S. at 587, 106 S.Ct. 1348 ).
If a genuine dispute exists, meaning "the evidence is such that a reasonable jury could return a verdict for the nonmoving party," summary judgement is not appropriate. Tokmenko , 488 F. Supp 3d at 576 (citing Anderson , 477 U.S. at 250, 106 S.Ct. 2505 ). If the evidence, however, "is merely colorable or is not significantly probative," summary judgment for the movant is proper. Id. The "mere existence of some factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment." Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (quoting Anderson , 477 U.S. at 247–48, 106 S.Ct. 2505 ).
"Just as plaintiff may not rely on conclusory allegations to proceed past the pleading stage, so too a plaintiff may not rely on conclusory evidence to proceed past the summary-judgment stage." Viet v. Le , 951 F.3d 818, 823 (6th Cir. 2020) (cleaned up). "Conclusory Statements unadorned with supporting facts are insufficient to establish a factual dispute that will defeat summary judgment." Id. (quoting Alexander v. CareSource , 576 F.3d 551, 560 (6th Cir. 2009) ).
ANALYSIS
Counts 1, 2, and 3 of Plaintiff's first amended complaint allege false designation of origin, unfair competition, trademark infringement, and deceptive trade practice under federal, State, and common law. (ECF No. 38.) To prevail on these claims, Plaintiff must establish ownership of the GERLACH mark superior to the rights of Defendants. See PGP, LLC v. TPII, LLC , 734 F. App'x 330, 333 (6th Cir. 2018) (stating that an infringement claim cannot succeed if the party does not have an enforceable ownership interest in the mark); see also Allard Enters., Inc. v. Advanced Programming Res., Inc. , 249 F.3d 564, 572 (6th Cir. 2001) ("The 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."). Therefore, the Court analyzes these counts together to determine the rightful owner of the GERLACH mark.
I. Ownership of the Trademark
Plaintiff argues that Gerlach, Inc. owns the GERLACH mark through an assignment of the trademark from GMG's predecessor and that its rights to the trademark are superior to any rights Defendants’ claim. (ECF No. 95, PageID #1389.) Defendants argue that, as a matter of law, Plaintiff cannot establish ownership of trademark rights in the GERLACH mark. (ECF No. 89, PageID #1141–42.)
Under the Lanham Act, assignments of federally registered marks must be in writing. 15 U.S.C. § 1060(a)(3). While the Lanham Act requires an assignment in writing, common-law trademark rights may be assigned orally. At the outset, the record does not contain a written assignment of the GERLACH mark. "When, as here, an assignment is not in writing, the plaintiff can prove an implied agreement to transfer with strong evidence of conduct manifesting agreement." Taylor v. Thomas , 624 F. App'x 322, 326 (6th Cir. 2015) (cleaned up).
A valid oral assignment "should satisfy the requirements of a contract, i.e., the legality of object, capacity of parties, consideration, and meeting of the minds." Wheel Specialties, Ltd. v. Starr Wheel Grp., Inc. , No. 4:10-cv-2460, 2012 WL 160249, at *4 (N.D. Ohio Jan. 19, 2012) (quoting Acme Co. v. Saunders & Sons Topsoil , 7th Dist. Mahoning No. 10 MA 93, 2011-Ohio-6423, ¶ 76 ). Therefore, a valid oral assignment "must contain clear evidence of the intent to transfer rights, must describe the subject matter of the assignment, must be clear and unequivocal, and must be noticed to the obligor." 6 Ohio Jur.3d Assignments § 26 (2021). An oral assignment may also be found where "there is intent on part of the assignor to assign the rights in question, an intent on the part of the assignment to be assigned the rights in question, and valuable consideration exchanged." Wheel Specialties , 2012 WL 160249, at *4 (quoting 6 Ohio Jur. 3d Assignments § 25 (2011) ).
Where an oral assignment is alleged, there must be evidence showing "when or how, exactly the assignment occurred." Page Plus of Atlanta, Inc. v. Owl Wireless, LLC , 602 F. App'x 232, 236 (6th Cir. 2015). A party cannot show an assignment occurred by relying on "conclusory assertions uncorroborated by other evidence" because "circumstantial evidence [is] insufficient to sustain [the] case through trial." Id.
I.A. Oral Assignment
In his 2018 declaration, Mr. Gerlach states that he "granted to Gerlach, Inc. all rights, title and interest in and to all of the aforementioned intangible information and property ... including the trademark GERLACH (stylized or otherwise) and the goodwill associated therewith ... in the United States." (ECF No. 75-17, ¶ 10, PageID #978–79.) Based on this declaration, Plaintiff argues that an assignment occurred. (ECF No. 95, PageID #1404–05.) Further, Plaintiff contends that Mr. Gerlach's later declaration from 2020 contains contradictory information making his credibility a question for a jury. (Id. , PageID #1405, 1408.)
In response, Defendants assert that the plain language of the 2018 declaration "describes an authorization to continue use of the GERLACH Mark rather than assignment (i.e., transfer of ownership)." (ECF No. 98, PageID #1433.) Further, Defendants argue that Mr. Gerlach's 2020 declaration "expressly disclaimed" assignment or transfer of the GERLACH mark to Plaintiff and any indication of the 2018 declaration "describing a trademark assignment or transfer was based on a misunderstanding of the scope and content" of the declaration. (ECF No. 89, PageID #1154.) Defendants contend that Mr. Gerlach's 2020 declaration also supports the conclusion that an assignment did not occur because it states: "If [Mr. Gerlach] had assigned something to [Plaintiff], then this would certainly have been in writing." (ECF No. 89, PageID #1155.)
Here, the record fails to establish that the 2018 and 2020 declarations are at odds. Plaintiff argues that the 2018 declaration establishes an assignment because it indicates Mr. Gerlach granted to Gerlach, Inc. the trademark and its goodwill to continue their business and that the 2020 declaration should be ignored. (ECF No. 95, PageID #1404–05.) But the record does not support this position. At most, the 2020 declaration clarifies the meaning of the 2018 declaration, which is a declaration, not an assignment. Further, the 2020 declaration undermines Plaintiff's argument for an assignment by confirming that an assignment would have been in writing. Consequently, Plaintiff's reliance on the 2018 declaration as an assignment does not provide support for an intent to transfer trademark rights. "For an assignment to be valid the parties must intend to make one and exchange consideration." Page Plus of Atlanta, Inc. , 602 F. App'x at 236–37 (citation omitted).
Moreover, Plaintiff does not direct the Court to any place in the record where there was a meeting of the minds regarding an assignment. Instead, Plaintiff relies on its own understanding of the arrangement for use of the mark. For example, Plaintiff cites a letter Mr. Hall drafted reflecting his understanding of rights to the GERLACH trademark. (See generally ECF No. 75-5.) While that letter references licensing of the mark and the rights between the parties, it is not itself a legal document. Nor does it prove that an oral assignment occurred. See Page Plus of Atlanta , 602 F. App'x at 236–37 (stating that an assignment requires corroborating evidence). Even construed in favor of Plaintiff, the record shows only debatable circumstantial evidence. But the law requires clear and unequivocal evidence of the intent to assign. And the record here does not permit a reasonable finder of fact to determine there was an oral assignment of the GERLACH trademark rights.
I.B. Other Theories
In addition to claiming an oral assignment, Plaintiff attempts to establish rights to the GERLACH mark through three other theories: continuous use; naked licensing; and abandonment. The Court addresses each in turn.
I.B.1. Priority Rights of the Trademark
Plaintiff asserts that it owns the common-law right to the GERLACH trademark through its continuous use. (ECF NO. 95, PageID #1408–09.) At common law, ownership of a trademark may be obtained by actual use. Allard Enters., Inc. , 249 F.3d at 571–72 (citation omitted). "The first to use a mark in the sale of goods or services is the ‘senior user’ of the mark and gains common law rights to the mark in the geographic area in which the mark is used." Id. at 572. "In a common law trademark action, the plaintiff has the burden of proof to establish first use of its trademark in every specific geographic area in which it claims superior rights." Innovation Ventures, LLC v. NVE, Inc. , 90 F. Supp. 3d 703, 715 (E.D. Mich. 2015).
According to Defendants, the record forecloses Plaintiff's claim to priority rights in the GERLACH mark. (ECF No. 89, PageID #1150–52.) The record establishes that the first sale of goods under the GERLACH Mark was in 1983, by Gerlach GmbH (Erkelenz), around five years before Gerlach, Inc.’s incorporation. (Id. , PageID #1150.) Defendants argue that Plaintiff's use of the GERLACH mark in the United States from 1988 to 2000 was "pursuant to agreements with and permissions from GMG's predecessor ... inur[ing] to GMG's predecessor's benefit," which further demonstrates Defendants’ priority in the mark. (Id. , PageID #1152.) Defendants assert that during the license agreement with Plaintiff, they continuously used the mark to sell their own machines within the United States. (Id. , PageID #1151.) Further, Defendants maintain that they continuously advanced their commercial interests within the United States after termination of the license. (Id. ) This continuous use of the GERLACH mark, in Defendants’ view, through their own use and Plaintiff's permissible use, establishes a superior right. (Id. , PageID #1151–52.)
Plaintiff agrees that its use of the GERLACH mark from 1988 to 2006 was under the authority and control of Defendants’ predecessor. (ECF No. 95, PageID #1406.) However, Plaintiff asserts that its use after 2006 followed assignment to it of rights to the GERLACH mark. (Id. , PageID #1406–07.) Plaintiff argues that it "owns the common law ‘Gerlach’ trade names and marks in the United States" because it has "established a secondary meaning in the surname ‘Gerlach.’ " (Id. , PageID #1408–09.) Further, Plaintiff contends that its continuous use of the mark in the United States without objection by Defendants establishes a claim of superiority in the GERLACH mark. (Id. )
The undisputed facts demonstrate that Defendants are the senior user of the GERLACH mark. Defendants began selling goods under the GERLACH mark before the incorporation of Plaintiff and before Plaintiff had permission to use the mark. As the first to sell rubber curing machines within the United States and Ohio, Defendants are the senior user of the GERLACH mark, which gives them common-law rights to the mark. "The first to use a mark in the sale of goods or services is the ‘senior user’ of the mark and gains common law rights to the mark in the geographic area in which the mark is used." Allard Enters., Inc. , 249 F.3d at 572. Also, Defendants established continuous use and marketing of the mark during (and after) the time of the license agreement with Plaintiff. (See ECF No. 76-2, ¶¶ 4–5, PageID #1005.) Therefore, Plaintiff fails to establish priority rights to the GERLACH mark and does not establish first use of the mark within the United States or Ohio. Innovation Ventures, LLC , 90 F. Supp. 3d at 715 (stating that "the plaintiff has the burden of proof to establish first use of its trademark in every specific geographic area in which it claims superior rights").
I.B.2. Naked Licensing of the Trademark
Trademarks distinguish products and manufacturers within the marketplace. "A trademark and trade name operate as indicators of origin, assuring customers that the goods and services sold thereunder are of a uniform nature and quality." Westco Grp., Inc. v. K.B. & Assocs., Inc. , 128 F. Supp. 2d 1082, 1087 (N.D. Ohio 2001) (citation omitted). To provide assurance to consumers, the trademark owner must control the nature and quality of the marked goods. "Under trademark law, where a licensor does not exercise reasonable quality control over a licensee, the mark is deemed abandoned due to the ‘naked licensing.’ " Yellowbook Inc. v. Brandeberry , 708 F.3d 837, 846 (6th Cir. 2013) (quoting Tumblebus Inc. v. Cranmer , 399 F.3d 754, 764–65 (6th Cir. 2005) ); see also 15 U.S.C. § 1127(2) (defining abandonment as "any course of conduct of the owner ... caus[ing] the mark to ... lose its significance as a mark.").
The party asserting abandonment through a naked licensing theory faces a "stringent" burden and must show the trademark or trade name "has lost its significance as an indicator of origin." Westco Grp. , 128 F.Supp.2d at 1090 (quoting Exxon Corp. v. Oxxford Clothes, Inc. , 109 F.3d 1070, 1075–76, 1079–80 (5th Cir. 1997) ). If, however, there are not "minimum characteristics of a valid trademark-licensing agreement" a court will not find that a naked license exists. Yellowbook Inc. , 708 F.3d at 846.
Here, Plaintiff fails to demonstrate that there was a license agreement—either express or implied—with Defendants following the termination of the original 2000 license agreement. Plaintiff relies on the 2018 declaration of Mr. Gerlach as evidence of a license. (See ECF No. 95, PageID #1406; ECF No. 75-17, ¶ 10, PageID #978–79.) Further, Plaintiff maintains that the conduct of Mr. Gerlach and Mr. Hall is consistent with the existence of a license. (ECF No. 95, PageID #1406.) However, the 2018 declaration belies Plaintiff's argument of a naked license for two reasons. First, Plaintiff fails to show the characteristics of a valid trademark license—for example, royalty payments for the use of the GERLACH mark following termination of the 2000 license agreement. Second, the parties’ conduct does not support an implied license under the stringent proof required. Absent the minimum characteristics of a valid trademark license, the Court cannot construe the authorization as a naked license. See Yellowbook , 708 F.3d at 846 (stating that the minimum characteristics of a trademark license must be present to construe an agreement as a naked license).
The Court need not determine whether Defendants adequately controlled the quality of Plaintiff's goods because there is no license agreement between the parties, express or implied. Without a licensing agreement, Defendants also could not have abandoned rights to the GERLACH mark through a naked license. Further, Plaintiff has not met the burden of demonstrating that the GERLACH mark has lost its significance as an indicator of origin. Therefore, Plaintiff may not succeed on its naked license theory.
I.B.3. Abandonment of the Trademark
Under the Lanham Act, a trademark is deemed abandoned if its "use has been discontinued with intent not to resume such use." 15 U.S.C. § 1127. "Nonuse for 3 consecutive years [is] prima facie evidence of abandonment." Id. Bona fide use of a mark does not require significant unit sales; rather, bona fide use is "a standard that should be interpreted with flexibility so as to encompass various genuine, but less traditional, trademark uses, such as those made in test markets and infrequent sales of large or expensive items." NetJets Inc. v. IntelliJet Grp., LLC , 602 F. App'x 242, 245 (6th Cir. 2015) (cleaned up).
Defendants assert that the evidence on which Plaintiff relies to prove abandonment is not admissible. (ECF No. 98, PageID #1440.) Plaintiff relies on a quote from an article in Rubber and Plastic News in 2015 in which Frings stated that it was not interested in the U.S. market and that " "Gerlach quit marketing on the continent in 2006." (ECF No. 93-8, PageID #1248.) Defendants argue that the article constitutes "classic hearsay which is not admissible to establish the truth of the matter, and therefore should be afforded no weight on this Motion for summary judgement." (ECF No. 98, PageID #1440.) This argument fails under Rule 803(17). Therefore, the Court overrules Defendants’ objection.
But taking the article as reporting accurate facts, the record shows sales by Defendants in 2006 and after. Plaintiff asserts that this use of the mark is "irregular and highly sporadic," resulting in abandonment. (ECF No. 95, PageID #1408–09.) Plaintiff supports its abandonment theory on the basis that Defendants sold only eleven products using the GERLACH mark between 2007 and 2015. (ECF No. 95, PageID #1394.) However, Plaintiffs only sold, rebuilt, or installed twenty-nine units over thirteen years, from 2006 to 2019. (See ECF No. 93-7, PageID #1243–44; ECF No. 94, PageID #1275 (detailing Plaintiff's sales).) The products sold by the parties are "large and expensive items," which can be sold infrequently and still constitute a bona fide use. See NetJets Inc. , 602 F. App'x at 245. Moreover, Plaintiff does not provide evidence that Defendants did not use the GERLACH mark for three consecutive years. Therefore, Plaintiff is unable to establish Defendants’ abandonment of the trademark.
II. Money Damages
Plaintiff seeks to hold Defendants jointly and severally liable. (ECF No. 38, PageID #434.) The parties debate at length whether the doctrine of laches bars Plaintiff's claims for money damages. Because such relief depends on a finding of infringement of the GERLACH mark, however, and the Court concludes that a reasonable finder of fact could not return a verdict for Plaintiff, the Court need not consider these arguments and declines to do so.
CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants’ motion for summary judgment.