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G&F Licensing Corp. v. Field & Stream Licenses Co.

July 21, 2010

G&F LICENSING CORP., PLAINTIFF,
v.
FIELD & STREAM LICENSES CO., LLC, ET AL., DEFENDANTS.



MEMORANDUM OPINION AND ORDER

Plaintiff G&F Licensing Corp. ("Plaintiff" or "GFLC") brings this action against Field & Stream Licenses Co., LLC ("FSLC"), Otto International FS, LLC ("Otto"), Costco Wholesale Corp. ("Costco"), and Moose Creek Inc. ("Moose Creek," and together with the other defendants, "Defendants"), asserting claims for trademark infringement, dilution, false designation of origin, and false advertising, in violation of Sections 32 and 43 of the Lanham Act, 15 U.S.C., §§ 1114 and 1125, as well as a number of New York state law claims, and seeks a declaratory judgment as to the effect of a license agreement on the parties' rights to the marks at issue and a permanent injunction against Costco's and Moose Creek's manufacture and sale of certain products. The Court has jurisdiction of this action pursuant to 28 U.S.C. §§ 1331, 1338, and 1367. Defendants move, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the amended complaint (the "Amended Complaint") for failure to state a claim. The Court has considered thoroughly the parties' submissions. For the following reasons, Defendants' motion to dismiss the Amended Complaint is granted.

BACKGROUND

The following facts are derived from the allegations in the Amended Complaint, which are construed as true for purposes of the instant motion practice. The Gordon & Ferguson Company ("G&F") was founded as a fur company in 1871 by Richard Gordon and Paul Ferguson. (Am. Compl. ¶ 17.) G&F first registered the name "Field and Stream" as a trademark for clothing in 1926. (Id. ¶ 20.) In 1987 Field & Stream Licenses Company ("F&S"), which was "formerly owned" by Gordon & Ferguson Merchandising Company, a wholly-owned subsidiary of G&F (id. ¶ 21), acquire the rights to all of the "Field and Stream trademarks then owned by [G&F]." (Id. ¶ 22.) On October 28, 1988, F&S and G&F of Delaware ("G&F Del.") entered into a license agreement (the "Agreement") which granted G&F Del. an exclusive license to use, manufacture, and sell "Outerwear" under certain trademarks owned by F&S (the "Licensed Marks"). (See id. ¶ 23; Am. Compl., Ex. A ("Agreement") § 1.) In or about February 2006, G&F Inc. purchased G&F Del.'s rights under the Agreement. (Am. Compl. ¶ 43.) On or about August 25, 2006, F&S was merged into FSLC and, as a result, FSLC became the registered owner of the Licensed Marks. (Id. ¶¶ 54-55.) On or about March 30, 2007, Plaintiff "was assigned" G&F Inc.'s rights under the Agreement. (Id. ¶ 61.)

Plaintiff alleges that, in July 2007, FSLC commenced a "calculated scheme to impermissibly regain control" of the interest in the Licensed Marks that was granted under the Agreement (Am. Compl. ¶ 68), culminating in FSLC's August 4, 2008, termination of the Agreement due to the purported occurrence of an event of default (id. ¶¶ 69-76). FSLC then went on to license the Licensed Marks to Otto for use on Outerwear. (Id. ¶ 92.) Moose Creek manufactures and Costco sells "certain flannel clothing products" pursuant to "one or more license agreements with Defendants." (Id. ¶ 217.) Some of these flannel products constitute "Outerwear" as that term is defined in the Agreement. (Id. ¶¶ 218-221.)

DISCUSSION

In adjudicating a motion to dismiss a complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court accepts the factual allegations in the complaint as true and draws all reasonable inferences in the plaintiff's favor. See Roth v. Jennings, 489 F.3d 499, 501 (2d Cir. 2007).*fn1 Nevertheless, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This standard applies to all civil actions. Iqbal, 129 S.Ct. at 1953.

Plaintiff is Not the de facto Assignee of the Licensed Marks

For the purpose of this motion practice, the Court assumes that the assignments by the original parties to the Agreement and subsequent assignees were valid and thus conferred upon Plaintiff the same interest as originally possessed by the Original Licensee.*fn2 Plaintiff claims that, pursuant to the Agreement, it is not merely a licensee but an assignee of the marks at issue in this case. Plaintiff argues that, because (1) the Agreement provides an exclusive license, (2) Plaintiff pays a license fee of only $1 per year, and (3) certain restrictions on its ability to assign its interest under the Agreement and to encumber its own marks, which are not the subject of this litigation, were (according to Plaintiff) terminated pursuant to the terms of the agreement upon Plaintiff's predecessor-in-interest's payment, in 1991, of license fees totaling $1.5 Million, the Agreement renders it a de facto assignee of the marks.

Plaintiff cites Etri, Inc. v. Nippon Miniature Bearing Corp., No. 85 C 615, 1989 WL 99575 (N.D. Ill. Aug. 18, 1989), and Parkson Corp. v. Andritz Sprout-Bauer, Inc., 866 F. Supp. 773 (S.D.N.Y. 1994), in support of its contention that the Agreement was in fact an assignment. However, those cases involved licensing agreements that contained no meaningful limitations on the interest transferred. See Etri, 1989 WL 99575 at *3 (finding that the agreement, "although entitled a 'License Agreement,' operates as an assignment" because it "transferred to [licensee] all of [licensor's] rights in the use of the trademark" at issue); Parkson Corp., 866 F. Supp. at 774-75 (explaining that, in the patent context, a license agreement that "grant[s] all substantial rights in the patent to the licensee" may constitute an assignment); see also Calvin Klein Jeanswear Co. v. Tunnel Trading, No. 98 Civ. 5408 (THK), 2001 WL 1456577, at *4 (S.D.N.Y. Nov. 16, 2001) (describing Etri as a case in which "the 'licensing' agreement grants to an exclusive licensee a property interest in the trademark, or rights that amount to those of an assignee").

By contrast, the Agreement at issue in this case contains several significant limitations on Plaintiff's interest in, and use of, the licensed marks that remained in effect after the payment of $1.5 Million in license fees. Namely, (1) Plaintiff acquired the exclusive right to use the licensed marks only on "Outerwear," as that term is defined in the Agreement (Agreement § I); (2) Plaintiff is required to use the marks only in connection with "merchandise of the highest quality;" to permit FSLC to inspect its manufacturing facilities and items in the process of manufacture; to submit to FSLC samples of "items proposed to be sold;" and to discontinue or correct any item to which FSLC "reasonably object[s]" as being of inferior quality (Agreement § V); (3) Plaintiff is required to pay a license fee of $1 per year (Agreement § VI(D)); and (4) Plaintiff is not permitted to prosecute a trademark infringement claim unless it first notifies FSLC of its belief that an infringement of the licensed marks has occurred and FSLC declines to take action to stop such infringement within thirty days of receipt of the notice, and if Plaintiff does prosecute an infringement claim it is required to "keep [FSLC] advised" and to "consult with [FSLC] with respect to" the action, and may not settle the action without FSLC's written approval (Agreement § XI(A)).

Also of significance is the section entitled "Use of Licensed Marks" (Agreement § III), which provides, inter alia, that "[l]icensee shall make no claim of ownership of the Licensed Marks . . . and shall not contest the validity of any Licensed Mark, or any registration thereof . . . ." (Agreement § III(A)); "[l]icensee shall not initiate any litigation . . . which contests the validity of the Trademarks or [FSLC]'s rights in and to the Trademarks" (Agreement § III(B)); "[t]he use of the Trademarks pursuant to this Agreement . . . shall not vest in [l]icensee any title to or right or preemptive right to continue said use except to the extent granted in this Agreement" (id.); reserved for FSLC the right to advertise Plaintiff's "Licensed Products" (Agreement § III(D)); and that Plaintiff must obtain FSLC's approval before using "type scripts" other than those already in use by the Original Licensee at the time of the Agreement (Agreement § III(E)). The section entitled "Events of Default" (Agreement § X), also includes limitations on the licensee's right to use the marks as it permits the licensor to terminate the agreement upon the licensee's failure to pay the license fee (Agreement § X(B)(1)); the occurrence of any of a number of enumerated events relating to the licensee's solvency (Agreement § X(B)(3) and (4)); or the licensee's "failure to perform, or violation of, any of the terms, conditions, agreements or covenants of th[e] Agreement" (Agreement § X(B)(2)).

These provisions of the Agreement clearly demonstrate that it does not transfer all of the licensor's rights to the licensee. The Agreement grants a mere license and, even after certain restrictions expired upon the payment of $1.5 million in license fees, the nature of the interest granted did not change. See, e.g., Calvin Klein Jeanswear Co., 2001 WL 1456577, at *5 (holding that because the license agreement at issue was not an assignment because it was limited in geographical scope, required licensee to "maintain the quality of the licensed mark," and "contain[ed] numerous explicit representations that it is a license"); Silverstar Enters., Inc. v. Aday, 537 F. Supp. 236, 240 (S.D.N.Y. 1982) (holding that "it [wa]s clear that the licensor retained ownership of the marks" because the license agreement recited "the Licensor's exclusive right, title and interest in and to the [marks at issue]" (citing DEP Corp. v. Interstate Cigar Co., 622 F.2d 621, 623 n.2 (2d Cir. 1980))).

Plaintiff's reliance on Ex parte Teca Corp., 117 U.S.P.Q. 367 (Comm'r Pat. 1958), is equally misplaced. Although that case also involved an exclusive license to use certain trademarks for a license fee of $1 per year, the license agreement contained no other limitation on the licensee's right to use the marks. Furthermore, the Commissioner of Patents held that "the failure to establish a relationship whereby [the licensor] was responsible for the nature and quality of the products in connection with which the mark is used resulted in forfeiture of all trademark rights by [the licensor]," and that title passed to the licensee, who had been using the marks since that forfeiture. Ex parte Teca Corp., 117 U.S.P.Q. at 368. See also 3 McCarthy on Trademarks and Unfair Competition ยง 14:48 (4th ed. 2010) (explaining that "[u]ncontrolled licensing of a mark [occurs when] the licensee can place the mark on any quality or type of goods or services," that uncontrolled licensing "may result in . . . an 'abandonment' of the trademark," and citing Ex parte Teca Corp. for the proposition that "uncontrolled licensing may result in . . . the licensor [being] estopped from ...


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