• And Not Even a Passing Reference to Whitman’s Chocolates

    by  • August 17, 2008 • trademark

    Family relationships are frequent fodder for a blog about ownership of IP and also my favorite kind of case, because they are such tangled human stories. The contracts are also poor or nonexistent and the IP rights misunderstood if recognized at all, so trying to get to a fair outcome sometimes an interesting exercise. I have to agree with Merpel, though, that family cases can be a difficult read just trying to sort out all the names.

    So this is a story about a family candy business named “Widman’s.” There was a Widman’s Candy Co., a Carol Widman’s Candy Co., at least two Widman’s Candy Shops, a Widman’s on Eighth, a Widman’s Candy, and a Widman’s Coffee and Chocolate, all in various places in Minnesota and North Dakota. We’ll just say everyone was “Widman’s.”

    (With a nod to Merpel) Grandma and Grandpa started the first Widman’s in 1885; Plaintiff is a direct descendant and runs one of the Widman’s. Plaintiff’s Sister and Brother-in-Law also had a store and, the genesis of the saga, Brother-in-Law got to keep the store in the divorce. The now Ex-Brother-in-Law sold the store to MJR Candy Shop. In this sale Ex-Brother-in-Law explicitly transferred all rights to the name “Widman’s” to MJR Candy.

    MJR Candy sold the business to Freedom Enterprises, the defendant. Although Freedom Enterprises’s store was “Cafe Chocolat,” Plaintiff sued Freedom Enterprises under the Lanham Act for some other uses of “Widman’s.” Freedom then sued MJR Candy (the third party defendant) for breach of the Purchase and Sale Agreement; MJR Candy Shop then sued Ex-Brother-in-Law (the fourth party defendant) but he has not appeared in the case. Plaintiff then paid Freedom an undisclosed sum to relinquish any rights in “Widman’s,” settling the original Lanham Act claim. This left the breach of contract suit between Freedom Enterprises and MJR Candy Shop; this opinion is on cross-motions for summary judgment.

    The court commented several times that the purchase and sale contract was “inartfully drafted” and “not a model of clarity.” As you will see that’s true enough, but at least some of the reason was undoubtedly the result of what we all have to do, which is make concessions during negotiations in the hope that, if push comes to shove, a court will find the contract supports our interpretation more readily than the other side’s. In this case, it was MJR Candy that played it right.

    The court used standard contract interpretation principles to arrive at its conclusion. The first question was whether MJR Candy had given the name “Widman’s” to Freedom. The contract specifically assigned to Freedom a “Chippers” trademark and the domain names widmans-chipperz.com, fargo-candy.com and widmanscandy.com, but listed as an excluded asset “the trade names of MJR Coffee & Fine Chocolates and Widman’s Candy.” However, the following sentence was crossed out and initialed by both parties: “Buyer does not have the right to use of the name ‘Widman’s Candy’ in connection with the business hereunder.” There were also general provisions that Freedom was getting the goodwill and all intangibles that MJR Candy used in the ongoing business.

    The court said that the language describing “Widman’s” as an excluded asset was clear and more general statements in the contract could not contradict it. The crossed-out sentence did not change anything either. (ed. note – this is where we make the change and cross our fingers, hoping the court will appreciate that there is a difference between not affirmatively assigning a trademark and saying that the other side can’t use it).

    The court also concluded that, even if there had been an assignment, there was nevertheless no breach of the agreement. The trademark/domain name assignment clause transferred “All Seller’s rights” in those assets. The court interpreted this as the equivalent of a quitclaim deed. Indeed MJR Candy warranted that it had transferred “good and marketable title to the Purchased Assets, free and clear of all security agreements, mortgages, liens, pledges, charges or encumbrances,” but the agreement also said it was selling the assets as-is and disclaimed any warranty of merchantability, relating to the condition of the purchased assets, or their suitability for the buyer’s business. The agreement also said that Freedom had been able to determine to its own satisfaction the condition of the purchased assets. Putting all of this together, the court decided that the intent of the agreement was to sell the assets as is and without any warranty. Holding: no breach of contract by MJR Candy.

    Merpel offers that perhaps there should be a special arbitral body that specializes in untangling family entanglements. I vote for a refinement, that a court that has already sorted everybody out should keep jurisdiction no matter what. That’s what happened here; there was no longer a federal question because the Lanham Act claim settled, so all that remained were the state law claims. The federal court could have kicked it but didn’t, for which I’m sure the state courts are grateful.

    Widman’s Candy Co. v. Knutson, Civ. No. 3:07-cv-13, 2008 U.S. Dist. LEXIS 61245 (D.N.D. Aug. 8, 2008).