Property, intangible

a blog about ownership of intellectual property rights and its licensing

When You Should Hire an Investigator

This case just stinks. I can’t say it’s wrongly decided, it just seems so unfair.

The dispute is over ownership of the trademark ZORLAC for skateboards and apparel. Opposer Jeff Newton started a skateboard business in 1976 under the ZORLAC mark, incorporating in 1986.

1984 ad

But shortly thereafter he was in financial trouble. He owed $80,000 (including to his mom – I have to think he was a very young man at the time), so his solution was to sell the company to trademark applicant David Brown. Thus in 1987 Newton signed an agreement transferring the company – or all of the assets of the company, it’s not clear – including the ZORLAC trademark in return for payment of his outstanding debts and future employment. Newton thereafter ceased using the mark and and worked for Brown’s company, Lambourne Industries, for about five years. Newton described his time there as “design team manager, the face of Zorlac, to slowly just becoming a salesperson with no input.” He left Lambourne Industries in 1992.

Newton left the skateboard industry for 10 years, returning in 2002. In 2005 he started using the ZORLAC mark again, presumably based on a belief that Brown wasn’t using it anymore.

From Wayback Machine, circa 2006
From Wayback Machine, circa 2007

A month after Newton had his first commercial sales using the ZORLAC mark, Brown filed an intent-to-use application for the same mark.

Newton opposed Brown’s application and the only question was priority. If Brown had abandoned the mark then Newton had priority, since his actual use preceded the intent-to-use application filing date. If the mark was not abandoned then Brown owned it, based on Newton’s transfer to him of the mark and its continuous use thereafter. There is little documentary evidence in the case; instead, the Board had to rely on conflicting testimony of adverse parties and biased witnesses to reach its conclusion.

First was a challenge to who the original assignee of the mark was. Newton claimed that he sold the mark to Lambourne Industries, not Brown personally, so applicant Brown was not the owner. If Brown was not the owner of the original rights, his claim based on continuous use would fail. (It’s not entirely clear to me why this is so. It seems that this would be a defect that could be remedied by an assignment, since Brown could clearly tack to the former use. But, Brown had any number of companies that used the ZORLAC mark over time, so maybe it was cleaner to just maintain that Brown always owned the mark.)

There were no records of the transaction introduced in evidence. Brown testified that he bought Newton’s business in an individual capacity. Newton’s evidence that instead the transfer was to Lambourne Industries was based on the testimony of a person named Schmid, who claimed that he was Brown’s partner. The problem with Schmid’s testimony was that Schmid had previously, and unsuccessfully, sued Brown claiming half-ownership of all the skateboarding businesses, although he had no stock certificates or agreements evidencing interest in any of the companies. The Board found Schmid’s testimony not credible without documentary evidence and decided that Brown had purchased the ZORLAC mark personally.

So the Board reached the meat of the case, which was whether Brown had continuous use of the mark. Newton’s first evidence of non-use was a Transworld Business magazine article that quoted employees who said that ZORLAC-branded skateboard deck blanks were being phased out and that “[T]he Zorlac brand has lost its appeal . . . So now it’s time to move on. . . .  Zorlac has been replaced with a new full-graphic line called Status . . . .  Zorlac’s history.”

But the problem with the article was that the people quoted in the article – Schmid and Mertz, a salesman – had no authority to represent the company. In contradiction, Brown testified that “In 2000, Zorlac was extremely important to us. It’s all we were selling. . . . [Schmid] wasn’t a member of the Board of directors or an officer. It may be his opinion, but he wouldn’t have any way of knowing what the company was or was not going to do.”

Newton also introduced Schmid’s testimony that Brown stopped making ZORLAC boards in the late 1990’s and that the stock was depleted by 2002. Another former employee testified that he no longer saw ZORLAC products in skateboard shops and visited a warehouse in 2004, hoping to find “freebie” products, but there weren’t any. A warehouse manager testified he never saw ZORLAC products in the warehouse when he worked for one of Brown’s distribution companies, Syndrome Distribution. A president of another Brown company, Alliance Board Sports, said he did not sell ZORLAC products and never heard of Alliance Distribution, the company supposedly distributing the ZORLAC products.

Brown rebutted that the there were only a few skateboard decks and shirts “somewhere,” but that most orders were made-to-order, either in house or ordered from Taiwan. He said he sold to a buyer, “Bill,” in Texas, with whom Brown had been doing business for 10 years by cell phone (although he produced no invoices for sales to Bill). Brown said some buyers picked up the goods from Mexico. Thus, the Board found there was good reason why none of Newton’s witnesses would have seen any inventory.

Rather, Brown had a witness who testified that Brown controlled the quality of the ZORLAC goods sold by any number of companies Brown owned over the years. Brown produced invoices for ZORLAC skateboard decks and wheels dated 1997, 1998 and 2000 to 2008. He also had correspondence with a “national retailer” about ZORLAC skateboards from 2002 to 2005 and in 2007 and 2008, proposing sales of ZORLAC-branded skateboards. There was similar evidence for apparel.

Thus, Brown had continuous use of the ZORLAC mark. Further, even if there had been a cessation of use, the correspondence with the retailer shows that there was a continuing intention to use or resume use of the mark, so it could not have been abandoned.

So at the end of the day Brown mustered up enough evidence to prove continuous use of the ZORLAC mark. I’d put an image here of it if I could have found one.

I have so much sympathy for Newton. The goodwill in the ZORLAC brand is from what Newton did, not anything Brown did. When researching this post, I couldn’t even find a web page for Brown’s use of the ZORLAC mark. The only current use I could was Newton’s (now taken down), despite Brown having filed an intent-to-use application over five years ago. Newton poured his heart and soul into building a successful brand that, by all outward appearances, the acquiror just let molder. Newton had every reason to believe that the brand was now defunct – a public statement that it was gone and none found in the marketplace. Look at the evidence of use (albeit enough) – just the barest amount, a few sales to a few stores, so that even those familiar with the skateboard market and the Brown business weren’t aware of it.

It was a human impulse on Newton’s part to try to save what he had once built, so he jumped back in.  The unhappy result is that the person who originally created a brand and then built it back up a second time isn’t the trademark owner.

Newton v. Brown, Opposition No. 91174441 (TTAB Feb. 7, 2011).

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