The Naked Registration
by Pamela Chestek • May 30, 2017 • trademark • 2 Comments
I’ve written before about the trademark dispute over the Camellia Grill restaurant in New Orleans. The restaurant closed after Hurricane Katrina, after which the original owner, Shwartz, disposed of the business in various transactions with Khodr.1 The ultimate ownership of the CAMILLIA GRILL trademark is what I’ve been writing about.
To briefly summarize the several state and federal lawsuits, as it stands now the law of the case is that Shwartz sold the trademark for the original location on Carrollton Avenue to Khodr, but the transaction also included a license agreement. Khodr describes the transaction as the purchase of the Carrollton location as a fully functioning unit and a license agreement governing the use of the mark at any future location. By now, a state court has held that the license was terminated for breach. Khodr had opened another Camillia Grill restaurant in the French Quarter, which according to my Google skills is now renamed “The Grill,” and one in Destin, Florida, which has closed. Therefore, the only restaurant currently operating as “Camillia Grill” is the original location, for which Khodr owns the common law trademark rights.
In its first opinion the district court held that Shwartz didn’t retain any trademark rights at all. The appeals court partially reversed, holding that the relief went beyond that requested by Khodr, which was limited to the Carrollton Avenue location. Shwartz now moves for summary judgment that he owns the trademark except for the Carrollton Avenue location. The court denies the motion, noting that there were no other locations:
“A federal registration does not create the trademark; the trademark is acquired by use.” [Shwartz]’s pre-Bill of Sale rights were acquired through its use of the marks at Carrollton Avenue, and those rights were, without reservation, transferred to [Khodr’s] Uptown Grill. The parties have not shown that there was any use of Camellia Grill trademark rights by any Shwartz entity at any other location; accordingly, they cannot have acquired trademark rights associated with any other location. The Court finds no basis to rule that the Shwartz parties have any remaining protectable interest under trademark law, and therefore denies their request to find that they are the owner of the Camellia Grill trademarks beyond Carrollton Avenue.
Nevertheless, as a matter of contract, i.e., the now-terminated license agreement, Kodhr could not use the trademark at any location but Carrollton Avenue.2
But what we really have is a bifurcation of the underlying common law rights and the trademark registration based on those rights. Even if one assigns the common law rights that were used as the predicate to a trademark registration, might someone with a valid registration still be able to exert some degree of exclusivity?
The court thinks not. In saying “A federal registration does not create the trademark; the trademark is acquired by use,” the court assumed that the registration has no remaining effect. That is an error in logic. One cannot obtain a registration without having common law rights, but there nothing in the statute that says the registration remains dependent on them: “Any registration … of a mark registered on the principal register provided by this chapter and owned by a party to an action shall be admissible in evidence and shall be prima facie evidence of the validity of the registered mark and of the registration of the mark, of the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the registration.” Lanham Act § 33, 15 U.S.C. § 1115 (2012). We also know from Dawn Donut and What-a-Burger that there is a concept of inchoate rights, only exercisable when the two uses reach a stage where there is a possibility of confusion.
The decision in Lee v. Tam may help answer the question. Brief for Respondents at 19-21 (“ ‘Registration is significant. The Lanham Act confers important legal rights and benefits on trademark owners who register their marks.’ B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1300 (2015).”) The registrant will have to worry about defending a charge of abandonment, but intent not to resume use is a hard thing to prove. The registrant will also have to maintain the registration, which may be difficult to do without use,3 but perhaps it could file a Declaration of Excusable Nonuse. It is entirely possible to maintain a valid registration when the underlying rights no longer exist, so they must mean something. Why couldn’t a registrant, for example, ask the court for an injunction to prevent the opening of another restaurant that would negatively impact its ability to do so itself? Shwartz’s request for a declaration of ownership was not just theoretical; he is planning to open a location in Orleans county.4 It was a valid legal question properly before the court.
Appeal, here we come again.
Uptown Grill v. Shwartz, No. 13-6560 (E.D. La. May 26, 2017).
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- This actually all happened between various companies that Shwartz and Khodr owned, but for simplicity I will just refer to the individuals. ↩
- This is an important distinction to keep in mind. It is often assumed that use of a trademark after a license termination is a per se trademark infringement. In this case that is not true, it is a breach of contract only and the only damages available are for breach of contract. ↩
- Shwartz faces this hurdle soon. The renewal of the CAMILLIA GRILL word mark is due July 7, 2017 and two others are due in January, 2018. A registration for an image of the building is in the grace period for renewal. ↩
- Khodr stipulated that he would not contest Shwartz’s ownership outside of the Carrollton location, but did not agree that meant Shwartz could open a restaurant close to the Carrollton location. Although the court couldn’t reconcile the two statements it is a quite sensible position; Khodr only wanted full enjoyment of the rights he purchased, to use “Camellia Grill” without confusion where ever the reputation of the original Camellia Grill extends. ↩
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