Property, intangible

Sometimes the TTAB is an alternative reality. It’s happening right now as it struggles with trademark ownership disputes. In Arturo Santana Gallego v. Santana’s Grill, Inc., there was family falling out. The TTAB reached a conclusion that may be right, but in a way that is so doctrinally irrelevant that we can’t know.

The cast of characters:

Petitioner and father: Arturo Santana Gallego (Gallego)
President of respondent and son: Abelardo Santana Lee (Abelardo)
Ex-wife of son Abelardo: Claudia Vallarta (Claudia)
Son: Arturo Santana Lee (Arturo)
Third party: Arturo Castaneda (Castaneda)

In late 1987 and early 1988 petitioner Gallego re-named his two restaurants, one in San Diego and one in Yucca Valley (five hours away), “Santana’s Mexican Food.” He used a musical jingle that included the phrase “Es Muy Beuno” (“It’s Very Good”) and the phrase was incorporated into signage and menus for both restaurants.

Son Arturo worked in the San Diego restaurant for a year starting in 1986, then worked in the Yucca Valley restaurant for 1½ years. Son Abelardo started working in the San Diego restaurant in 1987. In January, 1992, Abelardo and his then-wife Claudia bought the San Diego restaurant from his dad. Abelardo and Claudia eventually formed the respondent entity, Santana’s Grill, Inc., in 1998.

In 1997 son Arturo opened a “Santana’s Mexican Grill” in El Cajon, California. His father helped him select the location and his brother and sister-in-law helped with the lease, insurance and staffing. This restaurant was similar in appearance to the Yucca Valley restaurant.

The father continued to operate the Yucca Valley restaurant until 1998 or 1999, when he sold it to employee Arturo Castaneda. At the time of the cancellation proceeding the respondent owned six restaurants, son Arturo owned two, and Castaneda owned eight. They were all using variations of the same mark.

On December 5, 2001 the respondent filed trademark applications for “restaurant services” for:

Santana’s Mexican Grill (typed word), Reg. No. 2,634,976
Santana’s Mexican Food . . . Es Muy Beuno (typed word), Reg. No. 2,631,458

Reg. No. 2,682,978

Three petitions to cancel were filed on March 30 and April 5, 2004. The deposition testimony shows a fractured family, but no hint, suggestion or breath of what caused the falling out. The TTAB, in its typical way, pretended this was just two independently adopted marks and approached it as a question of priority, abandonment through naked licensing, and likelihood of confusion.

On priority, the father was the first to adopt. The son’s first use, at best, was when he bought the San Diego restaurant, so the father won on priority.

The story told in the naked licensing portion of the case was a master class in how not to manage family businesses. There were no documents submitted evidencing transfers, only testimonial evidence. The father testified that when he sold the San Diego restaurant to his son Abelardo, he had no discussions about granting exclusive use of the mark. He said he didn’t charge his two sons for a trademark license, but had an oral license with Castaneda, who pays him for it. [Ed. note: the case suggests that this might be a paid-up license that isn’t fully paid for yet.] He said he was satisfied with Abelardo’s restaurant operation and would discuss problems with Abelardo if he saw them. He said he regularly checks Castaneda’s operations.

The respondent’s witnesses testified that Abelardo and his wife weren’t licensees, but acquired the mark with the restaurant. They said the respondent is the one who licenses the mark to brother Arturo and that Arturo’s restaurants are part of the respondent’s chain.

Arturo testified that his family members helped him set up his restaurant, but just because they were family and his English wasn’t good. He said that he uses the same menu and food preparation as first set up by his father. Abelardo and Claudia would visit and offer advice, but they didn’t indicate to him that they have the right to control the restaurant or the use of the mark.

Castaneda backed up the father’s story that he had an oral license for use of the mark. He said he consults with the father when opening a new restaurant and doesn’t open any near Abelardo or Arturo. He confirmed that the father regularly visits Castaneda’s restaurants to inspect them.

The TTAB held that the name was not transferred with the sale of the restaurant to Abelardo. The TTAB reasoned if the father had, he wouldn’t have continued to use it at the Yucca Valley restaurant and subsequently license the mark to Castaneda. Since there was an oral license and Castaneda continued to make payments, the TTAB held that Castaneda’s use inured to the father’s benefit, thus the father had continuous use of the mark from 1987 to the present and there was no abandonment. Likelihood of confusion was thereafter fait accompli.

So the case was cabined into likelihood of confusion and naked licensing theories, but neither appear really true at all. It seems unlikely that any of the involved parties ever thought in terms of “licensor” and “licensee” until their lawyers had to figure out a legal theory. Rather, more likely it was a loose collection of family-owned restaurants, where they were frequently in each others’ establishments and where they didn’t care about the consumer perception that they were all related establishments, or perhaps even fostered the perception.

By ignoring the true relationship of the parties and pretending that this is simply about two marks adopted separately, we wind up with dodgy reasoning inconsistent with the rest of trademark law. It’s fantastical to consider “priority” in the first place: the father had two restaurants with the same name, sold one to his son, yet, according to the TTAB, the son suddenly has his own mark with his own first use date. Another: the TTAB reasoned that the father hadn’t transferred the mark to his son because he continued to use the restaurant name at the original restaurant after he had sold the second restaurant to his son. Why is this any more likely than a theory that the father had transferred the mark to the son and the son licensed it back to the father? Probably neither is really true – they just went about their businesses never minding, until something went wrong. We shouldn’t create a false reality that instead there was some sort of licensing arrangement going on here.

The only question should be who, as a matter of equity, should wind up with the mark after the dust settles, if anyone. There are many facts that may be relevant, but they don’t come out because they don’t fit anywhere in a priority/abandonment/likelihood of confusion analysis. Have they been facilitating the consumer perception that they are a chain? Do they put each other’s locations on their menu? Do they have the same menu? Does one opinion about how the restaurants should be run, perhaps the father’s, dominate? Perhaps the reality is more similar to the case tried, which is that they are geographically separated so there is no perception that they’re the same chain. What is each restaurant’s territory? And most of all, why are they in a dispute now?

Using a better fitting legal theory would draw out evidence that would lead to a meaningful conclusion. Perhaps it would show no single one of them owns the mark, but rather they are co-owners or concurrent users. Note that the TTAB can’t enjoin use of the mark, so marketplace “confusion” presumably continues unabated; the next stop would be district court. The district court case may address the right question, or instead the parties may accept this decision and continue their spiral into more inapt legal theories, like laches. If instead the TTAB had dealt with the ownership question in an analytically logical way, the parties might have been much closer to working their way through to a rational resolution.

Arturo Santana Gallego v. Santana’s Grill, Inc., Cancellation Nos. 92043152, 92043160, 92043175 (TTAB May 6, 2009).

© 2009 Pamela Chestek