Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc. et al

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
STURGIS MOTORCYCLE RALLY, INC.,
Plaintiff,
vs.
RUSHMORE PHOTO & GIFTS, INC.;
CAROL NIEMANN; PAUL A. NIEMANN;
BRIAN M. NIEMANN, and WAL-MART
STORES, INC.,
Defendants,
-AND-
RUSHMORE PHOTO & GIFTS, INC.;
CAROL NIEMANN; PAUL A. NIEMANN;
and BRIAN M. NIEMANN,
Counterclaimants,
vs.
STURGIS MOTORCYCLE RALLY, INC.,
Counterclaim Defendant.
CIV. 11-5052-JLV
ORDER
TABLE OF CONTENTS
I. INTRODUCTION .................................................................................... 2
II. PROCEDURAL HISTORY ........................................................................ 3
III. ISSUES TO BE RESOLVED.................................................................... 8
A. SMRI’s Motion to Extend Deadlines .............................................. 8
B. SMRI’s Motion to Dismiss ACPA Claim ....................................... 12
1. Defendants’ efforts and expense involved in preparing
for trial ............................................................................. 14
2. Excessive delay and lack of diligence by the plaintiff
in prosecuting the action .................................................. 16
3. Insufficient explanation of the need for dismissal .............. 17
4. The status of the lawsuit ................................................... 19
C. Defendants’ Motion for Judicial Notice........................................ 21
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D. Defendants’ Motion for Summary Judgment ............................... 22
1. Standard of review ............................................................ 22
2. Undisputed material facts ................................................. 23
3. Analysis ............................................................................ 27
E. Defendants’ Motion to Strike ACPA Jury Demand ....................... 30
F. Defendants’ Motion for Damages for Improvidently Issued
Preliminary Injunction................................................................ 30
1. Amended preliminary injunction ....................................... 31
A. RP&G’s claims ......................................................... 35
B. Analysis .................................................................. 38
2. Contempt of court ............................................................. 43
3. Attorneys’ Fees ................................................................. 44
G. Defendants’ Motion for Application of Equitable Defenses ........... 46
1. Relevant facts .................................................................. 46
2. Legal background ............................................................. 50
A. Acquiescence ........................................................... 51
1. Analysis ......................................................... 52
2. Conclusion ..................................................... 55
B. Laches ..................................................................... 55
1. Analysis ......................................................... 58
2. Conclusion ..................................................... 60
C. State claims............................................................. 61
1. Deceptive trade practices................................ 61
2. Laches ........................................................... 61
3. Conclusion ..................................................... 61
D. Unclean hands ........................................................ 62
1. Defendants’ Conduct ...................................... 64
A. RP&G Defendants ................................. 65
B. Wal-Mart .............................................. 67
2. SMRI conduct ................................................ 67
A. 2001-2015 ............................................ 68
B. 2018-2020 ............................................ 73
3. Defendants entitled to equitable defenses .......................... 79
A. Rushmore Photo & Gifts .......................................... 79
B. Carol Niemann ........................................................ 80
C. Paul Niemann .......................................................... 82
D. Brian Niemann ........................................................ 83
E. Wal-Mart. ................................................................ 84
IV. ORDER ................................................................................................ 85
I. INTRODUCTION
Following remand from the United States Court of Appeals for the Eighth
Circuit, Sturgis Motorcycle Rally, Inc. v. Rushmore Photo and Gifts, Inc., et al,
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908 F.3d 313 (8th Cir. 2018) (“SMRI v. RP&G”), another barrage of motions was
filed. As detailed in this order:
1. SMRI’s motion to extend the discovery deadline is denied;
2. SMRI’s motion to dismiss its anti-cybersquatting consumer
protection act (“ACPA”) claim is denied;
3. Defendants’ motion for judicial notice is granted;
4. Defendants’ motion for summary judgment on SMRI’s ACPA
claim is granted;
5. Defendants’ motion to strike SMRI’s jury demand on its
ACPA claim is denied as moot;
6. Defendants’ motion for money damages based on an
improvidently issued preliminary injunction is granted;
7. Defendants’ motion for an order to show cause premised on
SMRI’s failure to pay previously awarded attorneys’ fees is
granted;
8. Defendants’ motion for application of equitable defenses is
granted; and
9. SRMI’s money judgment is vacated.
II. PROCEDURAL HISTORY
On April 24, 2012, plaintiff Sturgis Motorcycle Rally, Inc., (“SMRI”) filed
an amended complaint alleging trademark infringement and other claims.
(Docket 52). On May 4, 2012, defendants Rushmore Photo & Gifts, Inc., JRE,
Inc., Carol Niemann, Paul Niemann, and Brian Niemann (jointly referred to as
the “RP&G Defendants”) filed their answer and counterclaim. (Docket 55). On
May 16, 2012, SMRI filed its reply to the RP&G Defendants’ counterclaim.
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(Docket 58). On May 18, 2012, defendant Wal-Mart, Stores, Inc. (“Wal-Mart”)
filed its answer.1 (Docket 60).
On October 30, 2015, after a ten-day trial, the jury returned a
unanimous verdict in SMRI’s favor on the following counts: (1) registered
trademark infringement; (2) unregistered trademark infringement;
(3) trademark dilution; (4) deceptive trade practices; (5) violations of the Anti-
Cybersquatting Consumer Protection Act; (6) false advertising; and (7) unfair
competition. (Docket 264). The jury unanimously found in favor of SMRI on
its claims of infringement of the registered STURGIS®, STURGIS BIKE WEEK®,
and Composite Design marks and of the unregistered STURGIS MOTORCYCLE
RALLY™ and STURGIS RALLY & RACES™ marks (jointly referred to as “SMRI’s
Marks”). (Docket 264). The jury also unanimously found in favor of SMRI on
its claim of dilution of the famous STURGIS® mark. Id. The court entered
judgment on those claims in favor of SMRI on December 2, 2015. (Docket
269).
Consistent with the jury’s verdict, the court entered judgment in favor of
SMRI “and against the defendants as follows: Rushmore Photo & Gifts, Inc., for
the sum of $158,750; . . . Carol Niemann for the sum of $156,250; Paul A.
Niemann for the sum of $156,250; Brian M. Niemann for the sum of $158,750;
and Wal-Mart Stores, Inc., for the sum of $230,000.” (Docket 269 at pp. 1-2).
1For of the remainder of this order, “defendants” refer to Rushmore Photo
& Gifts, Inc., Carol Niemann, Paul Niemann, Brian Niemann and Wal-Mart,
unless otherwise indicated but not JRE, Inc. On March 10, 2017, the court
granted “defendants’ motion . . . for judgment as a matter of law as to JRE,
Inc.[.]” (Docket 420 at p. 63).
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On February 11, 2016, while defendants’ post-trial motions were
pending, the court entered a preliminary injunction in favor of SMRI and
against the defendants. (Docket 299). On March 10, 2017, the court denied
defendants’ motions for judgment as a matter of law and for a new trial.
(Docket 420 at p. 63). The order granted in part and denied in part
“defendants’ motion . . . for the application of equitable defenses . . . . [And
held] that SMRI is barred from recovering damages and profits from the
defendants for the time period prior to October 30, 2015, the date of the jury
verdict.” Id.
On July 21, 2017, the court entered a permanent injunction in favor of
SMRI and against the defendants. (Docket 451). Among other things, the
permanent injunction required the defendants to “impound and destroy”
certain products and advertisements, to “transfer to SMRI [defendants’] domain
name registrations . . . . and South Dakota trademark registrations[.]” Id. at
p. 3. The provisions of the permanent injunction were “stayed until 60 days
after all appeals are resolved.” Id.
On November 2, 2018, the Eighth Circuit issued a decision affirming in
part, reversing in part and remanding for further proceedings consistent with
the court’s decision. (Docket 468); see SMRI v. RP&G, 908 F.3d 313. Based on
the directive of the Eighth Circuit and the district court’s analysis of the
positions of the parties, this court held, among other things:
[T]hat the STURGIS mark is invalid. (Docket 489 at p. 8);
[T]hat the jury finding the defendants infringed on the STURGIS
mark . . . is vacated. Id.;
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[T]hat the jury finding the defendants did not infringe on the TAKE
THE RIDE TO STURGIS mark . . . is affirmed. Id.;
[T]hat the jury finding the STURGIS BIKE WEEK mark not invalid
. . . is affirmed. Id.
[T]hat the jury verdict in favor of SMRI on the STURGIS BIKE
WEEK mark . . . is affirmed. Id. at p. 9;
[T]hat the jury verdict in favor of SMRI on the BLACK HILLS
MOTOR CLASSIC STURGIS RALLY & RACES BLACK HILLS S.D.
mark (“Composite Design mark” or the “Monahan mark”) . . . is
affirmed. Id.;
[T]hat the jury finding the defendants’ Sturgis Designations are
counterfeits of the Composite Design mark . . . is vacated. Id.;
[T]hat the STURGIS MOTORCYCLE RALLY mark is invalid. Id.;
[T]hat the jury finding the defendants infringed on the STURGIS
MOTORCYCLE RALLY mark . . . is vacated. Id.;
[T]hat the STURGIS RALLY & RACES mark is invalid. Id. at p. 10;
[T]hat the jury finding the defendants infringed on the STURGIS
RALLY & RACES mark . . . is vacated. Id.;
[T]hat the jury verdict in favor of SMRI on the trademark dilution
claim . . . is vacated. Id.;
[T]hat the jury verdict in favor of SMRI on the deceptive trade
practices claim . . . is affirmed. Id.;
[T]hat the jury verdict in favor of SMRI on the anti-cybersquatting
consumer protection act claim . . . is vacated. Id.;
[T]hat the jury verdict in favor of SMRI on the false advertising
claim . . . is affirmed. Id.;
[T]hat the jury verdict in favor of SMRI on the unfair competition
claim . . . is affirmed. Id.;
[T]hat the portions of the March 10, 2017, order . . . granting in
part defendant’s motion for application of the equitable defenses
. . . are vacated. Id. at p. 11;
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[T]hat the portions of the March 10, 2017, order . . . vacating the
money judgment and barring SMRI from recovering money
damages for the time period prior to October 30, 2015, the date of
the jury verdict . . . are vacated. As modified by this order, any
money judgment in favor of SMRI is held in abeyance pending the
court’s resolution of defendants’ equitable defenses. Id.;
[T]hat the order on costs . . . The court will revisit costs after
resolution of the issues to be addressed following this order. Id. at
p. 12; [and]
[T]hat the order on attorneys’ fees . . . is affirmed. Id.
On February 15, 2019, the court vacated the earlier permanent
injunction and entered an amended preliminary injunction. (Docket 490). The
amended preliminary injunction enjoined the defendants from using “STURGIS
BIKE WEEK,” “BLACK HILLS MOTOR CLASSIC STURGIS RALLY & RACES
BLACK HILLS S.D.,” SMRI’s marks and the Composite Design Mark. Id. at
p. 2. Similar impound and destroy provisions were included but were “stayed
until 60 days after all appeals are resolved.” Id. at p. 3. Consistent with Fed.
R. Civ. P. 65(d) the court imposed a bond on SMRI. Id.
On March 15, 2019, SMRI filed a motion for reconsideration of the
amended preliminary injunction together with a supporting legal
memorandum. (Dockets 501 & 502). Relevant to the matters currently before
the court, the SMRI motion asked the court to vacate the $376,539 bond
requirement. (Docket 501 at p. 2). The court extended the deadline for SMRI
to post the full amount of the bond until January 10, 2020. (Docket 519 at
p. 23).
Based on SMRI’s failure to post bond, on March 24, 2020, the amended
preliminary injunction imposed on the defendants on February 15, 2019, was
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vacated. (Docket 541 at pp. 5-6). On SMRI’s motion, the order struck
“plaintiff’s claim for injunctive relief on . . . the [ACPA] claim[.]” Id. at p. 6.
III. ISSUES TO BE RESOLVED
A. SMRI’S MOTION TO EXTEND DEADLINES
On December 11, 2019, the court granted the parties’ motions for
discovery on plaintiff’s ACPA claim. (Docket 520 at p. 3). In part, the order
allowed the following discovery:
SMRI may serve interrogatories and requests for production of
documents on the RP[&]G Defendants seeking information and
documents regarding the ACPA claim for the time period beginning
on October 31, 2015, to the present. Id. at p. 4;
SMRI and the RP[&]G Defendants may each take up to three
depositions related to the written discovery permitted above. Id.;
[P]laintiff's expert disclosures, including a written report, shall be
due on or before March 10, 2020, and that defendants’ expert
disclosures, including a written report, shall be due on or before
April 10, 2020. Id. (bold omitted); and
[A]ll discovery, including expert depositions, must be concluded on
or before June 19, 2020. Id. at p. 5 (bold omitted).
On May 14, 2020, SMRI filed a motion to extend the remaining deadlines
by 120 days. (Docket 549 at p. 1). SMRI’s grounds for its motion focused on
defendants’ notice of a Fed. R. Civ. P. 30(b)(6) deposition of plaintiff. Id. at p. 2.
Plaintiff argued that “due to travel restrictions related to COVID-19, and in the
interests of protecting the parties, their counsel and all related court personnel,
an in-person deposition is not feasible at this this time.” Id. at p. 2. SMRI
represented that it “intends to provide its witness for a deposition at a mutually
agreeable time and date when health concerns dissipate, yet Plaintiff would not
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intend to produce its witness until it is safe to do so.” Id. Because “the
discovery period is set to close on June 19, 2020,” SMRI asserted “Defendants
will not be able to conduct a 30(b)(6) deposition in person before that time due
to general business disruptions and travel restrictions related to COVID-19.”
Id. SMRI submitted an “extension of 120 days would allow for flexibility in the
scheduling of a deposition and conclusion of any other necessary discovery.”
Id. Plaintiff’s motion acknowledged the “Defendants would not consent to the
requested relief.” Id.
Defendants oppose SMRI’s motion for extension of discovery. (Docket
561). Prior to SMRI’s motion, defendants filed a motion for summary judgment
together with a legal memorandum, statement of undisputed material facts, six
declarations and a total of 20 exhibits. (Dockets 550-57, 556-1 through 556-9,
557-1 through 557-11 & 558).
First, defendants oppose the motion because SMRI “failed to show good
cause to extend the written discovery deadline.” (Docket 561 at p. 1).
Defendants assert since December 10, 2019, “SMRI has not served any written
discovery[] [and] [t]he COVID-19 pandemic has nothing to do with that failure.”
Id. at pp. 1-2.
Second, defendants believe only a 30-day extension is necessary for
deposition discovery not the 120-day extension requested by SMRI. Id. at p. 2.
“As early as March 31, 2020,” defendants argue “SMRI knew that Defendants
would object to a blanket 120-day extension. . . . Instead of diligently moving
this Court to extend the deadlines at that time, SMRI waited six weeks and
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filed this motion a mere six days before the deadline to serve written discovery
to comply with the present scheduling order.” Id. at p. 3. Defendants contend
“[t]his is not the level of diligence required by a party to meet the Rule 16 ‘good
cause’ standard.” Id.
Third, prior to and in SMRI’s motion, defendants submit SMRI had not
disclosed any information about who it intended to depose. Id. at p. 2.
Defendants submit they “confirmed with the defendants’ expert, Dr. James
Wright, and defendant Brian Niemann that they are both willing to attend in-
person depositions so long as all necessary [COVID-19] precautions are taken.”
(Docket 562 ¶ 5). Defendants only intend to take one deposition―a Rule
30(b)(6) deposition of SMRI’s designated representative. (Docket 561 at p. 2).
While “[d]iscovery has been re-open[ed] for six months,” defendants argue
“SMRI’s failure to even identify who it wishes to depose further demonstrates
SMRI’s lack of diligence in attempting to meet the discovery deadline.” Id. at
p. 4.
Finally, defendants assert that SMRI did not disclose “an ACPA expert by
its March 10, 2020 deadline, despite the fact [SMRI] expressly demanded
expert discovery be allowed on its ACPA claim.” Id. at p. 3 (referencing Docket
520 at pp. 4-5).
SMRI chose not to file a reply in support of its motion. Plaintiff’s motion
makes no mention of wanting to take the depositions of defendants’ expert
witness, Dr. Wright, defendant Brian Niemann or anyone else. (Docket 549).
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For that reason, the court will accept defendants’ counsel’s statements
regarding the status of discovery. Fed. R. Civ. P. 11(b)(3).
The Federal Rules of Civil Procedure emphasize the importance of
compliance with the rules. Under Rule 16, the court’s scheduling order may
only be modified “for good cause and with the judge’s consent.” Fed. R. Civ. P.
16(b)(4); see also In re Milk Products Antitrust Litig., 195 F.3d 430, 437 (8th
Cir. 1999) (“When the district court has filed a Rule 16 pretrial scheduling
order, it may properly require that good cause be shown for leave to file an
amended pleading that is substantially out of time under that order.”) (citations
omitted); Cf. Fed. R. Civ. P. 6(b)(1)(B) (“When an act . . . must be done within a
specified time, the court may, for good cause, extend the time . . . on motion
made after the time has expired if the party failed to act because of excusable
neglect.”). “The primary measure of Rule 16’s ‘good cause’ standard is the
moving party’s diligence in attempting to meet the case management order’s
requirements.” Bradford v. DANA Corp., 249 F.3d 807, 809 (8th Cir. 2001). A
district court’s discovery rulings are reviewed for abuse of discretion. Id.
SMRI fails to “make the requisite showing” of “good cause.” Id. SMRI did
not display any diligence in attempting to comply with the court’s December
11, 2019, scheduling order. Months before the expiration of the June 19,
2020, discovery deadline, procedures had developed to conduct remote
depositions by video to avoid in-person contact and travel restrictions cause by
the COVID-19 pandemic. Despite this, plaintiffs took no steps to undertake
discovery. SMRI conducted no discovery whatsoever and thwarted defendants’
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efforts to complete a Rule 30(b)(6) deposition. SMRI’s conduct does not
constitute a good faith effort to comply with the court’s scheduling order.
SMRI’s conduct borders on bad faith. The court agrees with the defendants
that the only reason SMRI wanted an extension of the discovery deadline was
to “prolong this lawsuit to stall cancellation of its invalid STURGIS trademark.”
(Docket 561 at p. 4 n.1) (referencing id. at pp. 5-7).
Plaintiff’s motion for an extension of the discovery schedule is denied.
B. SMRI’S MOTION TO DISMISS ACPA CLAIM
SMRI moves to dismiss the ACPA claim of its amended complaint.
(Docket 569). Plaintiff makes two representations as the basis for its motion.
First, SMRI “acquired through the open market the seven domain names
subject to the claim after Defendants abandoned them last year . . . and no
longer need . . . the equitable remedy of having the domain names transferred
to it.” Id. at p. 1. SMRI “discovered the domain names and their availability
and acquired them on or about April 25, 2019.” (Docket 570 at p. 3).
Second, SMRI asserts that “despite its entitlement to monetary remedies
against Defendants for violation of the ACPA . . . Plaintiff no longer can afford
to devote its limited resources to pursuing the claim when faced with
Defendants’ insurance-funded defense.” (Docket 569 at p. 1). Plaintiff
contends “the costs associated with further litigation . . . have mounted
substantially. . . . [And] the Defendants have . . . served two expert witness
reports, filed numerous declarations, filed motions such as a motion to strike
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and a summary judgment motion, and sought to take deposition testimony
subject to Rule 30(b)(6).” (Docket 570 at p. 3).
For these reasons, SMRI asks that its ACPA claim be dismissed with
“each side bearing their own costs and fees, and for such other and further
relief as to the Court deems just and reasonable.” Id. at pp. 3-4 (referencing
Fed. R. Civ. P. 41(a)(2)).
Defendants resist plaintiff’s motion. (Docket 571). Defendants argue all
of the factors which must be considered under Rule 41(a)(2) “weigh against
granting SMRI’s motion.” Id. at p. 1. Defendants argue the court may “impose
conditions on a dismissal such as dismissing with prejudice, awarding costs
and fees to the defendant, or declaring the defendant to be the prevailing party
so it can pursue fees under a cost-shifting statute, such as the Lanham Act.”
Id. at p. 7.
In reply, SMRI agrees the court may dismiss the ACPA claim with
prejudice as SMRI “has no intention to further litigate these claims[.]” (Docket
575 at p. 1). SMRI submits it “is not inclined in the context of these pleadings
to address each and all of the Defendants’ contentions resisting the motion to
dismiss. . . . As to any further and additional terms or relief separate from
SMRI’s motion, the Court retains jurisdiction and Defendants’ recourse (if any)
is accommodated by other statutes or rules.” Id. at p. 2.
Rule 41 directs the court as to how and when a motion to dismiss may
be granted under these circumstances. “[A]n action may be dismissed at the
plaintiff’s request only by court order, on terms that the court considers
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proper.” Fed. R. Civ. P. 41(a)(2). “The purpose of Rule 41(a)(2) is primarily to
prevent voluntary dismissals which unfairly affect the other side.” Paulucci v.
City of Duluth, 826 F.2d 780, 782 (8th Cir. 1987). The court’s ruling is
reviewed for abuse of discretion. Id. at pp. 782-83. When considering a
voluntary motion to dismiss, the “court is not limited to considering just the
expenses and costs related to the lawsuit.” Id. at 783. The court is required to
consider the four Paulucci factors to resolve SMRI’s Rule 41(a)(2) motion. Id.
1. Defendants’ efforts and expense involved in preparing for trial
During the January 16, 2019, post-remand status conference, counsel
for SMRI advised the court of plaintiff’s view of the retrial of the ACPA claim.
I will make a note about the retrial, that the cybersquatting claim
was only a $5,000 claim to the jury, but when you are talking
about statutory damages on a seven-domain name claim, each at
$150,000 potential damages per domain name registered in bad
faith, we are looking at a million fifty thousand dollars potential
claim to be retried.
(Docket 495 at pp. 5:24-6:5).2 With that claim in mind, plaintiff’s counsel
advised the court:
[W]e also think new discovery and a new discovery period on the
ACPA claims would be proper and appropriate. . . . [W]e think
there should be a discovery period and an expert discovery period
on these ACPA issues. . . .
What’s the nature of the bad faith in registering these domain
names? What do these witnesses have to say about that? How are
they registered? When were they registered? Have they been
maintained? How have they been used? What consumer
impressions have been derived at from that? What do the forensic
computer analysts say about the use of those domain names
2Because of the formatting of the status hearing transcript and all other
transcripts the court cites to the pages in CM/ECF as opposed to the pages of
the transcripts.
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before the Court orders them enjoined? Those are some of the
issues that could be addressed in discovery on that ACPA claim.
Id. at pp. 65:24-66:16. SMRI’s counsel argued “if Your Honor with the
authority of the Court is going to order things in additional discovery, then let’s
have it on the ACPA case as well, because if there’s some additional discovery, I
would like to take on that.” Id. at p. 67:11-15.
It was in part SMRI’s argument which convinced the court to allow an
additional period of discovery. (Docket 520 at pp. 2-3). With plaintiff’s request,
the court authorized SMRI to serve interrogatories and requests for production
of documents on the defendants “regarding the ACPA claim for the time period
beginning on October 31, 2015 [the day of the verdict], to the present.” Id. at
p. 4. SMRI’s expert disclosures and written reports were due on March 10,
2020. Id. (bold omitted). Defendants’ expert disclosures and written reports
were due on April 10, 2020. Id. (bold omitted).
It was this ruling that obligated the defendants to prepare their defense
to SMRI’s ACPA claim. Among the many things defendants did were:
Retain an expert witness, Dr. James Wright, to address ACPA
liability and damages issues and issue his report at a cost of
$10,000. (Docket 573 ¶ 9);
Retain an internet digital company, Internet Archive, to
authenticate captures of Rushmore Photo & Gifts historic internet
content at a cost of $310. Id.; and
Prepare notices of depositions for the Rule 30(b)(6) deposition,
develop counsel’s deposition notes, travel from Minneapolis to
Rapid City and return, and attend the June 19, 2020, deposition
all at a cost of $5,000. Id. ¶ 10.
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The court adopts defendants’ explanation of the process which occurred
relating to the canceled Rule 30(b)(6) deposition because SMRI’s counsel failed
to appear for the deposition or seek a motion to quash from the court in
advance of the date set by the notice of deposition. Fed. R. Civ. P. 45(d)(3).
This factor weighs heavily in defendants’ favor.
2. Excessive delay and lack of diligence by the plaintiff in prosecuting
the action
As described above, SMRI vehemently insisted on engaging in pretrial
discovery, including written interrogatories, retaining experts and taking
depositions on the ACPA claim. Yet, over the course of the next eighteen
months, SMRI did nothing. See Docket 562 ¶¶ 4 & 5.
For over six months, SMRI waffled as to if and when a Rule 30(b)(6)
deposition would take place. SMRI’s counsel failed to work with defense
counsel to set the deposition in light of the COVID-19 pandemic. Knowing full
well defendants’ notice of deposition was issued for June 19, 2020, counsel for
SMRI failed to discuss the matter further with defense counsel or to file a
motion to quash.
SMRI’s lack of candor with the court and opposing counsel is further
illustrated by the fact that on April 25, 2019, it purchased the seven domain
names which were the subject of plaintiff’s ACPA claim yet did not disclose this
information to the court or the defendants. Instead, SMRI waited a full
fourteen months to announce it was no longer interested in pursuing the ACPA
claim. All the while, defendants were preparing their defense for the ACPA
trial, filing a motion for summary judgment and other motions.
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While doing nothing on the ACPA claim, plaintiff misled the United States
Patent and Trademark Office (“PTO”) by asserting the STURGIS mark was not
invalid because the decisions of the Eighth Circuit and this court were merely
interlocutory. See Docket 562-4 at p. 3 (“Respondent [SMRI] contends that the
civil action [SMRI v. RP&G, CIV. 11-5052 (D.S.D. 2011)] is not yet final and
that the Eighth Circuit decision [SMRI v. RP&G, 908 F.3d 313] in which the
mark STURGIS was declared invalid is subject to appeal.”).
By doing nothing, SMRI extended the period of time during which the
STURGIS mark was apparently in limbo with the PTO. SMRI continued to
promote the STURGIS mark during the 2019 and 2020 Sturgis Motorcycle
Rallies, a mark the Eighth Circuit held in 2018 was invalid. SMRI v. RP&G,
908 F.3d 313.
This factor weighs heavily in defendants’ favor.
3. Insufficient explanation of the need for dismissal
In a Rule 41(a)(2) inquiry, the court is required to determine “whether a
party has presented a proper explanation for its desire to dismiss.” Donner v.
Alcoa, Inc., 709 F.3d 694, 699 (8th Cir. 2013) (internal quotation marks and
citation omitted). SMRI’s motion to dismiss its ACPA claim is based on its
acquisition of the seven domain names “via self-help,” and it “no longer needs
or seeks the equitable remedy of having the domain names transferred to it.”
(Docket 569 at p. 1). Plaintiff’s second basis for the motion is “despite its
entitlement to monetary remedies against Defendants for violation of the ACPA
should it prevail on its ACPA claim again, Plaintiff no longer can afford to
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devote its limited resources to pursuing the claim when faced with Defendants’
insurance-funded defense.” Id.
SMRI’s motion was filed 14 months after SMRI acquired the seven
domain names and only two days after Brian Niemann inquired of GoDaddy, a
domain name registry, and discovered legendarysturgis3 had been listed for
sale by SMRI for $6,884. (Docket 572 ¶¶ 2 & 3). SMRI’s response to
defendants’ motion for summary judgment was due on June 12, 2020. D.S.D.
Civ. LR 7.1(B). Yet SMRI’s motion to dismiss the ACPA claim was not filed until
ten days later. (Docket 569).
Plaintiff’s deadline for disclosure of experts had expired and defendants’
designated expert witness stood ready to testify:
None of the Rushmore Defendants’ seven domain names use any of
the three SMRI trademarks in their entirety. (Docket 552 ¶ 13)
(internal citation omitted);
Five of the seven domain names (sturgiscentral.com, legendary-
sturgis.com, authenticsturgis.com, official-sturgis.com, and
licensedsturgis.com) use the public domain “Sturgis” combined
with a single, additional word none of which is used in any of
SMRI’s three trademarks. Id. ¶ 14 (internal citation omitted);
The sturgisrallyonline.com domain name uses the public domain
“Sturgis” and a portion of the public domain phrase “Sturgis Rally
& Races” combined with “Online,” which is not used in any of the
three SMRI trademarks. Id. ¶ 15 (internal citation omitted); and
The sturgismotorclassic.com domain name uses the public domain
“Sturgis” and a portion of the public domain phrase “Sturgis
Motorcycle Rally” combined with “Classic,” which is not used in
3The court does not include the “www” or “.com” in the domain names to
make the domain names easier to read and to avoid creating a direct link to
each site.
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STURGIS BIKE WEEK or TAKE THE RIDE TO STURGIS. Id. ¶ 16
(internal citation omitted).
Either individually or in combination it is highly unlikely a jury would
find confusion between defendants’ Sturgis Designations and plaintiff’s valid
marks or award SMRI money damages on its ACPA claim.
It defies logic that a plaintiff would abandon an alleged million dollar
claim unless the plaintiff knew it would be defeated at trial. Both by the fact a
jury would not support pursuit of a claim for adverse use of a domain name
when the plaintiff owned the domain names at least two years prior to trial or
the fact that one-seventh of a million dollar valued claim was being offered for
sale for $6,884.
It would constitute an abuse of discretion for the court to “fail[] to
consider whether a motion to dismiss was being used for the improper purpose
of avoiding an unfavorable ruling[.]” Blaes v. Johnson & Johnson, 858 F.3d
508, 514 (8th Cir. 2017). The court finds SMRI has not “presented a proper
explanation for its desire to dismiss” the ACPA claim. Donner, 709 F.3d at 699
(internal citation omitted).
This factor weighs in favor of the defendants.
4. The status of the lawsuit
“The time and effort invested by the parties, and the stage to which the
case had progressed are the most important factors to consider when the court
decides whether to grant a dismissal with conditions.” Blaes, 858 F.3d at 516
(internal quotation marks and citation omitted). Defendants spent nearly two
years preparing their defense to plaintiff’s ACPA claim. Id.
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Defendants filed a motion for summary judgment on May 21, 2020.
(Docket 550). Defendants’ filings occurred 30 days prior to plaintiff’s motion to
dismiss. On the same day SMRI filed its motion to dismiss the ACPA claim,
plaintiff filed a response to defendants’ motion for summary judgment
declaring “[t]he District of South Dakota very recently stated that a dismissal of
a claim ‘without question’ would render a summary judgment motion on that
claim to be moot[.]” (Docket 568 at 4) (citing East v. Dooley, 4:19-CV-04126,
2020 WL 528451, at *1 (D.S.D. February 3, 2020)). On that basis, SMRI asked
the court to dismiss its ACPA “claim and deem Defendants’ motion for
summary judgment on that claim denied as moot.” Id. at p. 5.
Troubling to the court is SMRI’s baseless presumption it did not have to
comply with Fed. R. Civ. P. 56, D.S.D. Civ. LR 7.1(B) and LR 56.1(B). The local
rules require within 21 days of the service of defendants’ motion for summary
judgment SMRI was required to respond to defendants’ statement of material
facts and file a brief supporting plaintiff’s position on defendants’ motion.
D.S.D. Civ. LR 7.1(B) and LR 56.1(B).
SMRI’s cited cases do not save plaintiff from the court’s concern. In
East, the court was faced with plaintiff’s motion for summary judgment and
defendant Adams’ motion to dismiss. East, 2020 WL 528451, at *1. Defendant
Adams filed a motion to stay the deadline to respond to plaintiff’s motion. Id.
The court opined that granting the defendant’s motion to dismiss would render
plaintiff’s summary judgment motion moot. Id. The court did not, as SMRI
suggests, rule the motion to dismiss would trump the summary judgment
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motion. Rather, the court granted defendant Adams’ motion for a stay and
ordered the deadline to respond to plaintiff’s motion for summary judgment
“enlarged to 28 days after this Court denies, if it were to deny, Adams’ Motion
to Dismiss.” Id., 2020 WL 528451, at *2. In East, the court was not asked to
address the interplay between Rule 41(a)(2) and Rule 12(b) or Rule 56. The
same deficiency exists in the other cases cited by SMRI. See Docket 568 at
pp. 4-5.
Contrary to SMRI’s argument, the court is required to consider the Rule
41(a)(2) factors when resolving plaintiff’s motion. “Rule 41(a)(2) [is] applicable
once an answer or motion for summary judgment has been served[.]” Paulucci,
826 F.2d at 782. It is clear SMRI filed its motion to dismiss the ACPA claim to
avoid an adverse decision on defendants’ motion for summary judgment.
Donner, 709 F.3d at 697 (“a party is not permitted to dismiss merely to escape
an adverse decision[.]”); Blaes, 858 F.3d at 514 (“[I]t was an abuse of discretion
when the district court failed to consider whether a motion to dismiss was
being used for the improper purpose of avoiding an unfavorable ruling[.]”).
This factor weighs heavily in defendants’ favor.
All of the Rule 41(a)(2) factors weigh heavily in defendants’ favor. SMRI’s
motion to dismiss the ACPA claim is denied.
C. DEFENDANTS’ MOTION FOR JUDICIAL NOTICE
Defendants move the court to take judicial notice of certain webpage
screenshots which are attached to Dr. Wright’s report. (Docket 559). Those
screenshots were “taken from the Internet Archive Wayback Machine[.]” Id. at
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p. 1. Defendants argue the accuracy of the exhibits is “readily determined from
sources whose accuracy cannot be reasonably be questioned.” (Docket 560 at
pp. 1-2) (referencing Fed. R. Evid. 201). Defendants filed a declaration of
authenticity from Wayback Machine. Id. at p. 2 (referencing Docket 560-1 at
p. 1). SMRI did not file a response to defendants’ motion. See D.S.D. Civ. LR
7.1(B).
Rule 201 provides “[t]he court may judicially notice a fact that is not
subject to reasonable dispute because it . . . can be accurately and readily
determined from sources whose accuracy cannot be reasonable be questioned.”
Fed. R. Evid. 201(b)(2). Defendants provided the court with the information
necessary to consider taking judicial notice of the exhibits. Fed. R. Evid.
201(c)(2); see also Docket 560-1. The court finds the webpage screenshots
attached to Dr. Wright’s report can be “accurately and readily determined” from
the publicly available website of Wayback Machines. Fed. R. Evid. 201(b)(2).
The court grants defendants’ motion and takes judicial notice of the
webpage screenshots attached to Dr. Wright’s report.
D. DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
1. Standard of Review
Under Rule 56(a), “a movant is entitled to summary judgment if the
movant ‘shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.’ ” Fed. R. Civ. P. 56(a).
Once the moving party has met its burden, the nonmoving party may not rest
on the allegations or denials in the pleadings, but rather must produce
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affirmative evidence setting forth specific facts showing that a genuine issue of
material fact exists. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).
A[A]dmissions in the pleadings . . . are in the nature of judicial admissions [and
are] binding upon the parties, unless withdrawn or amended.@ Missouri
Housing Development Commission v. Brice, 919 F.2d 1306, 1314 (8th Cir.
1990).
However, the moving party is entitled to judgment as a matter of law if
the nonmoving party fails to “make a sufficient showing on an essential
element of [its] case with respect to which [it] has the burden of proof.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). In such a case, “there can be >no
genuine issue as to any material fact,= since a complete failure of proof
concerning an essential element of the nonmoving party’s case necessarily
renders all other facts immaterial.” Id. at 323.
If the undisputed evidence is such that a reasonable jury could return a
verdict for the nonmoving party, then summary judgment is not appropriate.
Anderson, 477 U.S. at 256. “Summary judgment must be denied even if no
opposing evidentiary matter is presented” if the moving party cannot meet the
Rule 56 standard. Heath v. John Morrell & Co., 768 F.2d 245, 249 (8th Cir.
1985).
2. Undisputed material facts
On May 21, 2020, defendants filed a motion for summary judgment on
SMRI’s ACPA claim together with a legal memorandum, statement of
undisputed material facts, six declarations and a total of 20 exhibits. (Dockets
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550-57, 556-1 through 556-9, 557-1 through 557-11 & 558). Pursuant to
D.S.D. Civ. LR 7.1(B) and LR 56.1(B), on or before June 12, 2020, SMRI was
required to respond to defendants’ statement of material facts and file a brief
supporting SMRI’s position on defendants’ motion. The local rules provide that
“all material facts set forth in the movant’s statement of material facts will be
deemed to be admitted unless controverted by the opposing party’s response to
the moving party’s statement of material facts.” D.S.D. Civ. LR 56.1(D). SMRI
failed to comply with the local rules and further failed to receive a stay or
extension of the deadlines imposed by the local rules. Pursuant to LR 56.1(D),
the court finds all of defendants’ statement of material facts, Docket 552, are
deemed admitted. Those facts are summarized as follows.
In 2006, Defendant Brian Niemann as the representative of JRE, Inc.,
registered the seven domain names at issue in SMRI’s ACPA claim. (Docket
552 ¶¶ 21, 22 & 27; see also Docket 558 at pp. 13-14). Six domain names
directed consumers to the “sturgismotorclassic” web page, which contained a
disclaimer of any affiliation with SMRI. Id. ¶¶ 32-34. The webpage also used a
 designation with “legendary-sturgis,” “authenticsturgis” and
“sturgismotorclassic.” Id. ¶ 36. Six domain names expired in July 2012 and
the domain name “sturgismotorclassic” expired in March 2013. Id. ¶¶ 29 & 30.
Defendants’ submission included the expert opinion report of James
Wright, Ph.D. (Docket 558). Dr. Wright evaluated SMRI’s three surviving
marks and defendants’ seven domain names during the critical period of
January 1, 2006 and December 31, 2013. Id. at p. 5. He concluded:
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None of the seven (7) domain names use any of the three SMRi
trademarks in their entirety;
None of the seven (7) domain names look like any of the three
SMRi trademarks
None of the seven (7) domain names sound like any of the three
SMRi trademarks
Five (5) of the domain names use the public domain word “Sturgis”
combined with an additional word (“Central,” “Legendary,”
“Authentic,” “Official,” or “Licensed”), none of which is used in any
of SMRi’s three trademarks;
One (1) of the domain names uses the public domain Sturgis and a
portion (“Sturgis Rally”) of the public domain Sturgis Rally &
Races, combined with an additional word (“Online”) that is not
used in any of SMRi’s three trademarks; [and]
One (1) of the domain names uses the public domain Sturgis and a
portion (“Sturgis Motor”) of the public domain Sturgis Motorcycle
Rally, combined with an additional word (“Classic”) that is not used
in any of SMRi’s three trademarks.
Id. at p. 6.
“With these characteristics in mind,” Dr. Wright made “direct
comparisons between” SMRI’s three marks and defendants’ seven domain
names:
“Take the Ride to Sturgis” can be distinguished immediately from
each of the seven domain names because none of them use the
trademark. . . . None of the seven (7) Defendant domain names are
even remotely similar to the “Take the Ride to Sturgis” mark and
there are no conceivable points of confusion.
The Monahan Composite Mark does not lend itself to domain
names directly because it is comprised of text and images, the
latter of which cannot be incorporated into a domain name. . . .
“Sturgis Bike Week” again only shares the geographic descriptor
“Sturgis” with the seven defendant domain names. Neither word
components of “Bike” or “Week” are contained in any of the seven
Defendant domain names. . . . As with the other two trademarks,
there is no evidence supporting a conclusion that any of the
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Defendants’ domain names could dilute or be viewed as
confusingly similar to “Sturgis Bike Week.”
In direct evaluation of the Defendants’ 7 domains, there are not
any elements that overlap or appear to tap any aspects specific to
the Plaintiff’s 3 marks. None of the 7 domains visibly resemble any
of the 3 . . . marks, apart from the “Sturgis” geographic descriptor.
None of the 7 domains audibly sound like any of the 3 . . . marks,
apart from the “Sturgis” geographic descriptor. Lastly, none of the
7 domains harbor the same meanings as any of the 3 . . . marks,
apart from the “Sturgis” geographic descriptor. Beyond sharing a
purely geographic descriptor, none of the 7 Defendant domains
share commonality in sight, sound or meaning with the 3 Plaintiff
trademarks.
Id. at pp. 6-7.
After investigating the navigational history, or use, of defendants’ domain
names, Dr. Wright opined “[t]he Defendants overtly displayed the trademark
designation TM in the website content that appeared on the only two domains
that had any content record, during the period in question. . . . This represents
an open declaration of Defendant’s belief in their intellectual property rights.”
(Docket 558 at p. 15). Defendants’ use of the domain names to list a “catalog-
style directory . . . listing products for sale,” in Dr. Wright’s opinion
“demonstrates a genuine offering of goods or services for sale and runs
contrary to any inference of bad faith.” Dr. Wright found
No evidence of diversion was found across any of the 7 domain
names. None of the domains . . . have any text, images or features
that included any of the Plaintiff’s 3 marks. . . . There was no
evidence about the content on these domain names related to the
Plaintiff’s 3 trademarks, thus it does not appear plausible the
Defendant domains diverted anyone.
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Id. at p. 16. Addressing plaintiff’s ACPA claim Dr. Wright’s concluded:
Based on clear and concrete differences, and the weakness of the
three [SMRI] trademarks, it is highly unlikely that reasonable
consumers would find any of the 7 Defendant domains confusingly
similar with any of the Plaintiff’s 3 marks. Likewise, it is highly
unlikely that internet users would have been diverted by any of the
7 Defendant[] domains. Particularly implausible considering that
for most of the time frame in question the Plaintiff did not have a
consistent web presence and the domains were inactive. Finally,
several noted actions by the Defendants demonstrate evidence that
runs contrary to bad faith.
Id. at p. 17.
The court incorporates the remainder of defendants’ statement of
material facts by reference. See Docket 552.
3. Analysis
The 2015 verdict identified only RP&G and Brian Niemann as the
defendants responsible under the ACPA. (Docket 263 at p. 16). When the
Eighth Circuit declared the “STURGIS” mark invalid, the court vacated the
“jury’s finding that the defendants engaged in cybersquatting.” SMRI v. RP&G,
908 F.3d at 333. The court found “[t]he district court submitted SMRI’s
cybersquatting claim to the jury based in part on the theory that the ‘Sturgis’
mark is valid. Since that theory was not submissible and we cannot tell
whether the jury based its finding on the theory ‘in whole or in part,’ we must
vacate the cybersquatting verdict.” Id. (referencing Friedman & Friedman, Ltd.
v. Tim McCandless, Inc., 606 F.3d 494, 502 (8th Cir. 2010)).
At trial, the jury found none of the defendants infringed on SMRI’s “TAKE
THE RIDE TO STURGIS” mark. (Docket 263 at p. 4). It is difficult to
understand how the jury would have found none of the defendants infringed on
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the “Take The Ride To Sturgis” mark, but then concluded RP&G or Brian
Niemann violated the ACPA. Despite this concern, the court will continue to
include “Take The Ride to Sturgis” in its analysis of SMRI’s ACPA claim.
Based on the jury’s verdict and the Eighth Circuit’s rulings, a new trial
would focus only on SMRI’s ACPA claim against these two defendants and only
as that claim relates to “STURGIS BIKE WEEK,” “TAKE THE RIDE TO
STURGIS” and the Composite Design Mark. To prevail on its ACPA claim,
SMRI must prove:
(1) The defendant had a bad faith intent to profit from SMRI’s
trademark;
(2) The defendant registered, trafficked in or used a domain
name;
(3) SMRI’s trademark was famous or distinctive at the time of
the registration of the domain; and
(4) The defendant’s domain name was identical to or confusingly
similar to SMRI’s trademark.
Coca-Cola Co. v. Purdy, 382 F.3d 774, 782-83 (8th Cir. 2004) (referencing
15 U.S.C. § 1125(d)(1)(A)). Under the ACPA the question is whether a
defendant’s domain is “identical or confusingly similar to [SMRI’s] mark.” Id. at
783. “The inquiry under the ACPA is thus narrower than the traditional
multifactor likelihood of confusion test for trademark infringement.” Id. “The
fact that confusion about a website’s source or sponsorship could be resolved
by visiting the website is not relevant to whether the domain name itself is
identical or confusingly similar to a plaintiff's mark.” Id.
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SMRI’s amended complaint alleged the STURGIS mark was famous, but
only that its other marks were distinctive. (Docket 52 ¶¶ 29, 30 & 49). It is
SMRI’s burden to prove each of its three remaining marks were distinctive and
were confusingly similar to defendants’ seven domain names. 15 U.S.C.
§ 1125(d)(1)(A). SMRI offers no direct evidence, whether by consumer
testimony or consumer surveys, to demonstrate the defendants’ domain names
are confusingly similar. See Heartland Bank v. Heartland Home Financial,
Inc., 335 F.3d 810, 821 (8th Cir. 2003) (“[T]here are at least three evidentiary
routes to prove a likelihood of confusion—survey evidence, evidence of actual
confusion, and/or argument based on an inference arising from a judicial
comparison of the conflicting marks themselves and the context of their use in
the marketplace.”); Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC, 745
F.3d 877, 888 (8th Cir. 2014) (“Lovely Skin presented no direct evidence, such
as consumer surveys or consumer testimony, to demonstrate that its marks
enjoy strong secondary meaning.”); Frosty Treats Inc. v. Sony Computer
Entertainment America, Inc., 426 F.3d 1001, 1005 (8th Cir. 2005) (“[D]irect
evidence such as consumer testimony or surveys are most probative of
secondary meaning[.]”). Nor has SMRI offered expert testimony to address the
confusion which might exist when comparing its three marks with defendants’
seven domain names.
Based on the undisputed material facts, no reasonable juror could find
any one or more of defendants’ seven domain names were either “identical or
confusingly similar to” SMRI’s three marks. Coca-Cola Co., 382 F.3d at 782
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(citing 15 U.S.C. § 1125(d)(1)(A)(ii)(I)). Nor could a reasonable jury find either
RP&G or Brian Niemann had “a bad faith intent to profit from” SMRI’s three
marks. Id. (citing 15 U.S.C. § 1125(d)(1)(A)(i)). Defendants RP&G and Brian
Niemann are “entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
See also Heath, 768 F.2d at 249.
Defendants’ motion for summary judgment is granted. SMRI’s ACPA
claim is dismissed with prejudice.
E. DEFENDANTS’ MOTION TO STRIKE ACPA JURY DEMAND
Based on the court’s ruling on defendants’ motion for summary
judgment, defendants’ motion to strike SMRI’s jury demand on its ACPA claim,
(Docket 563), is denied as moot.
F. DEFENDANTS’ MOTION FOR DAMAGES FOR IMPROVIDENTLY
ISSUED PRELIMINARY INJUNCTION
As used in this section, “defendant” relates solely to RP&G. There is no
claim the individuals, Carol Niemann, Paul Niemann, Brian Niemann, or Wal-
Mart, suffered any alleged damages as the result of the issuance of the
amended preliminary injunction. See Docket 538.
RP&G’s motion for damages actually seeks three remedies. (Docket
537). First, defendant seeks recovery of damages it incurred by the issuance of
the amended preliminary injunction of February 15, 2019, which allegedly
“improperly enjoined . . . [the] use of STURGIS MOTOR CLASSIC.” Id. at pp. 1-
2. Second, defendant seeks money “damages and an order to show cause as to
why SMRI should not be held in contempt of court for its violation of . . . two
2019 Court orders[.]” Id. at p. 2. Third, defendant seeks an order requiring
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SMRI “to pay $17,953.24” awarded to defendant as “attorney’s fees as a
sanction in post-verdict discovery.” Id. Each of these claims will be separately
addressed.
1. Amended Preliminary Injunction
Following the Eighth Circuit remand, on February 15, 2019, the court
issued an amended order. (Docket 489). The amended order was issued after
conducting a January 16, 2019, status conference and considering the parties’
“joint statement [Docket 481] regarding modifications to the permanent
injunction (Docket 451) necessitated by SMRI v. RP&G, 908 F.3d at 346.” Id.
at p. 4. Relevant to the current motion, the amended preliminary injunction
included the following provisions pertinent to the present motion:
ORDERED that this preliminary injunction shall immediately issue
and remain in effect until further order of the court.
IT IS FURTHER ORDERED that defendants RUSHMORE PHOTO &
GIFTS, INC., CAROL NIEMANN, PAUL A. NIEMANN, BRIAN M.
NIEMANN and WAL-MART STORES, INC., (“the enjoined
defendants”) are hereby immediately restrained and enjoined from
engaging in the following activities:
1. Using the following trademarks and composite design
trademark:
A. STURGIS BIKE WEEK, U.S. Reg. Nos. 2,070,955;
3,825,398; 3,838,171; 3,911,270; and 3,923,236; and
B. BLACK HILLS MOTOR CLASSIC STURGIS RALLY &
RACES BLACK HILLS S.D., U.S. Reg. No. 1,948,097;
or any colorable imitations of these marks in any
advertisement, promotion, offer for sale, or sale of any goods;
and
2. Using in commerce any reproduction, counterfeit, copy or
colorable imitation of SMRI’s Marks, STURGIS BIKE WEEK
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or BLACK HILLS MOTOR CLASSIC STURGIS RALLY &
RACES BLACK HILLS S.D., including defendants’ “Sturgis
Motor Classic,” without SMRI’s consent in a manner likely to
cause confusion, mistake, or deception as to the source,
origin, sponsorship or approval of the defendants’ product;
and
3. Acting, using, or employing any deceptive act or practice,
fraud, false pretense, false promise or misrepresentation or
concealed, suppressed or omitted material facts in
connection with the sale or advertisement of any
merchandise, including the use of “Officially Licensed
Sturgis,” “Licensed Sturgis,” “Authentic Sturgis” and “Official
Sturgis.”
IT IS FURTHER ORDERED that, pursuant to 15 U.S.C. § 1118, the
enjoined defendants shall impound and destroy all products
together with all labels, signs, prints, packages, wrappers,
receptacles, and advertisements bearing SMRI’s Marks, STURGIS
BIKE WEEK or BLACK HILLS MOTOR CLASSIC STURGIS RALLY &
RACES BLACK HILLS S.D., including defendants’ “Officially
Licensed Sturgis,” “Licensed Sturgis,” “Authentic Sturgis,” or
“Official Sturgis,” or any reproduction, counterfeit, copy, or
colorable imitation thereof, and all plates, molds, matrices, and
other means of making the same.
IT IS FURTHER ORDERED that the provisions of this preliminary
injunction requiring the destruction of impounded products is
stayed until 60 days after all appeals are resolved.
IT IS FURTHER ORDERED that SMRI shall post security for
purposes of this preliminary injunction in the amount of $376,539
on or before March 15, 2019.
(Docket 490 at pp. 2-3) (bold omitted). The court retained jurisdiction to
modify and enforce the terms of the amended preliminary injunction. Id. at
p. 4.
On March 15, 2019, SMRI filed a motion for reconsideration of both the
amended order and the amended preliminary injunction together with a
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supporting legal memorandum. (Dockets 501 & 502). Relevant to defendant’s
current motion, SMRI’s motion for reconsideration asserted:
[T]he District Court’s imposition of a bond requirement on SMRI in
the amount of $376,539 is a manifest error because the Court has
failed to identify with particularity what, if anything, is secured,
what conduct would result in a release or return of the bond, and
why a bond of hundreds of thousands of dollars is required of the
non-profit successful Plaintiff in this action. SMRI fully prevailed
on several of its claims and should not now have to pay monetary
security for the relief to which it is entitled under the law.
(Dockets 501 at p. 2 & 502 at p. 3).
In response to SMRI’s motion for reconsideration, defendant filed a legal
memorandum, five affidavits and four exhibits. (Dockets 506-507, 507-1
through 507-2, 508, 508-1, 509, 509-1, 510 & 511). The essence of
defendant’s response is highlighted by the following paragraph from its
memorandum:
Rushmore continues to lose sales of Sturgis rally-related goods.
SMRI’s representations that it will defend all trademarks, even
three invalid ones, have harmed and confused the public. . . .
Some people that have seen SMRI’s recent email to its licensees
and vendors fear SMRI will sue them if they do business with
Rushmore. . . . Last week, Bob Davis, owner of Sturgis Photo &
Gifts on Main St. in Sturgis, South Dakota, refused to buy from
Rushmore because SMRI told him it will defend all of its marks.
. . . He also said that his current licensing agreement with SMRI
mentions Rushmore and the Niemanns and that the agreement
prevents him from doing business with Rushmore. . . . Fearing
retaliation from SMRI, other store owners that previously have
bought 600-700 Sturgis pieces of merchandise from Rushmore are
now buying far fewer pieces or none at all.
(Docket 506 at p. 8).
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In its December 11, 2019, order addressing the cancellation of the
STURGIS Registrations, the court took up SMRI’s motion for reconsideration of
the amended order and the amended preliminary injunction. (Docket 519 at
pp. 18-22). Responding to SMRI’s objection to the court’s calculation of the
bond amount, the court reviewed Brian Niemann’s May 2016 testimony
concerning the loss which would be suffered by an injunction and found “Mr.
Niemann’s testimony credible.” Id. at p. 21. The court also found “SMRI’s
argument that it is a poor, not-for-profit corporation . . . disingenuous. The
trial evidence disclosed SMRI took in hundreds-of-thousands of dollars each
year. SMRI leadership testified its trademark leasing agreements controlled
hundreds of vendors during the Sturgis Motorcycle Rally.” (Docket 519 at
p. 21). “While the court believes a bond requirement of $376,539 may not fully
cover defendants’ damages in the event the amended preliminary injunction
was wrongfully issued, the court finds that sum consistent with defendants’
summary of their minimum losses and adequate to meet the requirements of
[Fed. R. Civ. P.] 65(c).” Id. at p. 22. Based on that analysis, SMRI’s motion for
reconsider was denied and SMRI was ordered to “post security in the amount of
$376,539 on or before January 10, 2020.” Id. at pp. 22-23 (bold omitted).
On January 10, 2020, SMRI filed a second motion for relief from the
terms of the amended preliminary injunction. (Docket 525). In this motion,
SMRI declared that “[d]ue to its inability to post bond in the amount ordered by
the Court in the Bond Order, Plaintiff hereby withdraws its request for
preliminary or permanent injunctive relief against the Defendants.” Id. at p. 2.
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As justification for this motion, SMRI asserted that while it took in significant
revenue from the Sturgis Rally, “with a mission of providing funds to other
non-profit organizations from Rally income, [it] is able to only provide a token
amount to those organizations due to SMRI’s legal costs.” (Docket 526 at p. 4).
After considering further briefing by the parties, on March 24, 2020, the
court entered an order, which among other things, found “SMRI did not post
the security required. The court finds it appropriate to vacate the injunction
based on SMRI’s failure to post security and its motion for relief from the
injunction.” (Docket 541 at p. 5.). The order granted “plaintiff’s motion
(Docket 525)” and ordered “the amended preliminary injunction (Docket 490)
. . . vacated.” Id. at p. 6.
A. RP&G’s Claims
RP&G argues “[f]or more than a year, SMRI has paid no heed to the
Court Order to obtain security to protect the Defendants all the while availing
itself of the benefits of the injunction.” (Docket 538 at p. 1). “Given the Eighth
Circuit’s invalidation of STURGIS, STURGIS MOTORCYCLE RALLY and
STURGIS RALLY & RACES,” RP&G submits “after remand SMRI had no basis
to demand an injunction prohibiting use of STURGIS MOTOR CLASSIC.” Id. at
pp. 1-2.
Because “the Amended Preliminary Injunction was wrongly issued,”
RP&G contends “Rushmore Photo[] [was] harmed.” Id. at p. 2. During the time
SMRI was delaying posting security, RP&G argues it “remain[ed] under the
restrictions of the Amended Preliminary Injunction, which will prevent [it] from
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selling any STURGIS MOTOR CLASSIC merchandise for a second straight
selling season.” Id. at p. 6. RP&G submits
SMRI sought the Amended Preliminary Injunction to prevent
Defendants’ use of its signature brand, STURGIS MOTOR
CLASSIC. While use of STURGIS BIKE WEEK was also enjoined,
trial testimony from seven of SMRI’s witnesses was unanimous
that Defendants had never used the term. . . . So too the Monahan
mark, where the same seven SMRI witnesses testified to never
having seen it used by Defendants. . . . And while the phrases
“Officially Licensed Sturgis,” “Licensed Sturgis,” “Authentic
Sturgis,” and “Official Sturgis” were also enjoined, the trial
evidence demonstrated that Defendants voluntarily stopped using
all of those terms in 2011, more than four years before both the
2015 jury verdict and injunction. . . . Thus, the value to SMRI of
the Amended Preliminary Injunction was against STURGIS MOTOR
CLASSIC.
Id. at pp. 8-9 (internal citations to the trial record omitted).
“[T]o justify the preliminary injunction against STURGIS MOTOR
CLASSIC,” RP&G asserts “SMRI must establish confusion and similarity
between ‘Week’ and ‘Classic.’ ” Id. at p. 12. This argument is “baseless” in
RP&G’s view. Id. “Given the direction provided by the Eighth Circuit,” RP&G
submits “it is clear there was no basis after remand to justify continued
enjoining of the use of STURGIS MOTOR CLASSIC.” Id. Vacating the
injunction in 2020 does not, in RP&G’s view, “reverse the damages already
suffered . . . . Rushmore Photo has been harmed as a result of SMRI seeking an
improper injunction, which limited its ability to compete for the 2019 and 2020
selling seasons.” Id. at p. 13.
RP&G alleges it suffered the following damages by the wrongfully issued
amended preliminary injunction.
2019 lost profits $ 72,992 - $ 97,322
2020 lost profits $134,163 - $178,883
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Lost value of
Impounded merchandise $ 45,253 - $ 45,253
Warehouse activities $ 5,112 - $ 5,112
Employee oversight $ 5,250 - $ 5,250
Customer service issues $ 19,571 - $ 19,571
Total losses $282,341 - $351,391
Id. at pp. 16-17.
SMRI opposes defendant’s motion. (Docket 544). SMRI’s response
asserts that “[f]ollowing the Court’s March 24, 2020 Order . . . vacating the
prior orders . . . imposing a bond requirement on Plaintiff . . . [SMRI] . . .
should not need to respond to Defendant’s motion for damages pertaining to an
‘improper preliminary injunction’ or in the alternative, for an order that Plaintiff
show cause to avoid contempt.” Id. at p. 1. SMRI argues “because authority
no less than the U.S. Supreme Court has held that a defendants’ sole recourse
for harm caused by an injunction, whether proper or even erroneously
imposed, is the bond.” Id. at p. 5; see also id. at p. 7 (citing W.R. Grace & Co.
v. Local Union 759, 461 U.S. 757, 770 n.14 (1983) (“A party injured by the
issuance of an injunction later determined to be erroneous has no action for
damages in the absence of a bond.”); also referencing Russell v. Farley, 105
U.S. 433, 437 (1881); Cagan v. Mutual Benefit Life Ins. Co., 28 F.3d 654, 656
(7th Cir. 1994); Buddy Systems, Inc. v. Exer-Genie, Inc., 545 F.2d 1164, 1167-
68 (9th Cir. 1976)). SMRI submits “ ‘[d]amages’ cannot be imposed on Plaintiff
who, it bears noting, remains the prevailing plaintiff as to at least three claims
set forth in its operative complaint[.]” Id. at p. 5.
SMRI argues RP&G’s damages calculations “are wildly speculative and
flat-out unsupportable. . . . Mr. Niemann has not identified or calculated how
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much of the inventory enjoined for several years falsely touts ‘officially licensed’
or ‘authentic’ merchandise, or constitutes infringing STURGIS MOTOR
CLASSIC goods as opposed to other ‘Sturgis’ goods that the Eighth Circuit
would deem allowable under its ruling.” Id. at p. 7. In SMRI’s view, “these wild
calculations beg to be cross-examined based on Mr. Niemann’s supporting
documents, Defendants’ detailed inventory records and sales records, and full
disclosure of Mr. Niemann’s top-secret formula.” Id. at p. 8.
In reply, RP&G submits the cases cited by SMRI “do not lead to SMRI’s
suggested conclusion, nor does equity permit Defendant[] to be left without
recourse.” (Docket 548 at p. 3). “Because SMRI was ordered to post security,”
RP&G argues it is “entitled to have this Court assess its damages as a result of
being wrongfully enjoined.” Id. at p. 5 (referencing Russell, 105 U.S. at 443).
RP&G argues Cagan and Buddy Systems are distinguishable on their facts. Id.
at pp. 5-6. “[S]ince remand from the Eighth Circuit,” RP&G argues it “had the
right to sell [its] STURGIS MOTOR CLASSIC merchandise.” Id. at p. 8
(referencing Slidell, Inc. v. Millennium Inorganic Chemicals, Inc., 460 F.3d
1047, 1059 (8th Cir. 2006) (“a party has been wrongfully enjoined if it is
ultimately found that the enjoined party had at all times the right to do what it
was enjoined from doing”).
B. Analysis
While it was proper to preliminarily enjoin RP&G’s use of STURGIS BIKE
WEEK and the Composite Design Mark, the court was wrong to enjoin RP&G’s
use of STURGIS MOTOR CLASSIC. SMRI has no claim to “Sturgis,” “Motor,” or
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“Classic.” The STURGIS mark is invalid. SMRI v. RP&G, 908 F.3d at 332.
“[T]he [Composite Design Mark], the federal registration . . . disclaims the
exclusive right to use ‘Motor Classic’[.]” Id. at 334 (emphasis added). The
Eighth Circuit repeated this disclaimer later in its decision. Id. at 337 (“the
federal registration for the [Composite Design Mark] disclaims the exclusive
right to use the words ‘Motorcycle Classic’[.]”). RP&G was “wrongfully enjoined”
as it “at all times [had] the right to do what it was enjoined from doing.” Slidell,
Inc., 460 F.3d at 1059.
The process of determining RP&G’s damages requires the court to
evaluate the purpose of a bond. Rule 65 provides a “court may issue a
preliminary injunction . . . only if the movant gives security in an amount that
the court considers proper to pay the costs and damages sustained by any
party found to have been wrongfully enjoined or restrained.” Fed. R. Civ. P.
65(c). “When the court sees no just cause for . . . suspending the effect of an
injunction bond . . . it should be enforced in pursuance of its terms; and the
party for whose benefit it was given will be entitled to an assessment of
damages.” Russell, 105 U.S. at 443. “[T]he governing principle that it is the
duty of a court of equity granting injunctive relief to do so upon conditions that
will protect all . . . whose interests the injunction may affect.” Inland Steel Co.
v. United States, 306 U.S. 153, 157 (1939).
Generally, “[a] party injured by the issuance of an injunction later
determined to be erroneous has no action for damages in the absence of a
bond.” W.R. Grace & Co., 461 U.S. 757, 770 n.14 (1983) (referencing Russell,
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105 U.S. at 437; Buddy Systems, Inc., 545 F.2d at 1167-68). But this
declaration is not as clear as SMRI might think. “Where no bond . . . has been
required, it is clear that the court has no power to award damages sustained by
either party in consequence of the litigation, except by making such a decree in
reference to the costs of the suit as it may deem equitable and just.” Russell,
105 U.S. at 436. When no bond is imposed as security for an injunction, the
court already concluded “that the damage arising from the injunction [would
be] damnum absque injuria,4 and that there could be no recovery[.]” United
Motors Service, Inc., v. Tropic-Aire, 57 F.2d 479, 483 (8th Cir. 1932)
(referencing Russell, 105 U.S. 433).
In United Motors Service, the United States Court of Appeals for the
Eighth Circuit acknowledged “that a formal injunction bond was not an
indispensable prerequisite to the determination of damages on the dissolution
of the injunction,” where “the order of the court provided that ‘complainant pay
the defendant such resulting damages as it may sustain in case it be finally
decided that said injunction ought not to have been granted.’ ” United Motors
Service, 57 F.2d at 483 (citing Mica Insulator Co. v. Commercial Mica Co., 157
F. 92, 94 (C.C.N.D. Ill. 1907)). “[T]he court has power at the granting of the
injunction to impose as a condition that complainant shall pay any damages
sustained by defendant if it turns out that the injunction was improvidently
granted, and that if complainant acts under the order of the court he is bound
by the condition.” Id. As the United Motors Service court observed:
4“Loss or harm that is incurred from something other than a wrongful act
and occasions no legal remedy.” BLACK’S LAW DICTIONARY (2009 ed.).
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It is through no fault of the defendant that it is before the court on
this motion without a formal bond. It relied upon the order of
court, which was . . . clearly either a condition upon which the
injunction would be issued, or, having been issued, continued in
force. Not only that, it imposed upon the complainant an
obligation to make good to the defendant any damages sustained
within its terms in case it was continued in force. The
complainant accepted and acted under it. To hold otherwise under
the circumstances of this case would be most inequitable. When
complainant proceeded to avail itself of the injunction, it became
obligated to make good to defendant its damages . . .; so that the
case comes wholly within the foregoing decisions of the Supreme
Court.
Id. (citing Mica Insulator Co., 157 F.2d at 94-59). The court concluded:
[Mica Insulator Co.] does not impair in any way the proposition
that when neither an injunction bond nor a similar undertaking
. . . has been required by the court there can be no assessment of
damages for the improvident issuance of the injunction either in
the equity suit proper or in a subsequent action at law . . . and
when a formal injunction bond alone is required by the court, as in
the instant case, the amount of the bond is the maximum amount
of damages which can be assessed[.]
Id. at 483. “The court in granting an injunction has a right to make such
restrictions and limitations as it deems just and hence can provide for a bond
or other adequate method of protecting the party against whom the injunction
is granted in recovering damages if it be improvidently issued.” Id.
SMRI’s argument that Cagan permits it to escape the assessment of
defendant’s damages is misplaced as “the district court did not require Cagan
to post an injunction bond[.]” Cagan, 28 F.3d at 656. In similar fashion,
Buddy Systems, Inc. does not support SMRI’s argument. “Once the security is
returned to the plaintiff there can no longer be [an] . . . action on a bond.”
Buddy Sys., Inc., 545 F.2d at 1168-69.
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When dealing with an injunction, the court is exercising its inherent
powers, “as a court of equity.” Russell, 105 U.S. at 438. It is through no fault
of RP&G that it presently stands before the court without a formal bond paid
for by SMRI. RP&G, and SMRI for that matter, relied on the amended
preliminary injunction as a directive of the court which was in effect and was to
be enforced. The amended preliminary injunction imposed on SMRI “an
obligation to make good to the defendant any damages sustained within its
terms in case it was continued in force.” United Motors Service, 57 F.2d at 483
(internal citation omitted).
The court imposed the bond in the amended preliminary junction of
February 15, 2019. (Docket 490 at p. 3). SMRI filed a motion to vacate the
bond requirement because it believed plaintiff was entitled to a permanent
injunction. (Dockets 501 at p. 2 & 503 at pp. 7-8). But at no time did SMRI
ask the court to suspend imposition of the amended preliminary injunction
because plaintiff could not or would not post bond. It was not until its
January 10, 2020, motion for relief from judgment or order that SMRI withdrew
“its request for preliminary or permanent injunctive relief against the
Defendants.” (Docket 525 at p. 2).
SMRI “accepted and acted under” the amended preliminary injunction for
the better part of 18 months. Id. When SMRI availed itself of the power of the
amended preliminary injunction, “it became obligated to make good to [RP&G
for] its damages.” Id. “To hold otherwise under the circumstances of this case
would be most inequitable.” Id.
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In this case, the court concluded that if the amended preliminary
injunction issued for SMRI’s benefit against RP&G was improvidently granted
the “bond requirement of $376,539 may not fully cover defendants’ damages
. . . [but] that sum [is] consistent with defendants’ summary of their minimum
losses and adequate to meet the requirements of [Fed. R. Civ. P.] 65(c).”
(Docket 519 at p. 22). The court earlier found credible Brian Niemann’s
calculations regarding the business financials of RP&G. Id. at p. 21. The
formula he employed in the 2016 hearing is the same proprietary formula Mr.
Niemann used to arrive at RP&G’s damages suffered by the improvidently
granted amended preliminary injunction. Compare Dockets 364 and 539.
SMRI’s argument Mr. Niemann’s calculations “are wildly speculative and flat-
out unsupportable,” is simply without merit. See Docket 544 at p. 7. The
court finds Mr. Niemann’s March 6, 2020, testimony credible and by the
greater weight of the evidence supports the loss suffered by RP&G.
Based on the record, the court finds RP&G is entitled to $282,341 to be
paid by SMRI for the damages caused to RP&G by the wrongfully issued
amended preliminary injunction. Fed. R. Civ. P. 65(c); United Motors Service,
57 F.2d at 483.
2. Contempt of Court
RP&G asserts that if it is “barred from obtaining damages as a result of SMRI
failing to post the required security, SMRI must be found in contempt of court
for failing to post the Court-Ordered security.” (Docket 548 at p. 10). Because
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the court determined RP&G is entitled to money damages pursuant to Fed. R.
Civ. P. 65(c), defendant’s motion for contempt of court is denied as moot.
3. Attorneys’ Fees
All defendants move the court to find SMRI in contempt of court for
failing to pay $17,953.24 awarded to the defendants as attorneys’ fees by a
March 20, 2017, order (“Attorneys’ Fee Order”). (Docket 538 at p. 22).
Defendants acknowledge this sum was originally intended to constitute a setoff
against their obligation imposed by a separate March 20, 2017, order assessing
costs (“Costs Order”). Id. at p. 23 (referencing Docket 423 at p. 21) (referencing
Docket 421). Defendants contend that changed following the Eighth Circuit’s
remand because the Costs Order was vacated and the Attorneys’ Fee Order was
affirmed. Id. (referencing Docket 489 at p. 12). Now, defendants seek recovery
of “$17,953.24 plus accrued interest [effective May 17, 2019], in addition to
defendants’ attorneys’ fees and costs relating to bring[ing] this motion.” Id.
SMRI opposes defendants’ motion. (Docket 544). SMRI contends “[t]he
parties, through their counsel, for many months treated the amounts as partly
offsetting, but recognized that when the Court issued a final bill of costs at the
conclusion of this action, the amounts would be ‘settled up.’ ” Id. at pp. 8-9.
“[W]ith the cost matter unsettled,” SMRI argues “[t]he Court should deny
Defendants’ opportunistic calling of the fee award prior to this case being made
final.” Id.
SMRI also contends since defendants’ legal fees may have been paid by
an insurance company, defendants should not be entitled to an award of
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attorneys’ fees whatsoever. (Docket 544 at p. 9). This argument is wholly
without merit and does not warrant further comment.
In reply, defendants argue “it is not within SMRI’s purview to dictate that
it need not comply with the Court’s order to pay fees until resolution of the
remaining issues. . . . [I]t is not up to SMRI to decide when and how Court
Orders will be enforced.” (Docket 548 at p. 14) (referencing Chicago Truck
Drivers v. Brotherhood Labor Leasing, 207 F.3d 500, 504 (8th Cir. 2000) (“One
of the overarching goals of a court’s contempt power is to ensure that litigants
do not anoint themselves with the power to adjudge the validity of orders to
which they are subject.”).
Once again, SMRI has chosen to decide if, when and how it will comply
with this court’s orders. Once the Costs Order was vacated on February 15,
2019, it was incumbent on SMRI to either pay the sum due to defendants, to
file a motion for clarification or to file a motion to stay the effective
implementation of the Attorneys’ Fee Order. Instead, as of the date of this
order, an additional 26 months since the February 15, 2019, order was
entered, and 11 months since defendants’ filed their motion asking the court to
hold SMRI in contempt of court, have lapsed. SMRI has done nothing.
Based on defendants’ submission and SMRI’s response, the court will
enter an order to show cause as to why SMRI should not be held in contempt of
court of its failure to comply with the Attorneys’ Fee Order, as affirmed by the
February 15, 2019, order.
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G. DEFENDANTS’ MOTION FOR APPLICATION OF EQUITABLE DEFENSES
RP&G Defendants’ answer to plaintiff’s amended complaint asserted
equitable defenses: “Plaintiff’s claims are barred in whole or in part by the
doctrines of acquiescence . . . estoppel . . . and/or laches.” (Docket 55 at p. 8
¶ 66). Their answer specifically referenced the Lanham Act as part of their
equitable defenses: “Plaintiff’s claims are barred in whole or in part pursuant
to 15 U.S.C. § 1115(b)(9) inasmuch as equitable principles, including laches,
estoppel, and acquiescence, are applicable.” Id. at p. 10 ¶ 81. Wal-Mart’s
answer asserted the same equitable defenses. See Docket 60 ¶¶ 66 and 81. In
response to the RP&G Defendants’ counterclaim, SMRI’s reply asserted by
affirmative defense that “Defendants’ claims are barred by Defendants’ own
unclean hands.” (Docket 58 at p. 9 ¶ 5). For this section of the order,
“defendants” refer to RP&G, Carol Niemann, Paul Niemann, Brian Niemann
and Wal-Mart, unless otherwise specifically indicated.
1. Relevant Facts
The critical time period for the defendants’ acquiescence defense and
laches defense was 1999 through 2009. The court finds the following trial
evidence relevant to the issues:
The STURGIS BIKE WEEK registration was owned by Sturgis Bike
Week, Inc., [Virginia Rhodes] since June 17, 1997. (Exhibits 1 at
p. 7 and 19 at p. 4).
Paul Niemann created Sturgis Motor Classic around 1997-98 with
the help of Light Images owner Mike Wolforth. (Docket 315 at
p. 89:7-17).
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Before becoming a co-owner of RP&G, Brian Niemann testified he
had seen many Sturgis Motor Classic items being sold in 1998 and
1999. (Docket 316 at pp. 21:21-22:6).
Brian Niemann, an officer and employee of RP&G, testified that
Sturgis Bike Week, Inc., conducted business with RP&G from at
least 1999 through 2009. (Docket 316 at pp. 33:9-34-1).
RP&G sold Sturgis Bike Week, Inc., products bearing the “Sturgis
Motor Classic” mark, including shot glasses, key chains, magnet
lanyards, head wraps and bandanas. Id. at p. 33:12-19.
Sturgis Bike Week, Inc., resold these products through its own
retail store. Id. at p. 33:20-34:1.
Sturgis Bike Week, Inc., never complained to RP&G about the use
of “Sturgis” or “Sturgis Motor Classic” on rally products. Id. at
p. 34:2-13.
As early as 2000, RP&G sold thousands of “Sturgis Motor Classic”
hats and shot glasses. (Docket 315 at pp. 79:14-20, 80:4-11,
87:1-4 and 10-17; 87:22-88:12; see also Trial Exhibits 785B, 785J
& 785K).
As early as 2003, RP&G used “Officially Licensed Sturgis” for its
Sturgis Rally products. (Docket 315 at p. 178:15-179:1). That
phrase first went on the cover of RP&G’s product catalog in 2007.
(Docket 315 at p. 179:2-6).
In 2006, JRE, Inc., had a retail store across the street from Sturgis
Bike Week, Inc.’s retail store. Id. at p.44:2-13. JRE’s 4′ x 8′ sign
advertised “Officially Licensed Sturgis Products.” Id. at p. 44:16-
21. Sturgis Bike Week, Inc., pointed its camera across the street
and published on its website JRE’s sign. Id. at p. 44:22-45:1.
Between March 1992 when Paul and Carol Niemann purchased
RP&G and 2015, RP&G product codes went from between 65-100
to approaching 7,000 inventory codes. (Docket 315 at p. 68:22-
69:6 and 72:3-19).
During the 1999-2009 time period, RP&G continued to grow and
develop its inventory and marketed “Sturgis” and “Sturgis Motor
Classic” rally products. Id. at pp. 28:2-29:10.
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The STURGIS BIKE WEEK registrations were not assigned to the
Sturgis Chamber and then SMRI until 2010 and 2011,
respectively. (Exhibit 1 at pp. 8-12 and Exhibit 19 at pp. 4-6).
Paul Niemann testified his company sold “Sturgis” rally products to
the Sturgis Chamber as far back as the 1990s. (Docket 315 at
p. 114:3-8.). At no time did the Sturgis Chamber complain to
RP&G about the use of the “Sturgis” mark. Id. at p. 115:10-19.
RP&G sold “Sturgis” rally products to Black Hills Harley, a
founding member of SMRI, “since the early ‘80s.’ ” Id. at
pp. 91:23-92:2; see also Trial Exhibit 727. Sales continued in the
1990s. (Docket 315 at p. 113:17-21). Black Hills Harley resold
those products at retail. Id. at p. 92:3-4. Black Hills Harley never
complained to RP&G about its use of the “Sturgis” mark. Id. at
pp. 92:3-4; 115:10-19.
Jim Burgess, an owner of Black Hills Harley, was a member of the
board of directors of SMRI at the time of its incorporation in 2010.
(Trial Exhibit 727 at p. 2).
RP&G sold “Sturgis” rally products to Mr. Berkowitz, a founding
member of SMRI and its principal licensee, and his companies
Good Sports and Hot Leather in the 1990s and those companies in
turn sold the RP&G products at retail. (Docket 315 at pp. 91:23-
92:4; 113:22-24; see also Docket 313 at p. 64:7-10 and Trial
Exhibit 727). Mr. Berkowitz and his companies never complained
to RP&G about its use of the “Sturgis” mark. (Docket 315 at
p. 92:10-19).
Mr. Berkowitz was a member of the board of directors of SMRI at
the time of its incorporation in 2010. (Trial Exhibit 727 at p. 2).
RP&G sold “Sturgis” rally products to Black Hills Rally & Gold,
now a major SMRI licensee, in the 1990s. (Docket 315 at pp.
113:25-114:2). Black Hills Rally & Gold never complained to
RP&G about its use of the “Sturgis” mark. Id. at p. 115:10-19.
From the 1990s through the 2000s RP&G continued to grow and
develop its inventory and marketed “Sturgis” rally products. Id.
315 at pp. 113:9-115:19.
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RP&G expanded its employee workforce from only family members
to 20 employees in 2015 and invested heavily in its Sturgis-related
rally products. (Docket 315 at p. 70:4-19; 71:8-15; 811:3-19;
816:16-20; 203:14-204:15; 207:24-209:2; Trial Exhibit 74a).
As of the time of trial, RP&G’s “Sturgis Motor Classic” line of
products was the top fourth or fifth revenue producer. (Docket
315 at p. 202:10-13). The “Sturgis” product line has remained
relatively stable at 20 percent of RP&G’s profits over the years.
(Docket 316 at p. 28:2-11).
RP&G’s profits from the “Sturgis Motor Classic” line of products
increased at an annual growth rate of five percent between 2006
and 2014. (Trial Exhibit 74A). RP&G’s profits from the “Sturgis
Motor Classic” line increased from $385,318 to $536,739 during
the same period. Id.
On behalf of SMRI, a cease and desist letter dated August 8, 2006,
was served on Paul Niemann and Carol Niemann. (Exhibit 52).
The letter demanded the RP&G [D]efendants “discontinue the use
of the terms, ‘Sturgis Motor Classic,’ ” and “ ‘Officially Licensed
Sturgis™’ Products” because the Sturgis Chamber owned what it
called the “STURGIS Logo.” Id. at pp. 1-2. The letter claimed the
“STURGIS Logo” had been owned as Registration No. 1,948,097
since January 16, 1996. Id. at p. 2.
SMRI’s complaint was not filed until June 22, 2011. (Docket 1).
Until the filing of the complaint, the Sturgis Chamber, its
successor-in-interest SMRI, and their major business members
never asserted a claim of ownership to “STURGIS,” “Sturgis Motor
Classic” or the “Officially Licensed Sturgis™ Products” then being
produced and marketed by the RP&G Defendants. (Docket 1).
Brian Niemann testified RP&G “specifically tried very hard to
differentiate” its products with (i) a disclaimer expressly disavowing
any affiliation with SMRI; (ii) the designation SMC©; and (iii)
identifying RP&G’s webpage as the source of its merchandise.
(Docket 316 at p. 8:5-25). RP&G used a color scheme on its tags
to differentiate its products from SMRI. Id. at p. 9:1-7. SMRI went
out of its way to make its tags similar to the tags of RP&G. Id. at
p. 9:5-7.
After the complaint was filed, RP&G permitted its state trademark
applications and domain name registrations to lapse and
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abandoned its federal trademark application for “Sturgis
Motorcycle Classic.” (Trial Exhibit 11). RP&G also stopped using
“Officially Licensed Sturgis,” “Licensed Sturgis,” and “Authentic
Sturgis.” (Docket 316 at p. 81:4-11).
2. Legal background
The Lanham Act specifically recognizes the equitable defenses of
acquiescence and laches. “[T]he right to use [a] registered mark shall be . . .
subject to the following defenses[:] . . . equitable principles, including laches,
estoppel, and acquiescence, are applicable.” 15 U.S.C. § 1115(b)(9)).
“Generally, where one party brings legal and equitable claims, the jury’s
factual determination is binding on the court’s equitable determination.” Blue
Cross Blue Shield of Minnesota v. Wells Fargo Bank, N.A., 816 F.3d 1044,
1049 (8th Cir. 2016). “[W]hen legal and equitable actions are tried together,
the right to a jury in the legal action encompasses the issues common to both.”
Id. (citing Song v. Ives Lab., Inc., 957 F.2d 1041, 1048 (2d Cir. 1992)). This
principle is subject to waiver. Id. The question is whether the parties have
“prospectively waived [the] ability to bind the court to the jury’s verdict in a
separately tried [equitable] claim.” Id.
“When there are discrete legal and equitable claims, the common
questions of fact on the legal claim must be tried first before a jury.” 6 J.
Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 32:126
(4th ed.) (referencing Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962)). “[W]hen
both legal and equitable issues are presented in the federal courts, the rule is
‘jury issues come first.’ ” Id. “It is clear that a judge sitting at equity may not
render a verdict which is inconsistent with that of a jury sitting at law on a
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claim involving the same essential elements. This is because ‘[w]hen legal and
equitable actions are tried together, the right to a jury in the legal action
encompasses the issues common to both.’ ” Song, 957 F.2d at 1048 (citing
Lincoln v. Board of Regents of University System, 697 F.2d 928, 934 (11th Cir.
1982) (citing Dairy Queen, 369 U.S. at 470-73). “When a party has the right to
a jury trial on an issue involved in a legal claim, the judge is of course bound
by the jury’s determination of that issue as it affects his disposition of an
accompanying equitable claim.” Lincoln, 697 F.2d at 934. “Where an
irreconcilable inconsistency exists between a bench decision and a jury verdict
on different claims arising out of the same transaction, the jury finding must
take precedence in the Seventh Amendment context[.]” Perdoni Brothers, Inc.
v. Concrete Systems, Inc., 35 F.3d 1, 5 (1st Cir. 1994).
A. Acquiescence
The equitable defense of estoppel by acquiescence is “created by a
plaintiff’s knowing acquiescence in a defendant’s activities.” Minnesota Mining
& Mfg. Co. v. Shurtape Technologies, Inc., No. CIV. 98-2134, 2001 WL 530551,
at *7 (D. Minn. May 17, 2001). Acquiescence occurs when a trademark holder
“through affirmative word or deed, expressly or impliedly consents to the
infringement.” Id. (referencing 5 J. Thomas McCarthy, McCarthy on
Trademarks and Unfair Competition, § 32.105 (4th ed.). The elements of
estoppel applicable to an acquiescence defense in this case are:
(1) knowledge by SMRI or its predecessors-in-interest of the
RP&G Defendant’s use of a mark;
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(2) SMRI’s or its predecessors-in-interest’s implied or express
consent to the use of the mark by the RP&G Defendants; and
(3) A change in position by the RP&G Defendants in reliance on
the conduct of SMRI or its predecessors-in-interest.
See Pennzoil-Quaker State Co. v. Miller Oil & Gas Operations, 779 F.3d 290,
294 (5th Cir. 2015) (the court analyzes the elements of acquiescence used by
the circuits).
1. Analysis
The jury made no finding of fact on any element of defendants’ equitable
defense of acquiescence. The court is free to resolve whether defendants’
acquiescence defense is applicable to SMRI’s claims.
While the 2006 cease and desist letter’s statement was true as it relates
to the Composite Design Mark, SMRI’s suggestion that registration for
STURGIS had been approved was not true and was deceptive. In fact, the
“STURGIS Logo” was the Composite Design Mark. (Exhibit 52 at p. 2). The
Composite Design Mark registration specifically acknowledged that it made “no
claim . . . to the exclusive right to use ‘MOTOR CLASSIC’ or ‘RALLY & RACES
BLACK HILLS S.D.’ apart from the mark as shown.” (Exhibit 1 at p. 6) (some
capitalization omitted).
On the matters relevant to this issue, the testimony of Brian Niemann
and Paul Niemann was unchallenged by SMRI or any of plaintiff’s witnesses at
trial. The court finds the testimony of Brian Niemann and Paul Niemann
credible on these matters.
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It is incomprehensible that for over 10 years no one at Sturgis Bike
Week, Inc., would have knowledge of these rally products being purchased at
wholesale from RP&G and then being resold at retail in its own store. By
purchasing “Sturgis” and “Sturgis Motor Classic” items from RP&G and then
reselling them through its own retail locations, Sturgis Bike Week, Inc.,
expressly or impliedly represented that it would not assert a right or exclusive
claim to use those terms. Sturgis Bike Week, Inc., acquiesced to RP&G’s use of
“Sturgis” and “Sturgis Motor Classic” during the time period before Sturgis
Bike Week, Inc., assigned “Sturgis Bike Week” to the Sturgis Chamber.
Minnesota Mining & Mfg. Co., 2001 WL 530551, at *7.
The same is true regarding the Sturgis Chamber. RP&G sold “Sturgis”
rally products to the Sturgis Chamber dating back into the 1990s which the
Chamber then sold at retail. It is incomprehensible that for over 20 years no
one at the Sturgis Chamber would have knowledge of these rally products
being purchased at wholesale from RP&G and then being resold at retail in its
own store. By purchasing “Sturgis” and “Sturgis Motor Classic” items from
RP&G and then reselling them through its own retail location, the Sturgis
Chamber expressly or impliedly represented that it would not assert a right or
exclusive claim to use those terms. The Sturgis Chamber acquiesced to
RP&G’s use of “Sturgis” and “Sturgis Motor Classic” during the time period
from when Sturgis Bike Week, Inc., assigned “Sturgis Bike Week” to the Sturgis
Chamber and ultimately to SMRI. Minnesota Mining & Mfg. Co., 2001 WL
530551, at *7.
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The conduct of Sturgis Bike Week, Inc., and the Sturgis Chamber, both
SMRI’s predecessors-in-interest, satisfies the first two elements of the
acquiescence defense. Pennzoil-Quaker State Co., 779 F.3d at 294.
The final element requiring resolution before the court may apply an
acquiescence defense is that the defendants must show a “change in position
based [on plaintiff’s conduct] to [defendants’] injury, detriment or prejudice.”
Id. at 2001 WL 530551, at *8. Over the 1999-2006 time period, the RP&G
Defendants continued to build their Sturgis product line and market to its
customers, including Sturgis Bike Week, Inc., the Sturgis Chamber, Black Hills
Harley, Good Sports, and Black Hills Rally & Gold.
There was no evidence presented at trial or now offered by SMRI
indicating the reasons, if any, why plaintiff waited 4 years and 10 months to
initiate litigation to protect SMRI’s trademark claims. The evidence presented
at trial showed it was more probable than not had Sturgis Bike Week, Inc., and
the Sturgis Chamber asserted their rights back in 1999 or shortly thereafter, or
had SMRI filed its lawsuit shortly after the 2006 cease and desist letter, the
growth and expansion of the “Sturgis” product line by the RP&G Defendants
would not have occurred to the extent it did. Hubbard Feeds, Inc. v. Animal
Feed Supplement, Inc., 182 F.3d 598, 602 (8th Cir. 1999) (“The defendant
spent large sums in reliance upon its apparent immunity . . . . When for eight
years one plans one’s business on the assumption that one may use a mark, it
is a grave dislocation of business to stop its use . . . .”) (internal citations
omitted).
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It is disingenuous of SMRI to suggest the defendants “did not change
their position in a way that would not have occurred had SMRI or its
predecessors-in-interest notified them [or filed suit] . . . even sooner.” (Docket
582 at p. 5) (internal quotation marks omitted). The RP&G Defendants held a
good faith belief that they had the right to use the “Sturgis” marks, a belief
ultimately vindicated by the Eighth Circuit in 2018. Notwithstanding that
belief, once sued the RP&G Defendants promptly scaled back their business
model by allowing state trademark applications to lapse, abandoning a federal
trademark application and terminating the use of “Officially Licensed Sturgis,”
“Licensed Sturgis,” and “Authentic Sturgis.”
The RP&G Defendants have shown significant prejudice. Id. The court
finds the facts satisfy the third element of the acquiescence defense. Pennzoil-
Quaker State Co., 779 F.3d at 294.
2. Conclusion
The RP&G Defendants’ equitable defense of estoppel by acquiescence is a
meritorious defense to SRMI’s trademark claims.
B. Laches
“Laches is an equitable defense to an action to enforce a trademark.”
Roederer v. J. Garcia Carrion, S.A., 569 F.3d 855, 858 (8th Cir. 2009). “Laches
applies when a claimant inexcusably delays in asserting its claim and thereby
unduly prejudices the party against whom the claim ultimately is asserted.”
Id. at 858-59. See also Hubbard Feeds, Inc., 182 F.3d at 602 (same). “[L]aches
denotes a merely passive consent, while acquiescence implies active consent.”
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6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition,
§ 31:41 (4th ed.) (citations omitted).
“For laches, timeliness is the essential element.” Petrella v. Metro-
Goldwyn-Mayer, Inc., 572 U.S. 663, 685 (2014). “[T]he District Court, in
determining appropriate injunctive relief . . . may take account of [plaintiff’s]
delay in commencing suit.” Id. at 687. One reason for the consideration of
timeliness “is the difficulty in proving damages long after the fact: Proving
damages in infringement cases is notoriously difficult, and delay in bringing
the question to court can increase those difficulties substantially. Another
reason is the inequity of a plaintiff waiting for defendant to build up its
business and profits and years later files suit and demands an accounting of
those profits.” 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition, § 31:4 (4th ed.) (internal quotation marks and citation omitted).
In order to prevail on a laches defense, the defendants are obligated to
prove the following:
(1) A delay [by SMRI] in asserting a right or a claim;
(2) That the delay [by SMRI] was not excusable; and
(3) That there was undue prejudice to the [RP&G Defendants]
against whom the claim is asserted.
Roederer, 569 F.3d at 859. “In addition, in trademark suits, courts consider
two additional factors when evaluating the merits of a laches defense: (1) the
doctrine of progressive encroachment, and (2) notice to the defendant of the
plaintiff’s objections to the potentially infringing mark.” Id.
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“[U]nder the doctrine of progressive encroachment, the time of delay is to
be measured not from when the plaintiff first learned of the potentially
infringing mark, but from when such infringement became actionable and
provable.” Id. The laches defense is not available “when the defendant knew
that the plaintiff objected to the use of the mark,” as “[a]ny acts after receiving
a cease and desist letter are at the defendant’s own risk.” Id. (internal citation
omitted). “[T]he determination of whether laches applies . . . [is] a matter
within the sound discretion of the district court . . . review[ed] . . . for an abuse
of discretion.” Id. at 858 (internal citation omitted). “Whether laches should be
applied depends upon the facts of the particular case. . . .” Id. (internal
citation omitted). “When a defendant has invested generally in an industry,
and not a particular product, the likelihood of prejudicial reliance decreases in
proportion to the particular product’s role in the business.” Id. at 861. The
defense of laches is not available when “the defendant’s investment was in an
entire industry, not the plaintiff’s particular mark.” Id. (internal citation
omitted).
Courts have applied the doctrine of laches when a claimant delays
enforcement of a trademark for any number of years depending upon the
particular facts of each case. See Tough Traveler, Ltd. v. Outbound Products,
60 F.3d 964, 968 (2d Cir. 1995) (one-year delay); MCV, Inc. v. King-Seeley
Thermos Co., 870 F.2d 1568, 1571-72 (Fed. Cir. 1989) (four-year delay);
Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 192-93 (2d Cir. 1996) (five-
year delay); Hilton International Co. v. Hilton Hotels Corp., 888 F. Supp. 520,
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535 (S.D.N.Y.1995) (eight-year delay); and Hubbard Feeds, Inc., 182 F.3d at
602 (9-year delay). Although the expenditure of significant funds by a
defendant to build up a business or increase inventory is not dispositive,
“[w]hen . . . one plans one’s business on the assumption that one may use a
mark, it is a grave dislocation of the business to stop its use . . . .” Hubbard
Feeds, Inc., 182 F.3d at 602 (citing Hilton International Co., 888 F. Supp. at
535).
“Laches is an equitable defense. The doctrine, therefore, is flexible; no
fixed or arbitrary period of time controls its applicability.” Hot Stuff Foods, LLC
v. Mean Gene’s Enterprises, Inc., 468 F. Supp. 2d 1078, 1092 (D.S.D. 2006).
“In determining whether the doctrine of laches should bar a lawsuit, all the
particular circumstances of each case must be considered, including the length
of delay, the reasons for it, its effect on the defendant, and the overall fairness
of permitting the plaintiff to assert [its] action.” Id. at 1093.
1. Analysis
The jury made no finding of fact on any element of defendants’ equitable
defense of laches. The court is free to resolve whether defendants’ laches
defense is applicable to plaintiff’s claims.
On August 8, 2006, the Sturgis Chamber sent a cease and desist letter to
the RP&G Defendants. (Trial Exhibit 52). The letter demanded the RP&G
Defendants “discontinue the use of the terms, ‘Sturgis Motor Classic,” and
“Officially Licensed Sturgis™ Products” because the Sturgis Chamber owned
what it called the “STURGIS Logo.” Id. at pp. 1-2. The letter claimed the
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STURGIS Logo had been owned as Registration No. 1,948,097 since January
16, 1996. Id. at p. 2.
While that statement is true as it relates to the Composite Design Mark,
SMRI’s suggestion that registration for STURGIS had been approved was not
true and was deceptive. In fact, the “STURGIS Logo” was the Composite Design
Mark. Id. The Composite Design Mark registration specifically acknowledged
that it made “no claim . . . to the exclusive right to use ‘MOTOR CLASSIC’ or
‘RALLY & RACES BLACK HILLS S.D.’ apart from the mark as shown.” (Exhibit
1 at p. 6) (some capitalization omitted).
SMRI presented no evidence at trial, or now for that matter, identifying
the reasons, if any, why plaintiff waited 4 years and 10 months to initiate
litigation to protect SMRI’s trademark claims. By itself, this failure by SMRI to
justify its delay in asserting its claims satisfies the first two elements of the
laches defense. Roederer, 569 F.3d at 859.
After the 2006 cease and desist letter, RP&G continued to engage in the
sale of “Sturgis” rally products in the good-faith belief that the term “Sturgis”
was generic. Over the relevant time period, the RP&G Defendants continued to
market its Sturgis product line to its customers, including the Sturgis
Chamber, Black Hills Harley, Good Sports, and Black Hills Rally & Gold.
RP&G expanded its employee workforce from only family members to 20
employees in 2015 and invested millions of dollars in its Sturgis-related rally
products. (Docket 315 at p. 70:4-19; 71:8-15; 811:3-19; 816:16-20; 203:14-
204:15; 207:24-209:2; Trial Exhibit 74a). Until the filing of the complaint, the
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Sturgis Chamber and SMRI never asserted a claim of ownership to STURGIS,
Sturgis Motor Classic or the “Officially Licensed Sturgis™ Products” then being
produced and marketed by the RP&G Defendants.
The evidence discussed above regarding the acquiescence defense is
equally relevant and applicable to the equitable defense of laches. Again, the
court finds the testimony of Paul Niemann and Brian Niemann credible on
these matters.
The decision of the Eighth Circuit that the term “Sturgis” was generic,
supports the court’s finding that RP&G’s belief that “Sturgis” was generic was a
belief held in good faith. SMRI v. RP&G, 908 F.3d at 333. Without reciting all
of the evidence set out in detail in Section G(1) above, the court finds it was
more probable than not had the Sturgis Chamber and SMRI asserted their
rights back in 1999, 2006 or shortly thereafter, the massive investment in and
expansion of Sturgis rally lines by the RP&G Defendants would not have
occurred to the extent it did. Hubbard Feeds, Inc., 182 F.3d at 602. The
RP&G Defendants have shown significant prejudice. Id. The court finds the
facts satisfy the third element of the laches defense. Roederer, 569 F.3d at
859.
2. Conclusion
The RP&G Defendants’ equitable defense of estoppel by laches is a
meritorious defense to SRMI’s trademark claims.
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C. State Claim
1. Deceptive Trade Practices
In South Dakota “[i]t is a deceptive act or practice for any person to . . .
[k]nowingly and intentionally act, use, or employ any deceptive act or practice,
fraud, false pretense, false promises, or misrepresentation . . . in connection
with the sale or advertisement of any merchandise[.]” S.D.C.L. § 37-24-6(1).
“Any person who claims to have been adversely affected by any act or a practice
declared to be unlawful by § 37-24-6 shall be permitted to bring a civil action
for the recovery of actual damages suffered as a result of such act or practice.”
S.D.C.L. § 37-24-31.
2. Laches
South Dakota recognizes the affirmative defense of laches. Lamar
Advertising of South Dakota, Inc. v. Heavy Constructors, Inc., 745 N.W.2d 371,
375 (S.D. 2008). To support the affirmative defense of laches in South Dakota,
[It] must be found that, (1) [SMRI] had full knowledge of the facts
upon which the action is based, (2) regardless of this knowledge,
[SMRI] engaged in an unreasonable delay before commencing this
suit, and (3) that allowing [SMRI] to maintain the action would
prejudice [defendants].
Id. (citing Burch v. Bricker, 724 N.W.2d 604, 608 (S.D. 2006)).
3. Conclusion
The RP&G Defendants’ equitable defense of estoppel by laches is a
meritorious defense to SRMI’s deceptive trade practices claim based on the
court’s previous findings.
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D. Unclean hands
All defendants pled unclean hands as a separate equitable defense to
plaintiff’s claims. (Dockets 55 ¶ 67 & 60 ¶ 67). The defendants argue “SMRI’s
[own] unclean hands preclude recovery.” (Docket 578 at p. 38). Defendants
contend “SMRI’s deliberate decision to ignore multiple orders from this Court
and the Eighth Circuit is misconduct of ‘serious proportions’ that justifies a
finding of unclean hands.” Id. (citing Saxon v. Blann, 968 F.2d 676, 680 (8th
Cir. 1992) (internal citation omitted).
Because the Eighth Circuit upheld the jury verdict on SMRI’s STURGIS
BIKE WEEK mark and the Composite Design Mark due to defendants’ “willful
and intentional” infringement of those marks, SMRI argues defendants’ own
unclean hands bar them from prevailing on their equitable defenses of
acquiescence and laches.5 (Docket 582 at pp. 4, 6 & 19). SMRI submits
defendants have “the concept of ‘unclean hands’ backwards.” (Docket 582 at
p. 29). SMRI argues “[u]nclean hands looks to the conduct of the accused, who
are asserting other defenses to avoid or minimize liability, not to the conduct of
the Plaintiff.” Id. (emphasis in original). SMRI submits the unclean hands
doctrine “in practice . . . acts as a bar to the defenses of the violators of the
law.” Id. (referencing Hermes International v. Lederer de Paris Fifth Ave., Inc.,
219 F.3d 104, 107 (2d Cir. 2000); Abraham v. Alpha Chi Omega, 708 F.3d 614,
5When addressing plaintiff’s verdicts on its false advertising and unfair
competition claims, SMRI does not incorporate the elements of those claims
into its unclean hands argument. See Docket 582 at pp. 23-30.
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620 (5th Cir. 2013); National Lead Co. v. Wolfe, 223 F.2d 195, 202 (9th Cir.
1955)).
“[H]e who comes into equity must come with clean hands.” Precision
Instrument Mfg. Co. v. Automobile Maintenance Machinery Co., 324 U.S. 806,
814 (1945). “This maxim is far more than a mere banality. It is a self-imposed
ordinance that closes the doors of a court of equity to one tainted with
inequitableness or bad faith relative to the matter in which he seeks relief,
however improper may have been the behavior of the defendant.” Id. (internal
citation omitted). “This maxim necessarily gives wide range to the equity
court’s use of discretion in refusing to aid the unclean litigant. It is not bound
by formula or restrained by any limitation that tends to trammel the free and
just exercise of discretion.” Id. at 815 (internal quotation marks and citation
omitted). The clean hands “doctrine is rooted in the historical concept of court
of equity as a vehicle for affirmatively enforcing the requirements of conscience
and good faith. This presupposes a refusal on [the court’s] part to be ‘the
abetter of iniquity.’ ” Id. at 814. “[O]ne’s misconduct need not necessarily have
been of such a nature as to be punishable as a crime or as to justify legal
proceedings of any character. Any willful act concerning the cause of action
which rightfully can be said to transgress equitable standards of conduct is
sufficient cause for the invocation of the maxim[.]” Id. at 815.
“[T]he unclean hands doctrine bars a party that acted inequitably from
obtaining equitable relief[.]” Safeway Transit LLC v. Discount Party Bus, Inc.,
954 F.3d 1171, 1181-82 (8th Cir. 2020) (internal citation omitted). “The
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doctrine of ‘unclean hands’ bars a party who acted inequitably from obtaining
equitable relief. . . . However, the party with unclean hands is not barred from
opposing a request for equitable relief by the other side.” Wyeth v. National
Biologics, Inc., 395 F.3d 897, 902 (8th Cir. 2005) (internal citation omitted).
1. Defendants’ Conduct
Plaintiff bears “the burden of proving that [defendants’] hands were
unclean.” Conan Properties, Inc., v. Conans Pizza, Inc., 752 F.2d 145, 150
(Fifth Cir. 1985). “To foreclose the laches and acquiescence defenses, [SMRI]
must offer something more than mere objective evidence to demonstrate that
the defendant[s] employed the allegedly infringing mark with the wrongful
intent of capitalizing on its goodwill.” Conan Properties, Inc., 752 F.2d at 150
(internal citation omitted). SMRI’s “burden . . . is [a] heavy [one].” Id.
The jury was not asked to determine whether the defendants were
“intentional, bad faith infringer[s].” Id. “[T]he jury’s findings of trademark
infringement and unfair competition did not constitute a finding that
[defendants] acted with the wrongful intent to capitalize on [SMRI’s] goodwill,
since wrongful intent is merely one of at least seven critical elements
contributing to a finding of likelihood of confusion.” Id. at 150. See also SMRI
v. RP&G, 908 F.3d at 339 (“the standard of willfulness contained in the court’s
instruction is simply one of the many definitions that courts have used.”)
(referencing Western Diversified Services, Inc., v. Hyundai Motor America, Inc.,
427 F.3d 1269, 1273-74 (10th Cir. 2005)).
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Other willfulness standards consider (1) whether “the defendant deceives
the plaintiff into thinking [defendant] has ceased infringing the trademark
when in fact the illegal action continues, a finding of willfulness might be
appropriate[;] . . . .” (2) “misrepresentation to the courts might constitute willful
infringement[;] . . . .” and (3) “if the wrongdoer uses its own economic muscle to
weaken a plaintiff who has threatened an infringement action, a finding of
willfulness might be justified.” Western Diversified Services, Inc., 427 F.3d at
1274. The jury was not presented with any evidence supportive of these
alternative standards and SMRI does not now argue one or more of these
alternative standards apply to the issues presently before the court.
A. RP&G Defendants
The RP&G Defendants willfully and intentionally infringed the Composite
Design mark. SMRI v. RP&G, 908 F.3d at 339. That conclusion is based on a
single product, a shot glass. Id. at 338. But, “the differences between the
glass’s design and the Monahan mark are so obvious,” the Eighth Circuit ruled
“the jury did not have any basis in the record [to support a] finding [the shot
glass was] a counterfeit.” Id. at 340. Other than the Composite Design mark
itself and the shot glass, SMRI presented no evidence to support the jury’s
damages verdict on this infringement. Id. at 338.
The record does not support the jury’s finding the RP&G Defendants
infringed on SMRI’s “STURGIS BIKE WEEK” mark “with the conscious intent to
benefit from [SMRI’s] goodwill or reputation.” Id. at 344 (internal quotation
marks omitted). The RP&G Defendants used the word “Sturgis” in the good
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faith belief that SMRI’s “STURGIS” mark was invalid. When the RP&G
Defendants used “Sturgis” and “STURGIS MOTOR CLASSIC,” they did so “in
the face of [SMRI’s] disputed title” and they did so in good faith. SMRI v.
RP&G, 908 F.3d at 344 (internal citation omitted).
After 2006, the RP&G Defendants specifically employed its own labels
and tags to differentiate their products from SMRI’s products. See, i.e., Trial
Exhibits 239 and 276a. Those labels confirmed the products were a “STURGIS
MOTOR CLASSIC” product and “not affiliated with, sponsored or endorsed by
SMRI.” Conan Properties, Inc., 752 F.2d at 150. The court finds the RP&G
Defendants were subjectively intending to differentiate their products from
SMRI’s products and not confuse buyers. Id. RP&G built its own goodwill with
its wholesale customers and consumers. That goodwill was the basis of
RP&G’s continuing use of its Sturgis designations in expanding its business
over decades. RP&G Defendants’ conduct did “not constitute ‘willful
infringement.’ ” SMRI v. RP&G, 908 F.3d at 344 (internal citation omitted).
The court further finds “[t]he record . . . fails to reveal the subjective and
knowing bad faith necessary to foreclose the equitable defenses.” Conan
Properties, Inc., 752 F.2d at 151. SMRI “has not carried its burden of proving
that [RP&G Defendants] subjectively and knowingly intended to use [their
marks] for the purpose of deriving benefit from [SMRI’s] goodwill.” Id.
Were the court to conclude the RP&G Defendants had unclean hands,
which the court has not done, SMRI failed to “prove that the defendant[s] [have]
engaged in particularly egregious conduct.” SMRI v. RP&G, 908 F.3d at 345
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(internal citation omitted). The court exercises its “discretion not to apply the
doctrine of unclean hands.” Id. at 344.
The RP&G Defendants’ conduct does not rise to the level of unclean
hands so as to defeat the defendants’ right to assert acquiescence and laches.
B. Wal-Mart
SMRI failed to present any evidence Wal-Mart was a “willful infringer.”
Conan Properties, Inc., 752 F.2d at 150. In 2011, the first year Wal-Mart
carried any of RP&G’s products, a manager observed the RP&G Defendants’
tags disclaiming any relationship with SMRI but proclaiming the products to be
“official Sturgis Motorcycle Rally products.” SMRI v. RP&G, 908 F.3d at 341.
Even though the manager of the Rapid City Wal-Mart called SMRI’s licensing
agent and learned the RP&G products were not officially licensed by SMRI,
Wal-Mart continued to sell RP&G’s products with the RP&G Defendants’ tags
on them. Id. While this may have been bad business judgment on the part of
Wal-Mart, the conduct does not rise to the level of “subjective . . . bad faith,”
Conan Properties, Inc., 752 F.2d at 151, or “particularly egregious conduct.”
SMRI v. RP&G, 908 F.3d at 345.
Wal-Mart’s conduct does not rise to the level of “unclean hands” so as to
defeat that defendant’s right to assert acquiescence and laches.
2. SMRI Conduct
SMRI’s argument that the court cannot examine plaintiff’s conduct to
determine if it has unclean hands is without merit. “The defense of unclean
hands will bar enforcement of a valid copyright when a plaintiff commits
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wrongdoing ‘of serious proportions.’ ” Saxon, 968 F.2d at 680 (internal citation
omitted). In Saxon, the court held “[t]he district court did not err in finding
that Saxon’s conduct barred him from enforcing his copyright[.]” Id.
Defendants bear “the burden of proving that [SMRI’s] hands were unclean.
Conan Properties, Inc., 752 F.2d at 150.
A. 2001-2015
To assess SMRI’s conduct for equity purposes, the court is compelled to
look back to 2001. On May 8 of that year, an examining attorney with the PTO
rejected the application by the Sturgis Chamber to register the term STURGIS.
(Trial Exhibit 769 at pp. 544-51). In arriving at the decision to reject the
application, the examiner concluded “the mark is primarily geographically
descriptive of the applicant’s goods and services . . . . The primary significance
of the term “STURGIS” is geographic, and the applicant’s goods and services
come from the geographical place named in the mark. Therefore, a public
association of the goods and services with the place is presumed. . . . The
proposed mark is unregistrable on the Principal Register.” Id. at p. 546)
(internal citations and references omitted).
On November 1, 2001, Marlin Martin, then-President of the Sturgis
Chamber, filed a sworn declaration with the PTO seeking reconsideration of
the Chamber’s application. In his declaration, Mr. Martin stated he had
“overall management responsibility for the activities of the Chamber, including
the marketing and promotion of the STURGIS motorcycle rally (the “Rally”) held
each August in Sturgis, South Dakota, and the marketing, distribution and
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sales of a variety of products in connection with the Rally by the Chamber and
its authorized licensees.” Id. at p. 583 ¶ 1; see also Trial Exhibit 540 ¶ 1. Mr.
Martin further stated that “[t]he Sturgis Chamber has used the STURGIS mark
in commerce in connection with the promotion of motorcycle and vehicle
rallies, exhibits and competitions and the promotion of the City of Sturgis and
the Black Hills area of South Dakota and Wyoming since at least as early as
July 1, 1986.” (Trial Exhibit 769 at pp. 583-84 ¶ 2). Mr. Martin’s declaration
concluded:
It is my opinion that, as a result of the extensive marketing and
promotional efforts of the Sturgis Chamber in connection with the
Rally and the Sturgis Chamber’s continuous and substantially
exclusive use of the STURGIS mark in connection with the
marketing and promotion of the Rally since at least as early as
July 1, 1987, the purchasing public has come to identify the
STURGIS mark with the source of the Sturgis Chamber’s Rally
Products and its Rally promotion and entertainment services and
to recognize that the STURGIS mark distinguishes the Sturgis
Chamber’s Rally Products and promotion and entertainment
services from those sold by others.
Id. at pp. 584-85 ¶ 4.
In its opposition to the Sturgis Chamber’s application with the PTO,
Sturgis Motorcycles, Inc., d/b/a Black Hills Harley-Davidson, d/b/a Sturgis
Harley-Davidson (jointly referred to as “Sturgis Motorcycle”) on December 11,
2002, declared under oath, among other things:
Sturgis Motorcycles . . . have continuously used the name
STURGIS in commerce on and in connection with the sale of “Rally
Products” . . . . at the Sturgis Motorcycle Rally . . . held in and
around Sturgis, including Rapid City, SD, in the Black Hills area of
South Dakota each year since at least 1981. (Trial Exhibit 539 at
p. 6 ¶ 1).
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Sturgis Motorcycles . . . have continuously used the name
STURGIS in commerce in connection with the promotion of the
Rally including organizing and sponsoring events at the Rally since
at least 1991. Id. ¶ 2.
. . .
Sturgis Motorcycles has had gross sales of Rally Products bearing
the name STURGIS totaling approximately $9 million since 2000.
Id. at p. 7 ¶ 9.
. . .
Many of over 700 vendors use the name STURGIS in connection
with the sale of Rally Products each year at the Rally. Id. at p. 8
¶ 11.
Many of over 700 vendors use the name STURGIS in connection
with the promotion of the Rally. Id. ¶ 12.
On December 11, 2002, Good Sports Sturgis, Inc., through its owner
Jerry Berkowitz, filed a separate notice of opposition to the Sturgis Chamber’s
application with the PTO. (Trial Exhibit 538). The notice of opposition under
oath declared:
Good Sports has continuously used the name STURGIS in
commerce on or in connection with the sale of “Rally Products” as
defined in the Application, . . . at the Sturgis Motorcycle Rally . . .
since at least 1985. Id. at pp. 5-6.
Good Sports has continuously used the name STURGIS in
promotion of the Rally since at least 1985. Id. at p. 6.
. . .
[Sturgis Chamber] knows it has not used the name STURGIS
substantially exclusively in conjunction with the sale of Rally
related products in the five years preceding November 1, 2001. Id.
at p. 12.
[Sturgis Chamber] has knowledge of the substantial use by others
of the name STURGIS in conjunction with the promotion of the
Rally. Id.;
[Sturgis Chamber] knows that many of the over 700 vendors use
the name STURGIS on or in connection with Rally Products. Id.;
and
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At least as early as 1990, [Sturgis Chamber] knew of Good Sports
use of the name STURGIS in commerce in connection with the sale
of Rally Products. Id.
At trial, Jim Burgess, one of the owners of Sturgis Motorcycle,
testified his company told Mr. Martin four times before the Chamber’s
application with the PTO was filed that Sturgis Motorcycle had been
making substantial use of STURGIS for two decades before November 1,
2001. (Docket 336 at pp. 63:11-64:5; see also Trial Exhibit 539 ¶¶ 57-
64). SMRI, as the successor of the Chamber, and Sturgis Motorcycle
reached an agreement to end their almost 10-year fight. Trial Exhibit
514. In exchange for Sturgis Motorcycle’s withdrawal of its opposition to
the Chamber’s original PTO application, SMRI agreed Sturgis Motorcycle
could use the STURGIS mark without any licensing agreement with
either the Chamber or SMRI. Trial Exhibit 514; see also Docket 336 at
pp. 34:23-36:22.
Mr. Berkowitz testified at trial his companies, Good Sports and Hot
Leathers, operated in Sturgis. (Docket 314 at pp. 71:13-17 & 72:19-23). In an
agreement to dismiss his company’s opposition to SMRI’s application with the
PTO, Good Sports became the exclusive licensee of SMRI’s trademarks. Id. at
pp. 78:1-18; 81:7-10 & 116:9-13; see also Trial Exhibits 167 & 165. Mr.
Berkowitz also became a member of the board of directors of SMRI at its
inception as part of the deal. (Docket 314 at p. 73:6-11).
Good Sports pays SMRI “to use their family of trademarks. [His]
company does generate money from the sublicensee . . . contracts. . . . And
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part of that royalty goes to Good Sports.” (Docket 314 at p. 97:13-18). Good
Sports “licensed over 50 sublicensees in 2015 on Sturgis product[s].” Id. at
p. 117:13-15. Since 2011, Good Sports has generated $16.25 million in
revenue from the Sturgis Rally. Id. at p. 118:3-7.
After Sturgis Motorcycle and Good Sports withdrew their notices of
opposition to SMRI’s trademark applications, the PTO granted the “STURGIS”
trademarks to SMRI. (Trial Exhibits 16 & 17).
The court instructed the jury that whether SMRI’s “STURGIS”
registration was fraudulently obtained had to be “proven by clear and
convincing evidence.” (Docket 235 at pp. 36 & 57). The jury was required to
consider whether “SMRI or the Sturgis Chamber . . . knowingly made
inaccurate statements, misrepresentations or knowingly failed to disclose
material information to the [PTO]. . . . with the intent to deceive the [PTO].” Id.
at p. 36. The jury by its verdict concluded SMRI had not obtained the
STURGIS trademark registration fraudulently. (Docket 263 at p. 2).
The Eighth Circuit best described Mr. Martin’s submission to the
PTO.
The only way that Martin was able to assert that the Chamber had
substantially exclusively used the word “Sturgis” for decades to
promote the rally was by denying that virtually anyone else
promoted it when they independently used the word to sell their
own rally-related goods and services. . . . Although it was patently
unreasonable for Martin to think that only Chamber-approved
uses of the mark counted as rally-related uses, it was this logic
that enabled him to tell the Trademark Office that the word
“Sturgis” had become distinctive through the Chamber’s
substantially exclusive use of it in connection with the marketing
and promotion of the rally.
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Martin’s logic was so incoherent and self-serving that no
reasonable jury could accept it. . . . The fact that non-Chamber-
affiliated producers were using the word [“Sturgis”] on their rally-
related products was directly relevant to whether the Chamber was
its substantially exclusive user. Martin, however, ignored those
third-party uses since he believed that only the Chamber actually
promoted the rally. But he had no right to declare that by fiat. . . .
Martin thus had no right to declare that only the Chamber’s
promotions actually promoted the rally. It is irrelevant to our
conclusion here that the jury also found that Martin did not
“knowingly” lie in his affidavit: A person can be indisputably, but
sincerely, wrong.
SMRI v. RP&G, 908 F.3d at 328. The appellate court’s ruling frees the district
court from the jury’s finding.
B. 2018-2020
On June 14, 2018, the Eighth Circuit ruled the STURGIS mark was
invalid. SMRI v. RP&G, 908 F.3d at 333. Since that date, SMRI continues to
irrationally assert its STURGIS marks are valid. On February 15, 2019, the
court observed that “[n]otwithstanding the Eighth Circuit decision, SMRI
‘continues to claim ownership of [STURGIS, STURGIS RALLY & RACES, and
STURGIS MOTORCYCLE RALLY], despite the Eighth Circuit’s opinion that
Plaintiff insufficiently proved infringement against Defendants.’ ” (Docket 489
at pp. 4-5) (citing Docket 482 at pp. 3-4). In response to SMRI’s posturing, the
court stated: “SMRI’s arguments fail. The word ‘Sturgis’ is not a valid
trademark. The terms STURGIS, STURGIS RALLY & RACES, and STURGIS
MOTORCYCLE RALLY when used by the defendants, or by anyone else for that
matter, do not infringe on SMRI’s marks. SMRI is bound by this decision under
the doctrines of res judicata and collateral estoppel.” Id. at p. 7 (emphasis
added).
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As part of defendants’ motion to cancel the “Sturgis” registrations, the
court was asked to take judicial notice of “SMRI’s February 22, 2019 Status
Report filing before the Trademark Trial and Appeal Board (“TTAB”).” (Docket
519 at p. 2) (citing Docket 496). In a TTAB proceeding brought by Concerned
Citizens of Sturgis, Inc., SMRI stated:
Respondent states further that . . . the civil action for which the
Board suspended this proceeding, Sturgis Motorcycle Rally, Inc. v.
Rushmore Photo & Gifts, Inc., et al. (5:11-cv-05052-JLV), has not
yet reached finality and the Amended Order for Remand
concluding that “the STURGIS mark is invalid” is subject to
appeal and not based in law, such that [Concerned Citizens for
Sturgis, Inc.’s] request for cancellation of U.S. Reg. Nos. 3,923,284
and 4,440,406 is not final or likely to become final. . . .
In view of the foregoing, Respondent respectfully requests that the
present cancellation remain suspended pending full resolution of
the civil action.
(Docket 497-1 at pp. 1-2).
SMRI opposed defendants’ motion for judicial notice. (Docket 505).
SMRI argued “[a]lthough the filing of the status report is indisputable, the
contents of the report are not. . . . The issues contained in the status report are
not capable of accurate and ready determination without supporting evidence
or further argument and they can be reasonably questioned[.]” Id. at p. 4.
Based on its argument, SMRI asked the court to “take judicial notice only of
the filing of the status report with the Trademark Trial and Appeal Board and
not consider the truth of the contents of the report.” Id. (emphasis added).
The court granted defendants’ motion for judicial notice. (Docket 519 at
p. 23). “In the proceeding before the TTAB, Concerned Citizens for Sturgis,
Inc., seeks cancellation of the Sturgis mark.” (Docket 519 at p. 17 n.4)
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(referencing TTAB, Cancellation 92054714, Docket #1). In the TTAB
proceeding “SMRI defends against cancellation alleging its Sturgis Registration
No. 3,923,284 is and remains valid.” Id. (referencing TTAB, Cancellation
92054714, Document #2).
SMRI’s statement and representations to the TTAB are patently
misleading. It is incomprehensible SMRI would suggest the court not look to
the contents of plaintiff’s filing with a federal agency for truthfulness. See Fed.
R. Civ. P. 11(b), 37 CFR § 2.116(a) & Roux Laboratories, Inc. v. La Cade
Products Co., 558 F.2d 33 (C.C.P.A. 1977) (The Federal Rules of Civil Procedure
are applicable to interparty proceedings before the TTAB).
During the same time period, defendants filed a motion for cancellation
of the STURGIS registrations pursuant to 15 U.S.C. § 1119. (Docket 493).
SMRI opposed the motion. (Docket 500). SMRI again “argue[d] the court’s
declaration that the STURGIS mark is invalid is wrong because the court
‘misreads the Eighth Circuit’s [decision] by relying on it to make such
declaration, as the Eighth Circuit merely cited Plaintiff for its failure to offer
sufficient proof of validity, without going so far as to declare the mark invalid.”
(Docket 519 at p. 6) (citing Docket 500 at p. 3).
For the third time, on December 11, 2019, the court was compelled to
remind SMRI that its “argument the STURGIS mark is still valid and can be
enforced against others ignores the 8th Circuit’s holding that STURGIS is not a
valid mark.” Id. at p. 12 (citing SMRI v. RP&G, 908 F.3d at 323 & 333). To
make it clear the court declared:
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The United States Court of Appeals for the Eighth Circuit has
spoken. The STURGIS mark is invalid. As long as the public
records in the Patent and Trademark Office continue to represent
that the STURGIS Registrations are valid, the public will be
confused. Section 1119 gives authority to the court to remove
that confusion. . . . Because SMRI’s STURGIS mark has been
shown to be invalid, cancellation is not merely appropriate, it is
the best course.
Id. at p. 13 (internal citations and quotation marks omitted). The court found
“SMRI’s continuing effort to perpetuate misleading assertions before the TTAB
are a calculated attempt to confuse not only the TTAB and USPTO but also the
public about the STURGIS Registrations.” Id. at p. 17.
Based on these findings and others made in the order, the court “ordered
the STURGIS mark evidenced by Registration Nos. 3,923,284 and 4,440,406 is
canceled and this order of cancellation is certified to the Director of the United
States Patent and Trademark Office so that appropriate entries may be made to
its records.” Id. at p. 23 (some capitalization omitted). The court
FURTHER ORDERED the United States Patent and Trademark
Office is notified pursuant to Trademark Manual of Examining
Procedure § 1610 that the following proceedings before the
Trademark Trial and Appeal Board, namely:
1. Concerned Citizens for Sturgis, Inc., v. Sturgis Motorcycle
Rally Inc., Cancellation No. 92054714; and
2. Sturgis Motorcycle Rally, Inc., v. Sturgis Black Hills Rally
S.D., LLC, Opposition No. 91202965
involve the STURGIS registrations.
Id. A certified copy of the court’s order was received by the Office of the
Solicitor of the PTO on December 16, 2019. (Docket 522).
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Despite the rulings of the Eighth Circuit and this district court, on
January 24, 2020, SMRI continued to hold itself out as the owner of “Sturgis®,”
“Sturgis® Motorcycle Rally,” and “Sturgis Rally & Races.” (Docket 529-6).
As part of its deception, SMRI’s website intimidates or at least impliedly
intimidates Sturgis Rally venders to “Apply to Become a Sturgis® Licensee” and
“Fill out the form below to begin the Official Sturgis® Motorcycle Rally Brand
licensing application process.” (Dockets 529-6 & 529-7) (some capitalization
omitted). These efforts by SMRI are a continuing “calculated attempt to
confuse . . . the public about the STURGIS Registrations.” (Docket 519 at
p. 17).
In May 2020, the TTAB adopted SMRI’s deceptive November 2019
submission and did not cancel the Sturgis registrations on the mistaken belief
the cancellation order was an “interlocutory decision.” (Docket 562-4 at p. 2).
When challenged by the RP&G Defendants to “immediately correct its prior
misrepresentations to the TTAB,” SMRI did nothing. (Dockets 561 at p. 6 &
562-5 at p. 3).
For the fourth time, those three marks were invalided by the Eighth Circuit
in 2018. The public has an interest in respect for court orders and a “right not
to be deceived or confused” by SMRI’s misrepresentations about its marks.
Community of Christ Copyright Corp. v. Devon Park Restoration Branch of
Jesus Christ’s Church, 683 F. Supp. 2d 1006, 1018 (W.D. Mo. 2010).
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During the August 2020 Sturgis Rally, at which an estimated 365,979
people attended,6 SMRI continued its deception. SMRI’s website perpetuated
the misconception that rally vendors had to “Fill out the form . . . to begin the
Official Sturgis® Motorcycle Rally Brand licensing application process” and
“Apply to Become a Sturgis® Licensee.” (Docket 579-2 at p. 2) (some
capitalization omitted). The website furthered perpetuated this deception by
identifying as SMRI’s intellectual property “Sturgis® When used in conjunction
with The Sturgis® Motorcycle Rally,” “Sturgis® Motorcycle Rally,” and
“Sturgis Rally & Races.” Id. at p. 4. SMRI through its sublicensee vendors
continued to sell products with the “STURGIS®” on them. See Docket 579-1 at
pp. 1, 4 & 7-8.
SMRI does not come into this equity proceeding with clean hands.
Precision Instrument Mfg. Co., 324 U.S. at 814. Instead, SMRI “tainted” these
proceedings with conduct which can only be described as “bad faith.” Id. The
court sitting in equity “refus[es] to aid [SMRI,] the unclean litigant” in its
misrepresentations and deception. Id. SMRI’s conduct since 2001 through
trial, and after the Eighth Circuit decision through 2020 “transgress[es] [the]
equitable standards of conduct” and candidness the court is entitled to require
of litigants appearing before it. Id. at 815.
Defendants satisfied their burden of proof as to SMRI’s unclean hands.
The court finds SMRI “acted inequitably” and is barred “from obtaining
6See https://www.rideapart.com/news/439496/sturgis-2020-
attendance-crime-numbers/ (last visited January 13, 2021).
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equitable relief.” Safeway Transit LLC, 954 F.3d at 1181-82 (emphasis
removed). SMRI’s four claims of (1) trademark infringement of STURGIS BIKE
WEEK under 15 U.S.C. § 1114; (2) trademark infringement of the Composite
Design Mark under 15 U.S.C. § 1114; (3) false advertising under 15 U.S.C.
§ 1125(a)(1)(B); and (4) deceptive trade practices under SDCL §§ 37-24-6(1) &
37-24-31 must be dismissed.
3. Defendants entitled to equitable defenses
In the event a reviewing court disagrees with the court’s conclusion
regarding SMRI’s unclean hands, the court will identify whether each of the
defendants can assert the equitable defenses of acquiescence and laches and to
which claims remaining against that defendant.
A. Rushmore Photo & Gifts
The court finds the conduct of the corporation, RP&G, prior to the
October 30, 2015, did not “not constitute ‘willful infringement.’ ”7 SMRI v.
RP&G, 908 F.3d at 344 (internal citation omitted). The court further finds
“[t]he record . . . fails to reveal the subjective and knowing bad faith [on the
part of the corporation] necessary to foreclose the equitable defenses.” Conan
Properties, Inc., 752 F.2d at 151. SMRI “has not carried its burden of proving
[the corporation] subjectively and knowingly intended to use [its marks] for
purpose of deriving benefit from [SMRI’s] goodwill.” Id.
7This finding is not intended to suggest RP&G engaged in willful
infringement after October 30, 2015. SMRI offers no evidence that such a
claim existed then or now.
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RP&G is entitled to assert both equitable defenses against all four of
SMRI’s claims. See San Francisco Association for the Blind v. Industrial Aid
for the Blind, 152 F.2d 532, 537 (8th Cir. 1946) (“The delay of plaintiff [eight
years] in bringing this action . . . will, under the circumstances of this case,
deprive the plaintiff of any right to damages or an accounting.”) (referencing
Menendez v. Holt, 128 U.S. 514, 523-25 (1888); Grotrian, Helfferich, Schulz,
Th. Steinweg Nachf. v. Steinway & Sons, 523 F.2d 1331, 1344 (2d Cir. 1975)
(the court vacated money damages); Minnesota Mining and Manufacturing Co.
v. Beautone Specialties, Co., Ltd., 82 F. Supp. 2d 997, 1005 (D. Minn. 2000)
(“The general rule is that a finding of laches bars a plaintiff’s ability to recover
for past wrongs[.]”) (referencing A.C. Aukerman Co. v. R.L. Chaides
Construction Co., 960 F.2d 1020, 1040 (Fed. Cir. 1992) (en banc)).
The money damages awarded by the jury against RP&G on the claims of
(1) trademark infringement of STURGIS BIKE WEEK under 15 U.S.C.
§ 1114; (2) trademark infringement of the Composite Design Mark under
15 U.S.C. § 1114; (3) false advertising under 15 U.S.C. § 1125(a)(1)(B); and
(4) deceptive trade practices under SDCL §§ 37-24-6(1) & 37-24-31 are vacated.
B. Carol Niemann
“A corporate officer is personally liable for the corporation’s trademark
infringement if the officer participates in that infringement.” Safeway Transit
LLC v. Discount Party Bus, Inc., 334 F. Supp. 3d 995, 1007 (D. Minn. Aug. 13,
2018) (citing Microsoft Corp. v. Ion Techs. Corp., No. 01-1769, 2003 WL
21356084, at *5 (D. Minn. May 30, 2003) (“An individual is liable for copyright
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infringement if [s]he has the ability to supervise the infringing activity and a
financial interest in that activity, or if [s]he personally participates in that
activity.”) (internal citation omitted) (affirmed by Safeway Transit LLC v.
Discount Party Bus, Inc., 954 F.3d 1171 (8th Cir. 2020)).
SMRI identified no case which prohibits the court from extending RP&G’s
right to invoke these equitable defenses on behalf of the corporation’s board
members and employees. Application of the equitable defenses in this setting
is within the discretion of the court. SMRI v. RP&G, 908 F.3d at 343.
There is no evidence Carol Niemann engaged in any conduct outside of
her corporate and employee status which would give rise to personal liability
on SRMI’s claims. Carol Niemann’s conduct does “not constitute ‘willful
infringement.’ ”8 SMRI v. RP&G, 908 F.3d at 344 (internal citation omitted).
The court further finds “[t]he record . . . fails to reveal the subjective and
knowing bad faith [by Carol Niemann] necessary to foreclose the equitable
defenses.” Conan Properties, Inc., 752 F.2d at 151. SMRI “has not carried its
burden of proving that [Carol Niemann] subjectively and knowingly intended to
use [RP&G’s marks] for the purpose of deriving benefit from [SMRI’s] goodwill.”
Id. Carol Niemann is entitled to assert both equitable defenses against all four
of SMRI’s claims. San Francisco Association for the Blind, 152 F.2d at 537
(internal references omitted).
8This finding is not intended to suggest Carol Niemann engaged in willful
infringement after October 30, 2015. SMRI offers no evidence that such a
claim existed then or now.
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The money damages awarded against Carol Niemann on the claims of
(1) trademark infringement of STURGIS BIKE WEEK under 15 U.S.C.
§ 1114; (2) trademark infringement of the Composite Design Mark under
15 U.S.C. § 1114; (3) false advertising under 15 U.S.C. § 1125(a)(1)(B); and
(4) deceptive trade practices under SDCL §§ 37-24-6(1) & 37-24-31 are vacated.
C. Paul Niemann
A significant portion of SMRI’s evidence at trial focused on Paul
Niemann. But there is no evidence Paul Niemann engaged in any conduct
outside of his corporate and employee status which gives rise to personal
liability on SRMI’s claims. The evidence of Paul Niemann’s conduct developed
by SMRI does “not constitute ‘willful infringement.’ ”9 SMRI v. RP&G, 908 F.3d
at 344 (internal citation omitted). The court further finds “[t]he record . . . fails
to reveal the subjective and knowing bad faith [by Paul Niemann] necessary to
foreclose the equitable defenses.” Conan Properties, Inc., 752 F.2d at 151.
SMRI “has not carried its burden of proving that [Paul Niemann] subjectively
and knowingly intended to use [RP&G’s marks] for the purpose of deriving
benefit from [SMRI’s] goodwill.” Id. Paul Niemann is entitled to assert both
equitable defenses against all four of SMRI’s claims. San Francisco Association
for the Blind, 152 F.2d at 537 (internal references omitted).
The money damages awarded against Paul Niemann on the claims of
(1) trademark infringement of STURGIS BIKE WEEK under 15 U.S.C.
9This finding is not intended to suggest Paul Niemann engaged in willful
infringement after October 30, 2015. SMRI offers no evidence that such a
claim existed then or now.
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§ 1114; (2) trademark infringement of the Composite Design Mark under
15 U.S.C. § 1114; (3) false advertising under 15 U.S.C. § 1125(a)(1)(B); and
(4) deceptive trade practices under SDCL §§ 37-24-6(1) & 37-24-31 are vacated.
D. Brian Niemann
Even more than Paul Niemann, SMRI focused its evidence at trial on the
conduct of RP&G through Brian Niemann. Once he took over product
development and retail relations for RP&G, Brian Niemann became the primary
corporate board member and employee whom SMRI alleged spawned plaintiff’s
claims at trial. Brian Niemann was adamant SMRI could not claim “Sturgis” as
its trademark and he maintained that claim, in good faith, before, during and
after trial. The Eighth Circuit proved Brian Niemann was correct in his belief.
SMRI v. RP&G, 908 F.3d at 333 (“In sum, the jury’s finding that the “Sturgis”
word mark is valid cannot stand[.]”).
There is no evidence Brian Niemann engaged in any conduct outside of
his corporate and employee status which would give rise to personal liability on
SRMI’s claims. Brian Niemann’s conduct does “not constitute ‘willful
infringement.’ ”10 Id., at 344 (internal citation omitted). The court further finds
“[t]he record . . . fails to reveal the subjective and knowing bad faith [by Brian
Niemann] necessary to foreclose the equitable defenses.” Conan Properties,
Inc., 752 F.2d at 151. SMRI “has not carried its burden of proving that [Brian
Niemann] subjectively and knowingly intended to use [RP&G’s marks] for
10This finding is not intended to suggest Brian Niemann engaged in
willful infringement after October 30, 2015. SMRI offers no evidence that such
a claim existed then or now.
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purpose of deriving benefit from [SMRI’s] goodwill.” Id. Brian Niemann is
entitled to assert both equitable defenses against all four of SMRI’s claims.
San Francisco Association for the Blind, 152 F.2d at 537 (internal references
omitted).
The money damages awarded against Brian Niemann on the claims of
(1) trademark infringement of the STURGIS BIKE WEEK under 15 U.S.C.
§ 1114; (2) trademark infringement of the Composite Design Mark under
15 U.S.C. § 1114; (3) false advertising under 15 U.S.C. § 1125(a)(1)(B); and
(4) deceptive trade practices under SDCL §§ 37-24-6(1) & 37-24-31 are vacated.
E. Wal-Mart
Wal-Mart did not develop or sell its own Sturgis rally products. Wal-
Mart’s association with Sturgis rally merchandise came through its
relationship with RP&G and its Sturgis Motor Classic products. A Wal-Mart
representative did call SMRI about the differences in its merchandise tags and
those of RP&G. SMRI v. RP&G, 908 F.3d at 341. But Wal-Mart took RP&G at
its word for intellectual property issues associated with the Sturgis Motor
Classic merchandise. (Docket 316 at pp. 128:5-129:17).
Equity demands Wal-Mart benefit from both defenses. It would be
inequitable to permit SMRI to recover against Wal-Mart when RP&G is
protected by both equitable defenses. Wal-Mart is not a “willful infringer.”
Conan Properties, Inc., 752 F.2d at 150. Wal-Mart’s conduct did not rise to the
level of “subjective . . . bad faith,” Id., at 151, or “particularly egregious
conduct.” SMRI v. RP&G, 908 F.3d at 345. The court further finds “[t]he
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record . . . fails to reveal the subjective and knowing bad faith [on the part of
Wal-Mart] necessary to foreclose the equitable defenses.” Conan Properties,
Inc., 752 F.2d at 151. SMRI “has not carried its burden of proving that [Wal-
Mart] subjectively and knowingly intended to use [RP&G’s marks] for purpose
of deriving benefit from [SMRI’s] goodwill.” Id. Wal-Mart is entitled to assert
both equitable defenses against all four of SMRI’s claims. San Francisco
Association for the Blind, 152 F.2d at 537 (internal references omitted).
The money damages awarded by the jury against Wal-Mart on the claims
of (1) trademark infringement of STURGIS BIKE WEEK under 15 U.S.C.
§ 1114; (2) trademark infringement of the Composite Design Mark under
15 U.S.C. § 1114; (3) false advertising under 15 U.S.C. § 1125(a)(1)(B); and
(4) deceptive trade practices under SDCL §§ 37-24-6(1) & 37-24-31 are vacated.
IV. ORDER
Based on the above analysis, it is
ORDERED that SMRI’s motion to extend the discovery deadline (Docket
549) is denied.
IT IS FURTHER ORDERED that SMRI’s motion to dismiss the ACPA
claim (Docket 569) is denied.
IT IS FURTHER ORDERED that defendants’ motion for judicial notice
(Docket 559) is granted.
IT IS FURTHER ORDERED that defendants’ motion for summary
judgment (Docket 550) is granted.
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IT IS FURTHER ORDERED that SMRI’s ACPA claim (Docket 52 at p. 13)
is dismissed with prejudice.
IT IS FURTHER ORDERED that defendants’ motion to strike SMRI’s jury
demand on its ACPA claim (Docket 563) is denied as moot.
IT IS FURTHER ORDERED that the motion of RP&G for damages for an
improvidently issued amended preliminary injunction (Docket 537) is granted.
IT IS FURTHER ORDERED that Rushmore Photos & Gifts, Inc., is
entitled to a money judgment against Sturgis Motorcycle Rally, Inc., in the
amount of $282,341.
IT IS FURTHER ORDERED that the motion of RP&G asking the court to
find SMRI in contempt of court (Docket 548 at p. 10) is denied as moot.
IT IS FURTHER ORDERED that defendants’ motion asking the court to
issue an order to show cause (Docket 538 at pp. 22-23) is granted. A separate
order to show cause as to why SMRI should not be held in contempt of court
for its failure to failure to pay $17,053.24 awarded to the defendants as
attorneys’ fees by a March 20, 2017, order, (Docket 421), as confirmed by the
February 15, 2019, order, (Docket 489 at p. 12), will issue.
IT IS FURTHER ORDERED that defendants’ motion for the application of
equitable defenses (Docket 276) is granted.
IT IS FURTHER ORDERED that SMRI is barred from recovering damages
from the defendants for the time period prior to October 30, 2015.
IT IS FURTHER ORDERED that the money judgment (Docket 269) in
favor of plaintiff Sturgis Motorcycle Rally, Inc., and against the defendants
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Rushmore Photo & Gifts, Inc., for the sum of $68,750; Carol Niemann for the
sum of $68,750; Paul A. Niemann for the sum of $68,750; Brian M. Niemann
for the sum of $68,750; and Wal-Mart Stores, Inc., for the sum of $105,000, is
vacated.
Dated March 29, 2021.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
UNITED STATES DISTRICT JUDGE
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