Safeway Transit LLC v. Discount Party Bus, Inc. et al

Filing 97

MEMORANDUM OPINION AND ORDER ON REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE; overruling Plaintiffs' objection 94 ; adopting the Report and Recommendation 93 ; denying 79 Plaintiffs' Motion for Partial Summary Judgment. (Written Opinion). Signed by Chief Judge John R. Tunheim on 09/28/2017. (JMK)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
SAFEWAY TRANSIT LLC and
ALEKSEY SILENKO,
Plaintiffs,
v.
DISCOUNT PARTY BUS, INC., an
inactive Minnesota corporation, PARTY
BUS MN LLC, a Minnesota limited
liability company, and ADAM
FERNANDEZ,

Civil No. 15-3701 (JRT/HB)

MEMORANDUM
OPINION AND ORDER ON
REPORT AND RECOMMENDATION
OF MAGISTRATE JUDGE

Defendants.

Chad A. Snyder and Michael H. Frasier, RUBRIC LEGAL LLC, 233
Park Avenue South, Suite 205, Minneapolis, MN 55415, for plaintiffs.
Adam E. Szymanski and Casey A. Kniser, PATTERSON THUENTE
PEDERSEN, PA, 80 South Eighth Street, Suite 4800, Minneapolis, MN
55402, for defendants.

Plaintiffs Safeway Transit LLC and Aleksey Silenko (collectively, “Plaintiffs”)
filed this Lanham Act action for infringement of three unregistered trademarks against
Discount Party Bus, Inc., Party Bus MN LLC, and Adam Fernandez (collectively,
“Defendants”). (Second Am. Compl., Oct. 15, 2015, Docket No. 8.) Plaintiffs allege that
Defendants attempted to steal Plaintiffs’ business by infringing Plaintiffs’ trademarks,
including “Rent My Party Bus,” “952 LIMO BUS,” and “Party Bus MN,” and by seeking
transfer of associated web domains. (Id. ¶ 1.) On November 14, 2016, Plaintiffs moved
for Partial Summary Judgment on Count III, federal trademark infringement under 15

U.S.C. § 1125(A), and on Count VII, reverse domain hijacking under 15 U.S.C.
§ 1114(2)(D)(v). (Mot. for Partial Summ. J., Nov. 14, 2016, Docket No. 79.)
On July 31, 2017, United States Magistrate Judge Hildy Bowbeer issued a Report
and Recommendation (“R&R”), recommending that the Court deny Plaintiffs’ motion
and finding that Plaintiffs failed to show that there is no genuine dispute of material facts
warranting judgment as a matter of law on either count. (R&R, July 31, 2017, Docket
No. 93.) Plaintiffs filed objections on August 14, 2017, arguing that the Magistrate Judge
erred in denying summary judgment for two of the three marks at issue in Count III
(“Rent My Party Bus” and “952 LIMO BUS”) and in finding a material fact dispute as to
whether use of one of the marks (“Rent My Party Bus”) was exclusive to the parties to
this case. (Pls.’ Obj. to R&R, Aug. 14, 2017, Docket No. 94.) The Court will exercise its
discretion to receive additional evidence from Plaintiffs as to the second point, but that
evidence does not impact the Magistrate Judge’s sound legal rationale or conclusions.
Accordingly, the Court will overrule Plaintiffs’ objection and adopt the R&R.

ANALYSIS
Upon the filing of a report and recommendation by a magistrate judge, “a party
may serve and file specific written objections to the proposed findings and
recommendations.” Fed. R. Civ. P. 72(b)(2); accord D. Minn. LR 72.2(b)(1). “The
objections should specify the portions of the magistrate judge’s report and
recommendation to which objections are made and provide a basis for those objections.”
Mayer v. Walvatne, No. 07-1958, 2008 WL 4527774, at *2 (D. Minn. Sept. 28, 2008).

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“The district judge must determine de novo any part of the magistrate judge’s disposition
that has been properly objected to.” Fed. R. Civ. P. 72(b)(3); accord D. Minn. LR
72.2(b)(3).

“The district judge may accept, reject, or modify the recommended

disposition; receive further evidence; or return the matter to the magistrate judge with
instructions.” Fed. R. Civ. P. 72(b)(3); accord D. Minn. LR 72.2(b)(3).
Summary judgment is appropriate where there are no genuine issues of material
fact and the moving party can demonstrate that it is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the
lawsuit, and a dispute is genuine if the evidence is such that it could lead a reasonable
jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). A court considering a motion for summary judgment must view the facts in
the light most favorable to the non-moving party and give that party the benefit of all
reasonable inferences to be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986).
Plaintiffs object to the Magistrate Judge’s conclusion that summary judgment is
not appropriate for the unregistered descriptive trademarks “Rent My Party Bus” and
“952 LIMO BUS” because a material factual dispute remains over whether the terms
acquired secondary meaning as to Plaintiffs’ services prior to the alleged infringing use.
A party claiming ownership of an unregistered descriptive mark must show that
the mark acquired secondary meaning before any alleged infringement. Co–Rect Prods.,
Inc. v. Marvy! Advertising Photography, Inc., 780 F.2d 1324, 1330 (8th Cir. 1985). In
determining secondary meaning, it is “the attitude of the consumer that is important,” not
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the view of the mark’s user. Id. at 1332. The user “must show that by long and exclusive
use in the sale of the user’s goods, the mark has become so associated in the public mind
with such goods that the mark serves to identify the source of the goods and to
distinguish them from those of others.” Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863,
870 (8th Cir. 1994). The user “need not show that consumers know their name,” but does
need to show “that consumers associate the [mark] with a single source,” even if that
source is anonymous. Stuart Hall Co. v. Ampad Corp., 51 F.3d 780, 789 (8th Cir. 1995).
The problem Plaintiffs face at the summary judgment stage is that Defendants
have offered evidence of prior use of both marks from 2004 through 2008 or 2009 –
predating Plaintiffs’ use. (R&R at 29-30, 38-39.) In response, Plaintiffs contend that
Defendants abandoned any rights they might have had in the marks by failing to use them
from 2008 or 2009 through 2014. For a Lanham Act claim, a mark is deemed abandoned
“[w]hen its use has been discontinued with intent not to resume such use.” 15 U.S.C.
§ 1127. Three years of non-use creates a rebuttable prima facie presumption of a party’s
intent not to resume use. Id. A party alleging abandonment has the burden of proving it
by clear and convincing evidence. Cmty. of Christ Copyright Corp. v. Devon Park
Restoration Branch of Jesus Christ’s Church, 634 F.3d 1005, 1010 (8th Cir. 2011). Here,
Defendants’ admitted five to six years of non-use would create a rebuttable presumption

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that they abandoned the marks, but Defendants’ eventual resumption of use might serve
to rebut that presumption in the minds of a jury. 1
But even a finding of abandonment would not get Plaintiffs over the hurdle of
proving that the marks had acquired secondary meaning as to Plaintiffs’ own services.
The Magistrate Judge correctly stated that the evidentiary burden in this case is on
Plaintiffs, not Defendants: “the issue here is not whether Defendants had enforceable
rights in the mark themselves, but rather whether Plaintiffs had acquired such rights.”
(R&R at 30.)

Even if Defendants lost any right to enforce the marks due to

abandonment, it does not necessarily follow that Plaintiffs subsequently gained such a
right. First, Plaintiffs must show that the public identified the marks with them.
Whether secondary meaning exists is a question of fact, and as such it is generally
ill-suited for determination at summary judgment. See First Bank v. First Bank Sys., Inc.,
84 F.3d 1040, 1046 (8th Cir 1996). The inquiry is necessarily data-intensive, because it
looks to how a mark is perceived by consumers.

Id. at 1045.

Thus, evidence of

advertising is a factor, but is not itself sufficient. Id. at 1045-46. Other factors include
consumer surveys, deliberate copying, and anecdotal evidence showing consumer

1

Plaintiffs refer to two inapposite out-of-circuit cases on this point. In Emergency One,
Inc. v. American Fire Eagle Engine Co., 332 F.3d 264, 269 (4th Cir. 2003), the Fourth Circuit
held that a jury’s finding of abandonment defeats a priority claim. Notably, in a previous appeal
in the same case, the Fourth Circuit held that the question of intent – at least on the facts of that
case – was properly to be decided by a jury, not on summary judgment. 228 F.3d 531, 537 (4th
Cir. 2000). In Casual Corner Associates, Inc. v. Casual Stores of Nevada, Inc., 493 F.2d 709,
712 (9th Cir. 1974), the Ninth Circuit interpreted the plain text of 15 U.S.C. § 1065 to hold that a
common law mark holder must show “continuing use,” irrespective of intent, to defeat the
incontestability of a registered mark holder. The marks at issue here are unregistered.

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identification.

Stuart Hall, 51 F.3d at 789-90.

The Magistrate Judge found, and

Plaintiffs do not contest, that the record has little evidence to inform this analysis –
Plaintiffs have provided no customer surveys, no concrete sales or customer data, no
market analysis, and no specifics on advertising. (R&R at 33, 40.)
Plaintiffs argue that the Magistrate Judge failed to give due weight to evidence
that Defendants knew Plaintiffs were using the marks at issue when Defendants began the
alleged infringing use.

Again, though, credibility determinations as to Defendants’

evidence of prior use and intent are required to decide whether the alleged infringing use
of the marks was deliberate copying or merely a resumption of prior use. The Magistrate
Judge was thus correct to conclude that this is a matter for a jury, not the Court, to decide.
Five years of exclusive and continuous use creates a prima facie case that a
descriptive mark has acquired secondary meaning. 15 U.S.C. § 1052(f); Stuart Hall, 51
F.3d at 789 (applying Two Pesos Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992)).
Plaintiffs do not dispute that they cannot make a prima facie case for the “952 LIMO
BUS” mark because they have only claimed exclusive use from 2011 through 2014.
(R&R at 32-33.) Plaintiffs do claim sufficient exclusive use of the “Rent My Party Bus”
mark, relying on Defendants’ admission that no new advertising materials using the mark
were created after 2008 or 2009 and a new declaration stating that no other parties used
the mark during the time in question. 2 But as the Magistrate Judge noted, Fernandez

2

The Magistrate Judge held that Plaintiffs failed to carry their burden to make a prima
facie case that the mark “Rent My Party Bus” was not used by third parties in the market. (R&R
(Footnote continued on next page.)

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testified that he had seen the advertisements posted in bathroom stalls in the recent past.
(R&R at 38.) Again, because the inquiry looks to consumer perception, it is more
important when the advertising was seen than when it was published. Defendants’
evidence may be rather tenuous, but in the absence of more data from Plaintiffs, it is
sufficient to show a genuine issue of material fact as to whether Plaintiffs’ use was truly
exclusive for the requisite five years.
Creatively, Plaintiffs seek to establish secondary meaning through a syllogism:
concurrent use of a descriptive term can only cause confusion if the term has secondary
meaning; Defendants admitted that concurrent use of the descriptive terms at issue is
likely to cause confusion and that the descriptive terms at issue had secondary meaning
when used by Defendants; therefore, Defendants agree that the descriptive terms at issue
have secondary meaning. That conclusion is correct as far as it goes: the parties to this
case both believe that the marks at issue have secondary meaning as to their own
services. A reasonable jury could find for either party – or, because consumer perception
controls the inquiry into secondary meaning, it could find that both parties are wrong.
________________________________
(Footnote continued.)

at 39.) Plaintiffs now seek to resolve that shortcoming with a supplemental declaration. (Decl.
of Aleksey Silenko in Supp. of Pls.’ Obj. to R&R, Aug. 14, 2017, Docket No. 95.) Defendants
ask that the Court decline to exercise its discretion to consider this new evidence because
Plaintiffs could have submitted it to the Magistrate Judge. The Court has no obligation to accept
new evidence, see United States v. Jaunich, No. 13-183, 2014 WL 1026331, at *12 (D. Minn.
Mar. 14, 2014), but it nonetheless “has discretion to receive new evidence without any special
justification.” United States v. Hayden, 759 F.3d 842, 846 (8th Cir. 2014). The Court exercises
its discretion to consider Plaintiffs’ evidence and concludes that it does not impact the Magistrate
Judge’s legal rationale or conclusions.

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Therefore, Plaintiffs’ syllogism cannot support the claim that “someone must own the
marks,” let alone the subsequent deduction that, if Defendants abandoned the marks,
Plaintiffs necessarily must be that someone. (Pls.’ Obj. to R&R at 12.)
The anonymous source doctrine of Stuart Hall does not enable Plaintiffs to bypass
this fundamental failing. It is true that Plaintiffs are not required to show that consumers
think of them by name. But Plaintiffs are required to show that “consumers associate the
[mark] with a single source,” even if that source is anonymous. Stuart Hall, 51 F.3d at
789. The Magistrate Judge agreed that Plaintiffs do not have to show that consumers
think of Safeway Transit by name, but correctly held that Plaintiffs failed to show that
there was no genuine issue of material fact as to whether consumers think of them – even
anonymously – as the single source. (R&R at 31-32.)
Secondary meaning is not some abstraction found in the ether; it must be traced to
a single source. For Plaintiffs to prevail at trial, a jury must find that Plaintiffs were that
single source. For Plaintiffs to prevail at summary judgment, Plaintiffs must show that
no reasonable juror could think otherwise. On this record, Plaintiffs have not met that
burden. Even if Defendants did abandon the marks, the Court finds that the evidence is
insufficient to conclude as a matter of law that the marks had acquired secondary
meaning as to Plaintiffs’ services.

Accordingly, the Court will overrule Plaintiffs’

objection, adopt the R&R, and deny Plaintiffs’ motion for partial summary judgment.

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ORDER
Based on the foregoing, and all the files, records, and proceedings herein, the
Court OVERRULES Plaintiffs’ objection [Docket No. 94], and ADOPTS the Report
and Recommendation of the Magistrate Judge [Docket No. 93].
Accordingly, IT IS HEREBY ORDERED that Plaintiffs’ Motion for Partial
Summary Judgment [Docket No. 79] is DENIED.

DATED: September 28, 2017
at Minneapolis, Minnesota.

___________s/John R. Tunheim_________
JOHN R. TUNHEIM
Chief Judge
United States District Court

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