Salvo Guns v. SilencerCo
Filing
43
MEMORANDUM DECISION AND ORDER denying 21 SilencerCos Motion for Summary Judgment. Signed by Judge Robert J. Shelby on 12/19/2017. (jds)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, NORTHERN DIVISION
SALVO GUNS LLC,
MEMORANDUM DECISION
AND ORDER
Plaintiff,
v.
Case No. 1:15-cv-112
SILENCERCO, LLC,
Judge Robert J. Shelby
Defendant.
This case involves a dispute over the name “Salvo.” Plaintiff Salvo Guns holds a
trademark on the name, and brought this suit against Defendant SilencerCo after SilencerCo
began manufacturing a shotgun silencer it named the “Salvo 12.” SilencerCo contends the suit is
baseless because Salvo Guns no longer owns the mark, having sold it as part of the 2014 sale of
its Layton, Utah location to a third party. SilencerCo has now moved for summary judgment on
this basis. For the reasons below, the court concludes SilencerCo has not met its burden of
demonstrating that Salvo sold or does not otherwise own the mark.
BACKGROUND
Prior to 2014, Plaintiff Salvo Guns owned and operated a firearms facility in Layton,
Utah. The facility featured a shooting range and a retail sales location for firearms and firearm
accessories. In 2014, Salvo entered into a contract with Get Some Guns & Ammo—who is not a
party to this case—to sell the facility. Get Some, a competitor who was already operating several
shooting ranges and retail stores, subsequently began operating the facility under its own name.
Later that year, Defendant SilencerCo, a local manufacturer of firearm accessories, began
producing and marketing a shotgun suppressor it called the “Salvo 12.” SilencerCo attempted to
register the mark “SALVO” with the Patent and Trademark Office, but received an initial denial
on account of Salvo’s already-existing “Salvo Guns” Registration. SilencerCo subsequently filed
a petition to cancel the Registration on the basis of abandonment. Salvo responded by filing this
lawsuit, which stayed the PTO action. SilencerCo has now moved for summary judgment.1
ANALYSIS
Salvo’s Complaint asserts various federal and state law trademark and tort claims, all of
which are premised on the theory that Salvo retained the “Salvo” mark after the sale of its
Layton location to Get Some. Salvo contends that Get Some and Salvo never intended to
transfer the mark in the sale, as Get Some was interested only in the physical location and assets.
SilencerCo contends that regardless of Salvo’s and Get Some’s subjective intentions, the use of
certain language in the sale contract means the mark was necessarily transferred as a matter of
law, so Salvo no longer owns it. Alternatively, SilencerCo argues Salvo abandoned the mark.
The court addresses each argument in turn.
Whether the Mark Was Sold to Get Some
The court first addresses whether the mark was transferred in the transaction between
Salvo and Get Some. SilencerCo’s primary argument on this point is that the mere use of the
phrase “good will” in the sale contract caused the mark to be sold, whether Salvo and Get Some
intended that result or not. The court first addresses this argument, and then turns to whether the
intent of the parties—as evidenced by the contract language and extrinsic record evidence—was
that the mark be sold in the Get Some transaction.
Summary judgment is appropriate only if 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). SilencerCo carries the initial burden of
demonstrating the absence of any genuine dispute of material fact and its entitlement to judgment as a matter of law.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court will draw any reasonable inference from the evidence
in the light most favorable to Salvo Guns, the nonmovant. Lopez v. LeMaster, 172 F.3d 756, 759 (10th Cir. 1999).
1
2
I.
Inclusion of “Good Will” in the Contract
SilencerCo’s primary argument, as discussed, is that the use of certain words in Salvo’s
contract necessarily caused its mark to be sold to Get Some as a matter law, regardless of what
the remainder of the contract or any extrinsic evidence demonstrates about the intent of the
contracting parties. Initially, that argument was focused on the inclusion of “good will” in the
contract; because the contract included the sale of the business’s “good will,” and because “good
will” under Utah law unequivocally includes trademarks, SilencerCo argued, the business name
and trademark were necessarily sold in the transaction. This argument evolved, however, and at
oral argument SilencerCo’s position was that the sale of “good will” plus the contract’s sale of
the entire business and its inclusion of a covenant not to compete meant, regardless of the
contracting parties’ intentions, that the mark was necessarily sold. The court will take each
argument in turn.
As discussed, SilencerCo’s initial argument was that Salvo’s and Get Some’s intentions
as to whether the Salvo mark would be sold are irrelevant because they choose to use the term
“good will” in their contract, which, according to SilencerCo, means the mark transferred as a
matter of law.2 But this presumes that “good will” includes trademarks under Utah law, which is
not necessarily the case. In Utah, good will can, but need not include trademarks or tradenames.
Indeed, “good will” under Utah law can mean many things. It can be broadly described as “the
general public patronage and encouragement which [an establishment] receives from constant or
habitual customers, on account of its local position, or common celebrity, or reputation for skill
The court is skeptical that even if “good will” had a fixed meaning under Utah law, and even if that fixed
meaning included trademarks, that the parties could not knowingly and explicitly contract around that meaning—for
example, by defining good will and making clear that it does not include the name “Salvo” or any intellectual
property associated with it. The court need not address this issue, however, because, as discussed below, that is not
the state of the law in Utah.
2
3
or affluence, or punctuality, or from other accidental circumstances.”3 It is the “probability that
old customers will resort to the old place to seek old friends, and the likelihood of new customers
being attracted to well advertised and favorably known services or goods.”4 It can reside in the
business entity itself—“enterprise goodwill”—or in people associated with the entity—“personal
goodwill.”5 It can derive from the location of a business, the name of the business, the people
employed by it, or those managing it. In short, “good will” in Utah can mean just about
whatever contracting parties intend it to mean. Contrary to SilencerCo’s contention, however, it
need not necessarily include trademarks or tradenames.6
At oral argument SilencerCo narrowed this argument somewhat, contending that even if
inclusion of “good will” in the contract did not itself transfer the mark, the addition of the sale of
the entire business plus the covenant not to compete means the mark was necessarily sold,
regardless of the contracting parties’ intentions.7 But even this narrowed proposition proves too
much. Utah cases state merely that this is the “general rule,”8 and they make clear that
3
S. Utah Mortuary v. Roger D. Olpin S. Utah Mortuaries, 776 P.2d 945, 948 (Utah Ct. App. 1989).
4
Peterson v. Jackson, 253 P.3d 1096, 1106 (Utah Ct. App. 2011).
5
Id.
See, e.g., S. Utah Mortuaries, 776 P.2d at 949 (holding that “good will” passed to buyer of second and
third mortuaries, but “good will” in that case did not include the trade name because the trade name had already
been transferred to the buyer of the first mortuary). The cases SilencerCo relies on for its argument to the contrary
are either factually distinct or extrajurisdictional. See, e.g., Dovenmuehle v. Gilldorn Mortg. Midwest Corp., 871
F.2d 697 (7th Cir. 1989); Marshak v. Green, 746 F.2d 927 (2nd Cir. 1984); Lantz Bros. Baking Co. v. Grandma Cake
Co., 34 C.C.P.A. 1073 (C.C.P.A. 1947); Holly Hill Citrus Growers’ Assoc. v. Holly Hill Fruit Prods., Inc., 75 F.2d 13
(5th Cir. 1935). SilencerCo does cite Oklahoma Beverage Co. v. Dr. Pepper Bottling Co. from the Tenth Circuit, but
the Oklahoma Beverage court was not applying Utah law, and moreover, the court held only that where an “entire
business” was sold and where that business and its good will “are transferred to another who continued the operation
under the same trademark,” the trademark transferred. 565 F.2d 629, 632 (10th Cir. 1977). The case does not stand
for the proposition that under Utah law, “good will” necessarily includes trademarks.
6
7
See Feb. 2, 2017 Hearing at 46:39 (Court: “So the legal principle, and you say this is an established matter
of law so much so that the parties are not permitted to make an agreement otherwise, is that where a party sells all of
its assets in a purchase agreement, and includes good will, whether they intend to hold back some intellectual
property that they own or otherwise, they can’t.” Defense Counsel: “That’s exactly what I’m saying.”).
8
Peeples v. Wolfe, 430 P.2d 574, 575 (Utah 1967).
4
notwithstanding this general rule a trademark can, depending on the circumstances, be
transferred only for limited use,9 or not at all.10 Moreover, SilencerCo cannot even invoke this
general rule, for as will be discussed below, it is not at all clear that Salvo sold Get Some its
entire business.
In short, SilencerCo has not shown that the intent of the contracting parties in this case is
irrelevant to the question of whether Salvo sold the “Salvo” trademark to Get Some. It has not
established that “good will” in a sales contract necessarily includes trademarks under Utah law,
nor that adding the sale of the entire business plus a covenant not to compete necessarily changes
anything, nor that Salvo’s contract even meets this standard. Thus, the court turns to the intent of
the contracting parties.
II.
The Contracting Parties’ Intent
Having concluded the terms of the contract identified by SilencerCo do not, as a matter of
law and without regard to intent, establish Salvo’s trademark was sold with its Layton location,
the next question is whether SilencerCo has shown that the contracting parties intended that
result. To determine intent the court looks first to the language of the contract as a whole.11 In
the absence of ambiguity, the parties’ intentions can be ascertained from the contract language
alone.12 But where an ambiguity exists—that is, where a term or provision is capable of more
See S. Utah Mortuaries, 776 P.2d at 948 (“The right to use a trade name representing a business’s good
will may be transferred to a limited geographical territory, with rights to the name retained or assigned to another in
a different location.”).
9
See id. at 949 (concluding that sale of an ongoing business, along with a covenant not to compete,
presumptively included the business’s good will, but that “good will did not include the rights to the name”).
10
11
Mind & Motion Utah Investments, LLC v. Celtic Bank Corp., 367 P.3d 994, 1001 (Utah 2016).
12
Id.
5
than one reasonable interpretation—the court turns to extrinsic evidence for indicia of intent.13
If, at that point, the ambiguity persists, questions of fact preclude summary judgment.
On the question of whether the contracting parties intended that the mark be sold, there
are two theories under which SilencerCo might be granted summary judgment: (1) if the
contracting parties intended that Salvo’s entire business be sold, that, coupled with the inclusion
of good will and the covenant not to compete, would establish at least a presumption under Utah
law that the Salvo mark was sold as well; or (2) even if the entire business was not sold, if the
contracting parties intended that “good will” include the Salvo mark, SilencerCo would be
entitled to judgment, as the contract includes “good will” in the sale. The court first addresses
whether the contract language unambiguously establishes either of these theories, and then,
finding it does not, turns to whether SilencerCo has provided extrinsic evidence sufficient to
demonstrate the contracting parties intended either result.
A. Contract Language
The first question is whether the contract itself unambiguously establishes that the parties
intended Salvo’s entire business to be sold, for if that is so, as discussed above, Utah law
provides at least a presumption that the Salvo mark was transferred as well.14 In answering this
question the court assesses whether the contract language is “capable of more than one
reasonable interpretation because of uncertain meanings of terms, missing terms, or other facial
deficiencies.”15 If so, the contract is ambiguous, and not itself determinative of intent.
13
Id.
See Wolfe, 430 P.2d at 575 (nothing that the “general rule” is that “in a voluntary sale of business as an
entirety, trade-marks and trade-names which have been lawfully established and identified with such business will
pass to one who purchases as a whole the physical assets or elements of the business”).
14
15
Mind & Motion Utah Investments, 367 P.3d at 1001.
6
Several aspects of Salvo’s contract demonstrate that it could be reasonably interpreted to
reflect the parties’ intentions to transfer something less than the entire business. Most striking,
perhaps, is that nowhere does the contract mention service marks, trademarks, or the transfer of
the name “Salvo.” By contrast, the contract is meticulously detailed as to what was sold, listing,
for example, one “mop bucket,” one “mop ringer,” an “open sign,” and three “bar code readers,”
among other items.16 To be sure, explicitly listing the mark is not necessarily a requirement for
the mark to be transferred, but it is a factor supporting the reasonableness of an interpretation
that it was not.
Next, the contract allocates the entire purchase price to “Real Estate.”17 SilencerCo
interprets this as Salvo playing “accounting games” for tax purposes. That may be so, but
equally reasonable is the interpretation that some aspects of Salvo’s business were excluded from
the sale—namely, nontangible assets like the company’s name and its ability to use that name in
connection with other physical or online locations.
In that vein, the contract contains a noncompete provision that prohibits Salvo from
operating a business under a name similar to “Salvo” in Utah for three years.18 SilencerCo
contends this provision supports the notion that the “Salvo” name was sold because this
provision serves to provide additional protection by prohibiting Salvo from using similar names.
This may be a reasonable interpretation, but similarly reasonable is the possibility that the parties
intended Salvo to sell only the Layton location and retain the ability to operate a business using
the Salvo name outside Utah, or inside Utah after the three-year window closed. In short, these
16
Dkt. 29-8.
17
Dkt. 21-1 at 23.
18
Id. at 27.
7
provisions, and the contract as a whole, reasonably support either of two theories: that the entire
business was sold, or that it was not. For that reason, the contract is ambiguous on this point.
As to the second theory—that the contract language unambiguously shows the parties
intended that “good will” would include the Salvo mark—the court is not convinced. It is
certainly reasonable to conclude that “good will” was intended to include the mark. Similarly
reasonable, however, is that the parties intended “good will” to mean something else—for
example, the services of Salvo’s former employees, or the business of Salvo’s former customers.
SilencerCo contends this alternative interpretation is not reasonable because these items
are already alluded to in varying degrees of specificity elsewhere in the contract, including in a
provision granting Get Some the ability to hire Salvo’s former employees19 and an attached
schedule that “lists, by category, all . . . memberships, punch passes, classes, [and] gift cards . . .
that are subject to this transaction.”20 But interpreting “good will” to include former Salvo
employees or customers would not, as SilencerCo suggests, render these other provisions
meaningless. Indeed, the provisions could reasonably be interpreted to provide additional
information related to those transfers. For example, Section 15, dealing with employees, not
only makes clear that Get Some can hire Salvo’s former employees, but lays out how that
transfer might happen, explaining that “immediately prior to Closing, Seller will dismiss its
employees, who may thereafter be hired by Buyer in Buyer’s sole discretion.”21 And Schedule B
19
Id. at 28.
20
Id. at 24.
21
Id. at 28.
8
lists not just the fact that memberships, punch passes, classes, and gift cards would transfer, but
the amount of liability outstanding on each.22
In sum, the contract can reasonably be interpreted to mean either that the entire business
was sold, or that some portion of it was retained by Salvo. Similarly, “good will” can reasonably
be interpreted to include trademarks, or not. Thus, SilencerCo has not demonstrated that the
contract language unambiguously establishes the parties’ intent on either point.
B. Extrinsic Evidence
Having concluded the contract language is ambiguous both as to whether the contracting
parties intended the entire business be sold and whether they intended “good will” to include the
trade name, the court turns to the extrinsic evidence in the record.23 And this evidence strongly
suggests that the parties intended neither that the transaction would involve Salvo’s entire
business nor that it would include Salvo’s mark.
The relevant extrinsic evidence in the record consists primarily of a declaration and
supporting documentation by Brent Mitchell—one of Salvo’s founders and a party to the
negotiation of the Get Some sale. Mitchell testified that Get Some did not offer to purchase all
of Salvo, nor did Salvo intend to sell its entire business.24 Rather, both parties intended that Get
Some would “purchas[e] the physical facilities at the Layton location.”25 According to Mitchell,
Salvo has, since the sale, remained an ongoing business in good standing, and it intends to sell its
22
Id. at 24; Dkt. 29-8 at 3.
Mind & Motion Utah Investments, LLC v. Celtic Bank Corp., 367 P.3d 994, 1001 (Utah 2016) (noting
that reviewing extrinsic evidence is not only appropriate but required in light of a contract’s facial ambiguity).
23
24
Dkt. 29 ¶¶ 8, 16.
25
Id. ¶ 8.
9
firearm accessories nationwide after its noncompete agreement expires.26 For support, Salvo put
in the record copies of designs for accessories it intends to sell.27 As to Get Some, Mitchell
testified that Get Some indicated during negotiations that it intended to run the Layton location
under its own name, and the only evidence in the record is that it has done just that.28 In short,
the record evidence suggests that the parties intended that Get Some would purchase Salvo’s
physical Layton store, not its name.
SilencerCo provides two pieces of extrinsic evidence it contends demonstrate otherwise.
First, it points out that Salvo allowed its registration with the Utah Division of Corporations and
Commercial Code to lapse in 2015 and failed to renew until the day SilencerCo filed its petition
to cancel Salvo’s mark. This could certainly lend support to an interpretation that Salvo intended
not to resume business. But an oversight in renewal does not necessarily equate to an intent to
cease operations, and cutting against this interpretation is the fact that Salvo timely renewed in
2014 and 2016.29
SilencerCo next argues that Salvo informed “the entire world” (via its website and tax
returns) that it was no longer conducting business. After the sale, Salvo posted an announcement
on its website that it had “accepted an offer from ‘Get Some Guns’ for the purchase of Salvo
Guns,” and that Get Some would continue to honor existing memberships.30 It also noted on a
26
Id. ¶¶ 11, 14.
27
Id. ¶ 14; Dkt. 29-7.
28
Dkt. 29 ¶¶ 8, 10.
29
SilencerCo hints at the possibility that the 2014 renewal may have come before the January 13, 2014 sale
to Get Some, and argues that that renewal is therefore not evidence of Salvo’s intent to continue business after the
sale. This is SilencerCo’s Motion, however, and it was SilencerCo’s burden to put in the record evidence of the
renewal date if it wished to rely on that argument. Having not done so, the issue is at best ambiguous, and does not
weigh in SilencerCo’s favor.
30
Dkt. 21-3.
10
Return of Partnership Income Form 1065 that the Return would be a “Final Return.”31 While
this could be interpreted to indicate Salvo intended to cease conducting business altogether,
Salvo explains that the website served solely the Layton location, so the posting reflected only
the closing of that location, not necessarily the cessation of Salvo’s entire business. Similarly,
Salvo reports it closed the tax ID for its Layton operation on the advice of an accountant to avoid
continuing health insurance compliance obligations. Drawing inferences in Salvo’s favor, as the
court must at this point, this evidence demonstrates only that the Layton location was sold—an
inference that is further strengthened by the fact that the website salvoguns.com was not
transferred in the sale but instead remained under Salvo’s control.32
In short, the extrinsic evidence suggests the parties intended not to sell Salvo’s entire
business. It also suggests the parties intended that “good will” would not include the trade name.
From all accounts, Get Some never intended to use the name “Salvo” and has in fact not used it.
And it appears Salvo has always intended to continue using the name, is currently using it in
some capacity, and plans to use it in the future. SilencerCo has not met its burden of
demonstrating that Salvo and Get Some intended to sell the entire business, including the mark.
Dkt. 21-1 at 42. SilencerCo also represented to the court in its papers that a “cover letter for [Salvo’s]
2014 tax returns” states “[t]his is the final year that Salvo Guns, L.L.C. will file a Return of Partnership Income.”
Dkt. 21 at 6. It appears, in fact, that this document is not a cover letter Salvo submitted to the IRS with its 2014
return, but rather a letter from Salvo to one of its partners. Dkt. 21-1 at 37. Thus, this document does not support
SilencerCo’s contention that Salvo “represented to the IRS . . . that ‘Salvo Guns’ had been sold and was no longer
conducting any business.” Dkt. 21 at 9, 10, 11, 13, 14, 24.
31
SilencerCo contends this nonetheless weighs in its favor because, according to SilencerCo, the Layton
location was the entirety of Salvo’s business. That contention is belied by the Mitchel declaration, which states that
“Salvo maintained its business after the sale of the Layton location to Get Some because it had other business
opportunities, plans, and assets that were not sold to Get Some.” Dkt. 29 at 4. SilencerCo has not met its burden of
providing evidence to the contrary, so the issue is at best ambiguous.
32
11
Whether the Mark Was Abandoned
SilencerCo also argues, alternatively, that Salvo’s claims fail because it abandoned the
mark. A mark can be abandoned if (1) its use is discontinued with intent not to resume, or (2) the
owner engages in conduct that causes the mark to become a generic name or lose its
significance.33 SilencerCo conceded at oral argument it is proceeding only under the second
theory, and that this argument more or less rises and falls with its argument that the mark was
sold.34 Indeed, SilencerCo’s argument on this point is that “with the sale of the business, the
trade name passed, [and Salvo] has . . . caused the mark to lose significance.”35 The court has
already concluded that SilencerCo has shown neither that the entire business was sold nor that
the trade name passed, so its abandonment argument fails.36
CONCLUSION
SilencerCO has not shown the “Salvo” trademark was sold, nor has it shown Salvo
abandoned the mark. SilencerCo’s Motion for Summary Judgment37 is therefore DENIED.38
SO ORDERED this 19th day of December, 2017.
BY THE COURT:
________________________________________
ROBERT J. SHELBY
United States District Judge
33
15 U.S.C. § 1127.
34
See Feb. 2, 2017 Hearing at 52:30; id. at 52:21 (“The abandonment argument, your honor, is the same.”).
35
Id. at 52:44.
SilencerCo also moved for summary judgment on its counterclaim for Cancellation of Trademark, asking
the court to cancel Salvo’s mark on the basis that Salvo abandoned the mark or can no longer exercise control over
the mark. 15 U.S.C. § 1064(3). Because SilencerCo has shown neither, its Motion for Summary Judgment on the
counterclaim is denied.
36
37
Dkt. 21.
38
SilencerCo’s request for attorney fees is also denied.
12
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