Title: Southern Christian Leadership Conference v. Shannon

State: virginia

Issuer: Virginia Supreme Court

Document:

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Present:  All the Justices 
 
SOUTHERN CHRISTIAN LEADERSHIP 
CONFERENCE, VIRGINIA STATE UNIT, INC. 
 
v.  Record No. 041941 
  OPINION BY JUSTICE DONALD W. LEMONS 
 
 
 
 
 
 
 
June 9, 2005 
 
ANDREW SHANNON, ET AL. 
 
FROM THE CIRCUIT COURT OF THE CITY OF NEWPORT NEWS 
Edward L. Hubbard, Judge 
 
 
This appeal involves a dispute between two organizations, 
each of which claims entitlement to the name and service mark, 
"Southern Christian Leadership Conference" ("SCLC") or some 
version thereof.1  In this appeal, we consider whether the 
trial court erred in its judgment that the appellees had a 
common law right to the name and various service marks 
superior to that of appellants.  For the reasons discussed 
below, we will affirm the judgment of the trial court. 
I.  Facts and Proceedings Below 
 
Founded by Dr. Martin Luther King, Jr., and incorporated 
in the State of Georgia, the Southern Christian Leadership 
Conference ("Georgia SCLC"), appellees herein, formed and 
began operating the Virginia State Unit of the Southern 
                     
1 This opinion addresses two cases that were consolidated 
by the chancellor below for purposes of his final decree.  The 
first was styled Southern Christian Leadership Conference, 
Virginia State Unit, Inc., a Domestic Virginia Corporation v. 
Andrew Shannon, et al., Chancery No. 37884-EH.  The second was 
styled Southern Christian Leadership Conference, a Georgia 
Corporation v. Southern Christian Leadership Conference, a 
Domestic Virginia Corporation, Chancery No. 38254-A-02. 
 
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Christian Leadership Conference ("Virginia SCLC") as an 
affiliate of the Georgia SCLC in 1960.  Virginia SCLC operated 
in Virginia as an unincorporated association.  Prior to the 
dispute described herein, Georgia SCLC did not obtain a 
certificate of authority to transact business pursuant to Code 
§§ 13.1-757 and –759 (or their predecessors), and did not file 
a fictitious name certificate pursuant to Code § 59.1-69 (or 
its predecessor).  While Georgia SCLC never registered its 
marks with the State Corporation Commission, it is undisputed 
that since 1960 the Virginia SCLC, as the affiliate of the 
Georgia SCLC, continuously used the service marks of the 
Georgia SCLC in Virginia. 
 
A dispute arose between various members of the Georgia 
SCLC and the Virginia SCLC, and a new organization was formed 
on or about October 18, 2000.  This new organization 
incorporated in Virginia as the "Southern Christian Leadership 
Conference, Virginia State Unit, Inc.," and used the service 
marks of the Georgia SCLC and its affiliate, the Virginia 
SCLC, as its own.  For convenience, it shall be referred to 
hereinafter as "Breakaway SCLC." 
 
Breakaway SCLC filed articles of incorporation with the 
State Corporation Commission and received a charter on October 
19, 2000.  It also filed a fictitious name certificate on May 
8, 2002.  Pursuant to Code § 59.1-92.6, it registered various 
 
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Georgia SCLC and Virginia SCLC service marks as its own 
between October 30 and November 5, 2002.2  Georgia SCLC then 
obtained a certificate of authority to transact business 
pursuant to Code § 13.1-757 on December 13, 2002, and filed a 
fictitious name certificate on September 2, 2003.  The Georgia 
SCLC, and the Virginia SCLC as its affiliate, continued to use 
its service marks in Virginia despite the fact that Breakaway 
SCLC registered them as its own. 
 
On August 4, 2003, Breakaway SCLC filed a bill of 
complaint against Andrew Shannon, in his capacity as agent for 
the Virginia SCLC, and the Georgia SCLC, claiming a superior 
right to the now-contested service marks based on its 
registration of them with the State Corporation Commission.  
Breakaway SCLC sought temporary and permanent injunctions and 
an accounting.  The trial court issued a temporary injunction 
and referred the case to a commissioner in chancery. 
The commissioner held a hearing on the matter and issued 
his report on December 8, 2003.  The commissioner concluded 
that Georgia SCLC "has established a common law right to use 
the service mark . . . by using and continuing to use this 
name or some variation thereof since 1960" and "that a 
                     
2 These included: "SCLC Virginia State Unit, Inc."; "The 
S.C.L.C."; "The S.C.L.C. of Virginia"; "The SCLC"; "The SCLC 
of Virginia"; "The SCLC, Virginia State Unit"; "Southern 
Christian Leadership Conference"; "The Virginia State Unit 
S.C.L.C."; and "The Virginia State Unit SCLC." 
 
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subsequent user of the mark, who registers that mark . . . 
would not prevail or defeat the common law right."  The 
commissioner recommended against the permanent injunction 
requested by Breakaway SCLC and recommended dissolution of the 
temporary injunction in effect. 
 
The trial court confirmed the commissioner's report on 
May 20, 2004 holding that the dispute was controlled by the 
Virginia Trademark and Service Mark Act (1998) ("VTSMA"), Code 
§§ 59.1-92.1 through 92.21.  The trial court framed the issue 
as whether Breakaway SCLC "has the superior claim to the use 
of the name, Southern Christian Leadership Conference[,] 
either as a result of its incorporation of the name in 2000 or 
its registration of same in 2002 or as a result of some common 
law right regarding usage."  The trial court ruled against 
Breakaway SCLC and held that Georgia SCLC, and its affiliate 
the Virginia SCLC, had superior rights to the contested 
service marks based on their prior and continuous use, and 
dissolved the temporary injunction. 
Breakaway SCLC noted its objections and filed a timely 
petition for appeal, which we granted.  For purposes of this 
appeal, a written statement of facts, pursuant to Rule 
5:11(c), was filed in lieu of a transcript.  The chancellor 
incorporated the commissioner's report into this statement of 
facts. 
 
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II.  Analysis 
 
The standard of review is well settled.  "A finding of 
the chancellor on conflicting evidence, heard ore tenus, 
carries the same weight as a jury's verdict and will not be 
disturbed on appeal unless it is plainly wrong or without 
evidence to support it."  Willis v. Magette, 254 Va. 198, 201, 
491 S.E.2d 735, 736 (1997) (citations omitted); see also 
Nelson v. Davis, 262 Va. 230, 234, 546 S.E.2d 712, 715 (2001). 
 
In its first assignment of error, Breakaway SCLC contends 
the trial court erred in determining that Georgia SCLC had a 
"common law right" to the marks in question "despite the fact 
that [Georgia SCLC] had not properly registered its name with 
the State Corporation Commission or filed Fictitious Name 
Certificates with any Virginia Circuit Court."  Citing Zysk v. 
Zysk, 239 Va. 32, 404 S.E.2d 721 (1990), and Martin v. Ziherl, 
269 Va. 35, 607 S.E.2d 367 (2005), Breakaway SCLC maintains 
that Georgia SCLC's lack of registration constitutes 
"wrongdoing" and that Virginia law "will not allow a wrongdoer 
to profit from its wrongful acts." 
In its second assignment of error, Breakaway SCLC 
maintains the "trial court erred in finding that the Georgia 
SCLC had a 'superior right' to use the [marks] in question" 
because Breakaway SCLC was the first to "lawfully" do business 
in the Commonwealth and was the first to register the marks in 
 
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Virginia in compliance with Virginia law.  It argues the trial 
court was "not empowered to reverse the State Corporation 
Commission's grant of service marks" to Breakaway SCLC. 
Nowhere in its brief or in its oral argument before the 
Court did Breakaway SCLC challenge the trial court's factual 
finding that Georgia SCLC, through its affiliate Virginia 
SCLC, continuously used the contested marks in Virginia since 
1960.  Additionally, Breakaway SCLC concedes this prior and 
continuous use in its brief.  In essence, Breakaway SCLC 
argues that Georgia SCLC's lack of compliance with Virginia 
law divested it of any claim upon the contested marks and that 
Breakaway SCLC's registration gave it priority.  Stated 
another way, the only issues before the Court are whether the 
registration requirements of the VTSMA supersede or alter the 
common law rules governing trademarks and service marks and 
whether a failure to obtain a certificate of authority to 
transact business in Virginia or file a fictitious name 
certificate precludes Georgia SCLC and Virginia SCLC from 
enforcing their common law rights. 
 
It is axiomatic that use, not registration, gives 
priority to trademark and service mark rights at common law.  
Stutzman v. C. A. Nash & Son, Inc., 189 Va. 438, 446, 53 
S.E.2d 45, 49 (1949); A. I. M. Percolating Corp. v. Ferrodine 
 
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Chemical Corp., 139 Va. 366, 377, 124 S.E. 442, 446 (1924).  
This remains so even after the enactment of the VTSMA. 
 
The VTSMA provides for the registration and protection of 
trademarks and service marks.  Upon compliance with the 
registration requirements, the State Corporation Commission 
issues a certificate of registration.  This certificate of 
registration 
shall be prima facie evidence of the 
registrant's ownership of the mark, and of the 
registrant's exclusive right to use the 
registered mark within the Commonwealth on or 
in connection with the goods or services 
specified in the certificate, and shall be 
admissible in evidence as competent and 
sufficient proof of the registration of such 
mark in any actions or judicial proceedings in 
any court of this Commonwealth. 
 
Code § 59.1-92.6.  However, while the VTSMA creates a 
rebuttable presumption of ownership based upon registration, 
the General Assembly clearly stated that nothing in the VTSMA 
"shall adversely affect the rights or the enforcement of 
common-law rights in marks."  Code § 59.1-92.15. 
Furthermore, it is clear from the plain meaning of the 
definitions given by the General Assembly that the VTSMA 
recognizes the common law rule of use.  A "mark" is "any 
trademark or service mark entitled to registration under this 
chapter, whether registered or not."  Code § 59.1-92.2.  A 
"service mark" is "any word, name, symbol, or device or any 
combination thereof used by a person to identify and 
 
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distinguish the services of such person from the services of 
others."  Id. (emphasis added).  A "trademark" is "any word, 
name, symbol, or device or any combination thereof used by a 
person to identify and distinguish the goods of such person 
from those manufactured or sold by others."  Id. (emphasis 
added).  The VTSMA also will not allow a mark to be registered 
if it "so resembles a . . . service mark or trade name 
previously used in this Commonwealth by another and not 
abandoned, as to be likely, when used on or in connection with 
the goods or services of the applicant, to cause confusion or 
mistake, or to deceive."  Code § 59.1-92.3(6) (emphasis 
added). 
Thus, the law of Virginia is clear that use, not 
registration, gives priority to trademark and service mark 
rights; registration merely serves as evidence of ownership, 
but this evidence may be rebutted.  The trial court 
acknowledged Breakaway SCLC's registration, but determined 
that the Georgia SCLC, and its affiliate Virginia SCLC, 
continuously used the contested marks in Virginia since 1960. 
It is true that both Georgia SCLC and Virginia SCLC 
operated in the Commonwealth without proper authority until 
2002.  There are certain consequences for transacting business 
in Virginia without authority.  Code § 13.1-758 clearly 
provides penalties for that conduct, but it further states, 
 
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"the failure of a foreign corporation to obtain a certificate 
of authority does not impair the validity of its corporate 
acts or prevent it from defending any proceeding in this 
Commonwealth."  Code § 13.1-758(E).  Additionally, this suit 
was brought by Breakaway SCLC in an attempt to deprive the 
Georgia SCLC and Virginia SCLC of their common law service 
mark rights.  The Georgia SCLC and Virginia SCLC merely 
defended themselves, as they are permitted to do pursuant to 
Code § 13.1-758(E).  Further, doing business in Virginia 
without a certificate of authority does not abrogate common 
law rights to trademarks or service marks.  See Code § 13.1-
758. 
There is no support in the Code or our case law for 
Breakaway SCLC's argument that the Georgia SCLC's and Virginia 
SCLC's corporate "wrongdoing" deprives them of rights in their  
service marks.  Breakaway SCLC's reliance on Zysk and Ziherl 
is misplaced.  In Ziherl, we adhered to the rule that "a party 
who consents to and participates in an immoral and illegal act 
cannot recover damages from other participants for the 
consequence of that act."  269 Va. at 43, 607 S.E.2d at 371 
(citations omitted).  This case, however, does not involve an 
immoral situation analogous to the factual circumstances 
presented in Zysk or Ziherl that would invoke the public 
policy-based proscription discussed in those two cases. 
 
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Finally, with respect to Breakaway SCLC's argument that 
the trial court was "not empowered to reverse the State 
Corporation Commission's grant of service marks," the final 
decree of the trial court made no finding pursuant to Code 
§ 59.1-92.10 regarding cancellation of Breakaway SCLC's 
registration nor did it contain any language that directed 
reversal of the registration.  The trial court merely 
determined that the Georgia SCLC possessed the "superior 
claim" and that "hence, the only valid use of the [mark] and 
its several variations would lie now with an organization 
sanctioned by the [Georgia SCLC]." 
III.  Conclusion 
 
The General Assembly has clearly indicated its adherence 
to the common law rule of continuous use to determine 
ownership of trademarks and service marks.  The trial court's 
judgment that Georgia SCLC and Virginia SCLC continuously used 
the contested service marks since 1960 and that Breakaway 
SCLC's registration did not defeat the common law right 
arising from such use was not plainly wrong or without 
evidence to support it.  The judgment of the trial court will 
be affirmed. 
Affirmed.