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Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 8, 2011 Decided June 17, 2011

No. 10-7098

JOHN C. FLOOD OF VIRGINIA, INC., ET AL.,

APPELLANTS

v.

JOHN C. FLOOD, INC., ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:06-cv-01311)

Stephen J. Zralek argued the cause for appellants. 

With him on the briefs was Paul W. Kruse. 

Robert A.W. Boraks argued the cause for appellees. 

With him on the brief was Benjamin J. Lambiotte. 

Before: SENTELLE, Chief Judge, TATEL, Circuit Judge,

and EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Chief Judge SENTELLE.

SENTELLE, Chief Judge: Two businesses with nearly

identical names—John C. Flood, Inc. (“1996 Flood”) and

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John C. Flood of Virginia, Inc. (“Virginia Flood”)—brought

suit against each other over which company had the right to

use two trademarks: JOHN C. FLOOD and its abridged form

FLOOD. The district court concluded that 1996 Flood was

the proper owner of the two trademarks and that Virginia

Flood, as the licensee of the marks, was estopped from

challenging 1996 Flood’s ownership. John C. Flood of

Virginia, Inc. v. John C. Flood, Inc., 700 F. Supp. 2d. 90, 98-

99 (D.D.C. 2010). Because we agree with the district court on

these points, we affirm the decision below, but remand the

case back to the district court for clarification regarding

whether Virginia Flood’s use of the mark JOHN C. FLOOD

OF VIRGINIA was prohibited by its decision.

I.

The parties in this case are two plumbing, heating and

air conditioning businesses and the principals of those

businesses whose histories are intertwined. The story begins

in 1984 when Mark Crooks and Mel Davis—defendants

below and two of the appellees in this case—incorporated

John C. Flood, Inc., a Maryland business that served the

Washington D.C. metropolitan area (“1984 Flood”). 1984

Flood traded under the service mark JOHN C. FLOOD, its

abbreviated form FLOOD, and variations thereof. In 1988,

looking to expand into the Virginia market, Crooks, Davis and

two of their 1984 Flood employees, Clinton Haislip and

James Seltzer—plaintiffs below and two of the appellants in

this case—incorporated a separate Virginia business, John C.

Flood of Virginia, Inc. Haislip and Seltzer originally owned

only 49% of Virginia Flood, but soon came to own 50% of the

business to become equal owners with Crooks and Davis. 

Although Virginia Flood had a verbal license to use the marks

JOHN C. FLOOD and FLOOD with or without the modifier

“of Virginia,” the parties disagree over the nature and scope

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of that license. Regardless of what limitations were or were

not part of the original oral agreement, neither party disputes

that Virginia Flood has used the two disputed marks

continuously since 1989.

In June 1991, 1984 Flood filed for Chapter 11

bankruptcy reorganization. One month later, Crooks and

Davis resigned as officers of Virginia Flood, but continued to

operate 1984 Flood in bankruptcy until March 1993, when the

bankruptcy court appointed a trustee and converted the case to

a Chapter 7 bankruptcy. At that time, Crooks and Davis shut

down 1984 Flood’s operations and ceased monitoring the

operation of Virginia Flood and its use of the disputed marks. 

In 1995, Haislip and Seltzer purchased Crooks and Davis’s

50% share of Virginia Flood from the trustee, becoming the

sole owners of the business.

After leaving 1984 Flood, Crooks and Davis joined

with Robert and Joanne Smiley—the remaining

defendant/appellees—and continued to trade in the plumbing,

heating and air conditioning business through various

corporations known as J.C.F, Inc., J.C. Flood, Inc., John C.

Flood of DC, Inc. and John C. Flood of MD, Inc. (collectively

the “New Flood entities”). While operating the New Flood

entities, Crooks, Davis, and the Smileys misappropriated the

assets, including the disputed marks, of 1984 Flood. In an

effort to preserve 1984 Flood’s assets, in May 1995 the

bankruptcy trustee filed an adversary proceeding, which

resulted in the bankruptcy court issuing a consent order for a

preliminary injunction against the New Flood entities and for

the appointment of a receiver with the authority to take charge

of the New Flood entities and their assets. By August 1995,

the bankruptcy court made the injunction and the receivership

permanent.

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In October 1995, the bankruptcy trustee proposed that

the disputed marks, as well as the seized assets and stock of

the New Flood entities, be sold to Crooks, Davis, and the

Smileys. As creditors of the 1984 Flood bankruptcy estate,

Haislip and Seltzer objected to the sale on the grounds that

Crooks, Davis, and the Smileys had unlawfully diverted and

concealed estate assets. In response, Crooks and Davis

withdrew and the Smileys increased the amount of their bid. 

Haislip and Seltzer made a competing bid to purchase only

the disputed marks and the 1984 Flood phone numbers. In

February 1996, over Haislip and Seltzer’s objections, the

trustee executed a bill of sale conveying the disputed marks

and the stock of the New Flood entities to the Smileys, who 

then incorporated a new Maryland business under the name

John C. Flood, Inc. (“1996 Flood”).

Since 1996, both 1996 Flood and Virginia Flood have

traded in the plumbing, heating, and air conditioning business

in the Washington D.C. metropolitan area with both

companies using the marks JOHN C. FLOOD and FLOOD. 

In 2000, Virginia Flood sought and obtained two trademark

registrations from the United States Patent and Trademark

Office, one for the phrase “JOHN C. FLOOD” and one for a

logo incorporating that phrase. According to 1996 Flood,

when it learned that Virginia Flood had registered the

disputed marks, it brought an action before the Trademark

Trial and Appeal Board of the U.S. Patent and Trademark

Office to cancel the registrations. That action was suspended

pending disposition of a civil action in July 2006 after

Virginia Flood brought a trademark infringement suit against

1996 Flood. In response, 1996 Flood filed a counterclaim

claiming, inter alia, that 1996 Flood had priority over

Virginia Flood to the disputed marks.

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Throughout the subsequent litigation, Virginia Flood

argued that 1984 Flood abandoned all rights to the disputed

marks when it created a “naked license” during its Chapter 7

bankruptcy. Virginia Flood also argued that it suffered a

decline in its quality of service, due to no fault of its own,

immediately following the appointment of a trustee and 1984

Flood’s cessation of oversight and involvement. As we noted

above, during that time 1984 Flood did not operate and no one

from 1984 Flood other than the bankruptcy trustee was

available to monitor Virginia Flood’s use of the licensed

trademarks. As the Ninth Circuit has noted, this lack of

supervision is important because “‘uncontrolled or ‘naked’

licensing may result in the trademark ceasing to function as a

symbol of quality and controlled source.’” Barcamerica Int’l.

USA Trust v. Tyfield Importers, Inc., 289 F.3d 589, 596 (9th

Cir. 2002) (quoting MCCARTHY ON TRADEMARKS AND

UNFAIR COMPETITION § 18:48 at 18-79 (4th ed. 2001)). 

“Consequently, where the licensor fails to exercise adequate

quality control over the licensee, ‘a court may find that the

trademark owner has abandoned the trademark, in which case

the owner would be estopped from asserting rights to the

trademark.’” Id. (quoting Moore Business Forms, Inc. v. Ryu,

960 F.2d 486, 489 (5th Cir. 1992)). Although naked licensing

was a central element of Virginia Flood’s claim, the district

court never had an opportunity to rule on the merits of the

naked licensing argument.

Instead, ruling on the parties’ cross-motions for

summary judgment, the district court concluded that

“[b]ecause 1996 Flood is the successor-in-interest of 1984

Flood, the original owner of the FLOOD marks, and because

Virginia Flood is barred by the doctrine of licensee estoppel

from asserting its naked licensing claim to obtain priority over

the marks, 1996 Flood is entitled to summary judgment on all

of Virginia Flood’s claims” and to “a declaration of its

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priority over Virginia Flood and of its exclusive right to use

and register the marks JOHN C. FLOOD and FLOOD.” John

C. Flood of Virginia, 700 F. Supp. 2d. at 98-99. For the

reasons set forth below, we agree.

II.

Virginia Flood argues that the district court made two

errors: first, holding that 1996 Flood had priority over the

disputed marks, and second, holding that Virginia Flood was

legally barred under the theory of licensee estoppel from

challenging 1996 Flood’s ownership. Virginia Flood claims

that the district court improperly discounted the New Flood

entities’ unlawful use of the disputed marks when it

determined that 1996 Flood had priority to the marks over

Virginia Flood. Virginia Flood argues that the New Flood

entities’ unlawful use broke the chain of priority upon which

the district court relied to determine that 1996 Flood was the

proper successor-in-interest of 1984 Flood, the creator and

original owner of the marks. Once that chain of priority was

broken, Virginia Flood argues that its continued use of the

marks from 1989 to the present—compared to 1996 Flood’s

use of the marks from 1996 to the present—established its

ownership of the mark by demonstrating that it was the first to

use the mark in commerce.

Virginia Flood also asserts that the equitable doctrine

of licensee estoppel should not apply in this case. Virginia

Flood argues that it should not be estopped from challenging

1996 Flood’s ownership of the disputed marks because the

verbal license between the parties did not include an explicit

no-challenge provision; because Virginia Flood attempted to

maintain the quality of the marks, but failed to do so only

because of lack of supervision by the licensor; and because in

this case, the trademark principles that discourage naked

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licensing should outweigh the contract principles that are

enforced by licensee estoppel. Virginia Flood also rejects the

distinction drawn by the district court between offensive and

defensive use of naked licensing by the licensee. Virginia

Flood asserts that there is no legal authority to support the

district court’s conclusion that Virginia Flood could argue

naked licensing as an affirmative defense in an infringement

case, but could not assert naked licensing offensively to

challenge the priority of the licensor. Finally, Virginia Flood

argues that the equities in this case strongly support Virginia

Flood’s claim to priority over the marks because granting

Virginia Flood priority would be the most just outcome for

the parties.

We review the district court’s summary judgment

determination de novo, drawing all reasonable inferences

from the evidence in Virginia Flood’s favor. Adams v. Rice,

531 F.3d 936, 942 (D.C. Cir. 2008). Summary judgment may

be granted only where there is no genuine issue as to any

material fact and the moving party is entitled to a judgment as

a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 247 (1986). In this case, we agree

with the parties who both assert that there is no dispute of

material fact and that judgment as a matter of law is

appropriate.

A.

“Undoubtedly, the general rule is that, as between

conflicting claimants to the right to use the same mark,

priority of appropriation determines the question.” United

Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 100 (1918). 

“Ordinarily, a party establishes ownership of a mark by being

the first to use the mark in commerce,” Estate of Coll-Monge

v. Inner Peace Movement, 524 F.3d 1341, 1347 (D.C. Cir.

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2008), and in this case, there is no dispute that 1984 Flood

was the first entity to acquire priority in the disputed marks

via such use. The district court traced an unbroken chain of

priority from 1984 Flood, to the 1984 Flood bankruptcy

estate, to 1996 Flood. Although this chain does not include

the New Flood entities, Virginia Flood argues that the

unlawful use of the disputed marks by the New Flood entities

breaks the chain of priority established by the district court.

Virginia Flood’s argument is fundamentally flawed. 

The unlawful use of the marks by the New Flood entities was

unlawful precisely because they did not have legal title to the

marks when they used them. When the New Flood entities

were misappropriating the disputed marks, the marks were

among the assets owned by the 1984 Flood bankruptcy estate. 

There is no evidence or even a suggestion that the New Flood

entities owned the marks or that the bankruptcy trustee

licensed the marks to the New Flood entities. As the district

court properly noted, the chain of priority in no way includes

the New Flood entities and therefore the unlawful use of the

marks by the New Flood entities—companies expressly

excluded from the chain of priority—cannot break that chain. 

1996 Flood, a company with no legal relationship to the New

Flood entities, did not obtain the marks from the New Flood

entities or derive any priority from the New Flood entities’

unlawful use. To the contrary, 1996 Flood legally purchased

the marks directly from the bankruptcy estate after offering a

superior bid to the one Virginia Flood offered.

Presumably, Virginia Flood’s unlawful use argument

stems from frustration over the fact that 1996 Flood—a

business associated with the same people who operated the

New Flood entities—now has priority to the disputed marks. 

See Brief of Appellants at 24 (“Despite the fact that the [New

Flood entities’] use was in violation of the law and a specific

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court order, the lower court considered such action to warrant

no negative consequences.”). 1996 Flood’s priority is

derived, however, not from the New Flood entities, but

instead from the bankruptcy trustee’s sale of the marks to

1996 Flood. The New Flood entities’ unlawful use of the

disputed marks is irrelevant to 1996 Flood’s claim to priority. 

Priority over the disputed marks originated with 1984 Flood,

transferred to the 1984 bankruptcy estate, and was then

conveyed to 1996 Flood via a bill of sale with the approval of

the bankruptcy court. The district court did not err when it

held that 1996 Flood was the successor-in-interest of 1984

Flood and the legal owner of the marks.

B.

Once the district court concluded that 1996 Flood was

the rightful owner of the disputed marks, it rejected Virginia

Flood’s arguments attacking 1996 Flood’s ownership under

the theory that, as a licensee, Virginia Flood was barred from

making such an attack by the doctrine of licensee estoppel. 

John C. Flood of Virginia, 700 F. Supp. 2d at 97 (“Virginia

Flood’s status as the licensee bars it from using the naked

licensing doctrine as a weapon to pry ownership of the

FLOOD marks from 1996 Flood.”). Although this circuit has

never explicitly recognized the equitable doctrine of licensee

estoppel, some other circuit courts have held that, in general,

trademark licensees are estopped from challenging the

validity of the licensor’s title because by agreeing to the

license, the licensee has recognized the validity of the

licensor’s ownership. See Seven-Up Bottling Co. v. Seven-Up

Co., 561 F.2d 1275, 1279-80 (8th Cir. 1977) (restating the

“‘long settled principle of law that a licensee of a trademark

or tradename may not set up any adverse claim in it as against

its licensor’”) (quoting Pac. Supply Coop. v. Farmers Union

Cen. Exch., 318 F.2d 894, 908-09 (9th Cir. 1963)). More

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recently, other circuits have permitted licensees to make such

challenges, but only based upon facts that arose after the

license expired. See, e.g., Creative Gifts, Inc. v. UFO, 235

F.3d 540, 548 (10th Cir. 2000) (suggesting that a licensee may

challenge the licensor’s title to a trademark based on events

that occurred after the license expired); WCVB-TV v. Boston

Athletic Ass’n, 926 F.2d 42, 47 (1st Cir. 1991) (same); Prof’l

Golfers Ass’n of Am. v. Bankers Life & Casualty Co., 514

F.2d 665, 671 (5th Cir. 1975) (same). The Second Circuit has

taken an even less restrictive view, holding that every claim of

licensee estoppel should be evaluated by balancing the public

interest in favor of challenging invalid trademarks against the

private interest in the enforcement of contracts. See Idaho

Potato Comm’n v. M & M Produce Farm & Sales, 335 F.3d

130, 137 (2d Cir. 2003) (adapting the patent licensee estoppel

test articulated in Lear, Inc. v. Adkins, 395 U.S. 653 (1969),

for use in the trademark context). 

Virginia Flood, relying on two unpublished district

court opinions both from districts in the Sixth Circuit, argues

that modern courts “apply licensee ‘estoppel as a non-rigid

equitable doctrine that is only employed based on a full

consideration of the totality of the circumstances.’” Brief of

Appellants at 31 (quoting Kebab Gyros, Inc. v. Riyad, No.

3:09-0061, slip op. at 6 n.7 (M.D. Tenn. Dec. 17, 2009)

(unpublished)). The district court opinions cited by Virginia

Flood derive this interpretation of licensee estoppel from the

Restatement of Unfair Competition, which states: “licensee

estoppel is an equitable doctrine, and a court remains free to

consider the particular circumstances of the case, including

the nature of the licensee’s claim and the terms of the

license.” See, e.g., Pride Publ’g Group v. Edwards, No. 1:08-

cv-94, slip op. at 4 (E.D. Tenn. May 23, 2008) (unpublished)

(quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION

§ 33 (1995)). Virginia Flood argues that based on a totalityUSCA Case #10-7098 Document #1313716 Filed: 06/17/2011 Page 10 of 14
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of-the-circumstances analysis, licensee estoppel would not

apply in this case.

We disagree. As we noted above, we have not

previously had the opportunity to define the contours of the

licensee estoppel doctrine in this circuit and there is no need

to do so now. We need not determine whether licensee

estoppel should be an automatic bar to all trademark licensee

challenges of its licensor’s ownership, or whether the court

should engage in a totality-of-the-circumstances analysis, or

whether some intermediate standard should apply, because in

this case the result is the same. The theory underlying the

licensee estoppel doctrine is that a licensee should not be

permitted to enjoy the benefits afforded by the license

agreement while simultaneously urging that the trademark

which forms the basis of the agreement is void. Lear, 395

U.S. at 656. Virginia Flood, which has benefitted from its

license of the disputed marks for over two decades, now asks

us to declare that the licensed trademarks have been void

since 1993. The facts in this case convince us that the

equities, no matter how balanced, weigh in favor of applying

licensee estoppel here. 

First and foremost, Virginia Flood’s case is irreparably

harmed by Virginia Flood’s failure to raise an appropriate

objection to the sale of the disputed marks by the 1984 Flood

bankruptcy trustee in 1995. Virginia Flood concedes that, at

that time, it was licensing the disputed marks from the 1984

Flood bankruptcy estate and had been doing so continuously

either from 1984 Flood or from the estate since 1989. If, in

1995, Virginia Flood believed that 1984 Flood’s trademark

had lapsed, due to naked licensing or for any other reason,

Virginia Flood should have made that objection to the sale of

the trademark by the bankruptcy trustee. Although Virginia

Flood did object to the consideration of 1996 Flood’s

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bid—due to the prior misappropriation of the trademarks by

the New Flood entities—Virginia Flood never suggested that

it took issue with the validity of the disputed trademarks. To

the contrary, Virginia Flood offered to buy the marks, and

only failed to do so because it was outbid by 1996 Flood.

Virginia Flood not only failed to raise its objection at

the time of the sale, but it also failed to raise it in June 1996

when 1996 Flood informed Virginia Flood that it was

infringing its trademarks and demanded that Virginia Flood

stop using the marks without the distinguishing designator “of

Virginia.” Virginia Flood concedes that in response to 1996

Flood’s demands, Virginia Flood’s counsel informed 1996

Flood that its telephone ads and signage would include the

words “of Virginia.” Virginia Flood also concedes that it did

not contest 1996 Flood’s ownership of the marks at that time

and did not raise its naked licensing claim until filing the

current lawsuit a decade later.

Faced with the reality of these significant failures,

Virginia Flood argues that the bankruptcy trustee should have

commenced, sua sponte, an adversary proceeding to resolve

the priority and ownership interests prior to selling 1984

Flood’s trademarks. This argument is a non-starter. As

Virginia Flood expressly conceded at oral argument, no party

contested the validity of the bankruptcy estate’s title to the

disputed marks or its right to sell those marks. Rather than

objecting to the sale or at least raising the possibility of

problems with the bankruptcy estate’s ownership of the

marks, Virginia Flood instead offered to purchase the marks. 

Although Virginia Flood argues that its attempt to purchase

the marks should have put the bankruptcy court on notice that

Virginia Flood believed that it had an interest in the marks,

exactly the opposite is true. By offering to purchase the

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disputed marks, Virginia Flood implicitly recognized the

bankruptcy estate’s ownership of those marks.

Because we agree with the district court that 1996

Flood was the proper successor-in-interest to 1984 Flood, and

that Virginia Flood is barred by the doctrine of licensee

estoppel from challenging 1996 Flood’s ownership of those

marks, we affirm the district court’s order granting 1996

Flood’s motion for partial summary judgment and denying

Virginia Flood’s motion for summary judgment.

III.

One issue remains that we cannot resolve. The district

court’s order granted 1996 Flood priority to the disputed

marks and the “exclusive right to use and register the trade

name and service mark JOHN C. FLOOD and any other name

or mark similar to JOHN C. FLOOD that, by colorable

imitation or otherwise, is likely to cause confusion or

mistake.” John C. Flood of Virginia, 700 F. Supp. 2d at 99. 

The district court further held “that no Virginia Flood party

has the right to register or use beyond the terms of its license

the name and mark JOHN C. FLOOD or its abbreviated

version FLOOD.” Id. A question remains, however, whether

Virginia Flood is permitted to use the disputed marks with the

distinguishing modifier “of Virginia.” The answer to that

question depends on the exact scope of Virginia Flood’s

license, a factual issue that was disputed before the district

court but never resolved because the district court decided the

case on summary judgment. Although we affirm the decision

of the district court holding that 1996 Flood was the proper

successor-in-interest to 1984 Flood, we must remand the case

to the district court for determination of the ownership and

priority rights of the parties as to the modified trademark

“John C. Flood of Virginia.” To clarify, our decision to

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affirm the district court is limited to the unmodified marks

and leaves open the possibility that with regard to the

modified marks, Virginia Flood is not estopped and could

establish abandonment or some other basis of priority or

ownership.

IV.

For the reasons set forth above, we affirm the decision

of the district court. We remand the case to the district court

for further proceedings.

So ordered.

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