### UNITED STATES DISTRICT COURT FORTHE DISTRICT OF COLUMBIA JOHN C. FLOOD OFVIRGINIA, INC., et ) 

### at., ) ) 

### Plaintiff/Counter-Defendants, ) ) 

### v. ) Civil Case No. 06-1311 (RJL) ) 

### JOHN C. FLOOD, INC., etat., ) ) 

### Defendants/Counter-Plaintiffs. )**s~** 

### MEMORANDUM OPINION**(March~,** 2010) [#60 and 65] This case involves two sister companies in the plumbing business that are, in effect, fighting overtheir "inheritance." They both claim exclusive rights to two trademarksJOHN C. FLOOD and its abbreviated form FLOOD. The plaintiffJohn C. Flood of Virginia, Inc. ("Virginia Flood") brought this suit against the defendants John C. Flood, Inc., which does business as John C. Flood ofDC, Inc., as well as other individuals and corporate entities (collectively, "1996 Flood"). 1 Virginia Flood alleges four causes of action: (1) trademark infringement in violation of 15 U.S.C. 

### § 1114(1) (Count 1), (2) unfair competition in violation of 15 U.S.c. § 1125(a) (Count 2), (3) common law service mark infringement and unfair competition (Count 3), and (4) declaration ofVirginia Flood's priority over all defendants and its rightto registerthe trademarks (Count4). (CompI. [#1] at 9-11; Am. CompI. [#28] at 13-18). 1996 Flood responded by bringing a numberof

I The additional defendants include lC. Flood, Inc., J.C. Flood Company, John C. Flood ofDC, JCF Inc., John Doe Companies 1and 2, Mark Crooks, Mel Davis, Robert Smiley, and Joanna Smiley. (Am. CompI. [#28] at 2-3).counterclaims against VirginiaFlood and otherparties (collectively, "VirginiaFlood,,).2 The counterclaims include: (1) false designation oforigin, source, or sponsorship in violation of 15 U.S.C. § 1125(a) (Count 1); (2) cancellation ofVirginiaFlood's registration ofthe disputed trademarks (Count 2-4); (3) declaration of 1996 Flood'spriority over Virginia Flood (Count 5); and (4) common law service mark infringement and unfair competition (Count 6). (Countercl. [#9] at 25-33). Now before the Court is Virginia Flood's Motion for Summary Judgment [#60] and 1996 Flood's Renewed Motion for Partial SummaryJudgment [#65]. Unlike VirginiaFlood, whichhas moved forjudgmenton all claims and counterclaims, 1996 Flood moves only forjudgmentonVirginiaFlood's claims and for declaratoryjudgment as to its counterclaim for priority overVirginiaFlood. 1996 Flood leaves its remaining counterclaims for future disposition. Having considered the pleadings and the record in this case, Ihave concludedthat VirginiaFlood, as the licensee of the FLOOD marks, is estopped from now claiming ownership ofthose marks. Accordingly, for the reasons set forth below, Virginia Flood'sMotion for SummaryJudgment is DENIED and 1996 Flood's Motion for Partial Summary Judgment is GRANTED. 

### BACKGROUND In 1984, defendants Mark Crooks and Mel Davis incorporated in Maryland a business by the name ofJohn C. Flood, Inc. ("1984 Flood"). (Countercl. [#9],-r 11). This business providedplumbing, heating, and air conditioning services to customers in Maryland, the District ofColumbia, and Virginia. 

## (ld.,-r,-r 11-12; Davis Dep. [#63-6] at 81).

2The otherparties include John C. Flood, Inc. (aVirginia corporation), John C. Flood Contractors, Inc., ClintonHaislip, and James L. Seltzer, Jr. (Countercl. [#9] at 1). 21984 Floodtraded underthe service marks JOHN C. FLOOD and FLOOD (orvariations thereof). (Davis Decl. [#37-2]**~~** 3-5, 10-11). Fouryears later, to further expandtheir operations in Virginia, Crooks and Davis incorporated another business underthe name John C. Flood ofVirginia, Inc. ("Virginia Flood"). (Id.**~** 6). Crooks and Davis invited Clinton Haislip and James Seltzer, whothen

were employees of 1984 Flood, (Seltzer Decl. [#63-11]**~** 5), tojoinVirginiaFlood as noncontrolling shareholders. (Davis Decl. [#37-2]**~** 7). Haislip and Seltzer initially owned 49% ofthe stock, while Crooks and Davis owned 51%, (Davis Dep. [#63-6] at 83), but eventually, Crooks and Davis gave Haislip and Seltzer an additional 1 % share in the company, making Crooks and Davis equal owners with Haislip and Seltzer, (id. at 83-84, 94). Because Haislip and Seltzer lackedthe technical expertise to run the business by themselves at the outset, Crooks and Davis regularly helped with the technical aspects ofthe business, maintained the books andrecords, and appointed a manager to oversee day-to-day operations. (Id. at 58-60). There is no dispute that Virginia Floodhadpermission-thatis, a license-touse the marks JOHN C. FLOOD and FLOOD without the modifier "ofVirginia." Theparties disagree, however, aboutthe nature and scope ofthat license. In his declaration, Seltzer testified that Crooks and Davis made a verbal agreement to allow VirginiaFloodto use the marks on, among otherthings, its service trucks, contracts, invoices, and telephone book advertisements. (Seltzer Decl. [#63-11]**~** 6). In exchange, VirginiaFloodpaid Crooks and Davis a weekly sum. (Id.). Davis testified, however, that VirginiaFlood was allowed to use the marks JOHN C. FLOOD orFLOOD only until it replaced the service trucks that already

3bore the marks and until it replaced old advertising spots with new ones. (Davis Dep. [#63- 6] at 57, 60-61). In any event, neitherparty disputes that Virginia Flood, whether or not it had authority to do so, has used the disputed marks continuously since it was formed in 1989. (See id. at 91; SeltzerDecl. [#63-11]**~** 7). In June 1991, 1984 Flood and its principals, Crooks and Davis, filed for bankruptcy reorganization under Chapter 11 ofthe Bankruptcy Code. (Countercl. [#9]**~** 15). Sometime after filing for bankruptcy, Crooks and Davis discontinued their involvement in Virginia Flood. (Davis Dep. [#63-6] at 26-27). They resigned as officers ofthe company in July 1991. (Haislip Decl. [#41-1]**~** 7). Nearly two years later, in March 1993, the bankruptcy court appointed a trustee over 1984 Flood, and in September ofthat year, the bankruptcy court converted the case to Chapter 7 liquidation. (Countercl. [#9]**~** 15). Until the trustee

was appointed, Crooks and Davis continued to operate 1984 Flood and to trade underthe marks JOHN C. FLOOD and FLOOD. (Davis Decl. [#37-2]**~** 11). Once the trustee took control of 1984 Flood, however, Crooks and Davis shut down operations, turned the keys

over to the trustee, and disconnected all the phones. (Davis Dep. [#63-6] at 104-06). At that point, 1984 Flood no longer generated any revenue. (Jd. at 105-06). Crooks and Davis also stopped monitoring Virginia Flood, (id. at 99), and relinquished its books, (id. at 96). In 1995, the trustee sold the 50% interest in Virginia Flood owned by Crooks and Davis to Haislip and Seltzer. (Countercl. [#9]**~** 17; Rinn Decl. [#37-3] at 234-35; Defs.' Resp. and Counterstatementto Virginia Flood Parties' Statement ofUndisputed Material Facts [#73]**~** 30).

4Even though Crooks and Davis no longer operated 1984 Flood afterthe trustee assumed control ofthe company, they nevertheless carried on theirplumbing, heating, and air conditioningbusiness. (Davis Decl. [#37-2]**~** 12). Together with Robert and Joanna Smiley, Davis's son-in-law and daughter, both Crooks and Davis did business through various corporations known as J.C.F., Inc., J.C. Flood, John C. Flood ofDC, Inc., and John C. Flood ofMD, Inc. (collectively, "newFlood entities"). (Id.). These entities used the marks JOHN C. FLOOD and FLOOD, as well as other assets belonging to 1984 Flood. (Id.; Rinn Decl. [#37-3]**~~** 5-6). To preserve those assets, the trustee commenced an adversary proceeding in the bankruptcy court in May 1995. (Rinn Decl. [#37-3]**~~** 5-6). The trustee sought to enjoin the new Flood entities from misappropriating the assets of 1984 Flood, including its service marks. (Id.**~** 6). The trustee also requested thatthe bankruptcy court appoint a receiverto take control of 1984 Flood's assets andto preserve them for the creditors ofthe bankruptcy estate. (Id.). In June 1995, the bankruptcy court entered a consent order for apreliminary injunction against the new Flood entities and for the temporary appointment ofa receiver with the authority to take charge ofthe new Flood entities and their assets, including the JOHN C. FLOOD and FLOODtrade names. (Id.**~** 10). The bankruptcy courtrenewed the receiver's authority in August 1995, (id.**~** 12), and the following month, the court entered a consent order making the receivership and the injunction permanent, (id.**~** 16). In October 1995, the trustee proposed thatthe assets and stock ofthe new Flood entities held in receivership, along with the trade names JOHN C. FLOOD, INC. and FLOOC, INC., be sold to Crooks, Davis, and the Smileys. (Id.**~** 18). Haislip and Seltzer,

5as creditors ofthe bankruptcy estate, filed an objection to the proposed sale on the ground that Crooks, Davis, and the Smileys had unlawfully diverted and concealed estate assets to the detriment ofcreditors. (Id.**~** 20). Haislip and Seltzer also offered abid oftheir own to purchase only the trade names and telephone numbers of 1984 Flood. (Id.**~** 21 

### & Attachment B-12**~~** 9-10). In response to Haislip's and Seltzer's objections, both Crooks and Davis withdrew, leaving only the Smileys, who chose to increase theirbid. (Id.**~** 22). Afterevaluating the competing bids, as well as Haislip's and SeIter's objections, the bankruptcy court approved the sale ofthe assets and stock ofthe new Flood entities, as well

as the trade names ofJohn C. Flood, Inc. and Flood, Inc., to the Smileys. (Id.**~** 22 & Attachment B-13). Several months later, in February 1996, the Smileys incorporated a business in Maryland underthe name John C. Flood, Inc. ("1996 Flood"). (Pl.'s Mot. for Summ. J., Ex. B [#63-2]). Laterthe same month, the trustee executed abill ofsale conveying the stock ofthe new Flood entities and the trade names ofJohn C. Flood, Inc. and Flood, Inc. to the Smileys pursuant to the proposal approved by the bankruptcy court. (Id., Ex. A [#63-1]). Like Virginia Flood, 1996 Flood operates in the metropolitan Washington, D.C. area and uses the marks JOHN C. FLOOD and FLOOD. (Countercl. [#9]**~** 53). Becausethe two companies compete for the same customers, their use ofthe same or similartrade names has-not surprisingly-caused confusion in the marketplace. (Id.; Davis Dep. [#63-6] at 131-32). In an effortto secure its right to the disputed marks, Virginia Flood sought and eventually obtained in 2000 two trademarkregistrations from the U.S. Patent and Trademark Office ("USPTO")-one for the word JOHN C. FLOOD and another for a logo



### 6incorporatingthe markJOHN C. FLOOD. (VirginiaFloodParties' Statementof Undisputed Material Facts [#61]**~~** 41-42). Nearly five years later, 1996 Flood commenced

an action before the TrademarkTrial and Appeal Board ("TTAB") ofthe USPTO, seeking to cancel the registrations. (Countercl. [#9]**~** 44). In July 2006, more than a year into the TT AB action, VirginiaFloodbroughtthis trademark infringement suit, (see id.**~** 48), in which both parties claim exclusive rights to the trademarks JOHN C. FLOOD and its abbreviated version FLOOD. DISCUSSION This case comes before the Court on VirginiaFlood's Motion for Summary Judgment and 1996 Flood's Motion for Partial Summary Judgment. Summaryjudgment is warranted wherethe evidence shows "that there is no genuine issue as to any material fact and thatthe movant is entitled tojudgment as a matter oflaw." Fed. R. Civ. P. 56(c)(2). Here, there is no meaningful dispute as to any fact that bears on the Court's disposition of the case. As a result, the question is simply whichparty is entitledto prevail as a matter of law. Forreasons discussed more thoroughly below, the Courtbelieves that 1996 Flood, as the successor-in-interestto the licensor ofthe disputed marks, is entitled to prevail because Virginia Flood, the licensee, is barredby the equitable doctrine oflicensee estoppel from asserting claims ofpriority over and above the licensor. Thethreshold issue in any trademark infringement case is whetherthe plaintiffcan show "that it owns a valid trademark." GlobalawLtd. v. Carmon & Carmon Law Office, 452 F. Supp. 2d 1,26 (D.D.C. 2006) (internal quotation marks omitted). The same requirement applies to statutory and common law claims ofinfringement as well as statutory

7and common law claims ofunfair competition. See, e.g., Info. Superhighway, Inc. v. Talk Am., Inc., 395 F. Supp. 2d 44, 56 (S.D.N.Y. 2005) ("The elements necessary to prevail on
common law causes ofaction for trademark infringement and unfaircompetition mirror LanhamAct claims.");Am. Ass 'nforAdvancementof Sci. v. Hearst Corp., 498 F. Supp. 244,262 (D.D.C. 1980) ("Where [the mark] is not inherently distinctive, the essential elements are the same for either a trademark infringement orunfair competition action."). Obviously, aplaintiffcannot claim infringement, or unfair competition, ifit cannot rightfully establish ownership ofthe disputed marks. Virginia Flood offers two theories to support its claim ofownership overthe FLOOD marks. First, Virginia Flood contends, quite simply, that it has "priority." In otherwords, it

owns the marks by virtue ofhaving used them first. "In the ordinary case ofparties competing under the same mark in the same market, it is correctto say thatprior appropriation settles the initial question ofownership, and thatthe service markrights ofthe senior usertrump those ofthejunioruser." Globalaw, 452 F. Supp. 2d at 27. Because Virginia Flood has used the FLOOD marks continuously since its formation in 1989, whereas 1996 Flood did notbegin using them until its incorporation in 1996, Virginia Flood contends that ithas priority over 1996 Flood and thus an exclusiveright to use the marks. 3

3Virginia Flood also contends that the two registrations it obtained from the USPTO in 2000 establish a presumption that it has an exclusive right to the marks. Although a registration is "prima facie evidence ofthe validity

... ofthe registrant's ownership ofthe mark, and ofthe registrant's exclusive right to use the registered mark," 15 U.S.c. § 1115(a), thatpresumption runs only to the date on which the registrant filed its trademark application. See id. § 1 057(c) ("Contingent on the registration ofa mark

... ,the filing of the applicationto register such mark shall constitute constructive use ofthe mark, conferring a right ofpriority

...."). In this case, Virginia Flood filed its application to registerthe FLOOD marks in 1999, (Am. Compi. [#28]**~~** 39-40), three years after 1996 Floodbegan 8This theory is unconvincing, however, because it conveniently disregards how 1996 Flood came to use the marks. 1996 Flood did not obtain the marks surreptitiously. To the contrary, itpurchasedthe marks from the trustee ofthe bankruptcy estate, who in tum had obtainedthe marks when 1984 Flood, the original owner ofthe FLOOD marks, entered into Chapter 7 bankruptcy. (See Pl.'s Mot. for Summ. J., Ex. A [#63-1]). There is no reason to believe-andVirginiaFlood certainly offers none-that a company'spriority ofownership

over its trademark ceases merely because the company goes bankrupt. The company's trademark and associated goodwill are valuable assets that become part ofthe bankruptcy estate and can be validly sold, assigned, ortransferred by the estate. See, e.g., McKay v. MadMurphy's, Inc., 899 F. SUpp. 872, 878 (D. Conn. 1995) ("Atrustee in bankruptcy has thepowerto sell the trademarks and accompanying good will ofthe bankrupt

...."); Johanna Farms, Inc. v. Citrus Bowl, Inc., 468 F. SUpp. 866, 874 (E.D.N.Y. 1978) ("[U]pon the bankruptcy ofthe trademark owner, the trademarktogetherwiththe goodwill it symbolizes becomes vested in the Trustee in Bankruptcy, and may be sold by him as an asset ofthe estate." (internal citation omitted)); MerryHull & Co. v. Hi-Line Co., 243 F. Supp. 45, 52 (S.D.N.Y. 1965) (holdingthatthe "defendant obtained good title to the mark through [the defendant's] purchase at the bankruptcy sale"). Because 1996 Flood acquired the FLOOD marks from the bankruptcy estate, it is the successor-in-interest of 1984 Flood, the original owner ofthe marks. Therefore, the fact that VirginiaFlood can demonstrate using the marks, (id. 

### ,-r 57). Because the registrations are later in time, they cannot establish VirginiaFlood'spriority over 1996 Flood. In any event, the presumption claimedby VirginiaFlood is not conclusive. Itmay be overcome by "any legal or equitable defense or defect

... which might have been asserted ifsuch mark had not beenregistered." 15 U.S.C. §1115(a). 9continuous use priorto 1996 Flood's acquisition ofthe marks does not necessarily entitle Virginia Flood to priority over 1996 Flood. Ofcourse, a trustee can lose ownership orpriority over trademarks that are within the bankruptcy estate. Even though a trademark and its associated goodwill may survive the temporary cessation ofbusiness activities during the course ofabankruptcy, the trustee may nevertheless, "byhis actions or inaction[,] effect the demise" ofthe trademark ortrade

name. Hough Mfg. Corp. v. Va. MetalIndus., Inc., 453 F. Supp. 496, 500 (E.D. Va. 1978) (citingMerryHull & Co., 243 F. Supp. at 50). This principle is the basis for Virginia Flood's second theory ofownership. According to Virginia Flood, 1996 Flood did not acquire the FLOOD marks from the bankruptcy estate because the estate had already abandoned ownership ofthe marks through naked licensing. 4 Simplyput, the trustee had nothing to sell. Because the bankruptcy estate abandoned the FLOOD marks, Virginia Flood claims that it now has priority ownership by virtue ofits continuous use ofthe marks since 1989. Abandonmentby naked licensing occurs when a trademark owner licenses its trademark but fails "to exercise appropriate control and supervision over its licensees." Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1075 (5th Cir. 1997); see also Boersma v. Executive Travel Club, Inc., 256 F. Supp. 289, 290 (D.D.C. 1966) (stating that

4The only theory ofabandonment raised by VirginiaFlood in its Motion for Summary Judgment is naked licensing. All othertheories, even ifalluded to in the Complaint, are therefore waived. See Grenier v. CyanamidPlastics, Inc., 70 F.3d 667,678 (1st Cir. 1995) ("Even an issue raised in the complaintbut ignored at summaryjudgment may be deemed waived."); HeadStartFamilyEduc. Program, Inc. v. Coop. Educ. Servo Agency 11,46F.3d 629, 635 (7th Cir. 1995) (holding that an argument not raised by aparty in its motion for summaryjudgment is waived). 10"the owner ofaregistered mark may license its use to others so long as such agreements are not merely naked license agreements"). The licensor, however, need not micromanage the licensee. To the contrary, "[r]etention ofa trademark requires only minimal quality control." Ky. Fried Chicken Corp. v. DiversifiedPackaging Corp., 549 F.2d 368, 387 (5th Cir. 1977). Because naked licensing is treated as an unintentional abandonment ofthe trademark, "which triggers the loss oftrademark rights against the world, anyone attempting to show such abandonmentvia naked licensing faces a stringent burden ofproof." Creative Gifts, Inc. 

### v. UFO, 235 F.3d 540, 548 (lOth Cir. 2000); see also Exxon Corp., 109 F.3d at 1075-76. The rationale for abandonment by naked licensing is rather straightforward: "Ifa trademark owner allows licensees to depart from its quality standards, the public will be misled, and the trademark will cease to have utility as an informational device. A trademark

owner who allows this to occur loses its right to use the mark." Ky. Fried Chicken, 549 F.2d at 387.Typically, naked licensing is used as a shield by the licensee against infringement claims brought by the licensor. See Exxon Corp., 109 F.3d at 1078 ("The naked licensing defense has traditionally been used in the context ofinfringement claims broughtby the trademark owner ...."). Here, however, the licensee is using naked licensing as a sword to pry ownership rights from the licensor. Indeed, Virginia Flood does not contend that the oral agreement made by Crooks and Davis to allow Virginia Floodto use the FLOOD marks

was a naked license. Instead, it contends that the arrangement became a naked license in September 1993, at the latest, when Crooks and Davis, and then the trustee, ceased monitoring Virginia Flood's operations. From that point forward, says VirginiaFlood, the

11licensor exercised absolutely no control overthe quality ofservices performedby Virginia Flood underthe FLOODtrade name. Whateverthe merits ofthis naked licensing argument, Virginia Flood is in no position to make it. VirginiaFlood's status as the licensee bars it from using the naked licensing doctrine as a weapon to pry ownership ofthe FLOOD marks from 1996 Flood, the successor-in-interest ofthe licensor 1984 Flood. "The licensee is estopped from claiming any rights against the licensorwhich are inconsistent with the terms ofthe license.

. .. He is estopped from contesting the validity ofthe mark,

... or challenging the license agreement

as void or against public policy, e.g., because it granted a naked license." Creative Gifts, 235 F.3d at 548 (internal quotation marks omitted).5 By entering into the license agreement, the licensee recognizes the licensor's ownership ofthe mark and by implication, covenants not to challenge the licensor's rights. This implied covenant also estops the licensee from claiming thatthe licensor abandoned his rights by failing to exercise adequate quality control during the terms ofthe license. Westco Group, Inc. v. K.B. &Assocs., Inc., 128 F. Supp. 2d 1082, 1089 (N.D. Ohio 2001) (internal quotation marks and emphasis omitted). Indeed, '''[t]he case for estoppel is strongest when the licensee's challenge rests on its own conduct underthe license, such as .. . a claim ofabandonment based on inadequate supervision ofthe licensee by the licensor.'"

5See also Pro!'l GolfersAss 'n of Am. v. BankersLife & Cas. Co., 514 F.2d 665,671 (5th Cir. 1975) (noting that "alicensee is estopped to contest the validity ofthe licensor's title during the course ofthe licensing arrangement"); Heaton Distrib. Co. v. Union Tank Car Co., 387 F.2d 477,482 (8th Cir. 1967) ("Even in the absence ofany proviso in the contract not to contestthe validity ofthe trademark ortrade name, we think thatthe dealer, in recognizingthe manufacturer as the owner ofthe trademark ortrade name underthe terms ofthe agreement, would be estoppedto claim otherwise.");

### E. G.L. Gem LabLtd. v. Gem QualityInst., Inc., 90 F. Supp. 2d 277, 292 (S.D.N.Y. 2000) (holding that the licensee "isprecluded from contending that the [marks] are invalid by virtue ofhis acceptance ofa sublicense to use them"). 12Id. (quoting Restatement (Third) ofUnfair Competition § 33 (1995) (emphasis omitted)). The reason is clear: "[A] licensee claiming that its own license is a naked license essentially seeks to benefit from its own misfeasance." Id. To make out a claim ofnaked licensing, the licensee must show thatthe quality ofits goods or services suffered due to the lack of supervisionby the licensor. "[B]yrelying on its own ability to offer inferior or nonuniform goods and services underthe trademark ortrade name, the licensee seeks to free itselfofthe constraints imposedby the licensor's ownership ofthe trademark ortrade name." Id. A naked licensing claim is particularly self-serving (and contrary to the consumingpublic's interests) when used, as it is here, as a sword against the licensor. The Courtrecognizes, ofcourse, that licensee estoppel is an equitable defense. "[T]he doctrine is not subject to rigid application. Instead, a court considering the doctrine's application remains free to considerthe particular circumstances ofthe case, including the nature ofthe licensee's claim." Id. at 1090 (internal quotation marks and alterations omitted). Here, the equities weigh in favor ofapplying licensee estoppel. First, as I have already mentioned, Virginia Flood seeks to employ the naked licensing doctrine, not as a defense to 1996 Flood's infringement claims, but as an offensive claim to transfer ownership ofthe marks from the licensor to the licensee based solely on the licensee's allegations that it is not adequately supervised. The equitable considerations that justify licensee estoppel are partiCUlarly relevant in this case given that Virginia Flood is the only licensee. Had Virginia Floodpointed to other licensees the quality ofwhose services had also declined due to inadequate control by 1996 Flood and its predecessors, the scales might have tipped against licensee estoppel. "The case for applying the licensee estoppel

13doctrine is weakwhen the licensee asserts a lack ofcontrol by the licensor over otherusers." Id. (internal quotation marks omitted and emphasis added). That is because a licensee loses the value ofits licensed trademark "[w]hen a licensor fails to control the quality ofgoods or services sold by other licensees." Id. Unfortunately for Virginia Flood, that is not the case here. As the only licensee, Virginia Flood has complete control over the value ofits license. So long as it provides quality services onparwith the licensor's services, the value ofthe license will not diminish. Virginia Flood cannot claim that the license is void and that it now has exclusive rights to the FLOOD marks because it has failed to maintain the quality of services that customers have come to expect from the FLOOD name. The point oflicensee estoppel is to foreclose the sort ofclaim, like the one here, where the licensee blames the licensor for the licensee's own failure to preserve the value ofthe license, and it is particularly warranted where the claim is raised offensively to deprive the licensor ofits ownership ofthe licensed trademark. Second, although Virginia Flood'sprincipals couldhave asserted their claim of ownership overthe FLOOD marks when the trusteeproposed in October 1995 to sell the marks to the Smileys, (Rinn Decl. [#37-3],-r 18-19), they did not do so. Instead, Haislip and Seltzer challengedthe sale, not on thebasis that they ownedthe marks by virtue ofnaked licensing, but on the basis that Crooks, Davis, and the Smileys had unlawfully diverted and concealed estate assets to the detriment ofcreditors. (See id. ,-r 20 & Attachment B-12). They even offered a bid to purchase the marks. (I d. ,-r 21 & Attachment B-12 ,-r,-r 9-10). To say the least, it is curious that Haislip and Seltzer offered to pay for the very marks thatthey

now claim to have owned since September 1993, at the latest, when Crooks and Davis, and

14then the trustee, ceased exercising control over Virginia Flood. Itis even more curious that Haislip and Seltzer failed to even mention their claim ofownership at thattime. As such, VirginiaFlood's utter failure to assert its ownership rights when afforded an obvious opportunity to do so weighs decisively in favor ofapplying licensee estoppel to its claims here. 6 CONCLUSION Because 1996 Flood is the successor-in-interest of 1984 Flood, the original owner of the FLOOD marks, and because VirginiaFlood is barred by the doctrine oflicensee estoppel from asserting its naked licensing claim to obtain priority overthe marks, 1996 Flood is entitled to summaryjudgment on all ofVirginia Flood's claims. For the same reasons, it is also entitled to summaryjudgment on Count 5 ofits Counterclaim for a declaration ofits priority overVirginiaFlood and ofits exclusive right to use and register the marks JOHN C. FLOOD and FLOOD.7 Accordingly, Count 5 of 1996 Flood's

6Virginia Flood contends that 1996 Flood cannot seek equitable reliefbecause it has "unclean hands." (Virginia Flood Parties' Reply to Defs.' Opp'nto PIs.' Mot. for Summ. J. [#74] at 16). Virginia Flood points specifically to evidence that Crooks, Davis, and the Smileys misappropriated assets from the bankruptcy estate. (Jd. at 17). Although it is true thattheir unauthorized use ofestate assets promptedthe trustee to seek and obtain appointment ofareceiver, it is not altogether clearwhy that should foreclose 1996 Flood from obtaining equitable reliefnow that it has purchased the marks from the trustee. That the trustee decided to sell the marks to 1996 Flood, even overthe same objections now raised by Virginia Flood, weighs heavily against Virginia Flood'sunclean hands argument. 7Because 1996 Flood requested reliefonly on Count 5 ofits Counterclaim, the Court reservesjudgment as to the remaining counts. The Court notes, however, that even though licensee estoppel forecloses Virginia Flood from using naked licensing as a sword, it does not necessarily foreclose Virginia Flood from asserting naked licensing as an estoppel defense against 1996 Flood's infringement and unfair competition counterclaims. See Exxon Corp., 109 FJd at 1076 n.7 (noting that a licensee in apurported naked license may "invoke the naked licensing defense as a form ofestoppel"); Sheila's Shine Prods., Inc. v. Sheila Shine, Inc., 486 F.2d 114, 124 (5th Cir. 1973) ("Failure to exercise such control and 15Renewed Motion for Partial Summary Judgment is GRANTED and Virginia Flood's Motion for Summary Judgment is DENIED. An Order consistent with this Memorandum Opinion is attached herewith. 

# ,**~** United States DistrictJudge

supervision for a significantperiod oftime may estop the trademark owner from challenging the use ofthe mark and business which the licensee has developed during the period ofsuch unsupervised use."). A word to the wise is sufficient. 

### 16