Opinion ID: 3037435
Heading Depth: 4
Heading Rank: 1

Heading: grant and description of premises:

Text: . . . The concession shall be located in the premises provided by State and known as the Casa de Pico Buildings, Old Town San Diego State Historic Park, at 2754 Calhoun Street, in the City and County of San Diego, State of California, and being a portion of Lot 1 all of Lot 2, Block 426 of Old San Diego .... There is obviously no mention of trademark rights in the name CASA DE PICO. DEP’T OF PARKS v. BAZAAR DEL MUNDO 5697 [8] Similarly, Amendment 3, paragraphs One and Ten, grant the rights to use the buildings for limited purposes: 1. GRANT AND DESCRIPTION OF PREMISES: The State . . . grants to Concessionaire the right, privilege and duty to construct or modify, equip, operate and maintain a Mexican-style Shopping Arcade together with the Casa de Pico, Lino’s, Hamburguesa and Casa de Bandini Restaurants. . . . The concession shall be located in the premises . . . known as the Casa de Pico Building, . . . and the Casa de Bandini . . . . 10. USE OF PREMISES: The subject premises shall be used by the Concessionaire to establish a Mexican Shopping Arcade, Lino’s, Hamburguesa, Casa de Pico, and the Casa de Bandini Restaurants .... Thus a plain reading of the Concession Agreement reveals that it is nothing more than a standard leasing arrangement. It does not even purport to convey a license to use the marks. The State itself prepared a Sample Contract containing a provision for the use of intellectual property in connection with its Request for Proposals for Bazaar del Mundo’s successor concessionaire, an acknowledgment that the prior Concession Agreement with Bazaar del Mundo did not similarly license use of the marks. Unlike in the typical implied licensing case, here the State asserts the doctrine of implied license as evidence of its ownership of the marks, as opposed to as a defense to an infringement action. Although this is an unusual context, the State is correct that an implied license to use a trademark for certain services may arise. See Secular Orgs. for Sobriety, Inc. v. Ullrich, 213 F.3d 1125, 1131 (9th Cir. 2000). None arose here, however, either from the parties’ mutual intentions, course of dealing, or the minimal quality-control provisions in the Con5698 DEP’T OF PARKS v. BAZAAR DEL MUNDO cession Agreement as urged by the State. As the Federal Circuit has explained: In most instances under contract law, a patent or trademark owner intentionally creates an express license . . . . In some circumstances, however, the entire course of conduct between a patent or trademark owner and an accused infringer may create an implied license. ... This implied license does not offend the protec- tion afforded patent and trademark rights by federal law. McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920, 922 (Fed. Cir. 1995), cert. denied, 516 U.S. 1174 (1996). The Supreme Court has long recognized that a license may arise absent “a formal granting.” See De Forest Radio Tel. & Tel. Co. v. United States, 273 U.S. 236, 241 (1927). In De Forest, the Court found an implied license granted by the American Telephone & Telegraph Company to the United States to make and use patented audions. The license stemmed both from American Telephone & Telegraph Company’s agreement that it would not do anything to interfere with the United States’ manufacture of audions, and from its subsequent conduct. The Court held: Any language used by the owner of the patent or any conduct on his part exhibited to another, from which that other may properly infer that the owner consents to his use of the patent . . . constitutes a license . . . . Id. Licenses are contracts “governed by ordinary principles of state contract law.” Power Lift, Inc. v. Weatherford Nipple-Up Systems, Inc., 871 F.2d 1082, 1085 (Fed. Cir. 1989). The State DEP’T OF PARKS v. BAZAAR DEL MUNDO 5699 cannot demonstrate an implied licensing agreement because it failed to introduce any evidence of an agreement or course of conduct by the parties to contract for a trademark license. [9] The clear intent of the parties as evidenced by the Concession Agreement itself was solely to lease premises—not to license trademarks. The Agreement’s terms are at odds with the State’s contorted effort to remake it as a trademark licensing agreement. The Agreement describes its purpose as “grant[ing] to Concessionaire the right, privilege and duty to construct or modify, equip, operate, and maintain a Mexicanstyle Shopping Arcade.” None of the terms typical of a trademark licensing agreement, such as payment of royalties, are present. To the contrary: the only payments to be made are labeled and structured as rental payments. The termination clauses do not provide for the surrender of intellectual property at the expiration of the contract, but rather state only that the concessionaire should quit the premises, surrender real property improvements, and execute a quitclaim deed. Similarly, the Agreement does not provide that the State retains title to any intellectual property developed during its term; the only provision for title requires Bazaar del Mundo to acknowledge the State’s title to the premises described in the contract and to any improvements made to the real property. Nor do any of the subsequent amendments reveal any intent to enter into a trademark licensing agreement. The preamble to Amendment One reiterates that the purpose of the concession was the “installation of a Mexican-style shopping arcade.” Amendment Two is silent on licensing. Amendment Three contains a renewal rent calculation provision that is not based upon the good will or market value of the trademarks, but rather was to be established based upon “a survey of thencurrent rental practices and rents and other lease terms established by governmental agencies and private owners for comparable commercial space on a statewide basis,” taking “into account local rental rates and other lease terms in the San Diego area.” 5700 DEP’T OF PARKS v. BAZAAR DEL MUNDO Nor did the subsequent course of dealing between the parties create an implied license to use the marks. Far from it: that Bazaar del Mundo felt free to register and publish the marks with the USPTO and the California Secretary of State belies any mutual agreement to a licensing arrangement. Moreover, the State’s intellectual property rights provision in the 2001 proposed new concession contract demonstrates its understanding that the old Concession Agreement did not impliedly grant a license to the marks. The new contract expressly recognizes the State’s ownership of any marks developed by the concessionaire through its own goodwill during the term of the agreement: 28. INTELLECTUAL PROPERTY RIGHTS: Any names, logos, trademarks and/or copyrights developed during and/or pursuant to this contract which will in any way associate with, identify or implicate an affiliation with California State Parks, shall be approved by State, shall belong to State upon cre- ation, and shall continue in State’s exclusive ownership upon termination of this contract. Furthermore, upon learning of the proposal for the new intellectual property rights provision in the proposed concession agreement on December 7, 2001, Bazaar del Mundo’s President, Diane Power, wrote back that the proposal is “totally unacceptable. Under no circumstances will we turn over the rights to our trade-marked names to the State unless we are fully and fairly compensated for their value,” evidencing Bazaar del Mundo’s understanding that it owned the marks. Power’s hypothetical musings that the State might be able to own a trademark in the name of a historic site, such as the Hearst Castle, where it also operates a concession, are not relevant to the question of ownership of the marks here. The State also makes an equitable argument based upon Bazaar del Mundo’s failure to provide actual notice to the State of its registration of the marks. We fail to see how this DEP’T OF PARKS v. BAZAAR DEL MUNDO 5701 argument assists the State in its trademark infringement claim. Nothing in the Concession Agreement prohibits Bazaar del Mundo from registering the names of its restaurants or requires it to provide actual notice thereof to the State. Because under 15 U.S.C. § 1072 registration serves as constructive notice of the registrant’s claim to ownership, the State’s delay in contesting the 1985 registration of the marks may in fact estop it from bringing an infringement claim. See Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002). Moreover, even if Bazaar del Mundo were shown to have fraudulently obtained federal registration of the marks, its common law rights in the marks would continue unabated. See Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 997 (9th Cir. 2001). [10] Finally, the State posits that the quality-control provisions set forth in the Concession Agreement demonstrate the existence of an implied license because well-established trademark law imposes a duty upon the licensor to retain sufficient control over the mark to prevent public deception. “The purpose of a trademark . . . is to identify a good or service to the consumer, and identity implies consistency and a correlative duty to make sure that the good or service really is of consistent quality, i.e., really is the same good or service.” Gorenstein Enters., Inc. v. Quality Care-USA, Inc., 874 F.2d 431, 435 (7th Cir. 1989); see also 2 McCarthy on Trademarks § 18:42. Without such control, “the risk that the public will be unwittingly deceived will be increased . . . . [and] the only effective way to protect the public . . . is to place on the licensor the affirmative duty of policing in a reasonable manner the activities of his licensees.” Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 367 (2d Cir. 1959). Because naked and uncontrolled licensing is “inherently deceptive,” Barcamerica Int’l USA Trust v. Tyfield Imps., Inc., 289 F.3d 589, 598 (9th Cir. 2002), the State must have exercised a high degree of control and supervision over Bazaar del Mundo’s provision of restaurant services under the marks to even assert this basis for proving an implied licensing arrangement. 5702 DEP’T OF PARKS v. BAZAAR DEL MUNDO [11] Although the State points to several measures of quality control in the Agreement to support its theory, nothing indicates that the State controlled or supervised the most critical aspects of building goodwill and value in the provision of restaurant services—the quality of the food and service. Nor do any of the provisions, which relate to such matters as signage, inspections of the premises, designated use of the premises and period dress, support a finding that the State has exercised such quality control and supervision over Bazaar del Mundo that the marks truly “reflect[ ] the goodwill and quality standards” of the State, Siegel v. Chicken Delight, Inc., 448 F.2d 43, 49 (9th Cir. 1971), as opposed to Bazaar del Mundo itself. The Agreement lacks any provision for routine inspections, adoption of any particular design, or even an operating manual for the conduct of the restaurants’ business. Although the parties agreed that food typical of the era would be served, employees would wear Mexican dress, and the premises would be kept clean, the Agreement provided no recourse to the State if the quality of the food, dress, service, or sanitation were to deteriorate. See Stockpot, Inc. v. Stock Pot Rest., Inc., 220 U.S.P.Q. 52, 58-59 (T.T.A.B. 1983) (holding that, if the validity of the license were determined solely on the basis of the lease provisions, the failure of the lease to control the quality of the food and service of the restaurant would constitute insufficient compliance with the Trademark Act). Though we have recognized that “ ‘[i]t is difficult, if not impossible to define in the abstract exactly how much control and inspection is needed to satisfy the requirement of quality control over trademark licensees,’ ” Barcamerica Int’l, 289 F.3d at 598 (quoting 2 McCarthy on Trademarks § 18:55 at 18-94.3), the State’s evidence of control fails to approach even the level of control that we found to be insufficient in Barcamerica, id. at 596. In Barcamerica, 289 F.3d at 596-97, we found that random tastings by the licensor of wine sold under his trademark, where there was no evidence as to how often, or under what circumstances the licensor tasted the DEP’T OF PARKS v. BAZAAR DEL MUNDO 5703 wine, did not rise to the level of ongoing monitoring or quality control sufficient to defeat a naked licensing challenge. While we held in Barcamerica that the lack of an express contract right to inspect and supervise a licensee’s operations is not conclusive evidence of lack of control, we found that there was no evidence of the licensor having a close working relationship with the licensee to render a formal agreement unnecessary. Id. at 597. Where “the particular circumstances of the licensing arrangement [indicate] that the public will not be deceived” because the licensor and the licensee have such a close working relationship, reliance on the measures used by the licensee may be justified, and a formal agreement providing for ongoing monitoring and inspections may not be necessary. Id. at 596 (internal quotation marks omitted and alteration in original); see, e.g., Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1017-18 (9th Cir. 1985); Arner v. Sharper Image Corp., 39 U.S.P.Q.2d 1282, 1995 WL 873730 (C.D. Cal. 1995). Here, however, the State points to no evidence revealing any effort to monitor or sample the quality of Bazaar del Mundo’s food and service. Nor is there any evidence that the State justifiably relied on Bazaar del Mundo’s reputation or had established a close working relationship with it to make a formal quality-control agreement unnecessary. Barcamerica, 289 F.3d at 597. Any argument that Bazaar del Mundo’s food and service actually was of high quality is irrelevant to our analysis, because what matters is that the State “played no meaningful role in holding” the restaurants to any “standard of quality—good, bad, or otherwise.” Id. at 598. In addition, because “[t]he major purpose of quality control is to protect the public,” exacting quality-control standards in the field of restaurant services is especially important because “a licensor’s failure to exert proper quality control over a careless licensee might lead an ordinary, unsuspecting customer to make an isolated purchase of contaminated food.” Edwin K. Williams & Co., Inc. v. Edwin K. Williams & Co.-East, 542 F.2d 1053, 1059-60 (9th Cir. 1976). As in Barcamerica, the 5704 DEP’T OF PARKS v. BAZAAR DEL MUNDO failure of the State to exercise quality control combined with the absence of a close working relationship would have misled the public into associating the marks with Bazaar del Mundo rather than the State. The cases upon which the State relies to support its quality control theory of implied license are unavailing. The asserted cases in fact undermine the State’s argument because the licensors there exercised rigorous and ongoing supervision and quality control over their licensees. In Turner v. HMH Publishing Co., 380 F.2d 225, 229 (5th Cir. 1967), the licensees were required to meet standards related to “decor, design, quantity and quality of food, beverages and entertainment in the clubs”; the trademark owner produced an operating manual for its franchisees to follow; and “periodically visit[ed] the clubs and report[ed] on the maintenance of standards for food, beverages, services and decor.” Similarly, the trademark owner in Pneutek, Inc. v. Scherr, 211 U.S.P.Q. 824, 833 (T.T.A.B. 1981), exercised adequate quality control because he personally selected advertising for the journal, employed an editorial board with veto power to peer review the papers to be published, and personally approved all promotional literature upon which the mark was displayed. Finally, the court in Nestle Co. v. Nash-Finch Co., 4 U.S.P.Q.2d 1085, 1089 (T.T.A.B. 1987), found adequate control where the licensor conducted periodic inspections and provided the licensee with training programs, manuals, raw materials, suppliers, merchandising bulletins, and recipe books. When compared to the cases cited in the State’s own brief, the minimal control and supervision here is an insufficient basis to support an inference of an implied licensing agreement. [12] Finally, the State holds up California Public Resources Code § 5080.02 et seq., in an effort to demonstrate a sufficient quality-control system. This effort is to no avail. Although the Code encompasses a detailed system of regulation of the bidding for and award of concession agreements, not a single DEP’T OF PARKS v. BAZAAR DEL MUNDO 5705 provision governs quality-control and supervision over concessionaires licensing trademarks from the State.