Opinion ID: 521946
Heading Depth: 2
Heading Rank: 3

Heading: Other Trademark Claims

Text: 25 Matusa claims that the district court erred in failing to find that Inc. repudiated the franchise agreement by filing a United States trademark registration for the trademark Ron Matusalem, and by its refusal to assign or abandon its registration subsequent to the October 15, 1982 letter from Matusa demanding such action. Inc. filed the application to register the trademark Ron Matusalem in the United States on August 3, 1981. Matusa demanded in its letter that Inc. abandon or assign to it Inc.'s pending application. 26 Rather than finding a repudiation of the franchise, the district court found that Inc. had filed at a time when it was acting for the benefit of Matusa: 27 I think that the efforts to secure the trademarks and trade names, whatever registrations, initially were done at a time when there was peace and tranquility in the family and were done on behalf of the welfare of everyone. In fact, I have heard testimony ... that that was always their intention, to secure these for the benefit of Matusa. (R7-160 Ex. 1-10). 28 We find nothing in the record to contradict this finding. The plaintiff presented no evidence suggesting that it did not agree to the filing prior to October 15, 1982. The district court found that the defendants previously had been successful in securing a trademark registration in Puerto Rico, and it was the consensus of feeling that that registration would benefit an application to Washington to get further registrations. (R7-160 Ex. 1-10). The record supports the district court finding that Inc. did not repudiate its sub-franchise by filing a trademark registration on behalf of itself and Matusa. 29 A closer question is whether Inc.'s refusal to assign or abandon its pending application after October 15, 1982 constitutes trademark infringement. Some courts have held that a licensee's registration of its licensor's mark may cause confusion, and thus constitute trademark infringement. See, e.g. Snelling & Snelling, Inc. v. Dupay Enters., Inc., 125 Ariz. 362, 609 P.2d 1062 (Ct.App.1980). However, the district court ruled that given the equities involved, the refusal could not be grounds for termination of the franchise. [T]heir refusal to withdraw the petition for a trademark was arbitrary, but both sides were being arbitrary at this time. Both sides were acting like spoiled children and insisting on any leverage they could get hoping to have an edge. (R7-160 Ex. 1-17). [T]o the degree that this case involves equity, both parties had unclean hands.... Id. at 18. We have held that the application of the doctrine of unclean hands in a trademark case lies within the sound discretion of the district court, Shatel Corp. v. Mao Ta Lumber & Yacht Corp., 697 F.2d 1352, 1355 (11th Cir.1983), and we decline to disturb the district court's ruling. 9 30 Although Inc.'s action with regard to the trademark application did not infringe Matusa's trademark, the district court ruled that any pending applications or any trade names that were acquired ... would be deemed to be and should be transferred to Matusa for their ownership. (R7-160 Ex. 1-10). Because the trademark clearly belongs to the plaintiff, we agree that the order is proper. 31 We are similarly unpersuaded by the plaintiff's claim that Inc.'s sales of the Roncoco liqueur in Canada constituted a repudiation of its franchise as a matter of law. The franchise prohibits Inc.'s use of the Ron Matusalem trademark in several countries, including Canada, except by agreement with Limited. The district court made a factual finding that at the time the Canadian venture began, it was done for the benefit of all parties concerned. The court stated that it was a business opportunity that was made available to the part of the family that was running the corporation at that time. (R7-160 Ex. 1-21). Because the label was designed to resemble the Ron Matusalem trademark, the court ordered that Inc. pay Matusa the ten percent royalty required in the franchise. Again, we find nothing in the record sufficient to disturb the district court's finding that the incorporation of the Canadian company was done for the benefit and with the acquiescence of both parties. By the time Matusa sent Inc. its notice of breach letter in 1982, the atmosphere of mutually beneficial business dealings had disappeared. As the court stated, all the rules have changed. This is no longer a family, it's two different corporations, so you have got to start enforcing these things like corporations instead of family. (R7-160 Ex. 1-20). 32 This is not to say that the district court did, or might write a new contract for the parties where the language of the contract is unambiguous. Haenal v. United States Fidelity & Guar. Co., 88 So.2d 888 (Fla.1956); Home Dev. Co. v. Bursani, 178 So.2d 113 (Fla.1965). Rather, it simply acknowledged that the franchise agreement could no longer be treated as an informal understanding purporting to lend legal authority to whatever the two parties chose to do at any given time. Where both parties had seemingly ignored the letter of the contract throughout the course of the franchise, the district court was understandably reluctant to allow Matusa to terminate Inc.'s franchise on the grounds that Inc. persisted in doing what it had been doing, with Matusa's approval, for some time. 33 The district court also recognized that termination of a franchise is a drastic remedy where neither party has caused irreparable harm: 34 When the franchise was given to Inc., it was a very substantial benefit.... This right should not be set aside lightly, and I think, that the agreement recognized it.... [O]n a simple mistake or misunderstanding a person doesn't lose a valuable property interest, which I believe this franchise is.... 35 (R7-160 Ex. 1-8). The record supports the district court's finding that Inc. behaved as it did with the acquiescence and for the benefit of the plaintiff. Thus we affirm the ruling that the sub-franchise is still in existence and that it should be strictly enforced.