Earthgrains Baking Companies v. Sycamore
15-4145
10th Cir.Oct 10, 2017Background
- Leland Sycamore developed "Grandma Sycamore’s Home Maid Bread" and later sold the trademarks to Metz (later Sara Lee, then EarthGrains) in a 1998 Asset Purchase Agreement that cross-referenced a Trademark License Agreement (TLA) granting Sycamore a perpetual, royalty-free, exclusive license in specified territories (Arizona, Nevada, Southern California) but barring assignment without consent and containing a Nonuse Forfeiture clause.
- Sycamore sublicensed rights to Holsum (2005) without consent; Holsum sold bread under the mark until the sublicense was terminated in 2009. Sycamore then purchased a bakery, renamed it Sycamore Family Bakery, registered state marks and domains, and sold in Utah (outside licensed territory), despite EarthGrains marketing in Utah.
- EarthGrains sued for trademark infringement, unfair competition, cybersquatting, and breach of contract. The district court granted summary judgment for EarthGrains on Lanham Act and common-law claims, found forfeiture under the TLA’s Nonuse clause (later partially reversed), and issued a permanent nationwide injunction prohibiting use of the mark.
- A jury awarded damages; this court in Sycamore I reversed only the district court’s finding that Sycamore forfeited his licenses in Arizona and Nevada and remanded.
- On remand the district court amended the judgment: it acknowledged forfeiture only for Southern California but terminated Sycamore’s TLA rights and reaffirmed the nationwide injunction based on two independent grounds—Sycamore’s material breaches of the TLA and his Lanham Act/common-law misconduct. Sycamore appeals only the termination based on material breach and the injunction scope.
Issues
| Issue | Plaintiff's Argument (Sycamore) | Defendant's Argument (EarthGrains) | Held |
|---|---|---|---|
| Whether Sycamore’s licensed rights can be terminated based on material breaches of the TLA (as opposed to only by the Nonuse Forfeiture clause) | Termination is improper because the TLA allows termination only via the Nonuse Forfeiture clause; Sycamore retained license rights in AZ and NV | Material breaches and Lanham Act violations independently justify termination of the TLA | Court: Termination affirmed; even if material-breach basis were erroneous, undisputed Lanham Act violations provide an independent, adequate basis to terminate rights |
| Whether the permanent nationwide injunction is invalid to the extent it prohibits use in Arizona and Nevada, where Sycamore claims licensed rights | Injunction inconsistent with surviving contractual rights; injunction should be narrowed to allow licensed use in AZ/NV | The injunction was primarily (and independently) grounded in Sycamore’s intentional Lanham Act and common-law violations and is necessary to prevent consumer confusion | Court: Sycamore waived challenge to injunction scope by not raising it earlier; in any event injunction valid and not an abuse of discretion given Lanham Act purposes |
| Whether the appeal is frivolous and dismissible | (implicit) the appeal raises legitimate issues about contract remedies | Motion to dismiss denied: appeal not frivolous because Sycamore chiefly challenges consequences of material-breach finding rather than the breach finding itself | Court: Denied motion to dismiss; appeal proceeds but fails on merits |
| Whether Sycamore has a contractual right to exclude others (distinct from right to use) that precludes injunction effect | Sycamore first argued at oral argument that TLA grants exclusionary property rights allowing him to bar others despite an injunction against his use | EarthGrains: argument forfeited and waived; injunction still extinguishes practical rights | Court: Argument waived (not raised below or in briefs); even if considered, injunction functionally defeats any exclusionary effect |
Key Cases Cited
- United States v. Spallone, 399 F.3d 415 (2d Cir. 2005) (court orders are construed like other written instruments; intent of issuing court controls)
- Sec. Mut. Cas. Co. v. Century Cas. Co., 621 F.2d 1062 (10th Cir. 1980) (when an order is ambiguous, the entire record may be consulted to determine what was decided)
- John Allan Co. v. Craig Allen Co. L.L.C., 540 F.3d 1133 (10th Cir. 2008) (district courts have broad equitable authority under the Lanham Act to craft injunctions)
- F.T.C. v. Accusearch Inc., 570 F.3d 1187 (10th Cir. 2009) (equitable injunctive authority may survive discontinuance of illegal conduct)
- Berna v. Chater, 101 F.3d 631 (10th Cir. 1996) (if a decision rests on alternative adequate grounds, challenging only one ground forecloses success on appeal)
- Olson v. Coleman, 997 F.2d 726 (10th Cir. 1993) (standards for deeming an appeal frivolous)