Lawn Managers, Inc. v. Progressive Lawn Managers, Inc
959 F.3d 903
| 8th Cir. | 2020Background:
- Randy Zweifel (Lawn Managers, Inc.) and Linda Smith (Progressive Lawn Managers, Inc.) operated Lawn Managers together for ~20 years; they divorced and executed a Marital Settlement Agreement (MSA) dividing customers, equipment, and permitting Smith to operate a separate company using the name "Progressive Lawn Managers doing business as Lawn Managers" for a limited period.
- The MSA (and a July 25, 2014 Settlement Agreement) split commercial and residential accounts by zip code, allowed Smith to use Lawn Managers' credit and staff for a limited time, and imposed a restricted non-compete/non-solicit period that expired by mid-2016.
- Smith/Progressive continued to use the Lawn Managers name and similar logos/advertising after the licensed period expired; Lawn Managers federally registered the mark in Feb 2015 and demanded cessation; Progressive did not change its mark.
- Lawn Managers sued in Feb 2016 for Lanham Act infringement; Progressive counterclaimed alleging naked licensing (abandonment) and raised an unclean hands defense; bench trial followed.
- The district court found the license was not "naked," found post-license infringement and deliberate exacerbation of consumer confusion, enjoined Progressive, awarded $80,688 (25% of Progressive's profits), $71,346 for corrective advertising, and attorney's fees; the Eighth Circuit affirmed.
Issues:
| Issue | Lawn Managers' Argument | Progressive's Argument | Held |
|---|---|---|---|
| Naked licensing / abandonment of mark | MSA created a limited, supervised license; Zweifel could reasonably rely on Smith's quality control based on their long working relationship | License was "naked" because MSA had no express quality-control provisions and post-divorce relationship was adversarial, so mark was abandoned | Court affirmed: Progressive failed to prove naked licensing by clear and convincing evidence; reasonable reliance supported by long prior association, shared employees, and no evidence of inferior quality |
| Unclean hands (mailer solicitation) | Lawn Managers: Settlement Agreement replaced original non-solicit; restriction barred only new residential sign-ups in specified zip codes until July 25, 2016, so Lawn Managers could solicit after that date | Progressive: Lawn Managers violated a perpetual award of certain customer accounts and thus its mailer was inequitable | Court held contract unambiguous; settlement limited restrictions to two years and did not prohibit later solicitation; unclean hands defense rejected |
| Damages (profits and corrective advertising) | Award appropriate: profits traceable to infringement; corrective advertising cost reasonable estimate to remedy confusion | Progressive: profits award excessive; causation contaminated by licensed period and non-compete; corrective-ad cost speculative | Court upheld damages: awarded 25% of profits as equitable reduction for causation issues and non-compete period; corrective-ad award accepted despite uncertainty because plaintiff offered a reasonable expert estimate |
| Licensee estoppel to challenge mark validity (raised in dissent) | Lawn Managers: licensee estoppel bars Progressive from contesting validity of mark while it used it | Progressive: estoppel does not bar post-license challenges to validity/abandonment; may assert naked licensing for post-license conduct | Majority did not adopt estoppel argument to bar Progressive's defenses; dissent argued estoppel not applicable and would allow naked-licensing challenge post-license |
Key Cases Cited
- FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509 (9th Cir. 2010) (quality-control requirement and limits of relying solely on licensee)
- Taco Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113 (5th Cir. 1991) (purpose of trademark quality-control requirement; special-relationship reliance)
- Stanfield v. Osborne Indus., Inc., 52 F.3d 867 (10th Cir. 1995) (naked licensing and abandonment where licensor lacked control)
- Community of Christ Copyright Corp. v. Devon Park Restoration Branch, 634 F.3d 1005 (8th Cir. 2011) (clear-and-convincing burden to prove abandonment)
- Land O' Lakes Creameries, Inc. v. Oconomowoc Canning Co., 330 F.2d 667 (7th Cir. 1964) (long-term relationship and lack of complaints support reliance)
- Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001 (9th Cir. 1985) (licensor's manufacturing role and integration support control)
- Barcamerica Int'l USA Tr. v. Tyfield Imps., Inc., 289 F.3d 589 (9th Cir. 2002) (insufficient informal oversight can still be inadequate; corrective-ad/quality issues)
- Eva's Bridal Ltd. v. Halanick Enters., Inc., 639 F.3d 788 (7th Cir. 2011) (naked licensing where licensor retained no control)
- WWP, Inc. v. Wounded Warriors Family Support, Inc., 628 F.3d 1032 (8th Cir. 2011) (uncertainty in damages does not bar recovery)