390 F. Supp. 3d 975
E.D. Mo.2018Background
- Lawn Managers, Inc. (Zweifel) has used the trade name "Lawn Managers" in commerce since 1981. Progressive Lawn Managers, Inc. (Smith) was formed after the principals' 2012 divorce; the divorce decree and a 2014 judgment granted Smith a time-limited license to use "Lawn Managers" and divided customer territories/non-solicitation rights for limited periods.
- The license to use the name expired December 31, 2014; after that date Progressive continued using a logo that minimized the word "Progressive," used yard signs and coupons reading "Lawn Managers," and ran other materials that customers could reasonably read as "Lawn Managers."
- Evidence showed persistent consumer confusion from 2012–2017 (misdirected calls, misdirected checks, >140 confusion-related phone calls after Jan 2016), and Progressive represented itself online and in video in ways suggesting continuity with Lawn Managers.
- Progressive counterclaimed to cancel Lawn Managers' federal registration, arguing abandonment via naked/uncontrolled licensing. Lawn Managers argued (and proved) it retained rights and that Progressive infringed after the license expired.
- The court found no naked licensing given the parties’ long prior 17-year working relationship and no demonstrated decline in quality; however, it found Progressive willfully infringed after license expiration and intentionally exacerbated confusion.
- Remedy: court awarded injunctive relief, attorney’s fees and costs, corrective-advertising costs of $71,346, and compensatory damages of $80,688 (25% of calculated profits of $322,753), explaining full disgorgement would be inequitable given pre-2015 confusion and a post-divorce non-compete period.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lawn Managers' mark was abandoned via "naked licensing" requiring cancellation | Lawn Managers: no abandonment; adequate control/no quality decline given long prior relationship | Progressive: two-year license and lack of formal quality control equals uncontrolled licensing and abandonment | Held: No abandonment; long prior association and unchanged quality precluded naked licensing; counterclaim dismissed |
| Whether Progressive infringed Lawn Managers after license expiration | Lawn Managers: Progressive continued to use confusing mark and diminished "Progressive" to pass off services | Progressive: prior license and post-divorce relationship explain confusion; use lawful as Progressive Lawn Managers | Held: Infringement proven for post-12/31/2014 use; Progressive intended to pass off services and exacerbated confusion |
| Whether there was a likelihood / actual confusion | Lawn Managers: mark has secondary meaning; marks are highly similar; direct competition; evidence of actual confusion | Progressive: prior relationship caused confusion, so later use not actionable or confusion unavoidable | Held: Likelihood of confusion and substantial actual confusion found; prior relationship explains some confusion but does not excuse post-license infringement |
| Appropriate relief and damages (apportionment) | Lawn Managers: seeks defendant's profits, damages, corrective advertising, injunction, fees | Progressive: profits must be apportioned to reflect only infringement; plaintiff's conduct (advertising) bars relief | Held: Court awarded injunctive relief, fees, costs, $71,346 corrective advertising, and $80,688 compensatory damages (25% of $322,753 profits) because apportionment impossible and equitable adjustment required |
Key Cases Cited
- Heaton Distrib. Co. v. Union Tank Car Co., 387 F.2d 477 (8th Cir. 1967) (naked licensing/uncontrolled licensing doctrine)
- FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509 (9th Cir. 2010) (factors for adequacy of quality control in licensing)
- Taco Cabana Intern., Inc. v. Two Pesos, Inc., 932 F.2d 1113 (5th Cir. 1991) (prior close association may excuse formal control requirements)
- Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001 (9th Cir. 1985) (licensor-licensee relationships and quality control context)
- Community of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ's Church, 634 F.3d 1005 (8th Cir. 2011) (burden and standard for proving abandonment)
- Co-Rect Prods., Inc. v. Marvy! Advertising Photography, Inc., 780 F.2d 1324 (8th Cir. 1985) (likelihood-of-confusion factors)
- SquirtCo v. Seven-Up Co., 628 F.2d 1086 (8th Cir. 1980) (factors for confusion analysis)
- Masters v. UHS of Delaware, Inc., 631 F.3d 464 (8th Cir. 2011) (injunctive relief and damages under Lanham Act)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (federal-law predominance in retaining jurisdiction)
- Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251 (U.S. 1916) (difficulties of apportionment of profits)
- Tonka Corp. v. Tonk-A-Phone, Inc., 805 F.2d 793 (8th Cir. 1986) (burden on defendant to prove deductible costs when plaintiff proves sales)