Third-party beneficiaries don't "use" a mark

Ruggers, Inc. v. United States of America Rugby Football Union, Ltd., --- F.Supp.2d ----, 2010 WL 3553885 (D. Mass.)

Is proximity to a mark “use” of the mark? Grocery stores might need to worry.

Ruggers, which sells rugby clothing and gear, sued USA Rugby, alleging it willfully violated the parties’ exclusive sponsorship agreement. Ruggers added claims against a number of its competitors, claiming they induced USA Rugby to violate its agreement, producing claims for unfair competition, false advertising, trademark infringement, unjust enrichment, intentional interference with contract, misappropriation of the right of publicity, and invasion of privacy.

Under Armour, a competitior-defendant, moved to dismiss and prevailed.

In 2004, Ruggers agreed to provide USA Rugby-sanctioned teams with $350,000 worth of rugby clothing and gear annually in exchange for the exclusive rights to use the USA Rugby trademark on its clothing and to have USA Rugby-sanctioned teams wear, use, and promote only Plaintiff's clothing and gear. Beginning in mid-2006, however, USA Rugby allegedly authorized a number of competitors, including Under Armour, to use the USA Rugby logo in association with their products; allowed teams to wear and promote competitors; clothes; and sold and promoted competitors’ brands through its website. Ruggers alleged that Under Armour and the other competitors induced this breach knowing of its existence and used USA Rugby’s marks and touted USA Rugby sponsorship knowing that Ruggers had the exclusive right to do so.

On the Lanham Act claims, Ruggers alleged that Under Armour (1) used USA Rugby’s trademarks to falsely indicate sponsorship, and (2) infringed USA Rugby’s registered marks. However, the allegations of the complaint were insufficient to demonstrate “use”; they were mere vague and conclusory allegations against “all” of the named competitor-defendants. The complaint didn’t allege that Under Armour sold or produced any item bearing the marks or attempted to exploit the marks in its ads; “broad undifferentiated allegations” were insufficient. (Also, isn’t there a standing problem? I can recall a few cases that have held that nobody can claim trademark infringement but the owner.)

The court also concluded that amendment would be futile, based on Ruggers’ additional factual allegations in its papers. Ruggers alleged that “on at least three occasions in 2007, representatives of USA Rugby, including members of the national team, wore Under Armour apparel ‘in close physical relation to the USA Rugby marks on other garments’ during public appearances.” The theory was that a USA Rugby representative’s choice to wear an Under Armour branded undershirt in conjunction with USA Rugby-branded uniforms was “use” by Under Armour.

The court was unpersuaded. Use “necessarily connotes some action by the user in relation to the object used.” The court cited Watson v. United States, 552 U.S. 74, 83 (2007) for the proposition that a person does not "use" a firearm when he receives it in trade for drugs. The allegations demonstrated, at most, that USA Rugby may have used its own mark in a manner which had the potential to confuse the public. This may have inured to Under Armour’s benefit, but passive receipt of such a benefit isn’t “use.”

I guess now athletes whose leagues have contracts with endorsers have to worry about wearing their pants so low that their branded underwear is exposed. While aesthetically I have no problem with that, I’m not sure it’s the proper subject of trademark law. But see National Football League Properties, Inc. v. Dallas Cowboys Football Club, Ltd., 922 F.Supp. 849 (S.D.N.Y.1996), a case I had not heretofore encountered: the exclusive licensee of the Cowboys’ trademarks sued the Cowboys under the Lanham Act. “Based in part on allegations the defendant-licensor Cowboys had posed in pictures at a press conference dressed in a shirt bearing a Cowboys Club trademark in conjunction with boots sporting a Pepsi logo, the NFL Properties court found that the plaintiff had sufficiently demonstrated that the Cowboys had used its marks in a manner likely to cause the public confusion as to sponsorship.” The court here assumed that the cases were not distinguishable on their facts, but noted that Pepsi, the alleged third-party beneficiary, was not a defendant in that case.

On this theory, what happens when Nike or some other official sponsor sues a tattoo artist for putting a tattoo too close to an athlete’s uniform and thus “free riding” on the value of the sponsor’s brand? Do we really want to enter an era in which we take seriously the theory that not only do consumers believe that every appearance of a mark in public is licensed, but that they also believe that the interactions between multiple sponsors are licensed? Or to put it another way: what exactly might USA Rugby’s conduct have had the potential to confuse the public about? Does anyone think that this potential confusion, whatever it was, could possibly have been material? USA Rugby has a remedy in contract, and (had it made out a case) the tort of intentional interference with contract. Trademark should stay out.

Regardless: Failure to demonstrate use of a USA Rugby mark by Under Armour was also fatal to the state-law unfair/deceptive acts or practices claim under Mass. Gen. Laws ch. 93A. Unjust enrichment failed: in Massachusetts, it’s a remedy unavailable to parties with an adequate remedy at law. Massachusetts also does not recognize a common law right of publicity claim. And the statute requiring written consent for the use of a person’s “name, portrait or picture” was aimed at protecting personality. Corporate plaintiffs have trademark remedies already, so the court was dubious that the statutory right should apply, but concluded that the failure to allege “use” of USA Rugby’s name or likeness was fatal to the right of publicity claim without deciding the scope issue. (What’s the “portrait or picture” of a corporation?)

Intentional interference with contract: the complaint lacked sufficient allegations to support the required elements that Under Armour knowingly induced USA Rugby’s breach and that its interference was improper in motive or means. Other than the bald and undifferentiated assertion that each defendants induced USA Rugby’s breach, there wasn’t a single factual allegation. The claim that Under Armour induced the breach “appears to rest on mere suspicion alone.” The court also noted that there was no allegation that Under Armour continued to supply its products to USA Rugby, only that USA Rugby representatives continued to wear them.