Thursday, January 11, 2018

There's only one master of The Commodores: the group itself

Commodores Entertainment Corp. v. McClary, 2018 WL 327302, No. 16-15794 (11th Cir. Jan. 9, 2018)

McClary was an original member of the award-winning Commodores, but, by his own admission, he “split from the band” in 1984 to strike out on his own in the world of music. He later formed a musical group that performed as “The 2014 Commodores” and “The Commodores Featuring Thomas McClary.” CEC, a corporation run by two original Commodores who remain active with the group, found out about McClary’s group, sued for trademark infringement, trademark dilution, passing off, false advertising, and unfair competition. The court of appeals affirmed a permanent injunction against McClary, who left behind his common-law rights to the marks when he left the band.

The original members of the Commodores “are generally regarded as William King, Ronald LaPread, Thomas McClary, Walter Orange, Lionel Richie, and Milan Williams,” who formed a general partnership with their manager in 1978. The agreement said: “Upon the death or withdrawal of less than a majority of the Partners, the remaining majority of the Partners shall continue to have the right to use the name THE COMMODORES for any purpose.”  Its agreement with Motown Records also restricted use of the name: band members could perform as “sidemen” for other artists and groups, but “in no event” could they use the name “Commodores” in connection with that engagement.  Richie left the group and the manager passed away.  A revised 1984 agreement stated: “Upon the death or withdrawal of less than a majority of the Partners, the remaining majority of the Partners shall continue to have the right to use the Group Name for any purpose.”  Later that year, McClary “split from the band” to pursue his own solo career. J.D. Nicholas joined the group, while LaPread and Williams departed from the group, leaving King and Orange as the only remaining original members. At some point, King and Orange transferred their common-law trademark rights in The Commodores’ name and logo to plaintiff CEC, which registered four COMMODORES trademarks in 2001.

In 2009, McClary performed with Richie and LaPread at the Superdome in New Orleans. McClary’s wife sent an email advertising the show as a Commodores reunion, and CEC objected. In 2010, McClary was asked to fill in as a guitar player when The Commodores’ regular guitar player became ill. McClary appeared with The Commodores two or three times and signed autographs with The Commodores’ members. In 2013, McClary formed the group “Commodores Featuring Thomas McClary.” His group began performing under the names “Commodores Featuring Thomas McClary” and “The 2014 Commodores,” and he scheduled a performance at a New York venue on July 6, 2014. On June 5, 2014, a friend called King to ask about the performance, thinking that it was an official Commodores show. King and Orange’s manager contacted the executive director of the venue, who said he thought he had booked the Grammy Award–winning Commodores—not a tribute or cover band featuring a former member.  (McClary had no involvement in the single that won the Grammy.)  A few days later, McClary’s wife sent a C&D claiming that McClary’s band name constituted fair use and asserted that CEC was interfering with McClary’s ongoing business relationships.

The district court enjoined McClary from “using any of the Marks at issue in a manner other than fair use, including performing under the name ‘The Commodores featuring Thomas McClary’ or ‘The 2014 Commodores’ ” based on the trademark infringement claim. The district court clarified that the injunction covered upcoming extraterritorial performances in the United Kingdom and Switzerland because use of the marks overseas would have a substantial and negative impact on CEC.

The court of appeals agreed with the district court that McClary walked away from his common law rights to the marks when he left the band in 1984.  Those rights remained with the group, then were validly assigned to CEC.

McClary offered the testimony of an attorney, Wolfe, on the validity and value of the marks, the goodwill associated with the marks, the validity of the assignment to CEC, the difference between statutory and common-law trademarks, and whether CEC breached duties owed to its shareholders.  After reviewing Wolfe’s report and hearing his testimony outside the presence of the jury, the district court excluded the testimony entirely, and the court of appeals found no abuse of discretion.  Wolfe’s expert was “replete with legal opinion,” offering the legal view that the original members “owned the underlying marks jointly as tenants in common, owning an undivided interest in the totality of the partnership assets” and similar legal conclusions, invading the court’s exclusive prerogative to determine the law.  His proposed trial testimony was no better: he said, inter alia, that a hiatus from a band is not enough to relinquish ownership in the band; and that “[t]here are multiple ways in which an owner of a mark can continue to participate and exploit that mark even though they may not be standing up on stage and performing.”  Opinions on music industry customs and norms weren’t offered in his expert report and he was also properly excluded from discussing those topics.  Although an attorney was allowed to testify for CEC, he was offered as a fact witness who testified about McClary’s interactions with the group, the letter he received from McClary, and whether any group member had formally voided his shares in the corporation.

There were no contested facts that would lead a reasonable juror to say that McClary should properly be termed the legal owner of the trademarks and allowed to use them to identify the source of his separate services.  The court of appeals found two distinct but reinforcing reasons for this: “First, the common-law trademark rights were initially jointly owned, could not be divided for simultaneous use by multiple independent parties, and remained in the group continually known as ‘The Commodores.’” Second, the parties’ various contractual agreements “confirm the group members contemplated that the marks were to be jointly but not severally owned and, in addition, that a member leaving the group would cease using the group’s name as an identifier.”

The court of appeals reasoned that, once trademark meaning was established, the original group, including McClary, had common-law rights to the marks.  But ownership was joint—leaving was like dying in a joint tenancy; McClary carried no rights with him when he left. “[O]wnership of the marks began in, remained in, and could not be divided from the group, as opposed to its individual members.” King and Orange were the only original members of “The Commodores” who maintained continuity with the performing group since McClary’s departure, and that group continued to perform as “The Commodores” in the years after he left.  McClary lacked control over that group.  Though he performed with The Commodores in 2010, there was no evidence that at he was being invited to rejoin the group as a permanent or otherwise ongoing member; instead he performed “with The Commodores.” “Even if the evidence could support a finding that McClary rejoined the group—and in no way does it afford that inference—it could not support the conclusion that McClary should be able to use the group’s name while performing separately from the group.”  Collecting royalties didn’t indicate that McClary retained rights to the marks, because he only collected royalties for the songs he wrote with the band before his departure; if anything, that temporal distinction supported the contention that he no longer had rights in the marks.

Even if McClary never formally left the partnership, none of the relevant agreements allowed him the right to use the marks in connection with his own musical performances.  That isn’t meant to diminish his contribution or that of other founding members.  Lionel Richie said that he would “always be a Commodore,” but when asked if he “identif[ied] with being in the group now,” he said he didn’t. “While an individual might identify with a name, he still might not have the right to use that name to identify himself in commerce.”

McClary argued that the injunction was overbroad because it prevented him from “hold[ing] himself and his music out to the public in an historically accurate way.” But CEC didn’t object to McClary billing himself as “Thomas McClary, founder of The Commodores” and other fair uses.  They objected to names like “The 2014 Commodores” or “The Commodores featuring Thomas McClary.” Thus, McClary “could either perform under a different band name without causing any confusion, or, to uphold his notoriety as a Commodore, he could make fair use of the Marks.”  The court of appeals declined to further enumerate which fair uses would be appropriate; that would be an advisory opinion.

Nor was the injunction overbroad because of its extraterritorial reach. The parties were citizens of the US; McClary’s booking agent operated from the US; and “use of the marks extraterritorially w[ould] have an effect on CEC, a United States corporation.” And “given the actual confusion that was experienced in the United States in connection with the New York performance, it is likely that McClary’s use of the marks abroad would create confusion both abroad and in the United States.” Though this was a closer question, there was no interference with the sovereignty of other countries because McClary didn’t have final approval for registrations in other countries, even though McClary’s corporation filed for a CTM in the EU, and OHIM denied CEC’s opposition. CEC appealed the denial of its opposition, so the opposition hadn’t yet been “rejected by a definitive decision,” and no CTM had yet issued.

McClary also argued the federal registrations of the marks were fraudulent and defective. But this had no relevance to the common-law rights to the marks. And it was wrong anyway: McClary’s claims of fraud failed for want of any evidence that CEC knowingly made false representations of fact; his burden was to show fraud by clear and convincing evidence.  Nor did challenges to the stated dates of first use and first use in commerce matter. “A misstatement of the date of first use in the application is not fatal to the securing of a valid registration as long as there has been valid use of the mark prior to the filing date.”

Finally, McClary’s laches defense failed. He claimed to have used the marks with CEC’s knowledge since 1984, but offered no facts or details about any use between 1984 and 2010.  In May 2009, when McClary’s wife sent a blast email advertising a Commodores reunion, CEC promptly sent a C&D to which McClary never responded. When CEC learned about of McClary’s “The 2014 Commodores” or “The Commodores Featuring Thomas McClary,” CEC promptly filed suit two months later. Moreover, McClary didn’t show prejudice from any delay. 

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