Real USFL, LLC v. Fox Sports, Inc., 2022 WL 1134487, No. CV 22-1350 JFW(MARx) (C.D. Cal. Apr. 14, 2022)
How it started:
In 1982, a group of investors launched a springtime professional
football league called the United States Football League (“USFL” or “Old
League”). The USFL had three successful seasons, featuring well known players
such as Herschel Walker, Steve Young, Jim Kelly, Doug Flutie and Reggie White.
The USFL ceased to exist in 1986 after an ill-fated attempt to move its season
to the fall to directly compete with the National Football League (“NFL”), and
ultimately force a merger.
Steve Ehrhart then
collected and distributed the USFL’s damages and attorneys’ fee awards from the
case against the NFL and, decades later, entered into purported licensing
arrangements for apparel, books and films, including a 2011 licensing agreement
to produce throwback t-shirts with USFL and USFL team logos along with
licensing of referential uses (not required and shouldn’t count) in a book and
a planned documentary about a player. He also hosted a reunion and golf
tournament in 2007 and engaged in other referential activities; he managed
royalties from the licensed USFL apparel from 2011-2021. That is, even assuming
that authorizing referential uses counted, he didn’t do anything after
distributing the 1986 award until 2006, nearly twenty years.
Defendants accounced
the launch of a new professional spring football league, also called the United
States Football League, in June 2021. The
press release stated: “Today, the United States Football League (USFL)
announced that the league will officially return in the spring of 2022.
Initially launched in 1983, the USFL originally was an upstart spring football
league.... When relaunched next year, the USFL Enterprises retains rights to
key original team names.” The press release concludes, “[t]he relaunch of the
USFL is a landmark day for football fans and Fox Sports, said Eric Shanks, CEO
and Executive Producer, Fox Sports.” Fox was named in the release as the USFL
Enterprises’ “Official Broadcast Partner.”
After Ehrhart
protested, Fox revised the press release to omit the language suggesting that
the New League was a relaunch of the original USFL. However, Ehrhart and
several of the former USFL team owners still received numerous calls and
inquiries raising questions about a “relaunch” of the USFL, and specifically
asking whether any of the original USFL owners were involved in the New League.
“The media coverage of the New League is replete with examples of reporters who
assume that there is a connection between the Old League and the New League.
Defendants intentionally decided to use the same league name and team names.
They have also used former USFL players to promote the New League in order to
establish a connection between the Old League and the New League.”
The New League announced
its team names and logos in a press release dated November 22, 2021, and has
also announced a multi-year media rights agreement with NBC, stadium deals in
Birmingham and Canton, and head coaches; it launched a line of apparel through
internet based sales, it commenced ticket sales; and it held its inaugural
draft in February 2022. It now has over 300 players on eight teams attending
training camps. Games are scheduled to begin on April 16, 2022. “In preparation
for the league’s debut, Defendants have invested tens of millions of dollars in
acquiring intellectual property rights, advertising, broadcasting, stadium and
apparel deals, and in hiring players, coaches, trainers, and other staff, and
in branded uniforms and equipment. They have also entered into numerous
business partnerships and relationships for ticketing, advertising and apparel
sales.” Third parties have also invested “considerable resources in the New
League.” NBC, for example, announced a multiyear deal and has sold around $5
million of advertising and sponsorship commitments to third parties in
connection with the planned New League programming. Birmingham, Alabama has also
invested substantial resources as the host to the majority of the scheduled games.
Plaintiff’s 1980s USFL
registrations lapsed. Defendants own a registration for USFL for apparel (filed
March 2011); USFL for entertainment (filed March 2011); and pending use-based
and ITU applications for various team names. The 2011 registrations were acquired
from an unrelated entity.
Pre-litigation,
defendants “consistently maintained their rights to use these Marks in the
launch of the New League, and asked Plaintiff for evidence of its ownership in
the Marks. Plaintiffs never supplied the requested information.” There were
repeated contacts in the months after the announcement but defendants were
never receptive, including contacts in August 2021 and December 2021, after
which Fox’s counsel sent a C&D to American Classics, the Old League’s sole
licensee for USFL apparel. American Classics responded by sending a copy of the
License Agreement between American Classics and Ehrhart, and other records
relating to the royalty payments. “In order to avoid threatened litigation, American
Classics ceased selling the USFL merchandise in December 2021.” Plaintiffs sued
in February 2022 and filed for a preliminary injunction in mid-March, 2022.
The court found that
plaintiffs were likely to prevail on their infringement claims. They based their
priority on use beginning in 2006. Defendants’ priority dated from 2011; at
this point, plaintiffs failed to show fraud.
So was plaintiffs’
use sufficient to give them priority? “The sole evidence of use of the League
Marks prior to the launch of the New League in June 2021 is the sale of apparel
by the Old League’s licensee American Classics from October 2011 through
December 2021.” Defendants argued that Ehrhart had nothing to license at that
time, because the marks were dead. “This may be true, but it is irrelevant.
Once abandoned, Mr. Ehrhart could establish ownership through use of the Marks.”
By the way, this license produced less than $20,000 in royalties over the past
twenty years—is under $1000/year real use? Does your answer change if the
licensed apparel was produced on demand, that is, there was nothing in stock?
Defendants claimed
that their 2011 priority date beat Ehrhart’s licensing date, but they failed to
show that their predecessor entity made any commercial use of the marks—owning a
registration isn’t enough to establish ownership. [Hmm. If it’s presumptively valid, doesn’t
that shift the burden to plaintiffs to show that there wasn’t use? Can this
challenge even be made at this point?]
Defendants, somewhat
against their larger interests, argued that use of the USFL and Old Teams names
on apparel were merely “ornamental” and are not “source identifying.”
This argument directly contradicts Defendants’ other arguments that rely
on the public’s desire for and memory of the USFL. Indeed, it was Defendants’
intentional decision to capitalize on the public’s interest by calling its New
League “USFL,” and using Old Team names instead of choosing new names for the
New League and Teams. In addition, Defendants chose to ask former USFL players
and coaches to promote the New League. There is an obvious reason for these
decisions that negates Defendants’ attempt to argue that there is no Old League
name or team logo recognition–there is a “nostalgia among older football fans”
for the USFL and its team “names, jerseys and helmets.”
[I mean, it’s not directly
contradictory, since the USFL could be like Woolworth’s, or Mike Dukakis’s
election campaign—something that one might want a memento of without using as a
source identifier; one could easily have “nostalgia” for something one recognizes
as no longer existing. The court is conflating meaning with source
identification, and when the promise of the t-shirts is “vintage” it seems
quite plausible that there would be meaning without source identification.]
The court also
credited Ehrhart’s other activities—the 2007 reunion, an interview for an ESPN
documentary, “consultation and releases for use in various book and film
projects from 2006 to 2016,” and managing the American Classics royalties—as part
of the totality of the evidence. None of that alone would establish commercial
use, but “taken as a whole and in combination with the apparel sales, it shows
an intent to use the Marks in commerce and to maintain the association of the
USFL Mark with the Old League.” So too with the team name marks, where defendants
had no registrations or use until after the launch of the New League in June
2021, while plaintiffs had apparel sales by the Old League’s licensee, American
Classic and the other non-sales activities.
Thus, plaintiff
owned the USFL marks and team name marks. With that, likely confusion followed
as the night the day. Although “the marks at issue, the goods, the channels of
trade (regarding sales of branded apparel), and potential customers are nearly
identical,” the court found intent to be the most important factor,
validating Barton Beebe’s conclusion that courts often run the factors based on
their intent findings:
The likelihood of confusion is enhanced because Defendants have created
and are using the confusion between the Old and New Leagues to their own
benefit or advantage. The evidence shows that Defendants deliberately decided
to launch their new league using the same names and teams as the Old League in
an apparent attempt to capitalize on the nostalgia for the Old League. The
Marks for the League and team logos are nearly identical. Defendants’ press
releases, public statements and news coverage of the New League’s launch have
specifically referenced a “relaunch,” a “return” and other verbiage conflating
the two leagues. Defendants also used former USFL players and coaches to
advertise the New League.
Despite finding
defendants’ arguments “incredibly disingenuous,” the court nonetheless denied a
preliminary injunction. The presumption of irreparable harm applied, but was
rebutted by delay. On the one hand, “Plaintiff’s minimal use of the Marks to
preserve the USFL’s legacy and reputation significantly reduces the possibility
that Plaintiff would suffer irreparable injury in the absence of an injunction.”
Plaintiff claimed that interference with “its ability to preserve what remains
of the USFL’s legacy” constituted irreparable harm, but, for four decades, use
of the marks and efforts on their behalf were “virtually nonexistent.” Although
“[e]vidence of loss of control over business reputation and damage to goodwill
[can] constitute irreparable harm, so long as there is concrete evidence in the
record of those things,” there was no such evidence here.
Any damage could be
redressed with money. “Because there is absolutely no evidence that Plaintiff
intends to establish a competing football league, any damages incurred by
Plaintiff will directly result from its loss of potential licensing income
which can be easily compensated by monetary damages.”
And delay showed
lack of irreparable harm. The announcement was in June 2021, but plaintiff
waited until the last day of February 2022 to sue. “Defendants were clear from
the outset–they were adamant in their belief that they had the absolute and
unfettered rights to use the Marks, and they were not interested in any further
meetings or conversations with Plaintiff, or interested in a resolution of the
matter that might have benefitted both parties.” This delay allowed a lot of
investment, which tilted the balance of equities in defendants’ favor and also
meant the public interest disfavored an injunction. “Although there is an
identifiable and important public interest in minimizing consumer confusion as
a result of the misuse of a trademark, the risk here is limited to a very small
number of potential licensed apparel sales.” But the disruption from an
injunction would shut all defendants’ and third parties’ investments down. “Had
the Plaintiff filed suit before all of these contractual obligations and
investments, before the player draft in February 2022 and training camp in
March 2022, before all the uniforms and equipment had been ordered, and before
Defendants’ broadcast partners had made all the necessary preparations to
televise games, the analysis of public interest factors may have favored
Plaintiff.”
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