Stephens Media Wins $200,000 Default Judgment Over Alleged Trademark Infringement of “Best of Las Vegas”

[After all these years, they still have do not have a category for “Best Las Vegas Trademark Attorney Blog” – or perhaps my dearth of blog posting in 2012 took me out of the running this year]

Back in 2009 (when I had much more time to blog on a more regular basis), I wrote about the three separate trademark infringement lawsuits filed by Stephens Media LLC (“Stephens Media”), the owner of the Las Vegas newspaper The Las Vegas Review Journal, against three separate companies over their alleged use of the term “BEST OF LAS VEGAS.”   See previous blog entry here.

In the case against one of the companies, CitiHealth LLC (“CitiHealth”), on August 6, 2012, U.S. District Court Judge Miranda Du issued a decision on a motion for default judgment filed by Stephens Media.  See Stephens Media LLC v. CitiHealth LLC, 2012 U.S. Dist. LEXIS 109431 (D. Nev. August 6, 2012).  What is interesting is how long it took for the case to get to this point.

The complaint against CitiHealth was originally filed on December 2, 2009, and related to the company’s publication of a magazine in December 2008 called “Healthy Living Las Vegas” that included the phrase on the cover “Best of Las Vegas.”  When CitiHealth failed to answer the complaint, a default was entered by the Clerk on March 24, 2010.  So why didn’t Stephens Media seek a default judgment at that time?  Well, the complaint was originally filed by Steve Gibson and his former firm Gibson Lowry and Burris.  Steve Gibson is also better known as the CEO of Righthaven LLC, the copyright enforcement company established by Gibson and Stephens Media to file lawsuits against websites that infringed on copyrights associated with Las Vegas Review Journal articles.  [I certainly don’t have the time or energy to go into all of the details of the Righthaven-saga in this post and will instead defer to those websites (here and here) that have tracked all things Righthaven and which will give any interested party the necessary background to understand what may have caused Mr. Gibson to be a little distracted during 2010 and 2011 as well as what may have caused  a rift between Mr. Gibson and Stephens Media].

Over a year went by without any follow-up after the entry of default against CitiHealth.  Finally, on May 24, 2012, the Court issued a Order to Show Cause, as to why the case should not be dismissed for failure to prosecute.  Six days later, Stephens Media filed a Motion to Substitute Attorney and subsequently informed the Court that that it had retained new counsel and intended to seek a preliminary injunction and default judgment.  On July 2, 2012, through new counsel Gordon Silver, Stephens Media filed the Motion for Default Judgment.  On July 13, 2012, Kenneth Shepherd, the co-owner of CitiHealth, notified both the Court and Stephens Media’s counsel that Healthy Living no longer exists and has not existed for the past 3 years and that CitiHealth had dissolved on May 9, 2012 and that the co-owners of the company had had filed for personal bankruptcy.

The Court nevertheless proceeded to analyze Stephens Media’s motion for default judgment under the Eitel factors established by the Ninth Circuit:

"The Ninth Circuit has identified the following factors as relevant to the exercise of the court's discretion in determining whether to grant default judgment: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff's substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to the excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471--72 (9th Cir. 1986); see also Trustees of Elec. Workers Health and Welfare Trust v. Campbell, No. 07-724, 2009 WL 3255169 (D. Nev. Oct. 7, 2009)."

Despite CitiHealth's dissolution, the Court found that CitiHealth's failure to appear in this action and the likelihood that it will never respond to this action creates a high possibility of prejudice to Plaintiff in the absence of a default judgment.  The Court found that the Complaint did sufficiently state claims for relief (under the Rule 8 liberal pleading standards).

With respect to the amount of money at stake, Stephens Media sought $200,000 pursuant to 15 U.S.C. § 1117(c)(1) for non-willful trademark infringement of one mark (i.e., the Trademark Act’s statutory damages provision for use of “counterfeit” marks).  Without much discussion, the Court stated that “[b]ecause Stephens demonstrates a basis for its requested monetary relief, the fourth Eitel factor favors Stephens.”   [Comment:  counterfeit use, really?  And even so, court has discretion to award statutory damages ranging  from $1000 to $200,000—did the circumstances really merit the “maximum”?]

The Court found that the sufficiency of the Complaint was such that no genuine dispute of material facts would prejudice granting the motion.  The Court also found that CitiHealth had sufficient notice of the complaint and therefore it is unlikely that CitiHealth's failure to respond and subsequent default resulted from excusable neglect.  Finally, the Court, while recognizing the preference to have cases decided on the merits, found that CitiHealth's failure to answer Stephens Media's Complaint makes a decision on the merits impractical, if not impossible.

In the end, the Court entered a default judgment  awarding $200,000 against CitiHealth as well as a permanent injunction against CitiHealth and its officers against any further use of the “Best of Las Vegas” mark.  The Court also gave Stephens Media 30 days to file a motion for attorneys fees.

While its highly unlikely that Stephens Media will be able to collect on its $200,000 default judgment, one wonders if Stephens Media, should it be able to collect such funds, would be willing to pump that money into back into Righthaven LLC so that Righthaven can pay the money that it owes to its creditors (including multiple defendants that the Nevada District Court found were wrongly sued by Righthaven for copyright infringement).   That’s probably even more highly unlikely.     

Another Epic Trademark Battle Prematurely Ends With Amicable, Reasonable Settlement

Tropicana Las Vegas

In one of my longer blog posts last year (link here), I detailed the convoluted and complicated history of the TROPICANA Hotel/Casino trademark – a fascinating look at how trademark rights are handled in the course of multiple large scale corporate transactions (including bankruptcy proceedings) and how certain things can (and indeed do) fall through the cracks.

What started out as a simple declaratory judgment action in Nevada state court by the new owners of the Tropicana Hotel & Casino in Las Vegas regarding their long-time right to use the name Tropicana in connection with that specific hotel/casino located at the intersection of Las Vegas Blvd. and Tropicana Avenue blew up into an epic lawsuit filed in Delaware Bankruptcy Court by a group of companies lead by Carl Icahn's Tropicana Entertainment Inc. The matters had been fully briefed by both sides and were awaiting a court hearing.

But alas, now we’ll never know how exactly the bankruptcy court would’ve unraveled the convoluted trademark issues raised by Tropicana Entertainment’s adversary proceeding (we know how the Clark County District Court decided those issues, but that is in part what led to Tropicana Entertainment to file the adversary proceeding it did in bankruptcy court).

As reported by VegasInc’s Steve Green (link here), the parties announced in mid-August that they had reached a Settlement that resolves the outstanding trademark disputes and which provides for an agreement regarding concurrent use by both parties of the mark TROPICANA. A copy of the Settlement Agreement, with all of its provisions regarding concurrent use of the Tropicana name by the respective parties, can be viewed here.

In short, Tropicana Las Vegas can continue to use the mark TROPICANA LAS VEGAS (or TROP LAS VEGAS) or TROPICANA LV (or TROP LV) in the city of Las Vegas, Nevada and within a 50 mile radius from the present location of the Tropicana Las Vegas Hotel and Casino. Tropicana Las Vegas can promote itself worldwide so long as it always mentions the property location. Tropicana Las Vegas does not get any other rights to use the mark TROPICANA, TROP, or any variation thereof apart from its rights to use the mark in reference to its Las Vegas property (although a small exception is made for on-property signage and certain marketing campaigns such as “Trop ‘Til You Drop” and “Trop Party Pass” so long as there is also a reference to the Las Vegas location). The agreement expressly consents to Tropicana Las Vegas’s use of the following logo

and clarifies that in any other logos used by Tropicana Las Vegas, the Las Vegas (or LV) portion of the mark shall not be smaller or less prominent in proportion to TROPICANA or TROP than as reflected in the above logo.

As for what Tropicana Entertainment gets out the deal, it gets the exclusive rights to use TROPICANA and TROP, but provided that it also is accompanied by some other mark indicating either a geographic location (other than Las Vegas obviously) or some other mark to identify services currently offered by Tropicana Entertainment (e.g., Tropicana Advantage).

The Agreement also deals with how the parties will handle present and future trademark registrations for marks using TROPICANA, use of their respective marks on the Internet, and issues relating to enforcement of rights in their respective territories.

By entering into this Settlement Agreement (with concurrent use provision regarding the trademark rights), the parties certainly ended up doing the smart thing in reaching an amicable settlement – bringing to a halt a dispute that had likely cost the parties millions of dollars in attorney fees and costs (fees that would have continued to be incurred given the high stakes) and doing so in a way that brings certainty to the rights of the parties moving forward. And it was probably the fair outcome given the long-time association that the world does have with the name Tropicana in connection with that particular hotel in Las Vegas while at the same time recognizing Tropicana Entertainment's investment in the name outside of Las Vegas.

Of course, at the same time, it would’ve been interesting to see which way the bankruptcy court would have sided in this dispute (and the legal rationale for such decision).

Mystic Lodge Loses Trademark Battle with Mystic Lake

Mystic Lake Casino Hotel in Minnesota

[Post by Mark Borghese]

As first reported by Steve Green, Mystic Lodge casino in Henderson ("Mystic Lodge") lost its trademark dispute with the Mystic Lake Casino Hotel in Minnesota ("Mystic Lake"). This case was first discussed on this blog here. In a July 25, 2011 order, U.S. District Judge James Mahan issued a Final Judgment and Permanent Injunction against Mystic Lodge ordering it to change its name.

Mystic Lodge Casino in Henderson, Nevada

The chips were stacked against Mystic Lodge from the beginning of this case. Not only are the two marks, Mystic Lodge and Mystic Lake substantially similar, but both marks are for the same services. Moreover, the senior user, Mystic Lake has been using its servicemark for almost twenty years and has multiple federal registrations.

Although a small Henderson, Nevada casino with no hotel and a large Minnesota Indian hotel casino resort may seem worlds apart, the Minnesota tribe which runs Mystic Lake argued in its Motion for Summary Judgment that both casinos operate on a national level and compete for the same customers.

[T]he undisputed evidence supports the conclusion that Mystic Lake Casino and Mystic Lodge Casino operate in a market that includes a nation-wide consumer base. First, more than 100 of the same individuals appear in both Mystic Lake Casino and Mystic Lodge Casino’s respective player databases… Mystic Lake and Mystic Lodge also have player databases that include residents of all 50 states… Both Mystic Lake and Mystic Lodge casino services expressly cater to travelers and tourists… In fact, both parties have thousands of customers in Nevada alone…. Simply put, [Mystic Lake] and [Mystic Lodge] compete for the same discretionary consumer dollar—Mystic Lodge is a competitor of Mystic Lake.

Mystic Lodge attempted to argue the Dawn Donut rule as a defense to the issuance of an injunction against it. That rule, first set out in the case Dawn Donut Co., Inc. v. Hart’s Food Stores, Inc., 267 F.2d 358 (2d Cir. 1959) provides a defense to the issuance of an injunction against a good faith junior user of a trademark which adopts the mark without knowledge of the federally registered mark and which operates in a geographically separate and distinct trading area to the senior user.

Judge Mahan however, ruled that the Dawn Donut defense was not applicable to the facts before the court because Mystic Lodge had actual knowledge of the federal registration for Mystic Lake, but decided to adopt the mark anyway.

The defendants argue under Dawn Donut that when two marks are confined to sufficiently distinct and geographically separate markets, without evidence that the registrant will expand to the defendant’s market, the plaintiff is not entitled to enjoin the junior user’s mark. See 267 F.2d at 364. Further, the “injunctive remedy does not ripen until the registrant shows a likelihood of entry into the disputed territory.” McCarthy, supra, at § 26:33. In the alternative, the defendants’ assert that there is a presumption of good faith since an opinion letter from counsel permitted the use of the mark. The court disagrees.

Here, the Dawn Donut defense does not apply to the plaintiff’s ability to receive injunctive relief due to the bad faith shown. The defendants received actual knowledge of the plaintiff’s registered mark through counsel, ignored requests for alternate names, and disobeyed express recommendations on how to limit the possibility of infringement. Although the final opinion letter by counsel timidly approved the use of the mark with certain limitations, the email from counsel advising that the mark was already registered and the senior user would aggressively protect it disallows the final opinion to serve as a rubber stamp for the defendants’ actions. “The Ninth Circuit does not . . . insulate the defendant from a finding of willful infringement based on advice of counsel of noninfringement.” Monster Cable Prods., Inc. v. Discovery Commn’s, Inc., No. C 03-03250, 2004 WL 2445348, *9 (N.D. Cal. Nov. 1, 2004) (citing Wolfe v. Nat’l Lead Co., 272 F.2d 867, 871 (9th Cir. 1959).

The lesson, of course, is to follow the recommendations of your attorney. Moreover, if you are willing to spend the money to get an attorney’s opinion about potential trademarks, use the advice to pick a name that (1) not federally registered and (2) is not the name used by a competitor in the United States for the same goods and services you want to sell.

The Final Judgment and Permanent Injunction prevents Mystic Lodge from,

(a) Distributing, displaying, marketing, promoting, offering for sale, and/or selling any goods or services using the mark Mystic Lodge Casino, or any other phrase, slogan, or business name that incorporates the word “Mystic” (a “Mystic Mark”);

(b) Affixing a Mystic Mark to any product, advertisement, point of sale material, interior/exterior signage or other promotional material;

(c) Disseminating any product, advertisement, point of sale material, signage or other promotional material containing or incorporating a Mystic Mark;

(d) Registering any domain name which includes the word “mystic” or any Mystic Mark; and

(e) Registering and/or applying for any trademark registration for a Mystic Mark.

The Judgment also gives Mystic Lake sixty (60) days to provide written confirmation that it is no longer using the Mystic Lodge mark and transfer all domain names which include the Mystic Lodge Mark to Minnesota casino.

Mystic Lodge has now filed an emergency motion to stay the ruling pending it’s appeal to the Ninth Circuit. In the motion, Mystic Lodge argues,

If a stay is not granted, Defendants face the risk of being put out of business complying with a permanent injunction before having been ultimately found by a jury not to have infringed upon Plaintiff's mark. Equally important, Plaintiff will not be harmed by a temporary stay of the permanent injunction pending appeal.

Of course Mystic Lodge can simply change its name and re-brand its business. While such a move may be expensive, so is an appeal to the Ninth Circuit Court of Appeals. This case once again highlights the importance of local Las Vegas businesses obtaining national trademark protection for their brands.

About the author
Mark Borghese is a Las Vegas business attorney with the law firm of Borghese Legal, Ltd.

A Lot of Love in Las Vegas Lately

[or alternatively, "Anything You Can Trademark, I Can Trademark Better."]

Earlier this year, as local Las Vegas hotel-casino chain Station Casinos was emerging from bankruptcy, it made a large splash about its new marketing campaign focusing on the locals market in Las Vegas and embracing the marketing slogan WE LOVE LOCALS (news story on the rebranding here).

So what did rival hotel-casino South Point decide to do? Came up with its own marketing slogan that not only is able to take advantage of the notoriety developed by Station Casinos in its LOVE mark, but able to clearly distinguish itself from Station Casinos at the same time (South Point's "Love" website here).

Clever comparative marketing (if you ask me) -- I wonder how Station Casinos feels about sharing the love.

Golden Nugget's Cybersquatting Campaign

GNLV, Corp., the company which owns the Golden Nugget Hotel & Casino in downtown Las Vegas (as well as Golden Nuggets in Laughlin and Atlantic City), continues its campaign to go after cybersquatters. After a two year lull of filing any type of cybersquatting lawsuits, GNLV has now filed five since April 27, 2011. [Ed.—Is this perhaps a sign of the improving economy that a gaming company is willing to invest the money to pursue such lawsuits in order to obtain (and/or prevent others from using) domain names of questionable value?]

In late April, GNLV Corp sued German resident Luca Mueller over the domain golddennugget.com (with an extra “d” in the spelling of Golden) which GNLV alleged linked to an online gambling site. See GNLV, Corp. v. Mueller, Case No. 11-cv-00663 (D. Nev. Filed April 27, 2011). (VegasInc article here.) Later in May, GNLV Corp. sued Kanter Associates over the domain name thegoldennuggett.com (with an extra “t” in the spelling of Nugget) which GNLV alleged linked to a travel reservation website. See GNLV, Corp. v. Kanter Associates SA, Case No. 11-cv-00827 (D. Nev. Filed May 20, 2011). (VegasInc article here.)

On May 31, 2011, GNLV filed three more cybersquatting lawsuits. The first lawsuit against Harald Ebert relates to the domain name www.goldennugget.info, which GNLV claims is linked to a website which offers “links to many of the same wagering games that are offered at Plaintiff’s casino resorts, such as Blackjack, Poker and Slots.” See GNLV, Corp. v. Mueller, Case No. 11-cv-00875 (D. Nev.). The second lawsuit against Marco Eckstein relates to the domain name www.golden-nugget-jackpot.com, which GNLV claims is linked to a website which offers “links to many of the same wagering games that are offered at Plaintiff’s casino resorts, such as slots.” See GNLV, Corp. v. Eckstein, Case No. 11-cv-00878 (D. Nev.). The third lawsuit against Hilary Moore involves the domain name www.seventysevengoldennuggets.com. See GNLV, Corp. v. Moore, Case No. 11-cv-00873 (D. Nev.). As for why GNLV can claim that the registration of this last domain name, which would be perceived by almost anybody as “77 Golden Nuggets” and not likely associated with GNLV’s GOLDEN NUGGET mark, constitutes cybersquatting? It would be because, according to the complaint, the domain name is linked to “a site offering a direct link to the Golden Nugget resort-hotel travel and reservation services, including a direct link to Plaintiff’s property located in Las Vegas, Nevada.” [ed.—might’ve been an easier case to defend had Defendant used the website in connection a gold mining business].

Of course, while I didn’t review the particular website printout exhibits attached to each complaint, a quick visit to each of the above domain names shows that they are your typical “landing page” offering various pay-per-click (“PPC”) generated ads (some of which may, as GNLV alleges, go to websites offering “the same wagering games offered by Plaintiff’s casino resorts” or to “resort-hotel travel and reservation services”). Are any of these particular websites truly causing economic harm to GNLV? Highly doubtful. So why is GNLV spending money filing lawsuits to go after domains that don’t really have much direct value for GNLV (and are certainly not diverting any business to GNLV’s own hotel/casino)? Perhaps simply because it can . . . and because it’s not as costly as you might think

When one considers that the minimum cost that a trademark owner would incur to file a domain name arbitration action under the UDRP is around $3000 (including fees paid for the arbitrator) and with an uncertain outcome (as anybody who has been involved in UDRP arbitrations will tell you), these lawsuits are a much much more cost effective way for a company to obtain possession of these domain names ($300 lawsuit filing fee, $100 bond, and maybe around $500-$1000 per case for attorneys fees and costs (assuming great economies of scale), since most of the documents are nearly identical and can be prepared mostly by administrative staff). In addition, unlike in a UDRP action, the lawsuit route allows the complainant to make a claim towards statutory damages for cybersquatting (minimum $1000 up to $100000 per domain name). Given the low likelihood that the Defendants will even respond to the complaints, each lawsuit has the strong potential to garner a $100,000 default judgment (albeit a judgment that is more often than not nearly impossible to collect).

Still, even at a price of about $1000 per domain name, one wonders why GNLV wants to invest even that amount of money for some of the domain names it is seeking. All GNLV is doing is preventing other third parties from obtaining a relatively minuscule amount of PPC revenue from the PPC ads showcased on the landing pages for each of these websites. As for the websites involving typosquatting, I continue to maintain that the vast majority of web users looking for GNLV’s GOLDEN NUGGET are saavy enough with respect to internet browsing that they will not be sidetracked by a landing page that offers links to an online casino or other hotel/casino – and will instead recognize their typo and retype the correct URL address or perform a search using one of the more popular internet search engines (which are certainly not fooled by these websites). When all is said and done, GNLV will be the proud owner of several domain names that will likely do very little in promoting the GOLDEN NUGGET brand and will generate very little additional traffic for GNLV's websites (along with very little additional revenue) beyond what GNLV would’ve already had, but which GNLV now will have to continue to pay annual registration fees in order to maintain these domain names. But I guess GNLV considers that fee (along with the fees paid to its lawyers for these sutis) a small price to pay to prevent domainers from making a single penny (literally) off of the GOLDEN NUGGET mark.

[UPDATE (July 26, 2011) -- Ron Coleman's Likelihood of Confusion® blog provides his response to my query here -- along with a shameless proposal to the people at the Golden Nugget to "handle their cost-effectiveness-be-damned domain trademark enforcement programs."]

Don’t Believe Everything You Read

Just because a court of law issues an order making findings of fact and conclusions of law does not mean that those facts and conclusions reflect the real truth. It only reflects a decision by the court based on the evidence and arguments presented to the court. Thus, a court decision may reflect the truth or may simply reflect the only factual conclusion that the court could reach based on the incomplete picture presented to it by the parties.

Such is the case with the cybersquatting and trademark infringement lawsuit brought by New York-New York Hotel & Casino, LLC (“NY-NY”), the company which owns the New York New York Hotel & Casino in Las Vegas (pictured above), against California resident Ronnie Katzin and his wholly-owned corporation, NewYorkNewYork.com, Inc., over the domain name newyorknewyork.com (the “Domain Name”). See New York-New York Hotel & Casino, LLC v. Katzin et al, Case No.09-cv-02139 (D. Nev.). On October 28, 2010, the Nevada district court issued an order (link here) granting NY-NY’s Motion for Summary Judgment against Defendant Defendant Katzin and finding as a matter of law that Katzin was liable for cybersquatting and trademark infringement with respect to his use of the Domain Name.

But as mentioned in the title above, don’t believe everything you read. For reasons detailed in my previous blog post regarding this case (link here), I believe the court’s decision is wrong. But as this case demonstrates, it’s often not enough that the defendant be in the right – a defendant has to be able to present factual evidence and make effective arguments to the court supporting its position that it is right in the face of accusations (however baseless) to the contrary by another party. And when you have to hire attorneys to help you do this in court, establishing that you are in the right suddenly becomes an expensive proposition.

In this case, Katzin, apparently not in a financial position to hire an attorney to fight NY-NY’s highly questionable allegations, decided to fight NY-NY pro se. But like many pro se litigants, he didn’t have the legal background and experience to put together factual evidence arguments in a way that would have been receptive to the court (and of course, with respect to NewYorkNewYork.com, Inc., because only lawyers can represent corporate entities in federal court and Katzin is not a lawyer, he was prohibited from filing any papers on behalf of his corporation).

The only positive thing about this order is that the court, recognizing the circumstances of the case, exercised its discretion and only awarded NY-NY $1,000 in statutory damages (the minimum amount of statutory damages for cybersquatting) – along with another “nominal” award of $1,000 for “corrective advertising” [ed.—correcting what?]. This is probably the best the court could do under the circumstances to send the message that while the court may have found Katzin liable for cybersquatting (and trademark infringement), he is not really a cybersquatter and did not really cause any significant harm to NY-NY’s precious trademarks.

The court’s awarding of $1,000 in statutory damages is a far more reasonable determination than the court’s previous awarding of the maximum statutory damages of $100,000 against NewYorkNewYork.com, Inc., as part of the default judgment entered by the court after no attorney made an appearance on behalf of the corporation to answer NY-NY’s allegations (and Katzin’s Answer filed on behalf of the corporation was struck since, as previously mentioned, Katzin is not a lawyer who could file an Answer on behalf of a corporate entity).

Having previously granted a default judgment against Defendant NewYorkNewYork.com, Inc., which resulted in the transfer to NY-NY of what NY-NY was really after in the first – the extremely valuable domain name newyorknewyork.com, the court’s decision (assuming no appeals are filed) effectively brings this example of injustice to an end.

Hard Rock Café Sues Hard Rock Hotel & Casino

On September 21, 2010, Hard Rock Cafe International (USA), Inc. (“HRCI”) filed a lawsuit in the U.S. District Court for the Southern District of New York against various defendants that use the “Hard Rock” trademark, most notably the group of companies which own and/or operate the Hard Rock Hotel & Casino in Las Vegas, Nevada (the “Defendants”). See Hard Rock Cafe International (USA), Inc. v. Hard Rock Hotel Holdings, LLC et al, Case No. 10-cv-07244 (S.D.N.Y. Filed September 21, 2010). A copy of the complaint can be downloaded here (HT: Steve Green). The Las Vegas Sun has an article on the lawsuit here (see also Courthousenews.com and Las Vegas Review Journal).

HRCI filed the action “in order to protect the enormous goodwill in its world-renowned trademarks from being systematically diminished, devalued and damaged by the wrongful conduct of Defendants.” HRCI claims that the Defendants are using the “Hard Rock” trademarks in a manner that has intentionally, materially breached the terms of a 1996 license agreement entered into with HRCI’s predecessor-in-interest and violates HRCI’s trademark rights to such marks.

More specifically, HRCI claims that the Defendants’ actions at the Hard Rock Hotel/Casino have caused HRCI’s marks to “become associated with objectionable and offensive conduct that is at odds with the brand imagery of the HARD ROCK trademarks” and “failed to use their best efforts to protect the goodwill associated with” HRCI’s trademarks.

The complaint spends several pages going through the history of the Hard Rock Café and the creation of the worldwide successful HARD ROCK brand by original founders Peter Morton and Isaac Tigrett.

Then, in 1990, The Rank Group, Plc (“Rank”), HRCI’s predecessor-in-interest, acquired all of Tigrett’s interests in the business then operated under the HARD ROCK Marks at that time. In June 1996, Rank entered into a transaction with Morton whereby Morton sold to Rank his interests in the business then conducted under the HARD ROCK Marks, with the exception of ownership of the Hard Rock Hotel & Casino in Las Vegas and the option to develop other properties using the HARD ROCK HOTEL and HARD ROCK CASINO marks in certain geographic areas.

According to the complaint, Rank acquired all right, title and interest to all HARD ROCK marks registered and used around the world and Morton received a license from Rank (through a Rank IP licensing special purpose entity, Rank Licensing, Inc.) to use the HARD ROCK HOTEL and HARD ROCK CASINO marks on a limited basis and subject to a number of conditions. Rank Licensing later assigned all right, title and interest in the HARD ROCK Marks to HRCI. (Note: The few assignment records reviewed regarding the some HARD ROCK registrations did not show this precise chain of title – see, e.g., here and here).

The complaint next asserts that in February 2007, as part of a buyout of Peter Morton’s interests in the Hard Rock Hotel/Casino business, Morton assigned the rights granted to and obligations imposed on him by the 1996 License Agreement to one of the Defendants, HRHH IP, LLC. And since that time, HRHH IP, LLC and Hard Rock Hotel Holdings, LLC have been licensees of HRCI under the 1996 License Agreement (and apparently represented to third party sublicensees that they are licensees under such agreement).

After detailing various sections of the License Agreement regarding use of the marks and protecting the goodwill, the complaint then gets into the juicy details which give rise to the dispute.

(looks like harmless, innocent fun)

In November 2008, a reality television program titled “Rehab: Party at the Hard Rock Hotel” (“Rehab”) began airing throughout the United States. Rehab supposedly depicts events occurring during pool parties held on Sundays at the Hard Rock Hotel & Casino in Las Vegas. [I use the word “supposedly” because does anybody really believe that “reality” shows actually depict reality anymore – as opposed to carefully calculated and constructed entertainment programs designed to appear as if they depict reality?]

According to the complaint, the behavior depicted in Rehab is “entirely at odds with the brand image of the HARD ROCK Marks.” Specifically,

Rehab portrays the Las Vegas HARD ROCK HOTEL & CASINO, a property operated under trademarks owned and licensed by HRCI, as a destination that revels in drunken debauchery, acts of vandalism, sexual harassment, violence, criminality and a host of other behavior that most members of the general consuming public of the United States who regularly frequent or are potential patrons of HRCI’s HARD ROCK CAFE restaurants and other properties operated under the HARD ROCK Marks would find unseemly and objectionable.

[Comment: Isn’t the "Hard Rock" brand image one that is associated closely with rock and roll music, which itself is associated with the image of sex, drugs, and rock and roll – sounds like the behavior depicted complements the brand imagery of the HARD ROCK marks quite nicely].

The complaint also maintains that the Rehab show portrays the staff of the Las Vegas Hard Rock Hotel & Casino as “unprofessional, incompetent, and/or physically and emotionally abusive to hotel guests and other staff.” [ed. – have you seen how rowdy and obnoxious some guests get while living it up in “Vegas”?] Of course, HRCI claims that it “prides itself on offering guests at its HARD ROCK CAFE restaurants and other properties operated under the HARD ROCK Marks dining and entertainment experiences that are pleasurable, fun and consistent with the democratic free spirit of rock music.” [Comment: I think the people engaging in the debauchery at the Rehab pool party were certainly having an entertainment experience that was pleasurable, fun and consistent with the democratic free spirit of rock music – and those watching the show from their homes would surely switch places if they could.]

HRCI then references some highly publicized arrests that occurred in September 2009 at the Rehab pool party where eight patrons were arrested for engaging in acts of solicitation of prostitution and drug distribution (Las Vegas Sun article here) – alleging that Defendants “allowed” the Rehab pool parties to become associated with criminal activity.

The complaint then quotes various communications from members of the public expressly various negatives comments about the Hard Rock Hotel/Casino after viewing the Rehab television show, including communications by members of the public who believe HRCI is responsible for the conduct depicted in the show.

HRCI received assurances from Defendants that the “negative associations” created by the show would be addressed, HRCI alleges that the third season of Rehab “depict the same offensive and depraved conduct portrayed in the first two seasons.” [ed. – does this type of language make anybody else want to check out this show now?]

HRCI maintains that this is harming the reputation and goodwill of the HARD ROCK Marks in violation of the 1996 License Agreement (which requires Defendants to use best efforts to maintain the goodwill of the HARD ROCK Marks). HRCI further maintains that by allowing the Rehab TV show to be aired – and causing the HARD ROCK Marks to become associated with “unsavory, offensive conduct that the majority of the American consuming public finds to be objectionable” [ed.—And yet, the ratings have been high enough to bring it back for a third season so people are watching!] – are intentionally damaging such goodwill.

HRCI also argues that Defendants breached a provision of the 1996 License Agreement by using the mark “HARD ROCK HOTEL” in the title of the Rehab show without HRCI authorization.

HRCI next argues that Defendants have begun branding certain facilities at the Las Vegas property using the acronym HRH (e.g., HRH Tower, HRH Beach Club, HRH Beach Club Bar & Grill) and even branding the property itself as the HRH HARD ROCK HOTEL & CASINO – with the HRH acronym being more prominent than the HARD ROCK HOTEL & CASINO trademark – in an attempt to create a sub-brand of the Hard Rock Marks over which Defendants can claim possesses independent goodwill and capable of being used independently of HRCI (HRCI does have one trademark registration for HRH for clothing items). HRCI maintains that such actions violate the 1996 License Agreement because Defendants are using a mark which is likely to cause confusion with and dilute the distinctive quality of the HARD ROCK Marks.

HRCI’s next focus is on Defendant’s sublicensing of the HARD ROCK HOTEL and HARD ROCK CASINO trademarks to the Cherokee Nation Enterprises, which operates a Hard Rock Hotel & Casino in Tulsa, Oklahoma, and to Pueblo of Isleta Indian tribe which operates a Hard Rock Hotel & Casino in Albuquerque, New Mexico.

Without getting much into specifics, HRCI alleges that the way the HARD ROCK Marks are being used at the Tulsa property are “inconsistent with the brand image HRCI has cultivated over many years” – citing on that “the range of services, character of the establishment and the experience offered to customers is incompatible with consumer expectations for goods and services branded with the HARD ROCK Marks.” [Comment: Are they not offering debaucherous pool parties?]. HRCI cites to some signage that is supposedly not the type of use allowed under the 1996 License Agreement and also mentions the use of the HARD ROCK HOTEL & CASINO mark in the restaurant name “Toby Keith’s I Love This Bar & Grill” where the HARD ROCK mark is subordinate (again, in violation of the provisions in 1996 License Agreement requiring the HARD ROCK Marks to be depicted more prominently, requiring HRCI consent, and requiring HRCI to have copies of all sublicense agreements made between Defendants and third party sublicensees).

HRCI maintains that Defendants have failed in their obligations to ensure that, for its sublicensees, the HARD ROCK Marks are used in a manner that is consistent with the reputation and goodwill of the HARD ROCK Marks. Similar allegations are made regarding Defendants sublicensing at the Albuquerque property.

HRCI’s final focus is the registration by the Defendants of numerous Internet domain names containing variations of the HARD ROCK Marks, including cherokeehardrockhotel.com, hrhpokeronline.com and hardrockroyalty.com, in violation of provisions of the 1996 License Agreement preventing the registration of domain names containing any HARD ROCK Marks.

HRCI’s causes of actions are for breach of contract, declaratory judgment regarding the enforceability of the 1996 License Agreement in light of Defendants’ intentional breaches, federal and state trademark dilution, registered and common law trademark infringement, and federal and common law unfair competition.

Egg Works Left With Egg On Its Face After Court Denies Preliminary Injunction Against Egg World

(I doubt they are smiling today)

The owners of the Las Vegas breakfast restaurants The Egg & I and Egg Works got egg on their face when a federal court denied their motion for preliminary injunction against a competing Las Vegas restaurant named Egg World.

Back in June, Bradley Burdsall, along with his two companies Egg Works, Inc. and Egg Works 2, LLC (collectively “Egg Works”), brought a trademark infringement lawsuit against Egg World, LLC, and two of its principals, Gabrijel Krstanovic, and Dejan Debeljak (collectively “Egg World”). See Egg Works, Inc. et al v. Egg World LLC et al, Case No. 10-cv-01013 (D. Nev.). A copy of the complaint can be downloaded here. The Las Vegas Sun ran an article about the dispute back when the suit was filed.

Probably figuring that upstart Egg World would not have the financial resources to devote towards legal fees, Egg Works came out guns blazing filing a Motion for Temporary Restraining (which was quickly denied) followed by a Motion for Preliminary Injunction – along with what can only be described as a litany of declarations from purportedly confused consumers that Egg Works submitted in support of its argument for trademark infringement of its registered mark EGG WORKS and for why an injunction should be issued immediately against Egg World while the lawsuit is pending.

An evidentiary hearing was held and on September 14, 2010, District court Judge Lloyd George denied Egg Works motion for preliminary injunction on the basis that Egg Works had not shown a likelihood of success on the merits of its trademark infringement claims. A copy of the court's order can be viewed here.

Analyzing the likelihood of confusion between Egg Works and Egg World, the court went though each of the Sleekcraft factors.

Regarding “strength of the mark,” the court rejected Egg Work’s unsupported assertion that the mark does not directly convey any feature or characteristic of its services to consumers and concluded that the mark was “descriptive” and “not entitled to protection absent a showing of secondary meaning” (an issue which Egg Works had not expressly addressed). As such, the court stated that “the descriptive nature of the mark indicates that this factor is likely to weigh in favor of defendants.” [Comment: Not sure how this reconciles with the fact that the PTO did register the EGG WORKS service mark, albeit with a disclaimer for the word EGG. Nonetheless, the court’s comments still reflect that Egg Works’ mark is not as strong as Egg Works would have this court believe].

The court next turned its attention to the factor of actual confusion, which even the court acknowledges “[f]rom the outset, Egg Works has relied heavily on its argument of actual confusion” and how Egg Works submitted “numerous declarations of consumers” and even called consumers as its first three witnesses. The court then provides a good background legal discussion, citing the Ninth Circuit’s recent decision in Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., ___ F.3d ___ , Case No. 08-56291 (9th Cir. Aug. 19, 2010), into the often overlooked, but important distinction between relevant confusion and non-relevant confusion.

Regarding Egg Works' evidence of actual confusion in the form of customer declarations, the court found that “the evidence presented by Egg Works reveals that a substantial number of consumers expressed a non-relevant confusion; confusion that resulted from something other than Egg World’s mark.”

The court noted several declarations from consumers mentioning that they were looking for the “Egg & I” restaurant and got confused when they saw Egg World. The court dismissed each of these declaration as express non-relevant confusion: “While the court agrees that these consumers are expressing confusion, their statements also establish that they are expressing a non-relevant confusion. Although the plaintiffs brought this action and motion to protect Egg Works’ mark, and though none of the above quoted declarants were subjected to cross-examination, each expressed confusion concerning the Egg & I. As Egg Works acknowledged and argued, this matter does not concern the Egg & I.”

The court recognized that the evidence “strongly indicates that the source of the consumers’ non-relevant confusion is the close affiliation between the Egg & I and Egg Works.” Other declarations from consumers supported customer recognition of this affiliation – consumers expressing a belief that Egg World was part of the Egg & I and Egg Works affiliated restaurants.

The court then eloquently explained how this particular type of consumer confusion is not relevant confusion for purposes of determining if Egg World infringes Egg Works:

While each of these declarants reveal their knowledge of the relationship between the Egg & I and Egg Works, they also reveal that this relationship is the source of their confusion. Each of the declarants quantify the relationship between the Egg & I and Egg Works as being a chain or group of restaurants. Each states a confusion whether Egg World was owned by or part of the Egg & I and Egg Works chain or group of restaurants. Based upon this belief, these consumers express a non-relevant confusion that Egg World was being opened as part of the chain or group of restaurants that includes Egg Works and Egg & I. Stated otherwise, the plaintiffs’ marketing successfully informed their consumers that they operated three breakfast and lunch restaurants under two dissimilar names that included the word “egg.” The consumers, so educated, submitted declarations expressing confusion whether the plaintiffs opened (or were opening) a fourth breakfast and lunch restaurant using a third name that included the word “egg.”

(emphasis added). [Comment: It’s statements like these that restores my faith in an impartial court’s ability to cut through all of the legal arguments propounded by attorneys on both sides and ascertain the truth – and then articulate that truth so brilliantly, eloquently, and concisely]. And with those words, the court essentially knocked away all of Egg Works evidence of actual confusion and found that Egg Works was not likely to succeed in showing that this factor weighed in their favor.

Regarding “similarity of the mark,” on the one hand, the court recognized that Egg Works disclaimed the word “EGG” in their trademark registration. The court, noting how one consumer in their declaration equated “egg” to the Egg & I restaurant (which is not Egg Works mark at issue, stated that:

The consumer’s reliance upon the disclaimed “egg” in relation to an entity that is not before the court suggests that little weight can be given to the similarity caused by the fact that both “Egg Works” and “Egg World” begin with the descriptive word “egg.”

The court also found “Egg World” and “Egg Works” are dissimilar in meaning and definition. Nonetheless, the court, mindful that similarities are given greater weight than differences, concluded that Egg Works is as likely to succeed as it is likely to fail in showing that this factor weighed in its favor – and accordingly, found this factor to neither favor Egg Works or Egg World.

On “relatedness of the services,” this favored Egg Works because both operate breakfast/lunch restaurants. Regarding “intent in selecting the mark,” the court rejected Egg Works purported evidence that the Defendants chose the Egg World mark after seeing Egg Works. The court also commented that “the conceptual strength of both ‘Egg Works’ and ‘Egg World’ strongly indicates that both are descriptive rather than suggestive.” The court found that this factor did not favor either side.

The court gave no weight to the “similarity of marketing channels” since the “only overlap of any significance identified by Egg Works is that both restaurants use exterior signs” and since the nearest Egg Works restaurant is located more than four miles from Egg World, such “marketing channel” “does little to suggest that confusion is likely to result from defendant’s use of its mark.”

The court found the factor of “likelihood of expansion into other markets” to be neutral based on the presented evidence – which thus favors the defendants (since its Egg Works burden to prove that the factors are in its favor in a motion for preliminary injunction).

Regarding the “degree of care likely to be exercised by consumers,” the court found that the evidence of this factor was “equivocal” because on the one hand, some Egg Works consumers “exercised so little care that they were initially confused by seeing the word egg on Egg World’s sign”, yet the evidence also indicated that the “actual confusion was caused by plaintiffs’ operation of three restaurants using two names.” [Hmm, one wonders why Mr. Burdsall has maintained the one “Egg & I” location rather than rebranding it as Egg Works in order to create a uniform brand? After all, wouldn't this also avoid confusion with the Ft. Collins, Colorado-based The Egg & I franchise chain which owns a trademark registration for the mark THE EGG & I?]

Based on its balancing of the Sleekcraft factors, the court concluded that Egg Works was not likely to succeed on the merits of showing a likelihood of confusion caused by the Defendant’s use of Egg World.

[Full Disclosure: The law firm I work for does represent one of the Defendants in some legal matters, but did not represent any of the Defendants in this case.]

The Convoluted and Complicated History of the TROPICANA Hotel/Casino Trademark

Tropicana Las Vegas

Last year, I wrote about the Nevada lawsuit involving a dispute about use of the name Tropicana in connection with the famed Tropicana Resort & Casino in Las Vegas (link here). Pamela Chestek – well known for her many blog posts regarding convoluted assignments and related transactions with respect to intellectual property – provided her own unique insights into the matter around the same time (link here).

What started out as a simple declaratory judgment action by the new owners of the Tropicana Las Vegas regarding their long-time right to use the name Tropicana in connection with the hotel/casino located at the intersection of Las Vegas Blvd. and Tropicana Avenue has recently expanded into a fight over actual ownership of the TROPICANA trademark. While the Las Vegas Sun published an succinct article last week (link here) regarding the lawsuit filed in Delaware Bankruptcy Court by a group of companies lead by Carl Icahn's Tropicana Entertainment Inc. (a copy of the complaint can be downloaded here), the actual factual circumstances giving rise to the instant dispute regarding ownership of the TROPICANA mark are interesting enough (and so amazingly convoluted) that I felt a more detailed discussion of the facts underlying the ownership dispute was merited – if anything to provide another illustration of how trademark rights are handled in the course of multiple large scale corporate transactions (including bankruptcy proceedings) and how certain things can (and indeed do) fall through the cracks.

The Tropicana’s Early Years
The story begins back in 1957 when the Tropicana hotel and casino first opened in Las Vegas (the “Tropicana Las Vegas”). The Tropicana Las Vegas was originally operated by a company named Hotel Conquistador, Inc. (“Conquistador”) on land that was owned by the Jaffe Family (“Jaffe Group”). Under the terms of a 1972 lease agreement between Conquistador and the Jaffe Group, Conquistador was required to transfer to the Jaffe Group whatever right it had, if any, in the “Tropicana” name after the termination of the lease.

Later, in 1977, the Jaffe Group formed a partnership with Edward and Fred Doumani (the “Doumanis”) named Tropicana Enterprises which succeeded the Jaffe Group as the lessor in the lease agreement with Conquistador. On June 26, 1979, a company named Hotel Ramada of Nevada, a subsidiary of Ramada Inns, Inc., acquired from Conquistador the land lease of the Tropicana Las Vegas and the right to use the “Tropicana” name. Then on July 25, 1979, the Doumanis sold their 50% interest in Tropicana Enterprises to Adamar of Nevada Inc. (“Adamar of Nevada”), also a subsidiary of Ramada Inns, Inc.

So at this stage, you have Ramada Inns, Inc. owning 100% of the company which operates the Tropicana Las Vegas and owning 100% of a company which owns a 50% interest in a partnership which is the lessor on the land lease for the Tropicana Las Vegas. The Delaware court filing even includes the following handy chart to illustrate the corporate relationship:

The Tropicana Trade Name Agreement
In September 1980, Tropicana Enterprises entered into the so-called 1980 Trade Name Agreement with Ramada Inns, Inc., the Jaffe Group, Hotel Ramada of Nevada, and Adamar of New Jersey, Inc (another wholly owned subsidiary of Ramada Inns, Inc.). This agreement authorized Ramada Inns, Inc. to file federal trademark registrations in its name for the “TROPICANA” mark, but also required that proof of such registrations be provided to the Jaffe Group. Ramada Inns, Inc. did subsequently register several trademarks with the U.S. Patent and Trademark Office including, among others, the mark TROP and TROPICANA (the “Tropicana Trademarks”).

Here is where the situation starts to gets messy. The 1980 Trade Name Agreement also included a reversionary interest (also sometimes referred to herein as the “contingent assignment right”) that upon the termination of Tropicana Enterprises land lease, Ramada “shall immediately cease to use the name TROPICANA and all of their interest in said name shall become the property of Enterprises, and they shall promptly execute and deliver to Enterprises such instruments as Enterprises may reasonably require; assigning and transferring to Enterprises all of their said right, title, and interest in such name, together with the good will of the business symbolized by such name . . . .”

In a subsequent 1984 lease between Tropicana Enterprises (as lessor) and Hotel Ramada of Nevada (as lessee), a separate reversionary interest clause provided that: “Lessee shall upon termination of this Lease for any reason whatsoever, immediately cease to use such name and all interest of Lessee in said name shall become the property of the Lessor, and Lessee shall if requested so to do by Lessor, execute and deliver to Lessor such instruments as Lessor may reasonably require, assigning to Lessor any right, title, and interest Lessee has in such name.”

The Tropicana Spinoff
In 1989, Ramada, Inc. (formerly named Ramada Inns, Inc.) decided to spin off its gaming assets and properties into a newly formed subsidiary, Aztar Corporation (“Aztar”). As part of the spinoff, on December 20, 1989, Aztar, Ramada Inc., Hotel Ramada of Nevada, Adamar of New Jersey, Inc., Tropicana Enterprises, the Jaffe Group, and a company named TROP C.C. entered into a Trade Name Agreement Assignment, Guaranty, and Agreement (the “1989 Agreement”) whereby all of the Ramada parties’ rights under the 1980 Trade Name Agreement were assigned to Aztar and Ramada was obligated to transfer to Aztar all of Ramada’s trademark registrations with respect to the “Tropicana” name (which Ramada subsequently did).

So as of January 2002, Aztar was the owner of the company which operated the Tropicana Las Vegas, Hotel Ramada of Nevada, and owned 100% of the company, Adamar of Nevada, which owned 50% of the partnership interests in Tropicana Enterprises, the lessor of the Tropicana Las Vegas land lease and the holder of the aforementioned reversionary interest. Again, the Delaware court filing includes a handy chart to illustrate the corporate relationship at this stage:

The Tropicana Consolidation by Aztar
The situation then becomes a little more convoluted. According to the Delaware complaint, on February 1, 2002, Aztar caused Adamar of Nevada to purchase the Jaffe Group’s 50% interest in Tropicana Enterprises, thereby causing Aztar to become the “beneficial owner” of the equity interests in Tropicana Enterprises.

As described in the Delaware complaint, Aztar’s purchase of the remaining 50% interest held by the Jaffe Group rendered the reversionary interest right that Tropicana Enterprises had in the Tropicana trademark meaningless “because the grantor and grantee of the contingent assignment right were now one entity under common ownership and management” for the first time since the opening of Tropicana Las Vegas in 1957. Stated differently, when “the Jaffe Group had an interest in Tropicana Enterprises, there was a reason for the Jaffe Group to have some ability to prevent Aztar from using the Tropicana name elsewhere (either in competition or in ways that might dilute the value of the brand) if Aztar were no longer operating the Tropicana Las Vegas.” But since Aztar’s purchase of the Jaffe Group’s 50% interest in Tropicana Enterprises “brought the lessor and the lessee under common ownership under the Aztar umbrella, . . . there was no longer any reason for the contingent assignment right to continue.”

However, even the corporate chart provided in the Delaware complaint shows that what apparently really happened is that the Jaffe Group’s 50% partnership interest in Tropicana Enterprises was divided and transferred to two newly formed companies, Tropicana Real Estate Co., LLC (acquiring a 40% interest in Tropicana Enterprises) and Tropicana Development Co., LLC (acquiring the remaining 10% interest in Tropicana Enterprises). Both of these new companies were wholly owned by Hotel Ramada of Nevada, which in turn was wholly owned by Aztar.

One other complicating factor was that also in 2002, Tropicana Enterprises and Hotel Ramada of Nevada entered into an amended lease agreement that expressly terminated the prior land lease and contemporaneously effectuated a new land lease; however, the amended lease agreement failed to reference the 1980 Trade Name Agreement or address whether the reversionary provision of the 1980 Trade Name Agreement was terminated. While this new lease effectively triggered the reversion under the 1980 Trade Name Agreement (there was never any express consent to the termination of the reversionary interest obtained from the entities which held the reversionary interest), there was never any demand for the transfer of the rights to the trade name made by the entities which held the reversionary interest.

Nonetheless, the “extinguishment” of the contingent assignment right from the 1980 Trade Name Agreement was expressly mentioned in subsequent SEC filings by Aztar. Later, in 2004, as part of a loan transaction pledging Aztar’s assets as collateral, Aztar entered into an Amended and Restated Trademark and Collateral Agreement with Bank of America (as administrative agent) which represented that Aztar owned the Tropicana Trademarks. As noted in the Delaware complaint, this particular agreement was signed by the all of the signatories to the 1980 Trade Name Agreement, or their successors-in-interest, with the exception of the Jaffe Group.

The Aztar Leveraged Buyout
On May 19, 2006, a company named Wimar Tahoe Corporation purchased Aztar for $2.1 billion – structured so that Aztar became a subsidiary of a newly formed company named Wimar OpCo LLC, which was later renamed Tropicana Entertainment, LLC, and became the holding company for the acquired assets, which based on representations by Aztar in the purchase agreement included the Tropicana Trademarks.

However, the way the Wimar-Aztar purchase was structured is where it starts to get even more convoluted. The $2.1 billion purchase of Aztar was financed through two separate credit facilities – what are generally described as the OpCo Credit Facility (for the so-called OpCo Debtors) and the LandCo Credit Facility (for the so-called LandCo Debtors). The LandCo Debtors were those entities involved in the ownership and operation of the Tropicana Hotel and Casino in Las Vegas, Nevada; and the OpCo Debtors were those entities involved the operation of the Tropicana Casino & Resort Atlantic City in New Jersey, the Tropicana Express in Laughlin, Nevada, and other casinos.

As part of the OpCo Credit Facility transaction (which consisted of a $1.53 billion secured term loan and a $180 million secured revolver), the OpCo Debtors pledged as collateral any and all trademark assets they owned. One of the schedules of trademark assets pledged included Aztar’s ownership of the Tropicana Trademarks, which were to be pledged as security to the OpCo Lenders. On September 12, 2007, Aztar executed a written assignment of its interest in the Tropicana Trademarks to Tropicana Entertainment, LLC, which subsequently pledged such trademarks to the OpCo Lenders under the OpCo Credit Facility. As part of the LandCo Credit Facility, the LandCo Debtors were also required to identify any trademarks owned. None of the LandCo Debtors identified any ownership or contingent interest in the Tropicana Trademarks.

The Delaware complaint argues that the representations made by the relevant parties as part of this financing transaction shows the clear understanding of all parties involved – i.e., that the Tropicana Trademarks were owned unconditionally by Aztar at that time. Moreover, all of the secured financing provided under the credit facilities were loaned in reliance upon the representations made with respect to the Tropicana Trademarks.

The Tropicana Bankruptcy
Of course, like so many companies in the mid-2000s who engaged in large scale secured debt financing only to find themselves unable to make debt payments when the economy tanked in 2008, Tropicana Entertainment, LLC filed for bankruptcy in Delaware Bankruptcy Court on May 5, 2008.

On May 30, 2008, the Court entered a Cash Collateral Order which provided that the Liens acquired by the OpCo Lenders under the OpCo Credit Facility were “valid, binding, perfected, enforceable, first priority liens on the personal and real property described in the” OpCo Credit Facility, which included Tropicana Entertainment, LLC’s ownership interest in the Tropicana Trademarks. Moreover, there was no challenge against the Court’s Order regarding the OpCo Lenders’ liens lodged by any party during the 90 day challenge period.

The court’s Order also stated that no grant of security under the OpCo Credit Facility “shall be stayed, restrained, voidable or recoverable . . . , or subject to any defense, reduction, setoff, recoupment or counterclaim” after the challenge period, that the LandCo and OpCo Debtors waived and released the OpCo agent and OpCo Lenders from any and all claims arising out of the OpCo Credit Facility, including the extent, validity, priority and perfection of liens in the Tropicana Trademarks, and that that any other party-­in­-interest’s claims against the OpCo Credit Facility agent and the OpCo Lenders would be forever relinquished, released and waived after the expiration of the 90 ­day challenge period.

On July 7, 2008, the OpCo and LandCo Debtors each filed separate schedules of their assets and liabilities. Tropicana Entertainment, LLC filed schedules of assets and liabilities that listed the Tropicana Trademarks as assets; the LandCo Debtors’ schedules, on the other hand, did not assert any interest, ownership or otherwise, in the Tropicana Trademarks. The so-called OpCo Exit Facility Lenders (the designated post-bankruptcy lenders to the post-bankruptcy debtors of the OpCo assets) pledged an additional $150 million loan to the OpCo Debtors to help the OpCo Debtors reorganize – a loan based in part on the pledging of the Tropicana Trademarks as security for the loan. In contrast, the LandCo Lenders acquired interests in the $440 million LandCo secured term loan under the LandCo Credit Facility without any reliance on the Tropicana Trademarks as security.

The Tropicana Separation
With insufficient assets available to satisfy the secured obligations under the OpCo Credit Facility and the LandCo Credit Facility [ed.-big surprise], the decision was made to file two separate plans of reorganization -- the LandCo Plan concerned only the Tropicana Las Vegas and the OpCo Plan concerned all of the remaining casino properties which were part of the bankruptcy reorganization. Both plans provided that the respective secured lenders would take equity and management interest in the reorganized OpCo and LandCo debtors and that following bankruptcy, the reorganized OpCo and LandCo entities would operate as separate enterprises. This decision to separate the two companies into distinctive and separate enterprise is what set up the eventual dispute over the rights to the Tropicana name because before bankruptcy, the Tropicana Las Vegas was part of one big happy corporate family and used the Tropicana name without having to pay any royalty; however, post-bankruptcy, Tropicana Las Vegas would be a separate company that the OpCo entities would no longer be able to control with respect to usage of the Tropicana Trademarks and the quality control related thereto.

During negotiations regarding the OpCo and LandCo plans, the OpCo Debtors advised the LandCo Lenders that the Reorganized LandCo Debtors (i.e., the LandCo Debtors after the reorganization) would need to obtain a license from the Reorganized OpCo Debtors to use the Tropicana Trademarks after the plans became effective. Understandably, the LandCo Lenders – in particular Onex Corporation, the largest secured lender under the LandCo Credit Facility – rejected the idea of paying any license fees for use of the Tropicana Trademarks and countered with a request to use the Tropicana Trademarks for free, in perpetuity, and without control of such use of the trademarks by the Reorganized OpCo Debtors – an idea that the OpCo Debtors rejected.

In order to allow the reorganizations to move forward, the parties agreed to postpone the dispute over a royalty payment for the Tropicana Trademarks. The Delaware complaint describes the understanding of the parties as one which recognized “that the OpCo Debtors owned the Tropicana Trademarks but that the LandCo Debtors may or may not have had a right to use the Tropicana Trademarks, and if so, could they use it without paying a royalty” but which said nothing about ownership or which challenged the Court’s original order.

On May 5, 2009, the Delaware Court issued its Confirmation Order for the OpCo Plan, which went into effect on March 8, 2010. The Order approved the OpCo Exit Facility and held that the OpCo Exit Facility Lender liens were “valid, binding, perfected and enforceable liens and security interests in the real and personal property described in the OpCo Exit Facility and its attendant documents” and that such liens “shall not be subject to avoidance, recharacterization, recovery, subordination, attack, offset, counterclaim, defense or ‘claim’ . . . of any kind under any Applicable Laws as of the Effective Date.” On May 5, 2009, the Delaware Court also issued its Confirmation Order for the LandCo Plan, which went into effect on July 1, 2009, and did not include any claim to any kind of ownership interest in the Tropicana Trademarks.

The Nevada Tropicana Trademark Lawsuit
On July 20, 2009, two of the Reorganized LandCo Debtors, Tropicana Las Vegas, Inc. and Hotel Ramada of Nevada, LLC (together “Tropicana LV”), filed a lawsuit in Clark County District Court in Las Vegas, Nevada (previously mentioned above) seeking a declaration that they have a right to use the Tropicana Trademarks in connection with the Las Vegas resort and casino property without control by or payment to the OpCo Debtors. See Tropicana Las Vegas, Inc., et al. v. Aztar Corporation, et al., Case No. A09595469­B (Nev. D. Ct., Clark County) (the “Nevada Action”).

In order to allow the Nevada Action to proceed (because the OpCo Plan was not yet effective at the time), the Reorganized LandCo Debtors had to seek permission from the Bankruptcy Court to lift the automatic stay to permit the Nevada Action to proceed. In certain representations to the Bankruptcy Court during motion practice regarding lifting the stay, counsel for the Reorganized LandCo Debtors supposedly stated that Tropicana LV was not challenging “ownership questions” that were “plainly answered” prepetition and that it was merely seeking to preserve longstanding rights concerning the use of the Tropicana name without a royalty through “a declaration that Tropicana Las Vegas may continue to operate the Tropicana under the Tropicana name without interference by OpCo or payment to them. . . . Just a straightforward request to preserve what we view as our pre­existing right to operate as we’ve always done.” The Bankruptcy Court lifted the stay and allowed the Nevada Action to proceed.

The Nevada Action was was subsequently removed to federal court. However, as part of a motion to remand the case back to Nevada state court, Tropicana LV argued that they were not challenging ownership of the Tropicana Trademarks, but rather seeking a declaration under Nevada Revised Statute 30.100 that they have a right to use the name that has been associated with that particular hotel/casino in Las Vegas since 1957 based on Nevada state law contract principles and estoppel.

Adding fuel to the dispute, on November 18, 2009 – four months after the LandCo Plan’s Effective Date – certain LandCo Debtors filed supplemental schedules of assets and executory contracts, in particular, a property interest in the “name ‘Tropicana’ and the goodwill of the business symbolized by and associated with the name ‘Tropicana’” was listed as an asset and the 1980 Trade Name Agreement was listed as an executory contract.

But the apparent final straw was that on January 8, 2010, Tropicana LV moved for summary judgment in the Nevada Action and requested a declaration that Tropicana LV owned the Tropicana Trademarks. The district court in the Nevada Action denied Tropicana LV’s motion for summary judgment finding genuine issues of material fact regarding the Reorganized OpCo Debtors’ status of a bona fide purchase for value which would be a defense to the Tropicana LV’s new claims for damages arising from the use of the Tropicana Trademarks over which Tropicana LV now claimed ownership.

The Delaware Bankruptcy Lawsuit

Nonetheless, Carl Icahan’s Tropicana Entertainment, Inc. (along with other related companies having interests in the OpCo assets), believing that Tropicana LV’s request for a declaration of ownership from the Nevada Court constituted an improper modification of the Bankruptcy Court’s approved reorganization plans, decided to move the matter back to Delaware Bankruptcy Court with the filing of the most recent lawsuit which seeks various claims for relief to stop the Reorganized LandCo Debtors’ efforts to now claim ownership to the Tropicana Trademarks despite all of the Bankruptcy Court’s Orders. In particular, the Delaware Complaint seeks a declaratory judgment that the Tropicana Trademarks were part of the OpCo Debtors’ assets, a declaratory judgment that the supplement schedules provided by the LandCo Debtors are void, a declaratory judgment that the Nevada Action violated the automatic stay by raising trademark ownership issues in the Nevada Action before the OpCo Plan effective date, a finding that the Reorganized LandCo Debtors’ are in contempt of the court’s Confirmation Order based on the assertions made in the Nevada Action regarding ownership of the Tropicana Trademarks, injunctive relief pursuant to the OpCo Plan and bankruptcy law., a claim for unjust enrichment, and a claim for declaratory relief that, regardless of who owns the Tropicana Trademarks, and the Exit Facility Agent has a valid and perfected security interest in the Tropicana Trademarks for the benefit of the OpCo Exit Facility Lenders.

The Nevada Action will likely be stayed pending a determination by the Delaware Court of the status of the conditional assignment right/reversionary interest that appears to have been long forgotten by all of the relevant parties and yet never formally terminated (nor was there any demand for transfer).

While Tropicana LV’s claim of ownership to the Tropicana Trademarks by virtue of this conditional assignment right/reversionary interest is an interesting one, this latest attempt to lay claim to the ownership rights is more likely just a means for Tropicana LV to bolster its bargaining position in order to get the relief that it ultimately wants – basically, the ability to continue to use the name Tropicana for the Tropicana Las Vegas without having to pay a license fee. Of course, the fact that Tropicana LV might actually be able to stake a claim of ownership over assets that had an appraised value of approximately $200 million in 2007 could also have something to do with it.

Bellagio Hotel & Casino Sues Mattress Maker Over BELLAGIO mark

Bellagio Hotel & Casino in Las Vegas, Nevada

Bellagio, LLC, the Mirage Resorts Incorporated (“MRI”) subsidiary which owns the Bellagio Hotel & Casino in Las Vegas, has sued Italian mattress maker Magniflex USA, Ltd. (“Magniflex”) in the U.S. District Court for the District of Nevada over Magniflex’s use of the mark BELLAGIO in connection with bed mattresses. See Bellagio LLC et al v. Magniflex USA, Ltd., Case No. 10-cv-01311 (D. Nev. Filed August 4, 2010). A copy of the complaint can be downloaded here (HT: Steve Green). The Las Vegas Sun has coverage of the lawsuit filing and Magniflex’s reaction to the lawsuit.

In the complaint, Bellagio alleges that it has been selling BELLAGIO mattresses since at least as early as 2001 through a retail store located at the Bellagio or through its website. Click here to see the section of Bellagio’s website selling “Serta mattresses, exclusively created for Bellagio” [Query: So are these Serta-brand mattresses or Bellagio-brand mattresses? And does Bellagio exercise quality control over the mattresses that Serta creates for it?]

Bellagio’s website

Of course, if Bellagio had been selling such mattresses for all that time, then one wonders why MRI chose to file trademark registration applications on February 3, 2010, for the mark BELLAGIO (word mark and stylized) in connection with “mattresses” on the basis of intent-to-use (as opposed to use-in-commerce). Both applications were provisionally refused registration based on the pending application for the mark BELLAGIO for various furniture goods – which itself was provisionally refused registration based on an existing registration for the mark BELLAGIO LUXURY for future goods. However, the applicant of the BELLAGIO furniture mark recently expressly abandoned its application (after abandoning its effort to cancel the BELLAGIO LUXURY MARK ), so there is nothing likely standing in the way of MRI’s applications moving forward towards publication.

Bellagio’s exclusively designed Serta® mattress

Bellagio first became aware of Magniflex’s mattresses at the Spring 2010 High Point Furniture Market in High Point, N.C. Magniflex showcased its Bellagio mattresses again at the bi-annual Las Vegas Market furniture industry event at the World Market Center in Las Vegas. Bellagio alleges in its complaint that Magniflex is selling a line of mattresses using the BELLAGIO mark that is likely to cause confusion with Bellagio’s use of the BELLAGIO mark in connection with its specially made Serta® mattresses. Bellagio also claims that Magniflex’s use of the BELLAGIO mark is likely to cause dilution of Bellagio’s famous BELLAGIO mark under federal trademark dilution law.

Magniflex’s Bellagio Lavender mattress

In a statement issued after hearing of the lawsuit, Magniflex’s President Marco Magni stated that its “Bellagio Lavender” line of mattresses were named after the town Bellagio in the Como province in Northern Italy located on Lake Como (which just so happens to have also served as the inspiration for Steve Wynn when he originally built the Bellagio Hotel & Casino). Magni stated that the Bellagio name is meant to pay homage to the Italian city and to be synonymous with fine Italian craftsmanship (Magniflex also maintains that it is one of Italy’s largest mattress manufacturers and sells its products throughout the world).

The town of Bellagio on Lake Como

(Photo Credit: Marcus90)

Bellagio’s causes of action are for federal trademark infringement, federal trademark dilution, federal unfair competition, and common law unfair competition. Bellagio seeks injunctive relief as well as damages, costs, and attorneys fees.