IP Law Daily, TRADEMARK—D. Minn.: Hydraulic lift door manufacturer prevails on claims against former licensee, (Apr 18, 2023)

By Donielle TIgay Stutland, J.D.

Hydraulic-lift door manufacturer is granted summary judgment for breach of contract and trademark infringement against licensee who continued to sue trademarks after termination of the parties’ contract.

A Minnesota district court granted a motion for summary judgment with respect to claims brought by Powerlift Door Consultants, Inc. (Powerlift) against a licensee for breach of contract and trademark infringement, finding that there was no dispute that the licensee had breached a distribution agreement between the parties and continued to use Powerlift’s marks without authorization. Additionally, the court granted a motion for sanctions against Rearden Steel Inc. and its principal Lynn Shepard Jr. for repeated failures to comply with court orders (Powerlift Door Consultants, Inc. v. Shepard, April 17, 2023, Wright, W.).

Background. Powerlift is a South Dakota corporation that manufactures hydraulic-lift doors and their component parts. Rearden Steel Manufacturing LLC (Rearden), owned by Shepard, is a licensee of Powerlift and operates under the business name Powerlift Hydraulic Doors of Florida. Rearden and Powerlift are parties to a 2014 distribution agreement that Shepard signed on his own behalf and on behalf of Rearden.

In 2021, Shepard sent a disparaging email to other Powerlift licensees throughout the United States. Among other things, the email made derogatory remarks about Powerlift and its products, stated that Shepard intended to force Powerlift to replace its distribution model with a franchise model, and opined that any existing distribution agreements were “Null and Void.” Following this email, Powerlift terminated its distribution agreement with Rearden and filed a lawsuit for various claims against Rearden, Shepard, and several affiliated entities.

Powerlift first moved for injunctive relief against Rearden's use of Powerlift’s trademarks. The court granted that motion and also ordered the defendants to comply with their post-termination obligations under the distribution agreement, including the agreement’s non-competition provisions. Subsequently, Rearden and Shepard’s attorneys withdrew from the Shepard began representing himself and Rearden in default.

Powerlift filed a motion for partial summary judgment against Shepard, contending that no genuine issues of fact remain as to Shepard’s liability for Powerlift’s claims of breach of contract and trademark infringement. Powerlift also sought sanctions against Shepard and Rearden.

Breach of Contract. The court began its analysis with the claims for breach of contract. The court indicated that, “The undisputed evidence shows that Shepard’s email impaired Powerlift’s goodwill with its customers,” and “Powerlift has established that no facts remain in dispute as to whether it properly terminated the distribution agreement.” The court considered the 2021 email from Shepard to other Powerlift distributors d a breach of paragraph 3.A. of the distribution agreement. As such, the court concluded that the undisputed evidence showed that Shepard and Rearden breached the agreement and Powerlift is entitled to summary judgment on its breach-of-contract claim.

Trademark infringement. Next, the court turned to the claim for trademark infringement. First, the court noted that it was undisputed that Powerlift owned a valid, protectable trademark.

To the extent that Shepard continued to use Powerlift’s trademarks after the agreement’s termination, Shepard could be individually liable for trademark infringement. The court concluded that Shepard’s unauthorized use of that trademark created a likelihood of confusion among customers. The evidence included an admission by Shepard that Rearden continued to use Powerlift’s trademarks after the distribution agreement’s termination. The court found that Powerlift was entitled to a judgment of liability on its trademark claims.

Sanctions. Finally, the court granted Powerlift’s motion for sanctions. The court highlighted that Shepard and Rearden have “repeatedly engaged in willful violations of this Court’s orders” and have twice been held in contempt of court.

The case is No. 21-cv-1316 (WMW/ECW).

Attorneys: Bryant D. Tchida (Moss & Barnett, APC) for Powerlift Door Consultants, Inc. Lynn D. Shepard, Jr., pro se.

Companies: Powerlift Door Consultants, Inc.; Rearden Steel Manufacturing LLC d/b/a Powerlift Hydraulic Doors of Florida; Rearden Steel Inc.; ABC Corp.

Cases: Trademark MinnesotaNews