IP Law Daily, TRADEMARK—D.N.J.: TRO denied in dispute between baseball coaching businesses over sloppy license agreement, (Feb 18, 2020)

By Joseph Arshawsky, J.D.

Agreement sought to carve out territories for use of the same trademark for the same type of business, but parties did not draft it for the global reach of the Internet.

A motion by baseball training and coaching business Hit Doctor Tri State Arsenal, LLC ("TSA") to enjoin competitors Joseph Barth, Hit Doctor New Generation, Inc., and All American C.C. (collectively "Barth") from using TSA’s licensed trademarks or confusingly similar marks in marketing to TSA’s potential affiliates within the licensed territories has been denied by the federal court in Camden, New Jersey. TSA failed to establish the validity of its asserted unregistered word marks or that it sustained irreparable harm in the form of lost potential customers caused by Barth’s marketing efforts. The court also denied an injunction on a cybersquatting claim, observing that the case was primarily about a deal gone bad, which might not have happened if the parties had considered the intangible nature of the property at issue and the international reach of email, websites, and social media sites (Hit Doctor Tri State Arsenal, LLC v. Barth, February 11, 2020, Kugler, R.).

For at least 30 years, Barth conducted a business located in New Jersey that taught baseball tips and conducted training at youth camps and sponsored travelling youth baseball teams, which competed successfully in regional and national competitions. Because of this business, Barth earned a reputation as a successful trainer and developer of baseball talent. On 28 September 2017, plaintiff Hit Doctor Tri State Arsenal and defendants Barth and Hit Doctor New Generation, Inc. entered into an Asset Purchase Agreement (APA) that sold the assets of Barth’s baseball training/coaching/development business, which included the tangibles of equipment and fixtures and the intangibles of the good will attributable to the business and the websites "www.hitdoctor.com" and "www.tristatearsenal.com." In a License Agreement, Barth granted to TSA an exclusive, perpetual, royalty-free, and non-cancelable license to use Barth’s trademarks listed in Schedule A in the Licensed Territory, the same as the Region stated in the APA, certain mid-Atlantic states. Schedule A of the License Agreement lists these 3 marks: the Hit Doctor having Serial No. 75871575; Tri-State Arsenal, having Appl. No. 87384238; and Arsenal Baseball, having Appl. No. 8737982. TSA filed a motion for a Preliminary Injunction with Temporary Restraints, and the court denied the motion.

Preliminary injunction standards. Since both trademark infringement and anti-cybersquatting actions arise under the Lanham Act, likelihood of success on the merits for both counts generally requires a showing that defendants’ use of the mark in commerce or as a domain name likely created confusion as the source of the goods/services solicited. To confirm likelihood of success on the merits of its trademark infringement claim, TSA must show three things: it "owns" valid and legally protectable marks; defendants used the marks in commerce; and such use will likely cause confusion as to the source, affiliation, and/or sponsorship of the goods. In other words, TSA must show Barth's use of a substantially similar mark for similar baseball training/coaching/ development services caused a likelihood of confusion as to the source of those services. In the Third Circuit, the determining standard for competing goods or services differs from that for non-competing ones: where the trademark owner and the alleged infringer deal in competing goods or services, the court need rarely look beyond the mark itself. Thus, in the Third Circuit, irreparable harm caused by the trademark infringement must be shown and is not presumed.

If a plaintiff shows both a likelihood of success on the merits and irreparable harm, the court may in its sound discretion determine whether all four factors must be reviewed or if, taken together, these two factors balance in favor of granting the relief sought. Specifically, that balancing weighs whether the injury likely to the plaintiff is greater than that likely to the defendant. In a Lanham Act dispute, the most basic public interest is the prevention of confusion, particularly as it affects the public interest in truth and accuracy.

Cybersquatting. This matter was about a deal gone bad, the court observed. The court noted that the parties’ pronounced discontent with the deal stemmed from the inadequacy of the agreements between them, which in no way considered the real nature of the property being exchanged or the international reach of email, websites, and social media sites. The APA, the License Agreement, and the Consulting Agreement all divided up a distinct and separate region of the country within which each party is intended to use the exchanged property. However, the agreements divided the exchanged property as if it were apartment buildings or car dealerships or donut franchises, that is, tangible things or services that can in fact be regionalized. But regionalized property wasn’t what was exchanged: it was trademark use within an exclusive region. Better said, the agreement intended to divvy up the use of the same trademarks and the same brands within exclusively different regions. The agreements spelled out that plaintiff would operate its baseball camps and other baseball education and events within the region where Mr. Barth had previously done much of his former business. Since almost all of the "property" exchanged in the APA is the goodwill attached to Mr. Barth’s successful operations for over 30 years, the agreements mapped out plaintiff’s purchase of a business well-branded within Barth’s previous region. Unfortunately, the agreements did not consider the "boundarylessness" of internet marketing and did not spell out how the parties’ internet marketing of the same trademarks for the same services must be limited to within exclusively separate regions online. Put differently, the aim of the deal—a grant of the use of the same marks for the same services in separate regions—would have been better structured as the regionalized use right of a brand. That is, had the agreements been skillfully and purposively drafted to limit each party use right of the internet to market only within its licensed region, the deal may not have soured.

Likelihood of prevailing on the merits. Neither licensed word mark—Tri-State Arsenal or Arsenal Baseball—has been registered in the USPTO, which leaves plaintiff incapable of meeting prong 1 of the trademark infringement standard, namely, a valid and legally protectable mark. Although Barth had been using these marks in commerce for presumably over 20 years, which could under certain circumstances provide him with prior use rights in some or all portions of the United States, his failure to attain registration because of cited prior art creates the presumption the abandoned marks are invalid inasmuch as the owner of the prior art registered marks could sue Barth for infringement. This presumption of invalidity has not been rebutted. Since plaintiff cannot demonstrate trademark infringement of the design mark, plaintiff cannot demonstrate anti-cybersquatting.

Irreparable harm. TSA did not demonstrate that it lost potential customers by Barth’s email blast or robocalling but implied only a possibility of losing customers in the future. Such a possibility did not rise to evidence of irreparable harm to the licensed mark and expired mark applications, said the court.

This case is No. 1:19-cv-14579-RBK-KMW.

Attorneys: Liza M. Walsh (Walsh Pizzi O'Reilly Falanga LLP) for Hit Doctor Tri State Arsenal, LLC. J. Philip Kirchner (Flaster Greenberg PC) for Joseph Barth, Jr., Hit Doctor New Generation, Inc. and All American C.C.

Companies: Hit Doctor Tri State Arsenal, LLC; Hit Doctor New Generation, Inc.; All American C.C.

Cases: TechnologyInternet Trademark NewJerseyNews