IP Law Daily, TRADEMARK—N.D. Ill.: Jury to resolve trademark dispute between Chicagoland cafes, (Feb 25, 2016)

By Mark Engstrom, J.D.

The evidence for trademark infringement, false designation of origin, and unfair competition—for Lanham Act claims that a Chicago-area restaurant (Sarkis’ Cafe) had brought against a similarly named Chicago restaurant (Sarks in the Park) that offered identical menu items with identical names (the “Loretta,” the “Disaster,” the “Animal,” etc.)—was not so one-sided that summary judgment was an appropriate action, the federal district court in Chicago has ruled (Sarkis’ Cafe, Inc. v. Sarks in the Park, LLC, February 24, 2016, Lee, J.). All three claims required a finding that consumers would likely be confused by the defendant’s use of the asserted marks. Because a likelihood of confusion finding was a highly factual determination, the evidence of consumer confusion was properly weighed by a jury, the court concluded. The plaintiff’s motion for summary judgment was therefore denied.

In 1965, Sarkis Tashjian opened a restaurant called Sarkis Cafe. The restaurant became known for its breakfast sandwiches, which Tashjian had identified with names such as the “Loretta” and the “Disaster.” In 2001, Tashjian sold the restaurant to plaintiff Sarkis Cafe Inc., which was owned by Jeff and Marla Cramin. When Jeff Cramin died in 2002, Marla’s brother—Scott Jaffe—became the manager of Sarkis Cafe.

In 2009, Jaffe commenced discussions with Josh Alomia and Daniel Gallagher about the possibility of opening a “sister restaurant” in Chicago, approximately 10 miles from the Sarkis Cafe. Based on those discussions, Alomia and Gallagher formed Sarks in the Park LLC and asked Jaffe to draft a franchising agreement that allowed the defendant to obtain a lease.

When Marla Cramin discovered that Jaffe was negotiating a franchise agreement with Alomia and Gallagher, Marla told Alomia that she was not interested in opening a “sister restaurant.” Nevertheless, Alomia and Gallagher opened its restaurant in 2009, calling it “Sarks in the Park.” The restaurant featured sandwiches such as the “Loretta,” the “Disaster,” and the “Animal.” Based in part on statements that Jaffe had made to the press, the defendant’s restaurant was described in the press as a “franchise” of Sarkis Cafe.

Thereafter, the parties tried to negotiate a licensing agreement that would allow the defendant to use the plaintiff’s marks for a fee, but the negotiations were fruitless. In 2012, Sarkis Cafe sued Sarks in the Park for trademark infringement, false designation of origin, unfair competition, and other causes of action. After the defendant filed a counterclaim for trademark cancellation, the parties filed cross motions for summary judgment.

Trademark Cancellation

The court noted that, under the Lanham Act, a trademark that comprised the name of a particular living individual could not be registered without the consent of that individual. In this case, the plaintiff argued that a cancellation claim based on 15 U.S.C. §1052(c) had to be raised by the party whose name had been registered. Consequently, only the original owner of the Sarkis Cafe— Sarkis Tashjian—could challenge the registration of the SARKIS mark on the basis that the mark was the name of a living person.

Although the Seventh Circuit had not yet addressed that issue, numerous other courts and the Trademark Trial and Appeal Board had held that unrelated third-parties could not seek trademark cancellation under §1052(c). For that reason, the court granted summary judgment to the plaintiff on the defendant’s counterclaim for the cancellation of the SARKIS trademark.

Trademark Infringement

The plaintiff alleged that the defendant’s use of its marks constituted false designation of origin in violation of 15 U.S.C. §1125(a) and trademark infringement and unfair competition in violation of 15 U.S.C. §1114. To prevail on either claim, the plaintiff had to show that: (1) the asserted marks were protectable and (2) the defendant’s use of the marks was likely to create consumer confusion.

Protectability. The plaintiff asserted the ownership of multiple trademarks in its logo and the names of its sandwiches—the “Loretta,” the “Disaster,” and the “Animal.” The court found that the names “Disaster” and “Animal” were arbitrary trademarks, as applied to sandwiches, and thus were protectable without any proof of secondary meaning.

The use of “Sarkis” and “Loretta, however, were protectable only if those marks had acquired secondary meaning. The court noted that conferring trademark protection on the use of SARKIS for restaurants would prevent another individual with the same name from opening a cafe and naming it after himself. The plaintiff argued that Sarkis was not a common name, but it failed to cite any evidentiary support for that argument. The use of “Loretta” for food products raised similar concerns, according to the court. The court thus concluded that SARKIS and LORETTA were protectable only if they had acquired secondary meaning.

In the court’s view, the record contained “very strong” evidence of secondary meaning for the SARKIS and LORETTA marks. Both marks had been used for nearly 50 years, the court explained, and the defendant had sought a licensing agreement to use them for its own restaurant.

Nevertheless, consumer confusion could have arisen from the news coverage that had occurred when the parties were negotiating a franchise agreement, and not from the secondary meaning of the SARKIS and LORETTA marks. Although the weight of the evidence may have been in the plaintiff’s favor, the court decided that the weighing of that evidence should be done by a jury.

Because the plaintiff failed to proffer any argument regarding the classification of its logo in terms of descriptiveness—and failed to offer any explanation for why its logo was a protectable mark—the court found that the plaintiff had waived its claim of a protectable mark in its logo.

Likelihood of confusion. The court found that some of the confusion factors in its likelihood of confusion analysis weighed heavily in favor of the plaintiff. There was very strong evidence, for example, that the defendant had intended to use the plaintiff’s marks to profit from the resulting confusion among consumers.

Significantly, the parties’ negotiations showed that the defendant wanted to use the plaintiff’s marks. Once the franchise negotiations stalled, for example, the parties tried to reach a licensing agreement that would allow the defendant to use of the plaintiff’s marks. The licensing discussions failed, however, and the defendant decided to use the plaintiff’s marks, despite that failure. In the court’s view, that decision showed that the defendant was hoping to profit from its unauthorized use of the plaintiff’s marks.

On the other hand, a reasonable juror could find that, given the 10-mile distance between the two restaurants, the asserted marks were not being used in the same geographic area. Furthermore, a jury could find that any resulting confusion could have been caused by the news reports that recounted the parties’ business negotiations, not by the use of the marks themselves. Notably, some of the news reports had asserted that the two restaurants were related.

Because a likelihood of confusion finding was a highly factual determination, courts had to be cautious about deciding that issue on summary judgment. For that reason, the court concluded that the record evidence was not so one-sided that summary judgment was warranted “despite the substantial evidence in Plaintiff’s favor.”

Affirmative Defenses

The defendant asserted the affirmative defenses of laches, acquiescence, and unclean hands.

Laches. The court rejected the defendant’s argument that the infringement claim was barred by laches. First, the defendant could not appeal to the equitable doctrine of laches when it knowingly infringed the plaintiff’s marks. Second, even if the defendant lacked unclean hands, the two-year period at issue was not long enough to find that the plaintiff had slept on its rights.

Acquiescence. According to the court, the parties’ failure to sign a franchise agreement was fatal to the defendant’s affirmative defense of acquiescence. Significantly, the franchise agreement that was drafted by Jaffe was never signed by the plaintiff’s sole owner, Marla Cramin. Because the signature line demonstrated the parties’ intent to make the signatures a condition precedent, the agreement was not executed.

In addition, none of the plaintiff’s actions—Jaffe’s training of the defendant’s employees to make the plaintiff’s sandwiches, for example—could be taken as an affirmative word or deed that conveyed to the defendant a right to use the plaintiff’s trademarks. For those reasons, the court denied the defendant’s acquiescence defense.

Unclean hands. The defendant argued that Jaffe’s actions made the plaintiff partially responsible for consumer confusion. The court disagreed. Jaffe’s actions were performed during the course of the parties’ negotiations, the court explained, and once the negotiations failed, the defendant knew that it lacked the plaintiff’s permission to use the trademarks at issue. For that reason, the court denied the defendant’s affirmative defense of unclean hands.

The case is No. 12 C 9686.

Attorneys: Audrey A. Berish (O’Halloran, Kosoff, Geitner & Cook, LLC) for Sarkis Cafe, Inc. Edward L. Bishop (Bishop, Diehl & Lee, Ltd.) for Sarks in the Park, LLC.

Companies: Sarkis Cafe, Inc.; Sarks in the Park, LLC

Cases: Trademark IllinoisNews