IP Law Daily, TRADEMARK—W.D. Tex.: Luckenbach Texas venue’s infringement suit against competing distillery survives motion to dismiss, (Oct 3, 2022)

By Linda O’Brien, J.D., LL.M.

Country entertainment venue possessed a legally protectable trademark to pursue its trademark infringement claim.

In a suit by a Luckenbach Texas entertainment and merchandising venue against a distillery over the use of its Luckenbach trademark with alcoholic beverages, the venue sufficiently pleaded its trademark infringement, state unfair competition, dilution, and cyberpiracy claims, the federal district court in Austin, Texas has ruled. The complaint set forth allegations that the plaintiff had a legally protectable trademark, its mark was famous and distinctive within Texas, and the defendants had a bad faith intent to profit from the use of the plaintiff’s mark. Thus, the defendants’ motion to dismiss was denied (Luckenbach Texas, Inc. v. Skloss, September 29, 2022, Pitman, R.).

Luckenbach Texas, Inc. operates an Old West-style entertainment venue featuring live music and events, dance hall, saloon, souvenir shop, and restaurant serving beer and wine. Luckenbach has used LUCKENBACH as a service mark and trade name since 1971, filed for registration in 1978, and the USPTO registered the mark for entertainment services in 1982. Subsequently, Luckenbach registered “Everybody’s Somebody in Luckenbach” and its Luckenbach oval logo.

In 2016, Luckenbach met with Stewart Skloss seeking a joint venture to launch a whiskey product bearing the name Luckenbach. Luckenbach filed a trademark application to expand the use of its mark into whiskey products. After several years Luckenbach decided against working with Skloss and, in May 2020, entered into a license agreement with Balcones Distilling LLC to manufacture whiskey. Under the agreement, Balcones ensured that the licensed products are of good quality and took reasonable precautions not to devalue the reputation and goodwill of the marks. Balcones paid the royalty to a charity rather than to Luckenbach.

After Luckenbach chose not to partner with Skloss, he formed several related entities – Frontier Spirits, LLC, LRW Ventures, LLC, Luckenbach Road Whiskey Distillery, LLC, Luckenbach Whiskey, LLC, Pura Vida Spirits Company, LLC, and Stemma Holdings, L.P. – to launch his own whisky product, Luckenbach Road Whiskey, and registered multiple domain names containing Luckenbach’s marks. Skloss also unsuccessfully applied to register a trademark for Luckenbach Road Whiskey.

In September 2021, Luckenbach filed suit against Skloss and his companies, alleging trademark infringement, unfair competition under state law, trademark dilution, and cyberpiracy. Luckenbach sought injunctive relief to order the defendants to cease any and all use of Luckenbach Whiskey, Luckenbach Road Whiskey, Luckenbach Road Whiskey Distillery, or any other mark that includes Luckenbach or any variation that would likely cause confusion, deception, or dilution of Luckenbach’s mark or name. Before the court was the defendants’ motion to dismiss the plaintiff’s claims.

Trademark infringement and unfair competition. The court found that Luckenbach possessed a legally protectable mark to allege a trademark infringement claim under the Lanham Act. The defendants’ argument that Luckenbach’s license agreement with Balcones violated the Texas Alcoholic Beverage Code (“tied-house statute”) which prohibits a person who owns or has an interest in a distillery from owning or having an interest in a retail business was rejected. The plaintiff’s allegations expressly disclaim any control over Balcones and Balcones paid no royalty fees to Luckenbach under the license agreement. Further, the defense that something of value or mutual consideration was implied by the existence of the license was unsupported without additional facts and was not yet widely adopted by the federal courts. The plaintiff’s allegations in support of trademark infringement also supported the state unfair competition claim, the court explained.

The defendants’ contention that Luckenbach engaged in naked licensing – the licensing of a mark where the licensee attached the mark to a product of any quality and the licensor exercised insufficient control over the licensee’s product – was also rejected. According to the court, a trademark owner’s failure to exercise appropriate control over its licensee may result in an abandonment of trademark protection for the licensed mark but did not automatically mean that the plaintiff abandoned its mark. Moreover, the defendants did not properly raise a naked licensing defense as such a defense was only relevant to the strength of the mark and was not available in an infringement suit brought by the trademark owner.

Dilution. The plaintiff’s allegations were sufficient to support a claim for dilution, the court stated. The complaint specifically alleges that the marks have received widespread publicity throughout Texas, Luckenbach attracts visitors from across the state, Luckenbach advertises its mark and products statewide through its online store and in person to Texas residents, and Texans regularly engage with Luckenbach’s mark through visits to its entertainment venue and through visits to its website. Those allegations were sufficient to show that the mark was famous and distinctive within Texas at the current stage of the litigation.

Cyberpiracy. The court determined that Luckenbach sufficiently pleaded the defendants’ bad faith intent to profit from the mark to proceed with its claim for cyberpiracy. The complaint specifically alleged that the defendants’ trademark application for Luckenbach Road Whiskey was suspended based on Luckenbach’s prior-filed whiskey application, the defendants’ registration of multiple domain names referred to Luckenbach, the defendants’ use was a commercial use of the mark, and the defendant's intent to divert customer to its site could harm the plaintiff’s goodwill by creating a likelihood of confusion. Those allegations were sufficient to survive the motion to dismiss, the court concluded.

The Case is No. 1:21-CV-871-RP.

Attorneys: Jeffery A. Handelman (Crowell & Moring LLP) for Luckenbach Texas, Inc. Lance Luckenbach (Luckenbach Law PLLC) for Stewart Skloss.

Companies: Luckenbach Texas, Inc.

Cases: Trademark TexasNews GCNNews