We will be discussing two 7th Circuit cases next week.  In the first, Judge Posner finds that a local Girl Scout chapter that was slated for combination with two other girl scout chapters by the national Girl Scout organization could oppose that combination on the basis of a Wisconsin fair-dealership law.  The second case involves abandonment of a trademark for failure to maintain control of the mark. We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, June 27, 2011.  Brief synopses of the cases are presented below.

Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America, Inc., No. 10-1986 (7th Cir. May 31, 2011) (attached).  In this case, the local Girl Scout chapter in Manitou, Wisconsin sued the national organization to stop the dissolution and combination of their chapter with two other nearby chapters.  It appears that the national Girl Scout organization was of the opinion that this would either aid in marketing efforts surrounding the sale of Girl Scout cookies by pooling resources or that it would aid in recruiting and maintaining more ethnically diverse Girl Scout chapters.  Judge Posner appeared to doubt that either reason was true.

The local chapter alleged that the attempted dissolution violated Wisconsin’s “fair-dealership” law that was seemingly desired to ensure that national organizations deal fairly with local franchises such as fast food restaurants and car dealerships.  The district court granted the national organization’s summary judgment motion because, it said, application of the law would violate the national organization’s free expression protections granted by the First Amendment in promoting ethnic diversity. The national Girl Scout organization accepted and argued this reasoning on appeal.  Judge Posner dismissed this basis as having no bearing on the combination (or non-combination) of multiple chapters.  The district court decision was reversed with an instruction to grant the local chapter’s motion for summary judgment that making the change violated the Wisconsin fair dealership law and affirmed the dismissal of several of the local chapter’s common law claims.

Eva’s Bridal LTD. v. Halanick Enterprises, Inc., No. 10-2863 (7th Cir. May 10, 2011) (attached). Eva’s Bridal was opened in 1966 by Said and Nancy Ghusein in Chicago. Over time, other locations were opened by relatives with the couple’s approval.  One location was sold to Nayef Ghusein for $10 and an agreement to pay $75,000 a year for the use of the “Eva’s Bridal” name and marks.  This agreement expird in 2002.  In 2007, Eva’s Bridal sued Nayef for use of the trademark without payment or a license.

The district court dismissed the case for “failure to exercise reasonable control over the nature and quality of the goods, services or business on which the mark is used by the licensee,” so-called “naked licensing” of the mark.  This resulted in abandonment of the mark.  On appeal, Eva’s Bridal argued that they never had any concern about the quality of the goods being sold under the mark.  Nayef utilized all the same designers and products that they had utilized in their own stores for years.  Judge Easterbrook pointed out that this demonstrates a failure to understand the term “quality” in the phrase “quality control”.  The relevant issue is consistency and the control required by the mark owner to maintain that consistency, not the actual quality of the products.  The required control is sufficient if it “insure[s] that the licensee’s goods or services would meet the expectations created by the presence of the trademark.”  That level of control must remain with the trademark owner or the mark will become abandoned.  The district court’s decision was affirmed.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, June 27, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.