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Gaudreau v. American Promotional Events

September 28, 2007

TERRY P. GAUDREAU, ET AL., PLAINTIFFS,
v.
AMERICAN PROMOTIONAL EVENTS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

This lawsuit arises out of a dispute over the rights to the trademark "TNT FIREWORKS." Plaintiffs Terry P. Gaudreau and TNT Fireworks, Inc., who sell consumer and commercial fireworks in Montana, North Dakota, and elsewhere, have sued American Promotional Events ("APE"), a nationwide distributor and vendor of fireworks, under the Lanham Act and Montana and North Dakota trademark law. APE now moves to dismiss four of plaintiffs' five claims on laches, statute of limitations, and ripeness grounds. For the reasons explained herein, defendant's motion will be granted in part and denied in part.

BACKGROUND

Plaintiff Gaudreau resides in North Dakota, and his business, plaintiff TNT Fireworks, Inc., is a Montana corporation. (Compl. ¶¶ 2, 3.) Gaudreau claims that he has been selling consumer fireworks in North Dakota and Montana using the trademark "TNT FIREWORKS" continuously since at least as early as 1985, and that he has sold commercial fireworks under a variation of that mark throughout the United States. (Id. ¶¶ 8, 11.) In October 2006, plaintiff TNT Fireworks, Inc. registered the "TNT FIREWORKS" trademark under Montana law. (Id. ¶ 9.) Gaudreau claims that at least as early as 1995 he began using defendant APE as one of his fireworks suppliers, and he alleges that he did business with APE using the name "TNT Fireworks." (Id. ¶ 15.)

Defendant APE, an Alabama corporation with its principal place of business in Alabama, claims that it has been selling fireworks bearing the trademark "TNT" throughout the United States "[s]ince long before [p]laintiffs began selling fireworks" or using the "TNT FIREWORKS" name. (Compl. ¶ 4; Def.'s Mem. at 2.) In addition, APE holds the rights to the marks "TNT THE NITE THEATRE" and "TNT," which were registered by the U.S. Patent and Trademark Office ("USPTO") in 1968 and 1988 respectively. (Def.'s Mem. at 2.) According to plaintiffs, Ronald Knutson, a former partner of Gaudreau's in the fireworks business, may have wrongly told APE or led them to believe that he owned the rights to the "TNT FIREWORKS" mark allegedly owned by plaintiffs, and, based on this misinformation, Knutson may have conveyed the mark and its goodwill to APE in 2003. (Compl. ¶¶ 16-18.) Plaintiffs allege that in 2003 defendant began selling consumer fireworks in North Dakota and Montana using the "TNT FIREWORKS" mark. (Id. ¶ 24.)

In July 2000, defendant APE filed an Intent-to-Use application with the USTPO for the mark "TNT FIREWORKS, INC." for fireworks distributorship services, which received serial number 76/090,310. (Id. ¶ 20.) As part of its application, APE declared that to the best of its knowledge, no other person or corporation had the right to use the mark in commerce. (Id. ¶ 21.) In February 2002, plaintiff Gaudreau, plaintiff TNT Fireworks, Inc., Knutson, and Knutson's North Dakota fireworks corporation filed a Notice of Opposition against APE's application with the USPTO Trademark Trial and Appeal Board ("TTAB"). (Id. ¶ 22.) TTAB dismissed Knutson and his corporation's opposition in March 2004, and it subsequently dismissed both plaintiffs' opposition with prejudice in February 2007. (Id.)

On June 22, 2007, plaintiffs filed this action as an appeal of the TTAB dismissal pursuant to Section 21(b) of the Lanham Act, 15 U.S.C. § 1071(b). In addition to the TTAB challenge (Count I), plaintiffs' complaint also includes a claim of false designation of origin under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Count II); a claim of fraud on the patent and trademark office under Section 38 of the Lanham Act, 15 U.S.C. § 1120 (Count III); and trademark infringement claims under Section 30-13-333 of the Montana Code (Count IV) and under North Dakota common law (Count V).*fn1 Plaintiffs request, inter alia, injunctive relief forbidding defendant from using the "TNT FIREWORKS" designation in connection with its fireworks business, and they seek an order under 15 U.S.C. §§ 1119 and 1071(b) prohibiting the "TNT FIREWORKS" mark from being registered by APE at the USPTO. (See Compl. ¶¶ (A), (C).) Plaintiffs also request money damages for their trademark infringement, fraud on the office, and false designation of origin claims, including treble damages under the Lanham Act and Montana state law. (Id. ¶¶ (F), (G), (H).)

Defendant argues that all of plaintiffs' claims except for their challenge to the TTAB ruling under 15 U.S.C. § 1071 must be dismissed as untimely. (Def.'s Mem. at 3.) Specifically, it argues that a three-year statute of limitations applies to state law trademark infringement actions in both North Dakota and Montana, and that because plaintiffs had notice of defendant's use of the contested mark at least as early as 2003, plaintiffs' state law claims, which they first raised in their 2007 complaint, are time-barred. (Id. at 4-5.) Similarly, defendant argues that plaintiffs' Lanham Act false designation of origin claim is barred by the doctrine of laches, which is "presumed" when there is delay beyond the analogous statute of limitations period. (Id. at 5-6.) Finally, defendant argues that plaintiffs' fraud on the office claim under Section 38 of the Lanham Act is premature because APE has not yet procured registration of the "TNT FIREWORKS, INC." mark with the USPTO. (Id. at 6.) The Court will address each of these arguments in turn.*fn2

ANALYSIS

I. State Law Infringement Claims

There is no specific limitations period for trademark infringement prescribed by statute in either Montana, North Dakota, or the District of Columbia. Without engaging in any choice-oflaw analysis to demonstrate which forum's statutes of limitations would apply to the state law claims brought in the District of Columbia, defendant argues that Montana's three-year limitations period for general torts, MONT. CODE ANN. § 27-2-204, applies to plaintiffs' claim for trademark infringement under Montana law, and that North Dakota's three-year limitations period for trade secrets misappropriation, N.D. CENT. CODE § 47-25.1-06, applies to the claim for trademark infringement under North Dakota common law. (Def.'s Mem. at 4.) Defendant contends that because plaintiffs' claims accrued no later than 2003 when they became aware that defendant was selling fireworks in North Dakota and Montana using the "TNT FIREWORKS trademark," both state law claims are now barred by their respective three-year statute of limitations. (Id.)

Setting aside for a moment the question of which statute of limitations applies, plaintiffs' state law infringement claims will not be dismissed as untimely in any event because it has been recognized that "[t]rademark infringement is a continuous wrong and, as such, gives rise to a claim for relief so long as the infringement persists." Brunswick Corp. v. Spinit Reel Co., 832 F.2d 513, 526 (10th Cir. 1987) (citing James Burrough Ltd. v. Sign of Beefeater, Inc., 572 F.2d 574, 578 (7th Cir. 1978)). A continuing tort is one that involves "continuing wrongful conduct" and "continuing injury." Flowers v. Carville, 310 F.3d 1118, 1126 (9th Cir. 2002); Page v. United States, 729 F.2d 818, 821 (D.C. Cir. 1984). The continuing tort doctrine "applies where there is 'no single incident' that can 'fairly or realistically be identified as the cause of significant harm.'" Flowers, 310 F.3d at 1126 (quoting Page, 729 F.2d at 821-22); see also Beard v. Edmondson & Gallagher, 790 A.2d 541, 547-48 (D.C. 2002) ("[A] 'continuing tort' can be established for statute of limitations purposes by showing '(1) a continuous and repetitious wrong, (2) with damages flowing from the act as a whole rather than from each individual act, and (3) at least one injurious act . . . within the limitation period.'" (quoting DeKine v. Dist. of Columbia, 422 A.2d 981, 988 n.16 (D.C. 1980))). Though the Court has not found a District of Columbia, North Dakota, or Montana case specifically addressing the question of whether trademark infringement constitutes a continuing tort, numerous opinions from other jurisdictions that have characterized it as such. See, e.g., Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 797 (4th Cir. 2001) (holding that the "well established rule . . . that the statute of limitations does not shield the defendant from liability for wrongful acts actually committed during the limitations period . . . applies . . . to trademark infringement claims brought under the Lanham Act"); Brunswick Corp., 832 F.2d at 526 ("Trademark infringement is a continuous wrong and, as such, gives rise to a claim for relief so long as the infringement persists."); James Burrough Ltd., 572 F.2d at 578 (same); Reid, Murdoch & Co. v. H. P. Coffee Co., 48 F.2d 817, 817 (8th Cir. 1931) ("Violation of a trade-mark . . . constitute[s] a continuing wrong . . . ."); Roehrs v. Conesys, Inc., No. 3:05-CV-829-M, 2005 WL 3454015, at *3 (N.D. Tex. Dec. 14, 2005) ("In the area of trademarks, a claim is actionable throughout the period of infringement, and is therefore a 'continuous harm.'"); First Sav. Bank, F.S.B. v. U.S. Bancorp, 117 F. Supp. 2d 1078, 1087 (D. Kan. 2000); Fourth Toro Family Ltd. P'ship v. PV Bakery, Inc., 88 F. Supp. 2d 188, 196 (S.D.N.Y. 2000); Guardian Life Ins. Co. of Am. v. Am. Guardian Life Assurance Co., 943 F. Supp. 509, 517 (E.D. Pa. 1996); Derrick Mfg. Corp. v. Sw. Wire Cloth, Inc., 934 F. Supp. 796, 807 (S.D. Tex. 1996) ("Trademark infringement is a continuing tort in Texas."); Hester Indust., Inc. v. Tyson Foods, Inc.. 94 Civ. 391, 1995 WL 113939, at *5 (N.D.N.Y. Jan. 30, 1995); see also MCCARTHY ON TRADEMARKS & UNFAIR COMPETITION § 31:33 ("Usually, [trademark] infringement is a continuing wrong . . . ."); 4 CALLMANN ON UNFAIR COMPETITION, TRADEMARKS, & MONOPOLIES § 22:31 (same).

Accordingly, plaintiffs have a "fresh cause of action so long as the wrong persists." Hester Indust., Inc., 1995 WL 113939, at *5. Because plaintiffs allege that APE continues to use the contested trademark to this day (Compl. ¶ 36), plaintiffs' state law trademark infringement claims are not time-barred.

Defendant insists that even if the claims are not time-barred, the Court must nevertheless decide the statute of limitations issue because the applicable limitations period will limit the scope of recovery under plaintiffs' state law claims. (Def.'s Reply at 5.) It is true that in the case of a continuing tort a plaintiff may "recover only for injuries attributable to the part of the continuing tort that was committed within the limitations period immediately preceding the date on which suit is brought." Jung v. Mundy, Holt & Mance, P.C., 372 F.3d 429, 433 (D.C. Cir. 2004); see also Shors v. Branch, 720 P.2d 239, 243 (Mont. 1986) ("In a continuing tort, recovery may be had for damages accruing within the statutory period preceding commencement of the action."). Thus, defendant argues that any potential recovery on plaintiffs' state law claims must be limited by the North Dakota and Montana ...


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