Icee Distributors, Inc. v. J&J Snack Foods Corp.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 02-30039

ICEE DISTRIBUTORS, INC.,

Plaintiff-Appellee,

versus

J&J SNACK FOODS CORP., WAL-MART STORES, INC.,

and ICEE OF AMERICA, INC.,

Defendants-Appellants.

Appeals from the United States District Court

For the Western District of Louisiana

March 21, 2003

Before JOLLY, HIGGINBOTHAM, and MAGILL, Circuit Judges.*

HIGGINBOTHAM, Circuit Judge:

These appeals concern a disagreement between two ICEE

distributors as to whether one, J&J Snack Foods, can distribute

frozen ICEE squeeze-up tubes of various flavors in the same

territory that the other, ICEE Distributors, distributes ICEEs in

a cup. After a jury trial, the district court entered a permanent

injunction barring J&J and Wal-Mart Stores, which sold J&J’s

squeeze-up tubes within the territory, from continuing to

*

Judge of the Eighth Circuit, sitting by designation.

1

distribute the tubes. We affirm.

I

In the 1960s, the John E. Mitchell Company (“Mitchell

Company”) developed the ICEE, a semi-frozen beverage consisting of

carbonated water and syrup mixed together that stands up when

poured into a cup. Through its subsidiary, ICEEQUIP, the Mitchell

Company owned the trademark rights to the ICEE name on products

such as the cups for holding the frozen carbonated beverage, the

machines for making the beverage, and the beverage itself.

ICEEQUIP entered into several trademark licensing agreements with

ICEE distributors in different parts of the country. The

plaintiff-appellee, ICEE Distributors, Inc. (“Distributors”), by

virtue of its purchase of several regional distributorships that

had each entered into these licensing agreements, is a party to

these identically-worded agreements for its various distribution

territories, which include most of Louisiana and Arkansas, and

parts of Texas, Missouri, Alabama, and Georgia.

In the 1980s, the Mitchell Company went out of business. In

response, the regional licensees, including Distributors and The

ICEE Company, a subsidiary of J&J, formed ICEE of America (“IOA”).

Upon execution of an assignment agreement, IOA acquired the

ownership rights and interests in the trademarks previously held by

ICEEQUIP. Both Distributors and The ICEE Company own stock in IOA,

with The ICEE Company being the largest shareholder and

2

Distributors the second largest.

In 1999, J&J began manufacturing frozen squeeze-up tubes under

the name “ICEE” on a nationwide basis. Appellant Wal-Mart sold

these tubes in its Sam’s Club stores. Although J&J requested

permission from Distributors to sell the tubes in its territory,

Distributors refused. J&J sold the tubes in Distributors’

territory nonetheless. Distributors filed this suit in May 1999

against J&J and Wal-Mart for trademark infringement and dilution.

After the case was filed, J&J attempted unsuccessfully to

register with the U.S. Patent and Trademark Office a trademark for

the use of the ICEE name on the tubes. The PTO rejected the

application on the basis that the proposed trademark would likely

be confused with IOA’s trademarks on the ICEE beverage, cups, and

beverage machine. J&J then assigned the trademark application to

IOA, which successfully registered the trademark. IOA’s president,

Dan Fachner, who was also the president of J&J’s subsidiary The

ICEE Company, then granted J&J a license to use the trademark in

areas including Distributors’ territory.1

After execution of the licensing agreement between IOA and

J&J, Distributors added IOA as a defendant, alleging that IOA, as

the assignee of the trademarks previously held by ICEEQUIP, was

1

A central issue at trial was whether Fachner executed this

license with the consent of the board of directors. Certain

directors and attendees at the 1999 meeting said that the board

only voted to register the tube trademark and allow J&J to sell the

tubes within its own territories; others testified that the board

voted to allow J&J to sell the tubes nationally.

3

bound to the licensing agreements with Distributors, and had

breached those contracts by entering into the squeeze tube

agreement with J&J. The district court granted summary judgment in

the defendants’ favor on the trademark infringement claim, but held

a trial on the trademark dilution and breach of contract claims,

bifurcating the liability and damages stages. After the liability

stage of the trial, the jury found J&J and Wal-Mart liable for

willful trademark dilution and IOA liable for breach of contract.

Based on the jury verdict, the trial court subsequently

entered a permanent injunction against J&J and Wal-Mart forbidding

the sale of squeeze tubes within Distributors’ territory.

Defendants appeal the injunction pursuant to 28 U.S.C. § 1292.2

II

A

IOA first objects that the verdict against it for breach of

contract cannot serve as a basis for the permanent injunction

because the district court improperly asserted jurisdiction over

IOA. Accepting the magistrate judge’s recommendation, the district

court denied IOA’s motion to dismiss for lack of personal

jurisdiction. In its motion, IOA, a Texas corporation with its

principal place of business in California, claimed that it was not

2

28 U.S.C. § 1292(a)(1) (“[T]he courts of appeals shall have

jurisdiction of appeals from: (1) Interlocutory orders of the

district courts of the United States ... granting, continuing,

modifying, refusing or dissolving injunctions, or refusing to

dissolve or modify injunctions ....”).

4

subject to personal jurisdiction in Louisiana because it had never

engaged in business in the state, had never owned or occupied any

property in the state, had never employed any person who worked or

lived in the state, had never earned, generated, or received any

income in or from the state, and had never entered into or acquired

an interest in any contract or license to be performed in the

state.

In response, Distributors argued, inter alia, that the

Mitchell Company’s assignment of trademark rights to IOA resulted

in IOA becoming a party to the license agreements between

Distributors and ICEEQUIP, which were to be performed in part in

Louisiana.

The magistrate judge concluded that although the

jurisdictional issue was “admittedly close,” Distributors put forth

a prima facie case for jurisdiction because of the license

agreements between Distributors and IOA. It explained, “[i]t is

entirely reasonable for the person who grants another party an

exclusive territory to expect to be haled into court in that

territory should it breach its promise.” However, it stated that

“to prevail at trial on the jurisdictional issue,” Distributors

“will have to produce substantially more evidence (and legal

authority) than it has shown on this motion.”

On appeal, Distributors reurges that IOA is subject to

specific jurisdiction because ICEEQUIP’s assignment of its

5

trademark rights to IOA meant that IOA became a party to the

exclusive licensing agreements ICEEQUIP had executed with its

regional distributors. This lawsuit arises from IOA’s breach of

these agreements, which occurred when IOA granted a license to J&J

to sell push-up tubes in Distributors’s territory, including

Louisiana. Thus, Distributors argues that IOA should have

reasonably anticipated being haled into court in Louisiana for

intruding upon Distributors’ exclusive territory there.

B

“Whether in personam jurisdiction can be exercised over a

defendant is a question of law subject to de novo review by this

court.”3 In determining whether to exercise jurisdiction over a

nonresident defendant, we must look to the restrictions of the

state long-arm statute and the Due Process Clause.4 In Louisiana,

this becomes a unitary inquiry, because the state long-arm statute

extends jurisdiction over nonresidents to the extent allowed by

federal due process.5 Extension of jurisdiction over IOA satisfies

due process if IOA had sufficient minimum contacts with the forum

state so that extension of jurisdiction over it comports with

3

Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 652

(5th Cir. 2002).

4

Id.

5

Id.

6

“traditional notions of fair play and substantial justice.”6

A court may exercise specific, as opposed to general,

jurisdiction over a nonresident defendant if “the lawsuit arises

from or relates to the defendant’s contact with the forum state.”7

A defendant’s singular act can be a sufficient basis for

jurisdiction “if that act gives rise to the claim being asserted,”

so long as the defendant “reasonably anticipate[s] being haled into

court” in the forum state.8

Because Distributors prevailed in the district court, we must

review the complaint and any factual disputes in favor of the

exercise of personal jurisdiction, and “all reasonable inferences

from the facts thus established are drawn in favor of the

prevailing plaintiff. However, the facts thus arrived at must be

sufficient to affirmatively show personal jurisdiction.”9

Contracting with a resident of the forum state does not alone

6

Id. at 652 n.17 (internal quotation marks omitted).

7

Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863, 871 (5th

Cir. 2000) (internal quotation marks omitted).

8

Id. at 872 (internal quotation marks omitted).

9

Felch v. Transportes Lar-Mex SA De CV, 92 F.3d 320, 327 (5th

Cir. 1996); see also id. at 326 n.16 (“[T]o the extent of any

actual conflicts in the evidence, we resolve these in favor of [the

plaintiff], as we do also any choice of reasonable inferences to be

drawn from the evidence; we likewise credit the nonconclusional

factual allegations of the complaint to the extent those are not

controverted by any of the evidence; however, the facts thus

arrived at must be sufficient to affirmatively show personal

jurisdiction where, as here, that has been properly challenged.”).

7

support the exercise of jurisdiction over the defendant.10 “Instead

we look to the factors of prior negotiations, contemplated future

consequences, terms of the contract, and the parties’ actual course

of dealing to determine whether [IOA] purposefully established

minimum contacts with the forum.”11

The textbook case of Burger King Corp v. Rudzewicz12 dealt with

a contractual relationship similar to that between IOA and

Distributors. The plaintiff, Burger King, sued a franchisee,

Rudzewicz, for breach of the franchise agreement’s payment

provision and for trademark infringement; the allegations stemmed

from Rudzewicz’s failure to pay required monthly amounts to Burger

King and his continued use of the Burger King trademarks at his

restaurant after termination of the franchise.13 Burger King filed

suit in Florida, the location of its headquarters, even though

Rudzewicz’s franchise was in Michigan.14 Rudzewicz argued that he

was not subject to personal jurisdiction in Florida because his

restaurant was located in Michigan and he had never even visited

Florida.15

10

Colwell Realty Inv., Inc. v. Triple T Inns of Ariz., Inc.,

785 F.2d 1330, 1334 (5th Cir. 1986).

11

Stuart v. Spademan, 772 F.2d 1185, 1193 (5th Cir. 1985).

12

471 U.S. 462 (1985).

13

Id. at 468-69.

14

Id. at 466.

15

Id. at 479.

8

The Court found otherwise, concluding that “this franchise

dispute grew directly out of ‘a contract which had a substantial

connection with that State.’”16 Rudzewicz had “eschew[ed] the

option of operating an independent local enterprise,” and instead

deliberately “‘reached out beyond’ Michigan and negotiated with a

Florida corporation for the purchase of a long-term franchise and

the manifold benefits that would derive from affiliation with a

nationwide organization.”17 It found that “[i]n light of

Rudzewicz’[s] voluntary acceptance of the long-term and exacting

regulation of his business from Burger King’s Miami headquarters,

the ‘quality and nature’ of his relationship to the company in

Florida can in no sense be viewed as ‘random,’ ‘fortuitous,’ and

‘attenuated.’”18 Furthermore, the defendant’s default on the

required payments and illegal use of Burger King’s trademarks

“caused foreseeable injuries to the corporation in Florida” and

therefore “it was, at the very least, presumptively reasonable for

Rudzewicz to be called to account there for such injuries.”19

Similarly, IOA’s predecessor, ICEEQUIP, and Distributors were

parties to agreements granting Distributors an exclusive license

over a region that included most of Louisiana, and ICEEQUIP

16

Id.

17

Id. at 479-80.

18

Id. at 480.

19

Id.

9

accepted a long-term relationship that contemplated its oversight

of Distributors’ actions in that territory: under the contract,

ICEEQUIP had the right to inspect locations there and to test the

equipment to ensure that ICEE quality standards were met. It also

undertook the responsibility to use its best efforts to maintain in

force the trademarks for the Distributors’s continued use in the

specified territories.20

IOA’s connection to the state of Louisiana thus cannot be

viewed as random or fortuitous. IOA’s predecessor to the contract,

ICEEQUIP, chose the geographic territory to be controlled by the

exclusive licenses to which Distributors is now a party, and

ICEEQUIP bargained for certain regulatory powers in regard to that

20

The contracts provide:

4. LICENSEE agrees (a) to maintain the standards of

quality for the various goods to which the trademarks

relate, as set forth in Appendix 4 attached hereto; (b)

at all times to use its best efforts toward the meeting

of said standards of quality; (c) on reasonable notice

from ICEEQUIP, to allow a qualified representative of

ICEEQUIP to make periodic inspections and tests during

normal business hours at machine locations to insure that

said quality standards are being met. In the event

ICEEQUIP notifies LICENSEE that said quality standards

have not been met and provides specific data and facts in

support thereof, LICENSEE shall have sixty (60) days

either to correct such failure or to discontinue use of

Trademarks at any such location.

5. ICEEQUIP agrees, at its expense, to use its best

efforts to maintain in force the various Trademarks,

which maintenance shall include, but not be limited to,

the timely filing of Affidavits of Use and Applications

for Renewals, and further agrees to use its best efforts

to obtain trademark registrations on the pending

trademark applications listed in Appendix 1....

10

area. Moreover, IOA’s contracting with J&J, which gave J&J a

license that overlapped geographically with Distributors’, “caused

foreseeable injuries” to Distributors within its territory, and it

is therefore reasonable for IOA to be called to account there for

such injuries.

IOA briefly argues that it is not a party to the license

agreements with Distributors. It explains that although IOA

maintains the registration of the ICEE marks, it did not merge with

or expressly assume the liabilities or obligations of the Mitchell

Company or its affiliates such as ICEEQUIP. However, it admits

that it executed an assignment agreement which gave it the

ownership rights to the trademarks previously held by ICEEQUIP.

IOA could only acquire the rights held by the Mitchell Company at

the time of the acquisition, which were those rights reserved by

the Mitchell Company and its affiliates in the license agreements.

“[F]ollowing a proper assignment [of a trademark], the assignee

steps into the shoes of the assignor.”21 In other words,

21

Premier Dental Prods. Co. v. Darby Dental Supply Co., 794

F.2d 850, 853 (3d Cir. 1986); see also Westco Group, Inc. v. K.B.

& Assocs., Inc., 128 F. Supp. 2d 1082, 1087 (N.D. Ohio 2001)

(“Defendant K.B. & Associates says th[e] integration clause in the

1995 Agreement does not set aside the 1989 Agreement. K.B. &

Associates says the 1995 Agreement only supersedes previous

agreements ‘between the parties [t]hereto.’ Because Plaintiff

Westco was not a named party in the 1989 Agreement, K.B. &

Associates says the 1995 Agreement has no effect on the 1989

Agreement. This argument does not persuade. In 1993, Jer-Wil, the

named party in the 1989 Agreement, assigned its rights in the

Mattress Warehouse trademark and trade name to Plaintiff Westco.

At that point, Westco stepped into the shoes of Jer-Wil for

11

[I]f the assignment is valid, and the assignee carries on

use of the mark as it was in the past, a continuity of

the mark and its good will is preserved .... Such an

assignee, by following in the footsteps of the assignor,

acquires not only all the rights and priorities of the

assignor, but also any burdens and limitations on use

that were incumbent on the assignor.22

Therefore, IOA was bound by the same contractual terms relating to

the trademarks as ICEEQUIP had been during its term of ownership.

IOA is a party to the license agreement with Distributors and

through the agreement established sufficient minimum contacts with

Louisiana.

This being so, we must also consider whether the “fairness”

prong of the jurisdictional inquiry is met.23 Here, we consider the

burden upon the nonresident defendant, the forum state’s interest

in the litigation, the plaintiff’s interest in securing relief in

that forum, “the interstate judicial system’s interest in obtaining

the most efficient resolution of controversies,” and “the shared

interest of the several States in furthering fundamental

substantive social policies.”24 IOA has pointed to none of these

purposes of the 1989 Agreement.”).

22

J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION §

18:15 (4th ed. 2002); see also SEIGRUN D. KANE, TRADEMARK LAW: A

PRACTITIONER’S GUIDE § 20:1 (3d ed. 2001) (“A trademark assignment is

a transfer of ownership. The trademark owner (assignor) gives up

all rights to the mark. Those rights are acquired by the assignee,

who stands in the shoes of the assignor.”).

23

Felch v. Transportes Lar-Mex SA de CV, 92 F.3d 320, 324 (5th

Cir. 1996).

24

Id. at 324 n.9.

12

factors as militating against exercising jurisdiction over it in

this case. In fact, several factors weigh in favor of

jurisdiction. Louisiana has an interest in the litigation because

it concerns which entity has the right to utilize the push-up tube

trademark in the state. Distributors, which counts Louisiana as a

major part of its territory, has a similarly strong interest in

pursuing this suit there. Furthermore, as a matter of judicial

economy, the best place for resolution of the issues presented is

in this suit, where claims against the three allegedly offending

parties – IOA, J&J, and Wal-Mart – can be resolved together in a

court located in the disputed territory. We hold that conferring

jurisdiction over IOA does not offend traditional notions of fair

play and substantial justice in this case.

III

IOA urges that even if it was subject to the district court’s

jurisdiction, the trial court nevertheless erred in entering the

injunction based on the jury’s breach of contract finding because

IOA did not breach the license agreements with Distributors. We

review the district court’s grant or denial of a permanent

injunction for abuse of discretion.25 The trial court abuses its

discretion if it “(1) relies on clearly erroneous factual findings

when deciding to grant or deny the permanent injunction, (2) relies

25

Peaches Entm’t Corp. v. Entm’t Repertoire Assoc., 62 F.3d

690, 693 (5th Cir. 1995).

13

on erroneous conclusions of law when deciding to grant or deny the

permanent injunction, or (3) misapplies the factual or legal

conclusions when fashioning its injunctive relief.”26 The district

court here did not make any express findings of fact or conclusions

of law supporting the injunction, as required by Federal Rule of

Civil Procedure 65(d). “While a court’s failure to do so does not

require that the injunction be reversed or vacated, particularly

when there is a jury verdict on which an injunction [is based], the

absence of findings does require some conjecture on our part.”27

It calls on us to “‘examin[e] the record to determine if ...

sufficient evidence supports the issuance of injunctive relief.’”28

IOA argues that the license agreement with Distributors does

not cover the trademark on the push-up tubes, but only those

trademarks on the beverage, beverage machine, and cups. Because of

the limited nature of the agreement with Distributors, IOA could

not have breached that contract by entering into the licensing

agreement with J&J for use of the trademark on the push-up tubes.

IOA cites language from the contract providing that the licensor

agrees “to grant no other licenses under the Trademarks in the

Marketing Area.” The agreement defines “Trademarks” as the federal

26

Id.

27

Professional Ass’n of College Educators, TSTA/NEA v. El Paso

County, 730 F.2d 258, 273 (5th Cir. 1984).

28

Id. (quoting Sampson v. Murray, 415 U.S. 61, 86 n. 58 (1974)).

14

trademark registrations and applications for registration listed in

its appendix 1, which include trademarks, trademark registrations,

and applications for the FCB, FCB machine, and cups, but not for

push-up tubes.

Distributors responds by singling out the contract’s statement

that Distributors received “a license under the Trademarks and

under any registrations which may issue to ICEEQUIP relating to the

Trademarks.” It argues that this contractual language implies that

it received the rights not only to the trademarks, registrations,

and applications listed in appendix 1 of the license agreement, but

also to any other registrations “relating to the Trademarks” that

may be issued in the future, such as an ICEE trademark on push-up

tubes.

Although IOA argues on appeal that the breach of contract

issue should not have been submitted to the jury because the

contract unambiguously shows that the push-up tube license falls

outside of the contract with Distributors, we find the contract is

ambiguous.29 Although in its appendix 1 it lists all of the

trademark registrations and applications that compose the term

29

See Martin Exploration Co. v. Amoco Prod. Co., 637 So. 2d

1202, 1205 (La. App. 1st Cir. 1994) (“Whether a contract is

ambiguous or not is a question of law.”). Appellants assert in a

footnote that the district court should have applied Texas, not

Louisiana, contract law to this dispute, because some of the

license agreements at issue were executed in Texas. Because

appellants have not shown that they raised this issue below, it is

waived. Tandy Brands, Inc. v. Harper, 760 F.2d 648, 653 (5th Cir.

1985).

15

“Trademark” as used in the agreement, the document also appears to

provide that other registrations outside of those listed in

appendix 1, but “related to” them, are affected. Thus, the court

properly submitted this issue of fact to the jury for resolution.30

IOA put forth the argument at trial that the phrase “related

to the Trademarks” meant only those marks used with ICEE in a cup.

It asserted that this was so because the contract only provided

quality-control standards for ICEE in a cup, not for any other type

of ICEE product, such as ICEE in a tube. IOA alternatively asserts

now on appeal that “any registrations which may issue ... relating

to the Trademarks” meant only the registration that would issue if

the PTO accepted the pending application listed in appendix 1, and

successful renewal applications for the already-registered marks in

appendix 1.

However, this argument overlooks the fact that the term

“Trademark,” as used in the contract, already encompasses every

item in appendix 1, including the registration application listed

there. The contract’s provision that “ICEEQUIP hereby grants to

LICENSEE a license under the Trademarks” is therefore sufficient to

include a grant of a license under the trademark application and

renewals of the previously registered marks, especially when

combined with the provision in the following sentence that “[t]he

30

See Total Minatome Corp. v. Union Tex. Prods. Corp., 766 So.

2d 685, 690 (La. App. 2d Cir. 2000) (“[W]hen a contract is

determined to be ambiguous, an issue of material fact exists....”).

16

license granted hereunder shall be for the life of the Trademarks

[i.e., those items listed in appendix 1] and their registrations.”

Read this way, “registrations which may issue ... relating to the

Trademarks” would be a superfluous term, because the applications

listed in appendix 1 and its potential registrations, as well as

any registration renewals, are covered by the immediately preceding

contractual provision. This suggests that the phrase “and under

any registrations ... relating to the Trademarks” may refer to

registrations distinct from the list in appendix 1.

The record fully supports the jury and district court’s

apparent finding that the contract gave Distributors a right to

marks obtained in the future related to the ICEE business.31 First,

the evidence suggests that in these contracts ICEEQUIP granted

regional licenses for every ICEE trademark in its possession, which

indicates its intent to license all ICEE marks. Additionally, IOA

appears to have continued the practice of allowing regional

distributors to use all of the ICEE marks. For instance, in 1995

IOA obtained a registration for use of the name “ICEE” on several

types of promotional items, such as beach bags, bicycles, pens,

coolers, towels, t-shirts, and toys. IOA’s president, Dan Fachner,

31

See id. (“[W]hen the terms of a written contract are

susceptible to more than one interpretation, or where there is

uncertainty or ambiguity as to its provisions, or the intent of the

parties cannot be ascertained from the language employed, extrinsic

evidence is admissible to clarify ambiguity or to show the parties’

intent.... A doubtful provision must be interpreted in light of the

nature of the contract, equity, usages, [and] the conduct of the

parties before and after the formation of the contract....”).

17

admitted that IOA allows all of its regional distributors to use

the mark on these promotional items. This practice suggests that

neither IOA nor its regional distributors believed they needed any

other licensing agreement to confer exclusive licensing rights on

them for use of this mark.

Furthermore, the actions of J&J at the time it was developing

the concept of the ICEE push-up tubes demonstrate that it

implicitly acknowledged that the regional distributors had a “right

of first refusal” for the use of ICEE marks in their respective

territories. At trial, J&J emphasized that it offered the

distributors the opportunity to sell the tubes in their regions.

It also had Fachner send out a letter requesting permission from

these distributors for J&J to sell the tubes in their territories.32

This also implies that the custom, as memorialized in the license

agreements, was that distributors had the rights to use all ICEE

marks in their regions.

This evidence supports the jury’s and the district court’s

implicit factual finding that the license agreements between

32

The letter provides in part:

.... J&J Snack Foods will begin selling the ICEE tubes

this year .... This means that there is an opportunity

that some grocery chains may be selling the product

regionally including the territory you operate in. We

all agree that this can be an excellent way to continue

to promote and to strengthen the over all [sic] value and

equity of the ICEE brand.

Please acknowledge your understanding of this by

signing below. If you have any questions, please call.

18

ICEEQUIP and Distributors encompassed not only the registrations

and applications listed in appendix 1, but also all other ICEE

marks.

Nor are we persuaded by IOA’s contention that the verdict did

not support an injunction.33 We find no error in the district

court’s implicit finding that Distributors would suffer irreparable

harm should J&J and Wal-Mart continue distributing the tubes in

Distributors’ area in violation of Distributors’ contractual rights

to the tube trademark.34 Although Distributors could potentially

prove past lost profits enabling it to recover some measure of

damages, it would be considerably more difficult for it to prove

the amount of damages owed from J&J and Wal-Mart’s future sale of

33

J&J and Wal-Mart do not argue that the injunction, based on

IOA’s breach of contract, is unenforceable as to them under Federal

Rule of Civil Procedure 65(d), which provides that an injunction is

only binding upon the party against whom the claim is asserted and

“their officers, agents, servants, employees, and attorneys, and

upon those persons in active concert or participation with them who

receive actual notice of the order by personal service or

otherwise.” Therefore, this argument is waived. Tandy Brands,

Inc. v. Harper, 760 F.2d 648, 653 (5th Cir. 1985).

34

Univ. of Tex. v. Camenisch, 451 U.S. 390, 392 (1981)

(reasoning that “a federal district court [should] consider four

factors when deciding whether to grant a preliminary injunction:

whether the plaintiff will be irreparably harmed if the injunction

does not issue; whether the defendant will be harmed if the

injunction does issue; whether the public interest will be served

by the injunction; and whether the plaintiff is likely to prevail

on the merits”); Amoco Prod. Co. v. Village of Gambell, 480 U.S.

531, 546 n.12 (1987) (“The standard for a preliminary injunction is

essentially the same as for a permanent injunction with the

exception that the plaintiff must show a likelihood of success on

the merits rather than actual success.”).

19

the tubes.

IV

A

The district court rested the injunction on the jury’s

findings regarding both breach of contract and trademark dilution.

J&J and Wal-Mart urge that the trademark dilution would not support

injunctive relief because IOA, rather than Distributors, owns the

ICEE trademarks and therefore Distributors could not sue under the

Federal Trademark Dilution Act. The purpose of the Act is “to

protect trademarks from unauthorized users who ‘attempt to trade

upon the goodwill and established renown of such marks.’”35 To that

end, the Act provides that

[t]he owner of a famous mark shall be entitled, subject

to the principles of equity and upon such terms as the

court deems reasonable, to an injunction against another

person’s commercial use in commerce of a mark or trade

name, if such use begins after the mark has become famous

and causes dilution of the distinctive quality of the

mark ....36

Appellants assert that since the federal trademark registrations

show that IOA owns the trademarks, Distributors has no standing to

sue under the Act.

Distributors counters that the jury weighed the evidence and

found that Distributors owned the ICEE trademarks with respect to

35

Ringling Brothers-Barnum & Bailey Combined Shows, Inc. v.

B.E. Combined Shows, Inc., 937 F. Supp. 204, 208 (S.D.N.Y. 1996).

36

15 U.S.C. § 1125(c) (emphasis added).

20

its distribution territory; that while the trademark registrations’

listing of IOA as the owner is prima facie evidence of IOA’s

ownership rights,37 its agreements with IOA, granting Distributors

an exclusive license to use the trademarks in its territory,

constitute an assignment of rights, not a license. It points to

language in Quabaug Rubber Co. v. Fabiano Shoe Co., in which the

First Circuit explained,

[some courts] have permitted trademark infringement suits

to be maintained by exclusive distributors and sellers of

trademarked goods, i. e., “exclusive licensees” who had

a right by agreement with the owner of the trademark to

exclude even him from selling in their territory.38

It further relies upon the principle that “[e]ven though a contract

states that it is a ‘license,’ a court will not be governed by

form, and the contract will be upheld as an assignment of trademark

rights if that is its actual legal effect.”39

Distributors points to its exclusive right to use the

trademarks in its territory, its license for the life of the

trademarks, its exclusive right to sue for trademark infringement

37

See 15 U.S.C. § 1057(b) (“A certificate of registration of

a mark upon the principal register provided by this chapter shall

be prima facie evidence of ... the registrant's ownership of the

mark, and of the registrant's exclusive right to use the registered

mark in commerce on or in connection with the goods or services

specified in the certificate ....”).

38

Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 159

(1st Cir. 1977); see also id. at 159 n.8 (“an exclusive licensee is

an assignee”).

39

J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION §

18:5 (4th ed. 2002).

21

in its territory, and its unconditional right to transfer or assign

its rights in the trademarks.

Appellants reply that under the contract IOA retained

ownership rights to the trademarks; that the agreement expressly

states that the licensor is the owner of the marks and that

Distributors is not granted ownership of the marks, but a “license

... to use” the trademarks in connection with the “terms,

conditions and limitations” of the agreement. They also point out

that the contract provides that IOA, as owner, can exercise

continuing control over the marks by requiring Distributors to

maintain quality control standards and by mandating that

Distributors either correct violations of such standards within a

certain period of time or cease using the mark at the location of

the violation. The argument continues that the contractual

provision requiring Distributors to promptly notify IOA of

infringements and aid IOA in investigating infringements

demonstrates that IOA is the actual owner of the marks. That the

contract also designates IOA as the party who must maintain the

trademarks by filing affidavits of use and applications for renewal

is, in appellants’ view, also determinative of the ownership issue.

Finally, appellants explain that the contract provided that

Distributors’ license payments were to be categorized for tax

purposes as payments for the licensing – not the sale – of the

trademarks, which indicates the contracting parties’ intent was to

22

create an exclusive license, not an assignment.40

B

"[A] license to use a mark ... is a transfer of limited

rights, less than the whole interest which might have been

transferred."41 As one court has explained,

One of the ways that the law extends the benefits of

trademarks and protects incentives to develop them is by

allowing trademark owners to license the use of their

marks to distributors and franchisees. Such licensing

allows more information to be conveyed to more consumers

without the licensor having to risk losing title to its

mark.42

It would be antithetical to the basic principles of trademark law

to extend to a licensee the rights of an assignee without caution,

since deeming a licensee an assignee would allow the assignee to

hold the registered trademark owner liable under trademark law,

rather than simply under contract law, for diluting the mark by

utilizing a similar trademark in the assignee’s area.

Although “a truly exclusive licensee, one who has the right

40

The contract provided that Distributors’ payments “for the

license rights granted hereunder” are payments “as defined under

Section 1253(a) of the United States Internal Revenue Code.” That

section distinguishes sales from licenses: “A transfer of a ...

trademark ... shall not be treated as a sale or exchange of a

capital asset if the transferor retains any significant power,

right, or continuing interest with respect to the subject matter of

the ... trademark ....”

41

Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1076

(5th Cir. 1997).

42

TMT North America, Inc. v. Magic Touch GmbH, 124 F.3d 876,

882 (7th Cir. 1997) (emphasis added).

23

even to exclude his licensor from using the mark” might be

considered an assignee since no right to use the mark is reserved

to the licensor, an agreement that sets forth “many duties and

rights between the parties that are inconsistent with an

assignment, such as geographic limitations on the licensee’s

territory, does not constitute an assignment.”43 The contract at

issue here does not explicitly exclude IOA itself from using the

marks in Distributors’ territory.44 Moreover, the agreements with

Distributors contain strict geographic limitations, and reserves to

ICEEQUIP certain rights indicative of ownership, such as IOA’s

ability to monitor the quality control of Distributors’ product and

its responsibility to renew the trademark registrations. Taken

together, the contractual provisions cited by appellants convince

us that the contract is an exclusive license arrangement only, with

ultimate control and ownership of the trademarks resting with IOA.

This conclusion is borne out by the testimony of one of IOA’s

other regional distributors. As part of its case-in-chief,

Distributors called Nate Parish, owner of Middle Tennessee ICEE,

Inc. He testified that IOA “is the holder of the ‘ICEE’ trademark,

43

Finance Inv. Co. (Bermuda) Ltd. v. Geberit AG, 165 F.3d 526,

532 (7th Cir. 1998).

44

Although the contract provides that Distributors may sue a

party using the Trademarks in its area “who claims any rights from

ICEEQUIP,” it does not specifically prohibit ICEEQUIP itself from

using the marks in Distributors’ region.

24

the look, the block letters, and it’s their job to police the

trademark in respects to, I guess I’d say the entire country.”

Parish further explained that at the 1999 IOA board of directors

meeting, he made a motion to allow J&J to make the ICEE squeeze

tubes and distribute the tubes in J&J’s own territory, not

nationally. In explaining why a motion was necessary to allow J&J

to distribute the tubes even in its own area, the witness stated,

“If I was to produce an ICEE cup with the Tennessee Titans, the

bear with the Tennessee Titans uniform on, I have to get permission

from Icee of America for that to take place.”

This exchange between Distributors and their own witness

indicates that IOA must give specific permission for regional

distributors to either use a trademarked term such as “ICEE” on a

different product or alter a trademark. IOA’s powers of oversight

are inconsistent with the notion that each regional distributor

owns the trademarks in their respective territories.45 Instead, as

an umbrella organization for all of the distributors, IOA serves

the purpose of “policing the trademarks” within each distributors’

individual region to assure that the marks are not being used in an

undesirable fashion.

45

Along these lines, appellants persuasively argue that

ICEEQUIP executed identical exclusive licensing agreements with

several regional distributors, and it would be illogical to hold

that these many agreements create a “patchwork of trademark

owners,” because “[s]uch divided national ownership would

jeopardize the goodwill associated with the [t]rademarks, create

customer confusion, and diminish the trademarks’ value of

indicating a single source and quality of ICEE [products].”

25

In conclusion, this evidence indicates that the district court

clearly erred in determining that Distributors, not IOA, was the

owner of the ICEE registrations. Because Distributors is not the

owner of the marks, but merely an exclusive licensee, it has no

standing to sue under the Dilution Act, and the district court

abused its discretion in basing its injunction in part on the

jury’s verdict on the dilution claim.46 However, we will not

reverse the trial court’s grant of injunction because it is

independently sustainable as a proper remedy for the breach of

contract.

AFFIRMED.

46

We note that, although the licensing contracts between

Distributors and IOA give Distributors the power to bring trademark

infringement actions in its territory, they do not provide that

Distributors may bring trademark dilution claims in its area.

26