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MNM Investments, LLC v. HDM, Inc.

United States District Court, D. Kansas

August 13, 2019

MNM INVESTMENTS, LLC, Plaintiff,
v.
HDM, INC. and DEREK MCCLOUD, Defendants. HDM, INC., Counterclaim-Plaintiff,
v.
MNM INVESTMENTS, LLC, KANSAS MOTORCYCLE WORKS, LLC, and MATTHEW MOORE, Counterclaim-Defendants.

          MEMORANDUM AND ORDER

          ERIC F. MELGREN, UNITED STATES DISTRICT JUDGE.

         Plaintiff MNM Investments, LLC, and Counterclaim Defendants Kansas Motorcycle Works, LLC, and Matthew Moore (collectively, “MNM”) move for partial summary judgment on the ownership of the federally registered trademarks “Big Dog Motorcycles” and “BDM” (the “Asserted Marks”).[1] MNM alleges that it acquired the Asserted Marks from their original owners and their lenders in a series of conveyances. Defendants HDM, Inc., and Derek McCloud (collectively, “HDM”) dispute MNM's ownership of the Asserted Marks and assert that they have acquired superior title in them. For the reasons discussed below, the Court grants in part and denies in part MNM's motion.

         I. Factual and Procedural Background[2]

         A. The Asserted Marks and Their Alleged Chain of Title

         The Asserted Marks were originally owned by Big Dog Motorcycles, LLC (“Old Big Dog”)-a former dealer of high-end custom motorcycles. In April 2011, Intrust Bank, N.A. (“Intrust”) foreclosed on its loans to Old Big Dog. Intrust possessed a security interest in Old Big Dog's physical and intangible assets, including the Asserted Marks. On April 5, 2011, Old Big Dog conveyed all of its property to Intrust so Intrust could dispose of and liquidate the assets as partial satisfaction of Old Big Dog's indebtedness. The next day, Intrust conveyed the registered trademark “BDM” and all associated goodwill to Motorcycle Enterprises, LLC. It also conveyed the registered trademark “Big Dog Motorcycles” and associated goodwill to Wichita Motorcycles, LLC.

         More than two years later, on November 18, 2013, Intrust entered into an agreement with Matthew Moore-a former Old Big Dog employee and current principal of MNM-regarding the sale of Old Big Dog's assets held by Intrust. The Letter of Agreement signed by Moore and Intrust states that Moore was to act as liquidator of the foreclosed assets, and in exchange, Intrust would provide him “10% of the gross sales value of the assets” and the “Intellectual Property of [Wichita Motorcycles, LLC, Motorcycle Enterprises, and Big Dog Motorcycles, LLC].”

         On October 2, 2014, Motorcycle Enterprises and Wichita Motorcycles executed a Quit Claim Bill of Sale (the “Quit Claim”). The Quit Claim states that Motorcycle Enterprises and Wichita Motorcycles “sell, transfer, and quit claim” to Intrust all of their right, title, and interest in the following property:

All inventory, equipment, accounts (including but not limited to all healthcare insurance receivables), chattel paper, instruments (including but not limited to all promissory notes), letter-of-credit rights, letters of creditor, documents, deposit accounts, investment property, money, other rights to payment and performance, and general intangibles (including but not limited to all software and all payment intangibles); all attachments, accessions, accessories, fittings, increases, tools, parts, repairs, supplies, and commingled goods relating to the foregoing property, and all additions, replacements of and substitutions for all or any part of the foregoing property; all insurance refunds relating to the foregoing property; all good will relating to the foregoing property; all records and data and embedded software relating to the foregoing property, and all equipment, inventory and software to utilize, create, maintain and process any such records and data on electronic media; and all supporting obligations relating to the foregoing property; and all products and proceeds (including but not limited to all insurance payments) of or relating to the foregoing property.[3]

         It further states:

Motorcycles Enterprises, LLC and Wichita Motorcycles, LLC further agree to deliver to INTRUST Bank, N.A. such other documents as the bank may reasonably request to document or complete the conveyance of any of the intangible or intangible property described above, including but not limited to: (i) trademarks, service marks, trade names, logos, and product names and the goodwill of the business associated therewith . . . .

         The Quit Claim Bill does not specifically identify the Asserted Marks, their federal registration numbers, or any other trademarks owned by Wichita Motorcycles or Motorcycle Enterprises.

         On November 13, 2014, Wichita Motorcycles and Intrust executed two identical conveyances titled “Assignment of Mark, ” except that one conveyance is for the “BDM” trademark and the other is for the “Big Dog Motorcycles” trademark. The “Assignment of Mark” documents contain two types of provisions. First, the documents state that Wichita Motorcycles “ratifies, confirms, and acknowledges the assignment” of the Asserted Marks to Intrust pursuant to the October 2014 Quit Claim. Second, the documents state that Intrust assigns all of its right, title, and interest in the Asserted Marks, together with the goodwill of the business, to MNM. The assignment provision states as follows:

Assignor [Intrust] does hereby assign unto Assignee [MNM] all of its right, title and interest in and to the Mark, if any, and the registration therefore for the United States . . . together with the goodwill of the business in connection with which the Mark is used and which is symbolized by the Mark, along with the right to recover for damages and profits for past infringements thereof.

         Less than a week later, on November 17, Intrust and MNM executed a “Quit Claim Assignment and Assumption of Intellectual Property” setting forth the terms and conditions of Intrust's assignment of certain assets and technology to MNM. Paragraph 2 of this document contains an “Assignment” provision stating that Intrust “does hereby quitclaim, assign, sell and transfer unto [MNM] WITHOUT RECOURSE all right, title, and interest in and to: . . . (iii) the Marks, [and] (iv) the goodwill of the Business symbolized by and associated with the Marks. . . .” The term “Marks” is defined as “all trademarks and service marks and the registrations and/or applications that are identified in the Quitclaim Bill of Sale identified as Exhibit A.” The document in Exhibit A is the Quit Claim.

         On November 20, an Intrust representative sent an email to Kathy Human, the manager of Wichita Motorcycles and Motorcycles Enterprises, stating that the parties had executed the wrong “Assignment of Mark” document for the “BDM” mark. The correct “Assignment of Mark” document lists Motorcycle Enterprises as the entity who assigned the mark to Intrust, and not Wichita Motorcycles. Motorcycle Enterprises executed a corrected Assignment of Mark for the “BDM” mark on November 24, and Intrust executed the same document on December 1.

         Motorcycle Enterprises and Wichita Motorcycles were dissolved in June 2015.

         B. HDM's Use of the Asserted Marks

         HDM began selling parts and accessories bearing the Asserted Marks in 2003. From 2003 to 2012, HDM purchased parts and accessories for resale from Old Big Dog. As early as 2011, it began ordering and selling newly manufactured parts and accessories, some of which bore the Asserted Marks, with full knowledge of and without objection of Old Big Dog. HDM continued to sell Big Dog motorcycle parts through its eBay storefront through 2018.

         From 2015 through 2018, HDM worked with Moore regarding selling parts and accessories bearing the Asserted Marks. After the liquidation of Old Big Dog in 2014, Moore represented that he owned the Asserted Marks because of the assignments executed between Motorcycle Enterprises, Wichita Motorcycles, Intrust, and MNM. Moore and MNM had full knowledge of, and did not object to, HDM's sale of parts and accessories bearing the Asserted Marks from 2015 through 2018. In addition, during this time period, HDM protected the Big Dog brand from unauthorized counterfeiters by pursuing them through the brand enforcement channels of various online retailers with MNM's knowledge and approval.

         C. This Litigation

         In 2017, the parties' relationship crumbled. MNM filed suit in September 2018 asserting claims of trademark infringement, trademark counterfeiting, and breach of contract. In response, HDM asserts that MNM is not the owner of the Asserted Marks due to gaps or missing conveyances that should have been executed but never were. HDM also asserts that it has acquired superior rights in the Asserted Marks due to HDM's use of them in commerce from 2003 to 2018. MNM now moves for partial summary judgment on the issue of ownership of the Asserted Marks.

         II. Legal Standard

         Summary judgment is appropriate if the moving party demonstrates that there is no genuine issue as to any material fact, and the movant is entitled to judgment as a matter of law.[4] A fact is “material” when it is essential to the claim, and issues of fact are “genuine” if the proffered evidence permits a reasonable jury to decide the issue in either party's favor.[5] The movant bears the initial burden of proof and must show the lack of evidence on an essential element of the claim.[6]If the movant carries its initial burden, the nonmovant may not simply rest on its pleading but must instead “set forth specific facts” that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.[7] These facts must be clearly identified through affidavits, deposition transcripts, or incorporated exhibits-conclusory allegations alone cannot survive a motion for summary judgment.[8] The Court views all evidence and reasonable inferences in the light most favorable to the party opposing summary judgment.[9]

         III. Analysis

         MNM seeks summary judgment on the ownership of the Asserted Marks based on the series of conveyances granting title in the marks to it. In response, HDM argues that summary judgment is not appropriate because the conveyances do not show that MNM owns the Asserted Marks as a matter of law and because there are genuine issues of material fact regarding loss of rights to the Asserted Marks and HDM's intervening rights in the marks by using them in commerce. The Court will first address the parties' arguments regarding the assignment of the Asserted Marks to MNM.

         A. Assignment of the Asserted Marks

         MNM contends that the conveyances at issue unambiguously transfer title in the Asserted Marks to it: Old Big Dog conveyed the Asserted Marks to Intrust on April 5, 2011. The next day, Intrust conveyed the “BDM” trademark to Motorcycle Enterprises and the “Big Dog Motorcycles” trademark to Wichita Motorcycles. Those two entities conveyed the Asserted Marks back to Intrust in October 2014 through the Quit Claim. Intrust subsequently conveyed the Asserted Marks to MNM through the “Assignment of Mark” documents and the “Quitclaim Assignment and Assumption of Intellectual Property” document in November 2014.

         HDM argues that the October 2014 Quit Claim was ineffective to transfer any trademark rights from Wichita Motorcycles and Motorcycle Enterprises to Intrust. HDM further argues that as a result, title in the Asserted Marks was still held by Wichita Motorcycles and Motorcycle Enterprises as of November 2014. According to HDM, when those entities ...


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