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MNM Investments, LLC v. HDM, Inc.

United States District Court, D. Kansas

August 22, 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, brought this suit against a former parts supplier and its principal, Defendants HDM, Inc., and Derek McCloud. MNM alleges that is the owner of three federally registered trademarks-the word mark “BDM, ” the word mark “Big Dog Motorcycles, ” and the logo mark “Big Dog Motorcycles”-as well as other intellectual property pertaining to the design and manufacture of high-end motorcycles. MNM asserts claims of trademark infringement and counterfeiting under the Lanham Act and a claim for breach of contract under Kansas law. This matter comes before the Court on MNM's Motion for Preliminary Injunction (Doc. 75). As explained in more detail below, the Court grants MNM's motion with respect to HDM's and McCloud's use of the entity name “Big Dog Motorcycles, LLC.” The Court otherwise denies MNM's request for preliminary injunctive relief.

         I. Factual and Procedural Background

          Between 1994 and 2011, Big Dog Motorcycles, LLC, (“Old Big Dog”) manufactured and sold specialty motorcycles under the “Big Dog” brand. Old Big Dog is the original owner of the “Big Dog Motorcycles” and “BDM” federal trademark registrations (the “Asserted Marks”). In 2003, HDM began purchasing parts and accessories from Old Big Dog for resale on its eBay storefront. Some of the parts and accessories that HDM sold bore the Asserted Marks. HDM eventually began ordering new Big Dog parts for resale, some of which also bore the Asserted Marks.

         In 2011, Old Big Dog entered bankruptcy. Its chief lender, Intrust Bank, N.A., foreclosed on more than $2 million in loans and looked to its collateral for satisfaction. Old Big Dog's director of marketing and sales at the time was Matthew Moore, who is also one of MNM's principals. Moore wanted to see the Big Dog line of motorcycles survive, so he made an agreement with Intrust to find a buyer for Old Big Dog's assets. In return, Intrust agreed to assign him Old Big Dog's intellectual property and 10% of the proceeds from the foreclosure process. Moore spent the next two years overseeing the liquidation. Intrust, for its part, executed a series of conveyances that assigned the Asserted Marks to MNM.

         In 2014, HDM purchased Old Big Dog's inventory, equipment, computers, and tooling from Intrust. From 2014 to 2018, HDM continued to sell Big Dog motorcycle parts and accessories, some of which bore the Asserted Marks and the “Big Dog Motorcyles” logo mark.[1]These parts and accessories were either purchased in liquidation from Old Big Dog, or newly manufactured for HDM, with MNM's knowledge and acquiescence. In fact, MNM coordinated with HDM: HDM advanced its parts to MNM's affiliate Kansas Motorcycle Works, USA, LLC for use in new motorcycles, and HDM allowed Kansas Motorcycle Works to sell parts through its website. HDM also defended the Big Dog brand by policing unauthorized use of the Asserted Marks on the website of other retailers.

         MNM and HDM worked together from 2014 to 2017. MNM alleges that the parties' relationship during this time was governed by a written license agreement. Under this agreement, MNM granted HDM a license to use certain Big Dog intellectual property in connection with the manufacture and sale of goods. The license agreement allegedly governed HDM's use of MNM's trademarks, which the agreement defines as “all copyrights, trade marks [sic], trade names, service marks, trade dress, logos, insignias and product names” that are owned by MNM. This definition encompasses the Asserted Marks as well as Big Dog product names like K-9, K-9 250, Coyote and others. The license also allegedly governed HDM's use of MNM's “Design Information, ” which is defined as “all information . . . about design and engineering specifications, directions, processes and procedures . . . that is used or useful in connection with the assembly, manufacturer [sic] or service of the Motorcycles or any parts incorporated therein.”

         MNM has not produced a signed copy of the license agreement. HDM's principal, Derek McCloud, testified at the hearing that this is because he never read, negotiated, or signed this agreement. McCloud admits that the agreement was sent to Cover Craft-a parts supplier-in December 2014 as evidence of HDM's right to use the “Big Dog Motorcycles” mark but testified that he never reviewed the agreement at that time or otherwise assented to its terms.

         In December 2017, Moore and McCloud began negotiating MNM's purchase of HDM. The negotiations were not fruitful. In June 2018, MNM sent McCloud an email telling him that HDM's right to use MNM's intellectual property expired in December 2017. MNM alleges that despite this notification, HDM continues to sell and order for manufacture Big Dog branded parts and accessories in violation of the license agreement.

         MNM filed suit against HDM on September 27, 2018, asserting claims of (1) federal trademark infringement, (2) common law trademark infringement, (3) trademark counterfeiting, and (4) breach of contract. MNM alleges that HDM's continued use of the Asserted Marks and its product names in connection with the manufacture and sale of its motorcycle parts constitutes infringement. It further alleges that HDM breached the license agreement between the parties by continuing to use the Design Information to manufacture motorcycle parts after termination of the license agreement and by underpaying royalties due to MNM on parts sold by HDM. HDM denies these allegations and disputes MNM's ownership of the Asserted Marks. It contends that MNM never acquired ownership of the “BDM” and “Big Dog Motorcycles” marks from Intrust, that it fraudulently acquired a federal registration for the “Big Dog Motorcycles” logo mark, and that HDM actually acquired common law ownership of the marks through its continuous use of them in commerce from 2003 to 2018.

         On May 13, 2019, MNM filed a motion for partial summary judgment on the ownership issue of the “BDM” and “Big Dog Motorcycles” word marks. On August 13, 2019, the Court ruled in MNM's favor, essentially finding that MNM owned the marks. The Court concluded, in part, that the conveyances from Intrust to MNM in 2014 effectively conveyed the marks to MNM. It also rejected certain defenses brought by HDM as to MNM's abandonment and naked licensing of the marks.

         While its summary judgment motion was pending, MNM filed a Motion for Preliminary Injunction. MNM asks the Court to enjoin HDM, McCloud, and their officers, agents, servants, employees, successors, and assigns, from:

1. Infringing, unfairly competing with, counterfeiting, and/or passing off the Big Dog trademarks, namely, the federally registered marks at issue in this lawsuit, as their own;
2. Using the Big Dog designation, or any colorable imitation;
3. Holding themselves or their products out to the public as “officially licensed, ” or of similar status with respect to the Big Dog marks;
4. Using the Big Dog Design Information or manufacturing, selling, or offering for sale goods derived from Big Dog Design Information.

         The Court held a hearing on MNM's motion on August 19, 2019. During the hearing, MNM clarified that it is not seeking an injunction prohibiting HDM and McCloud from selling any parts bearing the Asserted Marks or manufactured using the Design Information that were acquired or manufactured during what it alleges was the term of the license. It is, however, seeking to enjoin HDM and McCloud from selling any parts bearing the Asserted Marks or manufactured using the Design Information that were acquired or manufactured after the expiration of the alleged license.

         II. ...


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