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Seller Agency Council, Inc v. Kennedy Center For Real Estate Education


March 30, 2011


The opinion of the court was delivered by: Alicemarie H. Stotler U.S. District Judge



Plaintiff Seller Agency Council, Inc. ("plaintiff" or "SAC") brought the instant action against Kennedy Center for Real Estate Education, Inc. ("KCREE") and Joe Kennedy ("Mr. Kennedy") (collectively, "defendants/counter-claimants") for breach of contract and a declaration of trademark non-infringement. Defendants/counter-claimants brought a counterclaim for trademark infringement against SAC, RealtyU Group, Inc. ("RealtyU"), and Stephan Swanepoel ("Mr. Swanepoel") (collectively, "plaintiff/counter-defendants"). On September 29, 2008, after a court trial ending in June 2008, the Court issued findings of fact and conclusions of law in support of judgment for defendants and counter-defendants. (Doc. No. 111.) The Court found that no transfer of intellectual property rights from KCREE to SAC had been effected. (Id. at ¶ 18.) The Court also found that SAC had unclean hands, and thus could not seek specific performance of the parties' Stock Purchase Agreement. (Id. at ¶¶ 19-20.)

Before trial, the parties stipulated that the plaintiff/counter-defendants' actions would constitute trademark infringement if KCREE was found to be the rightful owner of the intellectual property, and if plaintiff/counter-defendants were not found to have some right to use the marks after July 12, 2006, the date of KCREE's cease and desist letter to Mr. Swanepoel and RealtyU. (Id. at ¶ 24.) The Court found that defendants/counter-claimants' conduct after the cease and desist letter led plaintiff/counter-defendants to believe they had permission to use the trademarks, but such consent ended upon entry of judgment and the Court's issuance of a permanent injunction. (Id. at ¶ 25.) Because plaintiff/counter-defendants' use of the trademarks was found to be with defendants/counter-claimants' "consent and acquiescence," the Court declined to award damages. (Id. at ¶ 26.)

On defendants/counter-claimants' appeal, the Court of Appeals for the Ninth Circuit noted that it had only "dealt in passing with the concept of acquiescence to infringement," and it had not "articulated a definition or established a practical test for district courts to apply." Seller Agency Council, Inc. v. Kennedy Center for Real Estate Edu., Inc., 621 F.3d 981, 988 (9th Cir. 2010). After reviewing relevant case law, the Ninth Circuit held that "[t]he elements of a prima facie case for acquiescence are as follows: (1) the senior user actively represents that it would not assert a right or a claim; (2) the delay between the active representation and assertion of the right or claim was not excusable; and (3) the delay caused the defendant undue prejudice." Id. at 989.

The Ninth Circuit vacated the judgment and remanded with instructions for the Court to consider "the scope of [defendants/counter-claimants'] active representations [and] the extent and reasonableness of [plaintiff/counter-defendants'] reliance on those representations." Id. at 990. In particular, the Ninth Circuit noted that the Court did not make findings whether defendants/counter-claimants' requests that plaintiff/counter-defendants use the marks for a specific purpose after the July 12, 2006 demand letter "amounted to a carte blanche to use the marks for any other purposes, whether and to what extent the marks actually were used for other purposes, or whether it was reasonable in light of the cease-and-desist letter and subsequent litigation for [plaintiff/counter-defendants] to use the marks either for purposes of the specific requests or for purposes outside of [sic] scope of those requests." Id.

Following a post-remand status conference on December 10, 2010, on January 10, 2011, the parties filed concurrent Phase One*fn1 opening briefs on acquiescence, followed by concurrent reply briefs on January 31, 2011. Upon the filing of the reply briefs, the Court took the matter under submission.

After consideration of the parties' post-remand briefing, as well as all trial exhibits and testimony, the Final Pretrial Conference Order, both parties' current and previous proposed Findings of Fact and Conclusions of Law, and the Court's own research, the Court makes the following Findings of Fact and Conclusions of Law, finding no acquiescence by defendants/counter-claimants. Pursuant to the Court of Appeals' remand, the Court's findings of fact only pertain to the limited issue of whether defendants/counter-claimants acquiesced to plaintiff/counter-defendants' use of KCREE's trademarks following the July 12, 2006 cease and desist letter.


A. The Parties

1. Defendant/counter-claimant Mr. Kennedy, an individual residing in Georgia, is the sole officer, director and shareholder of KCREE. KCREE owns an educational curriculum called the Accredited Seller Representative program (the "ASR program"), along with several trademarks (the "ASR trademarks") and copyrighted materials related thereto. The ASR trademarks include the following federal registrations: 3,071,769; 3,088,326; 3,093,851; 3,139,782; 3,325,443; and 3,240,837.

2. Plaintiff/counter-defendant SAC is a Nevada Corporation. Counter-defendant Mr. Swanepoel, an individual residing in California, was president of counter-defendant RealtyU at all relevant times.

3. In September 2005, Mr. Kennedy and Mr. Swanepoel executed a stock purchase agreement pursuant to which SAC was to own the ASR program and trademarks upon closing. Although the closing never occurred, SAC, RealtyU, and Mr. Swanepoel had permission and consent to use the ASR trademarks between September 8, 2005 and July 12, 2006.

B. July 12, 2006 Demand Letter and Mr. Kennedy's Requests

4. On July 12, 2006, through counsel, Mr. Kennedy and KCREE sent a cease and desist letter to Mr. Swanepoel. The letter asserted that "In light of the fact that your companies [SAC and RealtyU] do not have a contract with our clients, your continued use of our clients' trademarks constitutes trademark infringement. Unless we can reach an accommodation with you, please halt all use of our clients' trademarks." (Doc. 150-1, Excerpts of Record ("ER") 29.) As a solution to the alleged trademark infringement, the letter proposed an arrangement whereby Mr. Kennedy would sell all of his intellectual property rights to Mr. Swanepoel, with the exception of the territory of Georgia.

5. Following receipt of the demand letter, Mr. Swanepoel and Mr. Kennedy had a conversation wherein Mr. Kennedy expressed that he no longer wanted to work with Mr. Swanepoel and Mr. William Shue. During that conversation, Mr. Kennedy initially accepted an invitation to come to California to resolve any outstanding issues. However, Mr. Kennedy changed his mind a few days later and no further discussions took place.

6. On July 25, 2006, SAC filed a complaint for breach of contract and declaratory relief to determine whether it owned the ASR trademarks.*fn2 On February 2, 2007, Mr. Kennedy and KCREE answered and filed counterclaims for trademark infringement, unfair and deceptive trade practices, unfair competition, and copyright infringement.

7. When the litigation began, the database of ASR designees was in SAC's physical possession. During this time, defendants/counter-claimants could not access the database, nor did they have control over plaintiff/counter-defendants' use of the ASR trademarks.

8. During the litigation, Mr. Kennedy continued to teach ASR courses and generate income from the ASR program. Rather than fracturing the master ASR database, Mr. Kennedy sought to have it remain complete. In an attempt to keep the master database whole while it was in SAC's possession, Mr. Kennedy made certain administrative requests to plaintiff/counter-defendants regarding the use of his ASR intellectual property.

9. On several occasions after the July 12, 2006 demand letter, as early as July 28, 2006 and as late as November 19, 2007, Mr. Kennedy asked plaintiff/counter-defendants to make use of his ASR intellectual property as follows:

* On July 28, 2006, Mr. Kennedy sent an email to Cheryl Favreau, a potential student who was unable to sign up for the ASR course online, with a carbon copy to Tom Mitchell ("Mr. Mitchell") of RealtyU. Mr. Kennedy indicated that he was "forwarding this to our IT folks. Hopefully they can get you going." (ER 26.)

* On or about July 25, 2006, Mr. Kennedy sent a hand-written request to Mr. Mitchell regarding eleven students recently taught by Mr. Kennedy.*fn3

The request states that, "These are a direct result of me so no per student fee is due. These need to go into the system ASAP. In the interim, they are being added to my data base as well. Call me if you have questions." (ER 54.)

* On or about July 25, 2006, Mr. Kennedy also sent a hand-written note to Anita Eree regarding five student designee applications, requesting "directory changes and sen[d] pen [sic] certificates, ASAP." (ER 55.)

* Sometime during December 2006,*fn4 Mr. Kennedy sent another hand-written note to Ms. Eree regarding nine student applications. The note states, "Here are the apps from the December class." Mr. Kennedy signed the note with a smiley face and also wrote "Happy new year." (ER 44.)

* Sometime during late January 2007,*fn5 Mr. Kennedy sent another request regarding sixty-seven students to Mr. Mitchell and Ms. Eree, "Re: Candidate Apps Blanchard Calhoun." The request states, "These are from my January 13th/17th Class Augusta, GA." (ER 67.)

* On or around November 19, 2007, Mr. Kennedy sent a final request to Mr. Mitchell regarding twelve student applications. The request states, "From Kennedy Center to be placed in data base. Hope you and your family have a Great Thanksgiving." (ER 31.)

10. Plaintiff/counter-defendants complied with Mr. Kennedy's requests to process additional student names by adding them to the database and sending out pins and certificates.

11. In his requests to SAC to add a total of approximately 92 student names to the database, Mr. Kennedy did not intimate that he planned to release his trademark infringement claim against plaintiff/counter-defendants.

12. Through his actions in forwarding student names to SAC for inclusion in the master database, Mr. Kennedy sought to avoid customer dissatisfaction by ensuring a seamless student experience, one that was unaffected by the parties' ongoing business dispute. By not publicizing the dispute to students, and maintaining the appearance that the program was running smoothly, Mr. Kennedy hoped to minimize any injury to the ASR program or its designees until the litigation was resolved.

13. Mr. Kennedy testified at trial that "the bottom line is they [customers] expected the service. Until we got this issue resolved, there was no sense in upsetting the applecart in my way of thinking." (RT 06/24/08 204:15-17.) He goes on to say that, "I did not want them [students] to be aware that there was a -- well, a federal lawsuit filed against me. Okay? And the ASR designation program and such so as to actually diminish the value of the entire program for all of our benefits." (RT 06/24/08 209:8-13.)

14. Mr. Kennedy's students were his top priority, explaining that they "are the ones I care the most about, yes. Because they're the ones -- they're the ones that had paid us -- okay? To offer a service so that's my ultimate concern is our students, yes." (RT 06/24/08 209:21-24.) The ASR students "actually paid good money; they deserved to get the services and so, you know, this was the deal between us as far as the litigation, the lawsuit that they filed; and I was in hopes that we would ultimately resolve it without it ever seemingly there being a problem to our members. That's why. It would have been confusing to create another Council and all of that kind of good stuff." (RT 06/25/08 66:21-25, 67:1-3.)

15. During litigation, Mr. Kennedy forwarded his student names to SAC in good faith in order to avoid creating problems for the students and causing irreparable damage to the program, which would hurt all the parties involved. (RT 06/25/08 66:10-20.)

16. Following the demand letter, Mr. Kennedy's conduct changed with respect to SAC. Instead of jointly promoting the ASR program in conjunction with SAC, Mr. Kennedy resumed teaching courses only for the benefit of KCREE. In addition, instead of having the $65 student fee paid to SAC, after the demand letter, Mr. Kennedy began retaining the $65 fee for each student he taught, for the benefit of himself and KCREE. (RT 06/24/08 202:10-24.)

C. SAC Database and SAC's Use of the ASR Trademarks

17. As of December 2005, when KCREE forwarded the student database to SAC, there were 938 students' names in the database, representing students that KCREE previously registered under the ASR designation. (RT 06/25/08 102:5-7; Deft. Tr. Ex. 191.) Upon the formation of SAC, RealtyU transferred approximately 65-85 members into the database. (RT 04/10/08 36:18-25.) From 2006-2007, Mr. Kennedy taught an additional 250-300 students. (RT 04/10/08 34:14-23.) In 2006, RealtyU provided approximately 900 members to SAC. (RT 04/10/08 37:3-8.) In 2007, RealtyU provided approximately 900 to 1,000 members to SAC. (RT 04/10/08 37:10-16.) In addition to the students taught by Mr. Kennedy and RealtyU, independent affiliates supplied approximately 300 additional members. (RT 04/10/08 38:1-3.)

18. Although Mr. Kennedy, RealtyU, and independent affiliates provided a cumulative total of over 3,500 names to the master SAC database from 2006-2007, as of April 2008, the number of active members in the database dropped to approximately 1,800 // to 2,000, due to attrition and collection difficulties.*fn6 (RT 04/10/08 36:10-17, 38:3-18; RT 06/25/08 101:11-21.)

19. Before July 12, 2006, among other things, plaintiff/counter-defendants marketed, published and licensed the ASR course for schools to teach, collected fees related thereto, represented to the public through press releases, personal announcements, and license agreements that they owned the ASR course and trademarks, maintained a membership database website for ASR designees and candidates to advertise their ASR status, taught the ASR course online, owned and maintained related website URLs, tracked and collected student and member progress and dues, issued certificates and pins to members, collected membership fees, and handled customer - both student and teacher - problems with the ASR program.

20. Plaintiff/counter-defendants' use of the trademarks after July 12, 2006, did not differ from their use prior to July 12, 2006.

21. After the cease and desist letter, Mr. Kennedy made no requests with respect to plaintiff/counter-defendants' marketing the ASR program. Mr. Kennedy's requests to keep the database whole were made in order to benefit Mr. Kennedy and/or KCREE, and to protect existing and future ASR designees.


1. In Seller Agency Council, 621 F.3d at 989, the Court of Appeals adopted the test for acquiescence used in the Eleventh and Second Circuits. See Coach House Rest. v. Coach and Six Rests., Inc., 934 F.2d 1551, 1558 (11th Cir. 1991); ProFitness Physical Therapy Ctr. v. Pro-Fit Orthopedic & Sports Physical Therapy P.C., 314 F.3d 62, 67 (2d Cir. 2002). Under this test, to demonstrate a prima facie case of acquiescence, a defendant must show:

(1) The senior user actively represents that it would not assert a right or a claim;

(2) The delay between the active representation and assertion of the right or claim was not excusable; and,

(3) The delay caused the defendant undue prejudice. Seller Agency Council, 621 F.3d at 989.

2. In addition to setting forth a practical test that district courts may follow, noting the factual difficulties in this case, the Court of Appeals instructed that, "the proper inquiry is whether and to what extent [plaintiff/counter-defendants] relied reasonably on [defendants/counter-claimants'] active representations that [plaintiff/counter-defendants] had a right to use the marks." Id. at 991.

3. The doctrine of acquiescence turns on "'a consideration of the circumstances of each particular case and a balancing of the interests and equities of the parties.'" ProFitness, 314 F.3d at 67 (quoting Carl Zeiss Stiftung v. VEB Carl Zeiss Jena, 433 F.2d 686, 703 (2d Cir. 1970)).

A. Active Representations

4. Acquiescence "limits a party's right to bring suit following an affirmative act by word or deed by the party that conveys implied consent to another." Seller Agency, 621 F.3d at 988 (citing 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 31:42 (4th ed. 2008)).

5. "Active consent is implied by conduct on the plaintiff's part that amounts to an assurance to the defendant, express or implied, that the plaintiff would not assert his trademark rights against the defendant." ProFitness, 314 F.3d at 68 (internal quotation marks and alteration omitted).

6. Typically, any acts "after receiving a cease and desist letter are at the defendant's own risk because it is on notice of plaintiff's objections to such acts." Id. at 68 (internal quotation marks omitted). However, the effects of a cease and desist letter may be ameliorated by a good faith response that a plaintiff subsequently ignores. Id.

7. As discussed above, defendants/counter-claimants made certain requests to plaintiff/counter-defendants regarding the processing of student names, both after the cease and desist letter was sent, and after the instant trademark infringement complaint and counterclaims were filed. Given the ministerial nature of these requests, combined with the fact that the ASR database was in the possession of plaintiff/counter-defendants, Mr. Kennedy's conduct is not deemed a carte blanche grant of permission to use the marks for any or all program uses, including but not limited to marketing, publishing, and licensing the ASR course for the benefit of plaintiff/counter-defendants.

8. The limited scope of Mr. Kennedy's requests to SAC does not lead to the implication that plaintiff/counter-defendants could freely use the marks for their own benefit in the face of a cease and desist letter and ongoing litigation. See Coach House, 934 F.2d at 1558 (active representation that defendant could use logo does not lead to the implication that defendant had permission to do more with logo).

9. Failing to object to a junior user's conduct is not the equivalent of an active assurance that a senior user will not bring a claim. Auction Management Solutions, Inc. v. Manheim Auctions, Inc., et al., 2008 WL 4452362, *6 (N.D. Ga. Sept. 30, 2008) (not reported) (plaintiff did not complain about defendant's marketing practices with respect to plaintiff's customers, but plaintiff never actively represented it would not assert a right or claim with respect to its mark; failure to object is not legal acquiescence). Here, Mr. Kennedy did not actively represent he would not assert a claim; instead, he sent plaintiff/counter-defendants a cease and desist letter and actively pursued litigation regarding trademark infringement. That no follow-up cease and desist letters were sent periodically, to object to plaintiff's/counter-defendants' varied and ongoing use of the ASR marks, does not give rise to legal acquiescence, especially where a claim for trademark infringement was already being pursued.

10. Moreover, "[w]hile a plaintiff may acquiesce in some uses of the mark, . . . that acquiescence does not extend to a use that has not yet materialized[.]" ProFitness, 314 F.3d at 69. Here, the cease and desist letter notified plaintiff/counter-defendants that they no longer had permission to use the ASR marks. Following the letter, Mr. Kennedy acquiesced to use of the ASR marks in the context of keeping the database whole and providing processing services to his paying customers. This limited acquiescence did not extend to plaintiff/counter-defendants' renewed use (following the July 12, 2006 revocation of consent), which went beyond compliance with Mr. Kennedy's requests and encompassed the type of use undertaken before the demand letter.*fn7 See also Operation Able of Greater Boston, Inc. v. Nat'l Able Network, Inc., 646 F. Supp. 2d 166, 174 (D. Mass. 2009) (the fact that plaintiff acquiesced to certain use does not preclude it from challenging use by defendant that exceeds the scope of plaintiff's acquiescence); Trans Union LLC v. Credit Research, Inc., 142 F. Supp. 2d 1029, 1041 (N.D. Ill. 2001) (same).

11. Mr. Kennedy's course of conduct, including the fact that he stopped marketing the ASR program in conjunction with SAC, and stopped forwarding student fees to SAC, suggests that things were not "business as usual" after the dispute arose. Instead, Mr. Kennedy's limited representations regarding permissible use of the marks centered on preservation of the value of the marks and the ASR program for his own future benefit. See Trans Union, 142 F. Supp. 2d at 1041 n.9 (a trademark owner's use of its own marks does not prove that it acquiesced to defendant's use of the marks).

12. A trademark owner's decision to maintain the status quo in the eyes of customers during a pending dispute does not constitute evidence of the relinquishment of trademark rights. Trace Minerals Research, L.C. v. Mineral Res. Int'l, Inc., 505 F. Supp. 2d 1233, 1243 (D. Utah 2007) (while dispute is ongoing, decision to acknowledge exclusive agreement to potential buyer, notwithstanding the fact that agreement was in dispute, does not constitute evidence that plaintiff gave up its rights).

13. This is not a case in which defendants/counter-claimants actively participated in deception of the public in order to promote the belief that the junior user's goods were actually sourced by the senior user. See Getty Petrol. Corp. v. Shore Line Oil Co., Inc., 642 F. Supp. 203, 206 (E.D.N.Y. 1986) ("where the owner of the trademark has participated by its acquiescence in deceiving the public into believing that the source of goods is that of the trademark owner, enforcement of its right . . . should be denied"). Following the demand letter, while Mr. Kennedy did not actively seek to correct public perception that the ASR program was not owned by SAC, this course of action was not to deceive the public, but to preserve the goodwill of his marks and business during the pendency of litigation

14. Plaintiff/counter-defendants do not carry their burden to demonstrate that the scope of defendants/counter-claimants' representations convey consent for all use undertaken after July 12, 2006, nor do the representations suggest that defendants/counter-claimants would forego their claim for use of the ASR marks.

15. The absence of one of the required elements of acquiescence is sufficient to deny the equitable defense. Coach House, 934 F.2d at 1558.

B. Delay

16. The period of delay is calculated from when the senior user has notice that the junior user's actions would give rise to a claim. Coach House, 934 F.2d at 1558 (period of delay starts after junior user began using mark outside the scope of senior user's permitted use).

17. When litigants have been engaged in continuous business dealings and the trademark owner impliedly encourages continued use of its trademarks over a long period of time, acquiescence may be found. 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 31:42 (4th ed. 2008) (citing cases with periods of delay ranging from eight to thirty-five years). See also TMT North Am., Inc. v. Magic Touch, 124 F.3d 876, 885 (7th Cir. 1997) (on motion for preliminary injunction, plaintiff's conduct during negotiations and continued use of defendant as a distributor for period of three years after dispute arose "could well rise to the level of acquiescence").

18. Where, as here, a demand letter was sent shortly after a breakdown in the parties' business relationship, dueling complaints were immediately filed in this district and the Northern District of Georgia, and defendants/counter-claimants asserted trademark infringement counterclaims simultaneous with answering plaintiff's complaint, the Court does not find this period of delay, if any, unreasonable. See Coach House, 934 F.2d at 1558-59 (period of delay just over one year "not unreasonable and certainly not inexcusable under the circumstances").

C. Reliance/Undue Prejudice

19. "[P]rejudice in the context of acquiescence inherently must involve reliance on the senior user's affirmative act or deed, and such reliance must be reasonable." Seller Agency, 621 F.3d at 990. "When inquiring into the reasonableness of reliance, a district court must examine both the context of the affirmative act and the context in which that act was performed." Id.

20. Actively encouraging a junior user to use mark for a long period of time may lead to a finding of prejudice where the junior user acts in reliance on such encouragement and builds up a business around the mark. Ambrosia Chocolate Co. v. Ambrosia Cake Bakery, Inc., 165 F.2d 693, 695 (4th Cir. 1947) ("active encouragement and commercial urging by plaintiff to induce defendant to make and vend its cakes under the name 'Ambrosia'" resulted in finding of acquiescence). See also Ironclad, L.P. v. Poly-Am., Inc., 2000 WL 1400762, *13-14 (N.D. Tex. July 28, 2000) (not reported) (co-participation in business program and earning profits therefrom for one year before objecting to program's use of mark may lead to reasonable reliance that use was permissible; however, no prejudice shown where no business built up around name prior to senior user objecting to use of mark).

21. Mr. Kennedy's representations and plaintiff/counter-defendants' subsequent use of the ASR marks took place in the context of an ongoing business dispute and litigation. Given the context and limited nature of the representations, it was unreasonable for plaintiff/counter-defendants to rely on the representations as a carte blanche grant of permission to carry on with all use of the marks, just as they had done before the demand letter.

22. Mr. Kennedy's limited requests to process his students do not constitute assurance that plaintiff/counter-defendants should build their own business around infringing activities. Any continued use of the marks in light of the ongoing dispute, and outside the context of Mr. Kennedy's limited requests, was not reasonably justified. Because the resulting reliance was not reasonable, there can be no prejudice. Seller Agency, 621 F.3d at 990.

23. Under the Lanham Act, the prevailing trademark owner is entitled to an award of damages. See 15 U.S.C. § 1117.

D. Equitable Considerations

24. The Court is mindful that acquiescence turns on the circumstances in each case, requiring balancing the parties' equities. ProFitness, 314 F.3d at 67.

25. Considering the complicated factual background of this case, along with the circumstances surrounding the parties' business dispute, including a dispute over the ASR trademarks, the equities in this case point to a finding of no acquiescence. As of July 2006, plaintiff/counter-defendants were put on notice of possible infringement, both through the demand letter and the litigation that followed. In light of Mr. Kennedy's changed behavior after the dispute arose, including cessation of joint marketing activities and retention of student fees for himself, it would be inequitable to excuse plaintiff/counter-defendants' use of the ASR trademarks for the two-year period leading up to entry of judgment based solely on Mr. Kennedy's limited requests.


For the foregoing reasons, the Court finds in favor of defendants/counter-claimants, and rejects plaintiff/counter-defendants' affirmative defense of acquiescence. A separate order will issue regarding Phase Two briefing.

The Clerk shall serve the Court's Findings of Fact and Conclusions of Law on counsel of record for all parties in this action.

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