Knowledge Library San Francisco and San Jose gentlemen’s clubs can both use GOLD CLUB mark pending trial
IP Law
Friday, September 20, 2013

San Francisco and San Jose gentlemen’s clubs can both use GOLD CLUB mark pending trial

The operators of a San Francisco gentlemen’s club and restaurant operating under the name GOLD CLUB were not entitled to preliminary order preventing a San Jose gentlemen’s club from operating under the name THE GOLD CLUB pursuant to a license from a third-party, according to the federal district court in San Francisco (Gold Club-SF, LLC v. Platinum SJ Enterprise, September 18, 2013, Orrick, W.). Serious questions of material fact precluded deciding which party had priority in the GOLD CLUB mark and the geographic area of any prior common law rights.

Background. In 2004, the plaintiff, Gold Club-SF, LLC, purchased the San Francisco “Gold Club” (“GCSF”) from Solid Gold, Inc. (“Solid Gold”), which had operated the club on Howard Street in San Francisco since the mid-1990s. GCSF claimed it owned prior common law rights in the GOLD CLUB mark and lion-and-spear design in San Jose based on continuous use in commerce in nine-counties surrounding the San Francisco Bay Area since 1994. After GCSF purchased the San Francisco Gold Club, the club’s annual patronage has grown from 60,000 customers in 2004 to over 100,000 in 2012. The club advertised in “major print publications” in the Bay Area, as well as through digital advertisers. The club’s website and online presence also has expanded, including selling merchandise online, having a blog and media gallery, running a mailing list, and engaging with social media outlets. The San Francisco Gold Club was voted the SF Weekly’s “Best Gentlemen’s Club” in 2011, 2012, and 2013.

On August 8, 2013, defendant Platinum SJ Enterprise (“Platinum”) opened the San Jose “Gold Club.” Platinum had obtained the right to use THE GOLD CLUB mark pursuant to a June 14, 2013 license agreement it entered into with defendant PML Clubs, Inc. (“PML”). PML licensed “THE GOLD CLUB” name to various gentlemen’s clubs. The first Gold Club allegedly related to PML was opened in 1987 in Atlanta, Georgia. In 1989, the operator of the Atlanta Gold Club, Entertainment Systems, Inc., obtained a federal registrations for mark THE GOLD CLUB in standard character form and a registration for a stylized mark with two griffins and a staff topped with a fleur-de-lis over the words “THE GOLD CLUB.” Both the marks were later cancelled.

In 1992, Entertainment Systems’ THE GOLD CLUB marks were assigned to Entertainment Corporation of America (“ECA”). In 1995, ECA’s business, including THE GOLD CLUB mark, was sold in a lawsuit settlement to National Entertainment Systems, Inc. (“National”). Steve Kaplan, chief executive officer of National, claimed that his cousin, Lyle Goodman, on behalf of National, in 1995 orally granted a “nonexclusive, nontransferable, royalty-free license” to Solid Gold for use of THE GOLD CLUB mark in connection with its San Francisco club. The plaintiffs disputed the existence of any oral license.

On August 1, 2001, the day the original Atlanta Gold Club closed, Kaplan allegedly “assigned all rights in THE GOLD CLUB marks to Pat DeMone,” according to Goodman. In March 2004, DeMone and Goodman began using the mark THE GOLD CLUB for a club they opened in Philadelphia. DeMone, on behalf of PML, filed a new application with the USPTO to register “THE GOLD CLUB” on August 13, 2001. The registration issued on June 8, 2004, with March 4, 2004 listed as the date of first use in commerce.

Current lawsuit. GCSF filed suit against the defendants, asserting causes of action for trademark infringement and dilution under Section 43 of the Lanham Act and violation of California’s Unfair Competition Law. PML argued that it was the legal owner of THE GOLD CLUB marks and that the GCSF was infringing on its marks, because the oral license Goodman granted to Solid Gold in 1995 was not transferrable. PML alternatively argued that the doctrine of license estoppel barred GCSF’s claims. Before the court was GCSF’s motion for a preliminary injunction. A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.

Likelihood of success. On the present record, it was impossible to determine whether GCSF was likely to prevail on its claims, the court said. The parties did not dispute that “GOLD CLUB” was a protectable mark and that their marks were confusingly similar. In 2006, GCSF’s application to register the mark GOLD CLUB was rejected by the USPTO due to a “likelihood of confusion” with PML’s previously registered mark. Rather, the gravamen of the dispute centered on ownership rights and the scope of protection.

GCSF plausibly could have a common-law trademark for “GOLD CLUB” dating to 1995. If so, it would be the senior user who “has the right to enjoin ‘junior’ users from using confusingly similar marks in the same industry and market or within the senior user’s natural zone of expansion. Although PML’s 2004 federal registration for GOLD CLUB would afford PML trademark protection throughout the rest of the country, GCSF’s concurrent right in its natural zone of expansion would be carved out if its common law mark predates PML national mark, the court explained.

GCSF argued that San Jose was in the same “market” or “natural zone of expansion” as Gold Club San Francisco such that the defendants’ use of their purported marks in San Jose would violate the GCSF’s protectable interest. “There is reason to believe that this is true,” the court said. GCSF provided evidence that its customer volume has grown over the years, that it draws increasing numbers of customers from Santa Clara County (where San Jose is located), and that it has attempted to target advertising at customers in San Jose.

The court, however, was unable to assess whether the chain of licenses (at least one link of which was oral) described by PML occurred unbroken in the manner and with the scope asserted. It also could not determine whether Goodman had granted an oral license to Solid Gold to use THE GOLD CLUB mark in its San Francisco club. There was scant evidence from the interceding years that supported the existence of such a license, the court noted. There also were questions regarding whether Solid Gold randomly chose THE GOLD CLUB and design, given that it was “strikingly identical to the name and mark of Gold Club-Atlanta.” GCSF made a showing of serious questions going to the merits of its trademark infringement and related claims, but it did not establish likelihood of success on its claims, the court determined.

Other preliminary injunction factors. GCSS also did not sufficiently show a likelihood of irreparable harm. “While there is a possibility of damage to the plaintiff’s intangible interests, its primary damage is monetary and compensable,” the court said. A number of courts have cast doubt on the continuing viability of the rule that of irreparable injury may be assumed in trademark infringement cases and the Ninth Circuit has overruled similar presumptions in the copyright and patent contexts.

In addition, when there are only “serious questions going to the merits,” the party moving for a preliminary injunction must show that the balance of hardships tips sharply in [its] favor, the court said. The balance of hardships did not tip “sharply” in the plaintiff’s favor, in the court’s view. Indeed, it appeared that the San Jose Gold Club would suffer far greater injury if it had to change its name at this juncture than San Francisco Gold Club would be damaged absent an injunction, the court noted.

Finally, because it was early to tell which party would prevail, the public-interest factor did not favor either side.

The case is No. 13-cv-03797-WHO.

Attorneys: Alexander Hilary Tuzin (Phillips Erlewine & Given LLP) for Gold Club-SF, LLC. Gregory Harris Guillot (Gregory H. Guillot PC) for Platinum SJ Enterprise.

Companies: Gold Club-SF LLC; Platinum SJ Enterprise; PML Clubs, Inc.

MainStory: TopStory Trademark CaliforniaNews

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