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Sturgis Motorcycle Rally trademark verdict partially overturned

November 7, 2018

STURGIS — Sturgis Motorcycle Rally Inc. doesn’t own the Rally or its intellectual property, a federal appeals court has ruled.

SMRI, stewards of the Sturgis logo, had sued Rushmore Photo & Gifts, Inc., and Carol, Paul and Brian Niemann, and Wal-Mart in 2011 for improperly using the trademark “Sturgis” on merchandise they sold over a period of years. SMRi’s attorneys successfully argued in the October 2015 civil trial that the nonprofit owned that trademark and similar phrases when used in connection with the annual motorcycle rally.

The jury contended that the defendants infringed upon the Sturgis mark, engaged in false advertising and committed unfair competition. The jury awarded SMRI nearly $1 million in damages. That award was later vacated by circuit judge Jeffrey Viken.

Rushmore Photo and SMRI appealed the 2015 verdict on various grounds.

But on Nov. 2, judges Roger Wollman, Morris Arnold, and Jane Kelly of the United States Court of Appeals for the Eighth Circuit in St. Louis ruled, in a 44-page opinion, that “the trial evidence supports neither argument, nor any other basis for finding that the word ‘Sturgis’ identifies SMRI as a source of rally-related goods and services. The jury’s finding that the mark is invalid thus warrants reversal,” the court stated.

The court found that SMRI’s unregistered, common law trademarks “Sturgis Motorcycle Rally” and “Sturgis Rally & Races” are also invalid.

“This is a major victory for Rushmore Photo & Gifts, the Niemann family of Rapid City, SD, and Walmart Stores, Inc., the defendants in this seven-year dispute over the Sturgis mark,” said Eric Chadwick, of Rushmore Photo’s legal counsel Patterson Thuente IP of Minneapolis, Minn.

Chadwick said the decision vindicates the Niemann’s long-held belief that the terms STURGIS, STURGIS RALLY & RACES, and STURGIS MOTORCYCLE RALLY are in the public domain and available for use by anyone.

“They are not and never have been the property of SMRI,” Chadwick said.

The court did, however, uphold the jury’s findings that defendants infringed upon the Sturgis Composite Design mark and Sturgis Bike Week mark and committed false advertising and unfair competition.

Dean Kinney, chairman of the SMRI Board of Directors, said he doesn’t believe the verdict will change the group’s mission.

“We have lots of marks and art, and I think they still have value to the licensees and the public,” Kinney said. “Some licensees have been in the program for 20 to 30 years and have been through various legal issues related to Sturgis. I believe a lot of them will stay with us.”

Kinney said the all-volunteer board of SMRI is committed to the cause.

“We don’t know what happens next. We’re considering all the options. We do believe that we have returned a lot of value to Sturgis and its citizens including a charitable return,” he said.

Kinney also said he doesn’t believe the verdict means the city of Sturgis will lose sponsorships for the rally because of the verdict.

“SMRI and the city will continue to work together,” he said.

Court documents show that SMRI has two basic arguments as to why the “Sturgis” mark is valid: First, the mark identifies it as a distinct source of rally-related goods and services because it and the Sturgis Area Chamber, its predecessor-in-interest, have been the mark’s continuous and substantially exclusive users in relation to the rally since July 1, 1987; and second, consumers associate the mark with the Rally, and the Rally is a service that it provides (or alternatively is a service the service-mark rights to which it has acquired) because the Chamber has “hosted” the rally since the 1940s and is today the rally’s “sole organizer, promoter and sponsor.”

Judges wrote that the trial evidence supports neither argument, nor any other basis for finding that the word “Sturgis” identifies SMRI as a source of rally-related goods and services.

The court ruled that the group claiming the trademark isn’t the sole source of the services the trademark covers.

“The trial record does not support that SMRI owns the rally or its intellectual property, that SMRI and the Chamber before it have been the substantially exclusive users of the word ‘Sturgis’ in relation to either the rally or rally-related goods and services, or that relevant consumers associate the word ‘Sturgis’ with a single source of goods and services in any context,” the court ruled.

Jason Sneed, counsel for SMRI, said that while SMRI is disappointed in the 8th Circuit decision, the group is encouraged that other portions of the verdict will stand.

“SMRi will be considering next steps in its long-running fight to protect and enhance the STURGIS MOTORCYCLE RALLY and the Rally trademarks in the coming days, and will continue to fight to protect its rights in the STURGIS® trademarks,” he said. “SMRI’s licensing program is stronger than ever due to the hard work by SMRI’s volunteer board and by the City of Sturgis and its Rally Department.”

Sneed said SMRI will continue to press on to protect consumers from marketplace confusion and from goods that have not gone through SMRI’s quality control process.

“And SMRI, with the help of its licensing partner, the City of Sturgis, will continue to use proceeds from the Sturgis Motorcycle Rally licensing program to make charitable contributions to the Sturgis community and better the event for years to come,” he said.

The case now goes back to Viken, Chief United States District Judge in Rapid City.

“There are a number of issues left to be resolved by Judge Viken when the matter ends up before him,” Chadwick said. “He must take steps to narrow the scope of the permanent injunction in light of the appellate decision. He also must consider again whether equitable considerations prevent the defendants being liable on the remaining claims.”

Chadwick said that case may be heard in the next month or two.

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