AP NEWS

Confusion reigns over Sturgis Rally trademark ruling

May 5, 2019

STURGIS — Despite court rulings in the past year making some Sturgis Motorcycle Rally trademarks invalid, Sturgis Motorcycle Rally, Inc., continues to maintain the validity of the marks.

In emails and letters to licensees in recent months, the not-for-profit organization, which oversees the licensing of the trademarks, tells licensees all marks are still valid.

“It continues to be SMRI’s position that all of its trademarks are valid and protectable and enforceable. SMRI expects further court proceedings to address those issues with finality,” said Jason Sneed, SMRI’s attorney.

But in the past year, two separate courts ruled that SMRI did not own or have valid trademark rights to names “Sturgis,” “Sturgis Rally & Races,” and “Sturgis Motorcycle Rally.”

A federal appeals court ruled in November 2018 that SMRI doesn’t own the Rally or its intellectual property. In February, Judge Jeffrey Viken of the U.S. District Court, District of South Dakota, Western Division said: “The record does not support a finding that SMRI owns, produces, or operates the rally, or does anything else that might allow it to acquire ownership over the rally itself or its intellectual property. The record indicates to the contrary that the rally is a pluralistic endeavor.”

The rulings stem from a 2011 trademark infringement lawsuit that SMRI filed against Rushmore Photo & Gifts. As part of that ruling, SMRI and Rushmore Photo & Gifts were directed to come to the table and hash out their differences before a mediator. They did so for two days this week before U.S. Magistrate Judge Daneta Wollmann in Rapid City.

“All of the parties and their lawyers appeared for mediation at the federal courthouse. I’m not going to comment on anything that transpired that might be construed in such a way as to airing our positions in the media given the sensitive nature of the case,” Sneed said.

He said both sides will meet again next week and that if they come to an agreement, he would expect to have something to say at that time.

Rushmore Photo & Gifts, Inc., owned by the Niemann family of Rapid City, has long produced souvenir items containing the words “Sturgis,” “Sturgis Rally & Races,” and “Sturgis Motorcycle Rally.”

“They (SMRI) have snubbed their noses at Viken and the 8th Circuit ruling,” said Brian Niemann, president of Rushmore Photo & Gifts. “We have filed a motion to have Viken reach out to them and stop them from basically lying to their licensees.”

Niemann believes SMRI continues to adamantly profess the validity of the trademarks because they need money.

“There’s a lot of greed involved and a little bit of delusion,” he said. “Sturgis is no longer valid, and that was the linchpin of their whole licensing scheme.”

Some vendors have called Niemann seeking clarification on the rulings. They say they are under the perception that the rulings pertain only to Rushmore Photo & Gifts.

“If it’s invalid, it’s invalid. The overall ruling pertains to everyone,” Niemann said.

In 2015, after four years of litigation in SMRI’s trademark infringement lawsuit against Rushmore Photo & Gifts, a jury rendered a verdict in favor of SMRI, awarding it $912,500 in damages, but that award was later vacated by a judge.

Rushmore Photo & Gifts and the Niemann family have never been an SMRI licensee contending that SMRI had no claim to be the official sponsor of the Rally or the owner of the Rally’s intellectual property.

“We refused the licensing from the very beginning since it was all based on fraud,” Niemann said.

Since 1996, words and symbols associated with Sturgis and the Sturgis Motorcycle Rally have been trademarked.

Events in the case date to back to at least 1986, when Tom Monahan, a Sturgis artist and vendor, donated a composite mark for the Rally to the Sturgis Area Chamber of Commerce.

In 1987, the chamber debuted a licensing program for the mark. The chamber registered the mark federally in 1996, and in the 2000s, acquired word marks.

In 2010, the chamber assigned its Rally-related marks to SMRI, an entity the chamber helped create. Before the court rulings, if a vendor wanted to sell an item using the trademarked terms in conjunction with the rally, the vendor had to apply for and receive a license from SMRI that cost about 8% of the wholesale price of each item sold.

San Monahan, of Tom’s T’s in Sturgis and son of Tom Monahan, who created the artwork for the official mark, said he believes the ruling means that many vendors will come to town with products similar to those sold before SMRI took over licensing.

“That will change the value of shirts,” he said. “It will drive the price down. They can be cheaper because they won’t be paying a royalty to SMRI.”

The mark created by Tom Monahan, referred to in court proceedings as the Monahan composite mark, and the term Sturgis Bike Week are still valid and trademarked.

City Manager Daniel Ainslie said he was disappointed in the ruling, but there are still several other items pending before Viken that city officials are waiting to have clarified.

“This means that there are likely going to be additional vendors who may not sell as much Sturgis official product as before,” Ainslie said.

Why is it important to have official Sturgis products sold during the Rally?

“The official product provides quality assurance of the brand,” Ainslie said. More importantly, the sale of officially licensed products generates funds for Sturgis Rally Charities, which in turn distributes those monies to nonprofits in the community of Sturgis and surrounding areas, he said.

The city has not had any sponsors for the upcoming Rally pull their sponsorship because of the court decisions, Ainslie said.

“The city is undisputedly the host of the Rally. We own the assets that are primarily used to represent the Rally, whether the website, social media channels, the rally magazine, or banners within the city,” he said.

Those mediums are where corporate sponsors want to place their messages to reach the Rally-going audience, Ainslie said.

“This is a tremendous event that is known worldwide and continues to grow its reputation. It continues to attract hundreds of thousands of visitors each year and corporate America still wants to be a part of it,” he said.

The city’s sponsorship program last year brought in $444, 441.

“That’s a significant benefit to the city,” he said.

The city has a licensing agreement with SMRI to use the Rally trademarks and annually pays a royalty to the organization, Ainslie said. In 2018, that payment was $83,375.

In 2019, it is anticipated that the city will pay SMRI $87,777 through its licensing agreement.

“We will certainly be talking about this agreement in the future. People need to know that SMRI still owns some of the marks, and those are marks that we as well as others still use,” Ainslie said.

Ainslie cautioned vendors about using marks that still are owned by SMRI.

“There’s enforcement actions that could occur,” he said.

Some vendors have called the city seeking clarification on the trademark rulings.

“We have referred them to SMRI because ultimately this is SMRI’s territory and their fight. It’s not the city’s,” Ainslie said.

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