Department of Parks v. Bazaar Del Mundo

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DEPARTMENT OF PARKS AND 
RECREATION FOR THE STATE OF
CALIFORNIA, No. 05-55828
Plaintiff-Appellant,
v.  D.C. No.
CV-04-02244-JTM
BAZAAR DEL MUNDO INC., a OPINION
California Corporation,
Defendant-Appellee.

Appeal from the United States District Court
for the Southern District of California
Jeffrey T. Miller, District Judge, Presiding
Argued and Submitted
December 7, 2005—Pasadena, California
Filed May 24, 2006
Before: Robert R. Beezer, Cynthia Holcomb Hall, and
Kim McLane Wardlaw, Circuit Judges.
Opinion by Judge Wardlaw
5679
5682 DEP’T OF PARKS v. BAZAAR DEL MUNDO
COUNSEL
Richard P. Sybert, San Diego, California, for the plaintiff-
appellant.
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5683
John T. Brooks, San Diego, California, for the defendant-
appellee.
OPINION
WARDLAW, Circuit Judge:
The Department of Parks and Recreation for the State of
California (the “State”) appeals the denial of its motion to pre-
liminarily enjoin Bazaar del Mundo from using the registered
trademarks CASA DE BANDINI and CASA DE PICO in the
operation of restaurants located outside the boundaries of the
Old Town San Diego State Historic Park (“Old Town”). The
critical issue in dispute is whether the State owns any protect-
ible interest in the trademarks. Because we agree with the dis-
trict court that the State failed to introduce sufficient evidence
of ownership of the marks and thereby failed to establish the
requisite degree of likelihood of success on the merits, we
affirm the district court’s denial of injunctive relief.
I.
In 1968, the State of California acquired title to about four-
teen acres of land by condemnation judgment in order to
establish Old Town. The sale included the Casa de Pico and
Casa de Bandini properties, which were both built in the
1820s. Each building has a rich history: Casa de Pico was
built by Pio Pico, the last Mexican governor of California,
while Casa de Bandini was built by a Peruvian immigrant of
Italian descent who became a prominent San Diegan, Don
Juan Bandini. Before the State acquired the property, the Casa
de Pico building was operated as the “Casa de Pico Motel,”
while the Casa de Bandini house was operated as a hotel and
stage coach station, which included a restaurant. Afterwards,
the buildings were used to house shops and, in 1969, the Casa
de Bandini house served as the headquarters for the Fiesta 200
5684 DEP’T OF PARKS v. BAZAAR DEL MUNDO
celebration of San Diego’s bicentennial. In conjunction with
the Fiesta 200 festival, the State produced a brochure which
mentioned the Pico and Bandini families. Casa de Bandini
was registered as a California Historical Landmark in 1932.
On June 21, 1971, the State and Bazaar del Mundo entered
into a “Concession Agreement.” The Agreement provided that
the State grant Bazaar del Mundo the “privilege and duty” to
construct or modify, equip, operate and maintain a Mexican-
Style Shopping Arcade in the Casa de Pico Buildings in Old
Town for a five-year period, in return for rent and a percent-
age of receipts. The Agreement was amended several times.
In 1972, Bazaar del Mundo was permitted to extend its con-
cession activities into the “Bandini House — Cosmopolitan
Hotel,” and the Agreement was extended five years. In 1981,
the parties executed Amendment Three, which stipulated that
the “subject premises shall be used by the Concessionaire to
establish a Mexican Shopping Arcade, Lino’s, Hamburguesa,
Casa de Pico, and the Casa de Bandini Restaurants,” and
extended the Agreement another ten years. When the third
amendment was executed on November 18, 1981, Bazaar del
Mundo had been operating its Casa de Pico restaurant for ten
years and its Casa de Bandini restaurant for one year. In 1991,
Bazaar del Mundo exercised its option to extend the term of
the Concession Agreement for ten more years.
Before the Agreement was to expire, on June 30, 2001, the
State initiated an open bidding process for the next concession
agreement. In connection with its Request for Proposals, the
State prepared a Sample Contract containing a provision that
would govern intellectual property rights. Objecting to the
intellectual property rights provision, Bazaar del Mundo nev-
ertheless submitted a bid for the concession. On October 17,
2003, the State issued a “Notice of Intent to Award” the con-
cession to Delaware North, Inc., a Delaware corporation.
Bazaar del Mundo submitted to the State a “Protest of Bid
Award” on October 27, 2003, commencing a state administra-
tive review process. The State allowed Bazaar del Mundo to
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5685
continue operating as a holdover tenant in Old Town during
the pendency of its administrative appeal. During this time,
Bazaar del Mundo also filed a federal trademark infringement
action in the Southern District of California against Delaware
North and Ruth Coleman, the Director of the State Depart-
ment of Parks and Recreation. The district court dismissed
that action on March 3, 2004, finding that (1) the Eleventh
Amendment barred suit against Director Coleman; (2) the
case was not yet ripe for adjudication; and (3) Bazaar del
Mundo had failed to exhaust its administrative remedies.
On July 12, 2004, an Administrative Law Judge (“ALJ”)
denied Bazaar del Mundo’s administrative bid protest. Direc-
tor Coleman adopted the ALJ’s decision on July 23, 2004.
Bazaar del Mundo petitioned for a writ of mandate to review
the decision before the San Diego Superior Court on January
20, 2005, but the petition was denied. The State issued a “No-
tice to Vacate” the premises effective March 15, 2005. Dela-
ware North took over the concession on June 1, 2005.
Previously, in 1985, Bazaar del Mundo applied to the
United States Patent and Trademark Office (“USPTO”) and
the Secretary of the State of California, to register the trade-
marks CASA DE PICO, CASA DE BANDINI, LINO’S, and
HAMGURGUESA for restaurant services. The trademarks
were published and received no opposition. The USPTO
granted federal registration to Bazaar del Mundo for the mark
CASA DE BANDINI on July 16, 1985 and for the mark
CASA DE PICO on October 8, 1985. In its application,
Bazaar del Mundo distinguished the terms “Pico Pollo” and
“Pico de Gallo” from CASA DE PICO, representing that
“[t]he Pico in Bazaar del Mundo’s mark refers not to an ani-
mal but to General Pio Pico, the last Mexican governor.”
Bazaar del Mundo went on to state that “[t]he site on which
the restaurant stands was the home of General Pico which was
later converted into a motel in 1930 . . . [and] subsequently
converted into a restaurant.”
5686 DEP’T OF PARKS v. BAZAAR DEL MUNDO
In May 2005, after it had vacated its Old Town location,
Bazaar del Mundo announced its plans to open restaurants
under the names “Casa de Pico Restaurant” and “Casa de
Bandini Restaurant” in La Mesa, California and on the water-
front in downtown San Diego. This announcement prompted
the State to file this action against Bazaar del Mundo, seeking
(1) declaratory judgment of trademark ownership under Cali-
fornia Code of Civil Procedure § 1060; (2) rectification of the
trademark registry under 15 U.S.C. § 1119; and damages for
(3) common law trademark infringement; (4) fraudulent fed-
eral trademark infringement under 15 U.S.C. § 1120; (5)
unfair competition under California Business and Professions
Code § 17200; (6) false advertising under California Business
and Professions Code § 17500; and (7) false designation of
origin under 15 U.S.C. § 1125.
To prevent Bazaar del Mundo from using the marks in con-
nection with its new restaurants, the State moved for a prelim-
inary injunction. Bazaar del Mundo responded by filing a
motion for judgment on the pleadings pursuant to Federal
Rule of Civil Procedure 12(c). The district court denied both
motions by Order dated May 17, 2005. Only the State appeals
the district court’s ruling. The district court found, based on
the state of the record at that time, that the State failed to dem-
onstrate a protectible trademark interest in the marks so as to
demonstrate a sufficient probability of success on the merits
warranting injunctive relief.
II.
We review a district court’s denial of injunctive relief for
an abuse of discretion. See Hecht Co. v. Bowles, 321 U.S.
321, 331 (1944); Petroleum Exploration, Inc. v. Pub. Serv.
Comm’n, 304 U.S. 209, 218 (1938). We review the district
court’s findings of fact for clear error, see Hawkins v.
Comparet-Cassani, 251 F.3d 1230, 1239 (9th Cir. 2001), and
the district court’s conclusions of law de novo, see Brown v.
Cal. Dep’t of Transp., 321 F.3d 1217, 1221 (9th Cir. 2003).
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5687
III.
[1] To obtain injunctive relief, the movant must demon-
strate either: (1) a combination of probable success on the
merits and the possibility of irreparable harm, or (2) that seri-
ous questions are raised as to the merits and that the balance
of hardships tips in its favor. Arcamuzi v. Cont’l Air Lines,
Inc., 819 F.2d 935, 937 (9th Cir. 1987); see also Sardi’s Rest.
Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir. 1985) (applying
test in a trademark case).
The district court both articulated and applied the correct
legal standard to the State’s request for an injunction against
Bazaar del Mundo’s use of the CASA DE PICO and CASA
DE BANDINI marks. Quoting Arcamuzi, 819 F.2d at 937, the
district court set forth the two tests, noting that “ ‘[t]hese two
formulations represent two points on a sliding scale in which
the required degree of irreparable harm increases as the prob-
ability of success decreases.’ ” The district court also recog-
nized that under both formulations of the test, the party
seeking injunctive relief must demonstrate a “fair chance of
success on the merits” and a “significant threat of irreparable
injury.” And, as we also held in Arcamuzi, “[i]f the plaintiff
shows no chance of success on the merits, . . . the injunction
should not issue,” because “[a]s an irreducible minimum, the
moving party must demonstrate a fair chance of success on
the merits, or questions serious enough to require litigation.”
Arcamuzi, 819 F.2d at 937 (internal quotation marks omitted).
The district court also noted that if the public interest is impli-
cated, that, too, must be considered as a factor.
Conceding, as it must, that the district court articulated the
correct legal standards, the State nevertheless insists that it
failed to correctly apply them to this case. Specifically, it con-
tends that the district court applied the wrong “likelihood of
success” standard because of the “presence of significant
issues of public importance” tipping the balance of hardships
sharply in the State’s favor. The State’s assertion, however,
5688 DEP’T OF PARKS v. BAZAAR DEL MUNDO
confuses the analysis of the “success” factor with the “harm”
factor.
[2] Although we “must consider the public interest as a fac-
tor in balancing the hardships when the public interest may be
affected,” Caribbean Marine Servs. Co. v. Baldridge, 844
F.2d 668, 674 (9th Cir. 1988), the district court never reached
this end of the sliding scale, because the State failed to dem-
onstrate any chance of success on the merits on the evidenti-
ary record before it. The State failed to adduce any evidence
tending to demonstrate that, as a matter of intellectual prop-
erty law, it held a protectible ownership interest in the trade-
marks. Therefore, the public interest is not a factor that the
district court needed to weigh at this stage.
Nor was the district court required to issue an injunction to
restore the “status quo.” While the “basic function of a pre-
liminary injunction is to preserve the status quo pending a
determination of the action on the merits,” Chalk v. United
States District Court, 840 F.2d 701, 704 (9th Cir. 1988), the
status quo is not simply any situation before the filing of the
lawsuit, but rather the last uncontested status that preceded the
parties’ controversy. GoTo.Com, Inc. v. Walt Disney Co., 202
F.3d 1199, 1210 (9th Cir. 2000). The parties dispute what the
“status quo” is. Without the State adducing sufficient evi-
dence of ownership of the marks, and in view of the registra-
tion and continued use of the marks by Bazaar del Mundo, we
cannot say that the district court abused its discretion in
declining to enjoin Bazaar del Mundo’s use of the marks to
preserve the status quo.
IV.
To prevail on its claim of trademark infringement, the State
must prove: (1) that it has a protectible ownership interest in
the mark; and (2) that the defendant’s use of the mark is likely
to cause consumer confusion, thereby infringing upon the
State’s rights to the mark. Levi Strauss & Co. v. Blue Bell,
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5689
Inc., 778 F.2d 1352, 1354 (9th Cir. 1985) (en banc). Bazaar
del Mundo’s federal registration of the marks is prima facie
evidence of its ownership of the marks. See 15 U.S.C.
§ 1057(b); 15 U.S.C. § 1115(a); Sengoku Works Ltd. v. RMC
Int’l, Ltd., 96 F.3d 1217, 1219, as modified, 97 F.3d 1460 (9th
Cir. 1996). The State, however, may rebut the presumption of
ownership with evidence establishing its own prior use in
commerce of the registered mark. Id. at 1220. The State
argues that it acquired ownership of the marks before Bazaar
del Mundo registered them in two ways: (1) through the com-
mon law by its prior use of the marks in connection with the
tourism and recreation services it provided in Old Town
before the Concession Agreement;1 and (2) through the Con-
cession Agreement itself, in which it claims it granted a
license to Bazaar del Mundo to use the marks, from which we
might infer the State’s ownership of them. The State further
asserts that the district court abused its discretion by ignoring
potential misrepresentation to the public under section 2(d) of
the Lanham Act, 15 U.S.C. § 1052, due to the likelihood of
confusion which would result if Bazaar del Mundo were to
use the marks beyond Old Town.
A.
The district court correctly found that the State could not
demonstrate common law trademark rights based on its
asserted prior use of the marks in connection with the opera-
tion of the state park and its provision of tourism services
from 1968 to 1971, a time period immediately preceding the
Concession Agreement. Because the State failed in its attempt
to establish a protectible common law interest in its use of the
marks for those purposes, the district court properly rejected
the State’s argument that the marks extended to related ser-
vices, such as restaurants.
1
On appeal, the State abandoned its claim of ownership of the marks
based solely upon its ownership of the Casa de Pico and Casa de Bandini
historic buildings, which was correctly rejected by the district court.
5690 DEP’T OF PARKS v. BAZAAR DEL MUNDO
[3] The State first incorrectly contends that it need not dem-
onstrate prior use at all, relying on its own misapprehension
of section 5 of the Lanham Act, codified at 15 U.S.C. § 1055.
Section 5 provides:
If first use of a mark by a person is controlled by the
registrant or applicant for registration of the mark
with respect to the nature and quality of the goods or
services, such first use shall inure to the benefit of
the registrant or applicant, as the case may be.
Section 5, however, is not remotely relevant to the State’s cir-
cumstances. First, section 5 by its plain terms applies only to
first use by a person “controlled by the registrant or applicant
for registration.” The State is neither. Second, the State quotes
a passage that was added to section 5 in 1988, which func-
tioned only to permit an applicant to “reserve” a mark before
commencing use of the mark in its business. See 1988
Amendments to Lanham Act, Pub.L. 100-667 (S. 1883); 3
McCarthy on Trademarks and Unfair Competition § 19:1.1
(4th ed. 2005). Registration under the Lanham Act has no
effect on the registrant’s rights under the common law, which
requires a mark to have been used in commerce before a pro-
tectible ownership interest in the mark arises. See Kellog Co.
v. Nat’l Biscuit Co., 305 U.S. 111, 117 n.3 (1938); Cal.
Cooler v. Loretta Winery, Ltd., 774 F.2d 1451, 1454 (9th Cir.
1985). “To acquire ownership of a trademark it is not enough
to have invented the mark first or even to have registered it
first; the party claiming ownership must have been the first to
actually use the mark in the sale of goods or services.” Sen-
goku Works Ltd., 96 F.3d at 1219; see also 3 McCarthy
§ 19:1.1 at 19-12.
Next the State asserts that the district court incorrectly
assessed the character and extent of the State’s prior commer-
cial use of the marks when it concluded that the State failed
to introduce sufficient evidence of such use. We disagree. The
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5691
district court correctly found that the “evidence” submitted by
the State did not demonstrate actual commercial use.
[4] To demonstrate priority of use, the State must prove (1)
that it actually adopted and used the marks in commerce prior
to Bazaar del Mundo’s registration in such a manner that suf-
ficiently associated the marks with the State’s provision of
tourism and recreational services, Chance v. Pac-Tel Teletrac,
242 F.3d 1151, 1158 (9th Cir. 2001); New West Corp. v. NYM
Co. of Cal., Inc., 595 F.2d 1194, 1200 (9th Cir. 1979); and (2)
that its use of the marks was continuous and not interrupted,
Pac-Tel Teletrac Inc., 242 F.3d at 1157; Casual Corner
Assocs., Inc. v. Casual Stores of Nev., Inc., 493 F.2d 709,
711-12 (9th Cir. 1974). “[O]wnership of a mark requires both
appropriation and use in trade; and [ ]ownership of a mark
and the exclusive right to a mark belongs to the one who first
uses the mark on goods placed on the market.” Pac-Tel
Teletrac Inc., 242 F.3d at 1157 (internal quotation marks
omitted and alteration in original). While the first use need
not be extensive, the use must be bona fide and commercial
in character:
[A] single sale or shipment may be sufficient to sup-
port an application to register the mark, providing
that this shipment or sale has the color of a bona fide
transaction and is accompanied or followed by activ-
ities which would tend to indicate a continuing effort
or intent to continue such use and place the product
on the market on a commercial scale within a time
demonstrated to be reasonable in the particular trade.
Id. (citing Hydro-Dynamics, Inc. v. George Putnam & Co.,
811 F.2d 1470, 1472-74 (Fed. Cir. 1987)). The State cannot
rely on a few instances of use of the marks in the distant past
that were “casual” or had “little importance apparently
attached to [them].” Menendez v. Holt, 128 U.S. 514, 521
(1888); also 2 McCarthy on Trademarks § 16:9 at 16-18. To
the contrary, the litigant attempting to establish priority of
5692 DEP’T OF PARKS v. BAZAAR DEL MUNDO
commercial use must demonstrate both adoption of the marks
and “ ‘[u]se in a way sufficiently public to identify or distin-
guish the marked goods in an appropriate segment of the pub-
lic mind as those of the adopter of the mark.’ ” Brookfield
Commc’ns, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036,
1052 (9th Cir. 1999) (alteration in original) (quoting New
West Corp., 595 F.2d at 1200). “Although mere advertising
by itself may not establish priority of use,” New West Corp.,
595 F.2d at 1200, advertising combined with other non-sales
activity, under our “totality of the circumstances test,” Pac-
Tel Teletrac, 242 F.3d at 1158, can constitute prior use in
commerce.
It is not disputed that the State has offered tourism and rec-
reational services since Old Town was classified as a State
Historical Park in 1968. The State, however, offers no evi-
dence tending to show that it adopted and commercially used
the marks CASA DE PICO and CASA DE BANDINI “in a
way sufficiently public to identify or distinguish” its recre-
ational and tourism services “in an appropriate segment of the
public mind” as activities conducted by the State. Brookfield,
174 F.3d at 1052; see also Pac-Tel Teletrac, 242 F.3d at
1159.
[5] The State offers numerous documents, predominantly
historical and narrative in nature, in an effort to demonstrate
prior commercial use. These include books, brochures, and
guides entitled, inter alia, “An Armchair Tour of San Diego,”
“The Journal of San Diego History,” “Tour Guide to Old
Town,” excerpts from The History of San Diego 1542-1908
by William E. Smythe, Places at Old Town San Diego by
Orion M. Zink, and Silver Dons-The History of San Diego, by
Richard F. Pourade. Although due to their historical signifi-
cance, the Bandini and Pico families, names and homes are
described in most if not all of these books, brochures and
guides, they are not evidence of commercial use of the marks
by the State in connection with the State’s Old Town tourism
and recreational activities. Indeed, much of this evidence con-
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5693
tains historical data that predates the State’s acquisition of
Old Town.
The State points to one brochure advertising the 1969
Fiesta 200 Celebration as an example of prior commercial
use. Entitled “Old Town San Diego - State Historic Park,” the
brochure celebrates Old Town’s bicentennial dating from
1769 to 1969. The brochure primarily describes the park and
its first families, mentioning Juan Bandini and Pio Pico as
part of Old Town’s upper class and identifying the location of
the Bandini house, headquarters for the Bicentennial, on an
Old Town map. The State also submitted a brochure entitled
“Old Town San Diego - State Historic Park,” which also
recites the history of San Diego and the growth of Old Town,
identifies Bazaar Del Mundo on a map of the park and men-
tions, again in passing, Casa de Bandini and Juan Bandini.
Neither of these brochures uses the marks in relation to the
State’s provision of recreational or tourism services. Indeed,
neither of them even uses the contested marks at all.
[6] Morever, the State introduced no evidence about the
length of time the Casa de Bandini building was used to house
the Fiesta 200 shops, whether the brochures were provided to
visitors, how many brochures were provided, whether any
sales activity was conducted using the marks, or whether the
State continued to conduct advertising or non-sales activity
under the marks after the Fiesta 200 celebration. Because nei-
ther of the brochures was designed to attract the attention of
the viewer to the marks themselves, they fail to create any
association between the marks and the tourism and recreation
services provided by the Department of Parks. See Pac-Tel
Teletrac, 242 F.3d at 1159; New West Corp., 595 F.2d at
1200. Introduction of these two brochures, without any evi-
dence of sales activity and extent of distribution, falls far
short of what is required to establish genuine prior commer-
cial use. Cf. Pac-Tel Teletrac, 242 F.3d at 1159 (while some
evidence of commercial intent found, no priority of use was
established where plaintiff mailed 35,000 post cards, generat-
5694 DEP’T OF PARKS v. BAZAAR DEL MUNDO
ing 128 responses to its 800 number, but no sales); New West
Corp., 595 F.2d at 1200 (priority of use established where
430,000 copies of magazine were circulated and 13,500 sub-
scriptions were received).
The State’s failure to establish continuous use of the marks
in commerce also undermines its claim to ownership by virtue
of its alleged prior use of the marks. See Pac-Tel Teletrac,
242 F.3d at 1159; Casual Corner Assocs., Inc., 493 F.2d at
712. If the State in fact used the marks in commerce at the
Fiesta 200 celebration more than thirty-five years ago, that
use was merely transitory. The State does not assert any com-
mercial use of the marks after the 1969 event. Bazaar del
Mundo began making continuous commercial use of the
marks CASA DE PICO and CASA DE BANDINI in 1971
and 1980, respectively. Thus, even had the State acquired
seniority of use at one time, its failure to continue to use the
marks in commerce would have allowed Bazaar del Mundo as
a junior user to acquire priority. See Casual Corner Assoc.,
Inc., 493 F.2d at 712.
Even were the State able to establish prior commercial use,
because the trademarks are descriptive, i.e., based on their
geographic and historical origin, see 15 U.S.C. § 1052(e), the
State would not be entitled to trademark protection unless it
were able to establish that the marks “acquired secondary
meaning, i.e., it ‘has become distinctive of the applicant’s
goods in commerce.’ ” Park ‘N Fly, Inc. v. Dollar Park &
Fly, Inc., 469 U.S. 189, 194 (1985) (quoting 15 U.S.C.
§§ 1052(e), (f)); see 15 U.S.C. § 1052(f) (requiring five years
of continuous and exclusive use to establish prima facie evi-
dence of the development of secondary meaning of descrip-
tive marks). “The test of secondary meaning is the
effectiveness of the effort to create it, and the chief inquiry is
directed towards the consumer’s attitude about the mark in
question: does it denote to him a single thing coming from a
single source?” Carter-Wallace, Inc. v. Proctor & Gamble
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5695
Co., 434 F.2d 794, 802 (9th Cir. 1970) (internal quotation
marks omitted).
To determine whether a descriptive mark has acquired sec-
ondary meaning, we consider: “ ‘(1) whether actual purchas-
ers of the product bearing the claimed trademark associate the
trademark with the producer, (2) the degree and manner of
advertising under the claimed trademark, (3) the length and
manner of use of the claimed trademark, and (4) whether use
of the claimed trademark has been exclusive.’ ” Yellow Cab
Co. of Sacramento v. Yellow Cab of Elk Grove, Inc., 419 F.3d
925, 930 (9th Cir. 2005) (quoting Levi Strauss, 778 F.2d at
1358).
[7] The State failed to meet its burden of demonstrating that
by virtue of its prior commercial use of the marks CASA DE
PICO and CASA DE BANDINI, if any, they acquired a sec-
ondary meaning. The State failed to demonstrate that advertis-
ing it may have conducted was “of a nature and extent such
as to create an association of the term with the user’s goods,”
rather than the restaurant services of Bazaar del Mundo. Mal-
colm Nicol & Co. v. Witco Corp., 881 F.2d 1063, 1065 (Fed.
Cir. 1989) (quoting 1 McCarthy on Trademarks and Unfair
Competition § 20:4 at 1025-26 (2d ed. 1984)). We agree with
the district court that the State presented no evidence (i) of the
length and manner of its use of the marks CASA DE
BANDINI and CASA DE PICO in relation to its provision of
tourism services; (ii) no evidence of the extent and degree to
which brochures were printed and distributed; (iii) no evi-
dence of any other advertising or promotional efforts taken to
promote the services and/or sale of goods at the Casa de
Bandini and Casa de Pico locations designed to associate the
marks with the State’s services; and (iv) no consumer survey
or other evidence of consumer opinion, beliefs, or associa-
tions. Therefore, the State failed to introduce sufficient evi-
dence that it has created an association in the consumer’s
mind between the marks and a single service, recreational and
5696 DEP’T OF PARKS v. BAZAAR DEL MUNDO
tourism services, coming from a single source, the State.
Carter-Wallace, 434 F.2d at 802.
B.
Having failed to demonstrate ownership of the marks
through evidence of prior use, the State asserts that the Con-
cession Agreement operated as a trademark licensing agree-
ment as a matter of law. Of course, even if the Concession
Agreement were to be so construed, at most it would show
that the State purported to license trademarks in the Conces-
sion Agreement, not that it necessarily owned the rights to do
so. In any event, we agree with the district court’s finding that
the Concession Agreement neither expressly nor impliedly
granted Bazaar del Mundo a license to use the marks. Nor did
the parties’ course of conduct surrounding the agreement indi-
cate that the State had licensed marks it owned to Bazaar del
Mundo. Therefore, contrary to the State’s claim, Bazaar del
Mundo’s commercial use of the marks for restaurant services
did not inure to the benefit of the State. Because the Conces-
sion Agreement is silent on the topic of intellectual property
rights, it does not expressly license any such rights to Bazaar
del Mundo. The State nevertheless refers us to Paragraph One
of the Concession Agreement and to certain language in
Amendment 3, which reference the names of the restaurants
and the locations of the concessions. Paragraph One provides:
1. GRANT AND DESCRIPTION OF PREMISES:
. . . The concession shall be located in the premises
provided by State and known as the Casa de Pico
Buildings, Old Town San Diego State Historic Park,
at 2754 Calhoun Street, in the City and County of
San Diego, State of California, and being a portion
of Lot 1 all of Lot 2, Block 426 of Old San Diego
....
There is obviously no mention of trademark rights in the
name CASA DE PICO.
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5697
[8] Similarly, Amendment 3, paragraphs One and Ten,
grant the rights to use the buildings for limited purposes:
1. GRANT AND DESCRIPTION OF PREMISES:
The State . . . grants to Concessionaire the right,
privilege and duty to construct or modify, equip,
operate and maintain a Mexican-style Shopping
Arcade together with the Casa de Pico, Lino’s, Ham-
burguesa and Casa de Bandini Restaurants. . . . The
concession shall be located in the premises . . .
known as the Casa de Pico Building, . . . and the
Casa de Bandini . . . .
10. USE OF PREMISES: The subject premises
shall be used by the Concessionaire to establish a
Mexican Shopping Arcade, Lino’s, Hamburguesa,
Casa de Pico, and the Casa de Bandini Restaurants
....
Thus a plain reading of the Concession Agreement reveals
that it is nothing more than a standard leasing arrangement. It
does not even purport to convey a license to use the marks.
The State itself prepared a Sample Contract containing a pro-
vision for the use of intellectual property in connection with
its Request for Proposals for Bazaar del Mundo’s successor
concessionaire, an acknowledgment that the prior Concession
Agreement with Bazaar del Mundo did not similarly license
use of the marks.
Unlike in the typical implied licensing case, here the State
asserts the doctrine of implied license as evidence of its own-
ership of the marks, as opposed to as a defense to an infringe-
ment action. Although this is an unusual context, the State is
correct that an implied license to use a trademark for certain
services may arise. See Secular Orgs. for Sobriety, Inc. v. Ull-
rich, 213 F.3d 1125, 1131 (9th Cir. 2000). None arose here,
however, either from the parties’ mutual intentions, course of
dealing, or the minimal quality-control provisions in the Con-
5698 DEP’T OF PARKS v. BAZAAR DEL MUNDO
cession Agreement as urged by the State. As the Federal Cir-
cuit has explained:
In most instances under contract law, a patent or
trademark owner intentionally creates an express
license . . . .
In some circumstances, however, the entire course
of conduct between a patent or trademark owner and
an accused infringer may create an implied license.
...
This implied license does not offend the protec-
tion afforded patent and trademark rights by federal
law.
McCoy v. Mitsuboshi Cutlery, Inc., 67 F.3d 917, 920, 922
(Fed. Cir. 1995), cert. denied, 516 U.S. 1174 (1996). The
Supreme Court has long recognized that a license may arise
absent “a formal granting.” See De Forest Radio Tel. & Tel.
Co. v. United States, 273 U.S. 236, 241 (1927). In De Forest,
the Court found an implied license granted by the American
Telephone & Telegraph Company to the United States to
make and use patented audions. The license stemmed both
from American Telephone & Telegraph Company’s agree-
ment that it would not do anything to interfere with the United
States’ manufacture of audions, and from its subsequent con-
duct. The Court held:
Any language used by the owner of the patent or any
conduct on his part exhibited to another, from which
that other may properly infer that the owner consents
to his use of the patent . . . constitutes a license . . . .
Id. Licenses are contracts “governed by ordinary principles of
state contract law.” Power Lift, Inc. v. Weatherford Nipple-Up
Systems, Inc., 871 F.2d 1082, 1085 (Fed. Cir. 1989). The State
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5699
cannot demonstrate an implied licensing agreement because it
failed to introduce any evidence of an agreement or course of
conduct by the parties to contract for a trademark license.
[9] The clear intent of the parties as evidenced by the Con-
cession Agreement itself was solely to lease premises—not to
license trademarks. The Agreement’s terms are at odds with
the State’s contorted effort to remake it as a trademark licens-
ing agreement. The Agreement describes its purpose as
“grant[ing] to Concessionaire the right, privilege and duty to
construct or modify, equip, operate, and maintain a Mexican-
style Shopping Arcade.” None of the terms typical of a trade-
mark licensing agreement, such as payment of royalties, are
present. To the contrary: the only payments to be made are
labeled and structured as rental payments. The termination
clauses do not provide for the surrender of intellectual prop-
erty at the expiration of the contract, but rather state only that
the concessionaire should quit the premises, surrender real
property improvements, and execute a quitclaim deed. Simi-
larly, the Agreement does not provide that the State retains
title to any intellectual property developed during its term; the
only provision for title requires Bazaar del Mundo to
acknowledge the State’s title to the premises described in the
contract and to any improvements made to the real property.
Nor do any of the subsequent amendments reveal any intent
to enter into a trademark licensing agreement. The preamble
to Amendment One reiterates that the purpose of the conces-
sion was the “installation of a Mexican-style shopping
arcade.” Amendment Two is silent on licensing. Amendment
Three contains a renewal rent calculation provision that is not
based upon the good will or market value of the trademarks,
but rather was to be established based upon “a survey of then-
current rental practices and rents and other lease terms estab-
lished by governmental agencies and private owners for com-
parable commercial space on a statewide basis,” taking “into
account local rental rates and other lease terms in the San
Diego area.”
5700 DEP’T OF PARKS v. BAZAAR DEL MUNDO
Nor did the subsequent course of dealing between the par-
ties create an implied license to use the marks. Far from it:
that Bazaar del Mundo felt free to register and publish the
marks with the USPTO and the California Secretary of State
belies any mutual agreement to a licensing arrangement.
Moreover, the State’s intellectual property rights provision in
the 2001 proposed new concession contract demonstrates its
understanding that the old Concession Agreement did not
impliedly grant a license to the marks. The new contract
expressly recognizes the State’s ownership of any marks
developed by the concessionaire through its own goodwill
during the term of the agreement:
28. INTELLECTUAL PROPERTY RIGHTS: Any
names, logos, trademarks and/or copyrights devel-
oped during and/or pursuant to this contract which
will in any way associate with, identify or implicate
an affiliation with California State Parks, shall be
approved by State, shall belong to State upon cre-
ation, and shall continue in State’s exclusive owner-
ship upon termination of this contract.
Furthermore, upon learning of the proposal for the new intel-
lectual property rights provision in the proposed concession
agreement on December 7, 2001, Bazaar del Mundo’s Presi-
dent, Diane Power, wrote back that the proposal is “totally
unacceptable. Under no circumstances will we turn over the
rights to our trade-marked names to the State unless we are
fully and fairly compensated for their value,” evidencing
Bazaar del Mundo’s understanding that it owned the marks.
Power’s hypothetical musings that the State might be able to
own a trademark in the name of a historic site, such as the
Hearst Castle, where it also operates a concession, are not rel-
evant to the question of ownership of the marks here.
The State also makes an equitable argument based upon
Bazaar del Mundo’s failure to provide actual notice to the
State of its registration of the marks. We fail to see how this
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5701
argument assists the State in its trademark infringement claim.
Nothing in the Concession Agreement prohibits Bazaar del
Mundo from registering the names of its restaurants or
requires it to provide actual notice thereof to the State.
Because under 15 U.S.C. § 1072 registration serves as con-
structive notice of the registrant’s claim to ownership, the
State’s delay in contesting the 1985 registration of the marks
may in fact estop it from bringing an infringement claim. See
Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829,
835 (9th Cir. 2002). Moreover, even if Bazaar del Mundo
were shown to have fraudulently obtained federal registration
of the marks, its common law rights in the marks would con-
tinue unabated. See Far Out Prods., Inc. v. Oskar, 247 F.3d
986, 997 (9th Cir. 2001).
[10] Finally, the State posits that the quality-control provi-
sions set forth in the Concession Agreement demonstrate the
existence of an implied license because well-established
trademark law imposes a duty upon the licensor to retain suf-
ficient control over the mark to prevent public deception.
“The purpose of a trademark . . . is to identify a good or ser-
vice to the consumer, and identity implies consistency and a
correlative duty to make sure that the good or service really
is of consistent quality, i.e., really is the same good or ser-
vice.” Gorenstein Enters., Inc. v. Quality Care-USA, Inc., 874
F.2d 431, 435 (7th Cir. 1989); see also 2 McCarthy on Trade-
marks § 18:42. Without such control, “the risk that the public
will be unwittingly deceived will be increased . . . . [and] the
only effective way to protect the public . . . is to place on the
licensor the affirmative duty of policing in a reasonable man-
ner the activities of his licensees.” Dawn Donut Co. v. Hart’s
Food Stores, Inc., 267 F.2d 358, 367 (2d Cir. 1959). Because
naked and uncontrolled licensing is “inherently deceptive,”
Barcamerica Int’l USA Trust v. Tyfield Imps., Inc., 289 F.3d
589, 598 (9th Cir. 2002), the State must have exercised a high
degree of control and supervision over Bazaar del Mundo’s
provision of restaurant services under the marks to even assert
this basis for proving an implied licensing arrangement.
5702 DEP’T OF PARKS v. BAZAAR DEL MUNDO
[11] Although the State points to several measures of qual-
ity control in the Agreement to support its theory, nothing
indicates that the State controlled or supervised the most criti-
cal aspects of building goodwill and value in the provision of
restaurant services—the quality of the food and service. Nor
do any of the provisions, which relate to such matters as sign-
age, inspections of the premises, designated use of the prem-
ises and period dress, support a finding that the State has
exercised such quality control and supervision over Bazaar
del Mundo that the marks truly “reflect[ ] the goodwill and
quality standards” of the State, Siegel v. Chicken Delight, Inc.,
448 F.2d 43, 49 (9th Cir. 1971), as opposed to Bazaar del
Mundo itself. The Agreement lacks any provision for routine
inspections, adoption of any particular design, or even an
operating manual for the conduct of the restaurants’ business.
Although the parties agreed that food typical of the era would
be served, employees would wear Mexican dress, and the
premises would be kept clean, the Agreement provided no
recourse to the State if the quality of the food, dress, service,
or sanitation were to deteriorate. See Stockpot, Inc. v. Stock
Pot Rest., Inc., 220 U.S.P.Q. 52, 58-59 (T.T.A.B. 1983) (hold-
ing that, if the validity of the license were determined solely
on the basis of the lease provisions, the failure of the lease to
control the quality of the food and service of the restaurant
would constitute insufficient compliance with the Trademark
Act).
Though we have recognized that “ ‘[i]t is difficult, if not
impossible to define in the abstract exactly how much control
and inspection is needed to satisfy the requirement of quality
control over trademark licensees,’ ” Barcamerica Int’l, 289
F.3d at 598 (quoting 2 McCarthy on Trademarks § 18:55 at
18-94.3), the State’s evidence of control fails to approach
even the level of control that we found to be insufficient in
Barcamerica, id. at 596. In Barcamerica, 289 F.3d at 596-97,
we found that random tastings by the licensor of wine sold
under his trademark, where there was no evidence as to how
often, or under what circumstances the licensor tasted the
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5703
wine, did not rise to the level of ongoing monitoring or qual-
ity control sufficient to defeat a naked licensing challenge.
While we held in Barcamerica that the lack of an express
contract right to inspect and supervise a licensee’s operations
is not conclusive evidence of lack of control, we found that
there was no evidence of the licensor having a close working
relationship with the licensee to render a formal agreement
unnecessary. Id. at 597. Where “the particular circumstances
of the licensing arrangement [indicate] that the public will not
be deceived” because the licensor and the licensee have such
a close working relationship, reliance on the measures used by
the licensee may be justified, and a formal agreement provid-
ing for ongoing monitoring and inspections may not be neces-
sary. Id. at 596 (internal quotation marks omitted and
alteration in original); see, e.g., Transgo, Inc. v. Ajac Trans-
mission Parts Corp., 768 F.2d 1001, 1017-18 (9th Cir. 1985);
Arner v. Sharper Image Corp., 39 U.S.P.Q.2d 1282, 1995 WL
873730 (C.D. Cal. 1995).
Here, however, the State points to no evidence revealing
any effort to monitor or sample the quality of Bazaar del
Mundo’s food and service. Nor is there any evidence that the
State justifiably relied on Bazaar del Mundo’s reputation or
had established a close working relationship with it to make
a formal quality-control agreement unnecessary. Barc-
america, 289 F.3d at 597. Any argument that Bazaar del
Mundo’s food and service actually was of high quality is irrel-
evant to our analysis, because what matters is that the State
“played no meaningful role in holding” the restaurants to any
“standard of quality—good, bad, or otherwise.” Id. at 598. In
addition, because “[t]he major purpose of quality control is to
protect the public,” exacting quality-control standards in the
field of restaurant services is especially important because “a
licensor’s failure to exert proper quality control over a care-
less licensee might lead an ordinary, unsuspecting customer to
make an isolated purchase of contaminated food.” Edwin K.
Williams & Co., Inc. v. Edwin K. Williams & Co.-East, 542
F.2d 1053, 1059-60 (9th Cir. 1976). As in Barcamerica, the
5704 DEP’T OF PARKS v. BAZAAR DEL MUNDO
failure of the State to exercise quality control combined with
the absence of a close working relationship would have mis-
led the public into associating the marks with Bazaar del
Mundo rather than the State.
The cases upon which the State relies to support its quality
control theory of implied license are unavailing. The asserted
cases in fact undermine the State’s argument because the
licensors there exercised rigorous and ongoing supervision
and quality control over their licensees. In Turner v. HMH
Publishing Co., 380 F.2d 225, 229 (5th Cir. 1967), the licens-
ees were required to meet standards related to “decor, design,
quantity and quality of food, beverages and entertainment in
the clubs”; the trademark owner produced an operating man-
ual for its franchisees to follow; and “periodically visit[ed] the
clubs and report[ed] on the maintenance of standards for food,
beverages, services and decor.” Similarly, the trademark
owner in Pneutek, Inc. v. Scherr, 211 U.S.P.Q. 824, 833
(T.T.A.B. 1981), exercised adequate quality control because
he personally selected advertising for the journal, employed
an editorial board with veto power to peer review the papers
to be published, and personally approved all promotional lit-
erature upon which the mark was displayed. Finally, the court
in Nestle Co. v. Nash-Finch Co., 4 U.S.P.Q.2d 1085, 1089
(T.T.A.B. 1987), found adequate control where the licensor
conducted periodic inspections and provided the licensee with
training programs, manuals, raw materials, suppliers, mer-
chandising bulletins, and recipe books. When compared to the
cases cited in the State’s own brief, the minimal control and
supervision here is an insufficient basis to support an infer-
ence of an implied licensing agreement.
[12] Finally, the State holds up California Public Resources
Code § 5080.02 et seq., in an effort to demonstrate a sufficient
quality-control system. This effort is to no avail. Although the
Code encompasses a detailed system of regulation of the bid-
ding for and award of concession agreements, not a single
DEP’T OF PARKS v. BAZAAR DEL MUNDO 5705
provision governs quality-control and supervision over con-
cessionaires licensing trademarks from the State.
C.
The State asserts that Bazaar del Mundo’s intended use of
the names in connection with its new restaurant locations
would infringe upon its own use of the marks in Old Town
and violate section 2(d) of the Lanham Act, 15 U.S.C. § 1052because of the likelihood of confusion of the two marks.
Because this argument is based on yet another convoluted
reading of trademark law, the district court did not err in
rejecting it.
The State reasons that it showed a “fair chance of success”
on its claim to invalidate the marks because Bazaar del
Mundo’s use of the marks outside Old Town would deceive
the public into concluding that there was some affiliation with
or sponsorship by Old Town. While the State may file a peti-
tion to cancel Bazaar del Mundo’s registration of the marks
under 15 U.S.C. § 1064, its reliance upon 15 U.S.C. § 1052is misplaced because that section does not create a private
right of action for registering a mark giving rise to a likeli-
hood of confusion with another mark. Rather, section 1052(d)
sets forth: “No trademark . . . shall be refused registration . . .
unless it . . . [c]onsists of or comprises a mark which so
resembles a mark registered . . . or a mark or trade name pre-
viously used . . . as to be likely, when used on or in connec-
tion with the goods of the applicant, to cause confusion.”
Section 1052 simply authorizes the Director of the USPTO to
reject applications for marks that have the potential to create
confusion. We therefore do not reach the question of likeli-
hood of confusion, as the State urges to do, citing AMF Inc.
v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979).
Moreover, Bazaar del Mundo’s use of the mark has reached
incontestable status under 15 U.S.C. § 1065. Therefore,
Bazaar del Mundo is entitled to the presumption of the valid-
ity of its marks under 15 U.S.C. § 1057(b), which may allow
5706 DEP’T OF PARKS v. BAZAAR DEL MUNDO
it to contend in the course of further proceedings that any
intended use of the marks by the State in relation to restaurant
services would violate its requested trademarks. See Yellow
Cab Co. of Sacramento, 419 F.3d at 928.
CONCLUSION
[13] The State has not demonstrated a likelihood of success
in establishing a protectible ownership interest in the disputed
trademarks and thus has not shown any basis upon which it
would be entitled to injunctive relief. Therefore, the district
court did not abuse its discretion in denying the State’s
motion for a preliminary injunction. We therefore affirm the
district court’s order and remand for further proceedings.
AFFIRMED.