Hard Rock Cafe Licensing Corp. v. Concession Services, Inc.

955 F.2d 1143, 1992 WL 16299
CourtCourt of Appeals for the Seventh Circuit
DecidedFebruary 4, 1992
DocketNos. 90-3427, 90-3467, 90-3458
StatusPublished
Cited by26 cases

This text of 955 F.2d 1143 (Hard Rock Cafe Licensing Corp. v. Concession Services, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hard Rock Cafe Licensing Corp. v. Concession Services, Inc., 955 F.2d 1143, 1992 WL 16299 (7th Cir. 1992).

Opinion

CUDAHY, Circuit Judge.

The Hard Rock Cafe Licensing Corporation (Hard Rock) owns trademarks on several clothing items, including t-shirts and sweatshirts and apparently attempts to exploit its trademark monopoly to the full. In the summer of 1989, Hard Rock sent out specially trained private investigators to look for counterfeit Hard Rock Cafe merchandise. The investigators found Iqbal Parvez selling counterfeit Hard Rock t-shirts from stands in the Tri-State Swap-O-Rama and the Melrose Park Swap-O-Rama, flea markets owned and operated by Concession Services Incorporated (CSI). The investigators also discovered that Harry’s Sweat Shop (Harry’s) was selling similar items. Hard Rock brought suit against Parvez, CSI, Harry’s and others not relevant to this appeal under the Lanham Trademark Act, 15 U.S.C. § 1051 et seq. (1988). Most of the defendants settled, including Parvez, who paid Hard Rock some $30,000. CSI and * Harry’s went to trial.

After a bench trial, the district court found that both remaining defendants violated the Act and • entered permanent injunctions forbidding Harry’s to sell merchandise bearing Hard Rock’s trademarks (whether counterfeit or genuine) and forbidding CSI to permit the sale of such merchandise at its flea markets. The court also awarded treble damages against Harry’s. . The court did not, however, award attorney’s fees against either defendant.

All of the parties who participated in the trial appealed. CSI believes that it is not liable and that, in any event, entry of the injunction was inappropriate. Hard Rock wants attorney’s fees from both defendants. Harry’s appealed from the finding of liability and the entry of the injunction as well, but filed its appeal one day too [1146]*1146late; its appeal has therefore been dismissed. Finding errors of law and a fatal ambiguity in the findings of fact, we vacate the judgment against CSI, vacate the denial of attorney’s fees and remand for further proceedings.

I.

Most of the facts are undisputed. The following account draws from the district court’s findings, the record on appeal and the submissions of the parties. Where there are disputes of fact we will note them and defer to the district court’s resolution unless clearly erroneous. Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985).

A. The Parties and Their Practices

1. Concession Services, Inc.

In the summer of 1989, CSI owned and operated three “Swap-O-Rama” flea markets in the Chicago area: the Tri-State, in Alsip, Illinois; the Melrose Park, in Mel-rose Park, Illinois; and the Brighton Park, in Chicago itself. Although Parvez sold counterfeits at the Tri-State Swap-O-Rama and at Melrose Park, testimony at trial concentrated on the operations at the Tri-State. We too will refer mainly to the Tri-State Swap-O-Rama, although CSI’s operations are apparently similar at all three flea markets.

CSI generates revenue from a flea market in four ways. First, it rents space to vendors for flat fees that vary by the day of the week and the location of the space. Second, CSI charges a reservation and storage fee to those vendors who want to reserve the same space on a month-to-month basis. Third, CSI charges shoppers a nominal 75$ admission charge. Fourth, CSI runs concession stands inside the market. To promote its business, CSI advertises the markets, announcing “BARGAINS” to be had, but does not advertise the presence of any individual vendors or any particular goods.

Supervision of the flea markets is minimal. CSI posts a sign at the Tri-State prohibiting vendors from selling “illegal goods.” It also has “Rules For Sellers” which prohibit the sale of food or beverages,1 alcohol, weapons, fireworks, live animals, drugs and drug paraphernalia and subversive or un-American literature. Other than these limitations, vendors can, and do, sell almost any conceivable item. Two off-duty police officers provide security and crowd control (an arrangement that does not apply to the other markets). These officers also have some duty to ensure that the vendors obey the Sellers' Rules. The manager of the Tri-State, Albert Barelli, walks around the flea market about five times a day, looking for problems and violations of the rules. No one looks over the vendors’ wares before they enter the market and set up their stalls, and any examination after that is cursory. Moreover, Barelli does not keep records of the names and addresses of the vendors. The only penalty for violating the Seller’s Rules is expulsion from the market.

James Pierski, the vice president in charge of CSI’s flea markets, testified that CSI has a policy of cooperating with any trademark owner that notifies CSI of possible infringing activity. But there is no evidence that this policy has ever been carried into effect. Before this case, there have been a few seizures of counterfeit goods at Swap-O-Rama flea markets. In no case was CSI informed of a pending seizure, involved in a seizure or notified as to the ultimate disposition of the seized goods. On the other hand, CSI did not investigate any of the seizures, though it knew they had occurred.

2. Harry’s Sweat Shop

Harry’s is a small store in Darien, Illinois, owned and operated by Harry Spate-ro. The store sells athletic shoes, t-shirts, jackets with the names of professional sports teams and the like. Spatero testi[1147]*1147fied that the store contains over 20,000 different items. When buying t-shirts, Harry’s is somewhat indiscriminate. The store buys seconds, overruns and closeouts from a variety of sources. Harry’s buys most of its t-shirts from Supply Brokers of Pennsylvania, a firm which specializes in buying up stocks from stores going out of business. Spatero testified that Supply Brokers sends him largely unidentified boxes of shirts which he may choose to return after looking them over. But Spatero testified that Harry’s also bought shirts from people who came around in unmarked vans, offering shirts at a discount. The store kept no records of the sources of its inventory.

3. Hard Rock Licensing Corp.

Hard Rock owns the rights to a variety of Hard Rock trademarks. The corporation grants licenses to use its trademarks to the limited partnerships that own and operate the various Hard Rock Cafe restaurants. These restaurants are the only authorized distributors of Hard Rock Cafe merchandise, but apparently this practice of exclusivity is neither publicized nor widely known. The shirts themselves are produced by Winterland Productions, which prints logos on blank, first quality t-shirts that it buys from Hanes, Fruit-of-the-Loom and Anvil. According to the manager of the Chicago Hard Rock Cafe, Scott Floer-sheimer, Winterland has an agreement with Hard Rock to retain all defective Hard Rock shirts.2 Thus, if Winterland performs as agreed, all legitimate Hard Rock shirts sold to the public are well-made and cleanly printed.

The Chicago Hard Rock Cafe has done very well from its business. Since 1986, it has sold over 500,000 t-shirts at an average, gross profit of $10.12 per shirt.

B. The Investigation

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Bluebook (online)
955 F.2d 1143, 1992 WL 16299, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hard-rock-cafe-licensing-corp-v-concession-services-inc-ca7-1992.