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Hallmark Industries, Inc. v. Hallmark Licensing, LLC

United States District Court, W.D. Missouri, Western Division

September 27, 2019

HALLMARK INDUSTRIES, INC., Plaintiff/ Counterclaim Defendant,
v.
HALLMARK LICENSING, LLC, Defendant/Counterclaim Plaintiff.

          ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

          GREG KAYS, JUDGE

         This case arises from a long-running dispute over trademarks. Plaintiff Hallmark Industries, Inc. (“Plaintiff”), is a New Jersey corporation engaged in the manufacture, marketing, sale, and wholesale distribution of jewelry. Defendant Hallmark Licensing, LLC (“Defendant”), is a wholly owned subsidiary of Hallmark Cards, Inc., which owns and licenses various marks that include the HALLMARK mark and Crown logo.

         Plaintiff is appealing a decision of the Trademark Trial and Appeal Board (“TTAB”) denying Plaintiff’s applications to use two trademarks, HALLMARK and HALLMARK925, on its jewelry because the marks were likely to be confused with two of Defendant’s registered marks, HALLMARK DIAMONDS and HALLMARK RINGS. Plaintiff argues the TTAB’s ruling is incorrect because it actually owns the HALLMARK DIAMONDS and HALLMARK RINGS marks. Plaintiff is suing for an order vacating the TTAB’s decision and a declaratory judgment that it owns the HALLMARK DIAMONDS and HALLMARK RINGS marks. Plaintiff is also suing Defendant for various related tort and infringement claims.

         Defendant denies the allegations and seeks a declaratory judgment that it is the rightful owner of the HALLMARK DIAMONDS and HALLMARK RINGS trademarks. Defendant has also filed counterclaims for trademark infringement, dilution, and common law unfair competition.

         Now before the Court are the parties’ cross motions for partial summary judgment (Docs. 92, 95). Because the undisputed material facts demonstrate Defendant owns the HALLMARK DIAMONDS and HALLMARK RINGS marks, Defendant’s motion is GRANTED and Plaintiff’s motion is DENIED.

         Summary Judgment Standard

         A moving party is entitled to summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The nonmoving party may resist summary judgment by asserting affirmative defenses, but it must support these defenses with specific facts. Hiland Partners GP Holdings, LLC v. Nat’l Union Fire Ins. Co., 847 F.3d 594, 601 (8th Cir. 2017).

         Material Undisputed Facts

         For purposes of resolving this motion, the Court finds the material undisputed facts to be as follows.[1]

         Defendant Hallmark Licensing, LLC is a wholly owned subsidiary of Hallmark Cards, Incorporated. Defendant owns and licenses a large portfolio of marks, including the iconic HALLMARK mark and Crown logo, in the United States.

         Diastar, Inc. (“Diastar”) was a New York corporation wholly owned by Pramod Jain and his brother, Pradip Jain. Diastar was in the business of selling jewelry in the U.S. wholesale market for subsequent resale. In 1988 Diastar purchased a HALLMARK trademark for jewelry, including registrations and goodwill, from Hallmark Jewelry, a company which was owned by Katy Industries. Diastar thereafter maintained common law rights in the HALLMARK mark for use in conjunction with jewelry.

         In 2003, Diastar filed applications with the U.S. Patent and Trademark Office (“PTO”) to register HALLMARK DIAMONDS and HALLMARK RINGS for jewelry, claiming a date of first use in 1988.

         While these applications were pending, Diastar entered into a financing and loan agreement with Rosenthal & Rosenthal, Inc. (“Rosenthal”). To secure repayment of millions of dollars Rosenthal loaned to Diastar, Diastar granted Rosenthal a security interest in all of its assets, including all existing and future registered and unregistered trademarks, pending trademark applications, and goodwill associated therewith.[2] This financing and loan agreement is governed by New York law.

         On February 15, 2008, Pradip Jain, as vice-president of Diastar, executed a document titled “Bill of Sale and Assignment of Trademark Application” on behalf of Diastar that purportedly assigned the HALLMARK DIAMONDS and HALLMARK RINGS marks and related applications, together with all goodwill associated therewith, to Monica Jain (Pradip Jain’s spouse) and Anita Jain (Pramod Jain’s spouse). This purported assignment was made without Rosenthal’s knowledge, approval, or consent, [3] and the purported assignment was not recorded with the PTO until September 4, 2012.

         On March 17, 2008, Pradip Jain, as vice-president of Diastar, filed for Chapter 11 bankruptcy protection for Diastar in the U.S. District Court for the District of New Jersey.[4] Diastar did not list either the HALLMARK mark as an asset in its bankruptcy schedules, or the February 15, 2008, purported assignment of the HALLMARK RINGS and HALLMARK DIAMONDS marks (and related applications) from Diastar to Anita Jain and Monica Jain.

         A month later, on April 23, 2008, Plaintiff Hallmark Industries, Inc. was incorporated in New Jersey. It sells jewelry products wholesale to retailers. The Jain brothers’ wives each own 50 percent of the company. Initially, Monica Jain’s husband, Pradip Jain, was Plaintiff’s president. In 2016, Monica Jain became president. Diastar never transferred its common law rights in the HALLMARK mark for use in conjunction with jewelry to Plaintiff. Plaintiff, however, alleges that Diastar assigned its trademark applications for the HALLMARK Marks (HALLMARK, HALLMARK DIAMONDS, and HALLMARK RINGS) to Plaintiff.

         As a secured creditor, Rosenthal filed a Proof of Claim, and the Bankruptcy Court allowed the claim, deeming it a first priority, secured lien on all of Diastar’s assets, up to $5, 754, 117.08. This claim survived Diastar’s Chapter 7 bankruptcy proceedings. Diastar never repaid its debt to Rosenthal in full, and the outstanding unpaid balance due to Rosenthal was not released or forgiven. Rosenthal maintained its security interest, and it regularly filed UCC continuations through April 2014.

         The HALLMARK DIAMONDS and HALLMARK RINGS marks were registered to Diastar on January 4, 2011, both claiming a date of first use in 1988. On April 24, 2008, the day after Plaintiff was incorporated, Plaintiff filed an application with the PTO to register HALLMARK in class 14[5] for use in conjunction with a wide variety of jewelry items.[6] The HALLMARK application claimed April 23, 2008 (the date Plaintiff was incorporated), as the date of first use.

         On February 9, 2009, Plaintiff filed an application with the PTO to register HALLMARK925 in class 14 for use in conjunction with similar jewelry items.[7] The HALLMARK925 application claimed May 30, 2008, as the date of first use and contained no limitations regarding trade channels or classes of customers.

         On March 6, 2012, the PTO trademark examiner issued an office action refusing Plaintiff’s application to register HALLMARK because it was confusingly similar to the registered marks HALLMARK DIAMONDS and HALLMARK RINGS. In response, on September 4, 2012, Plaintiff filed documents with the PTO stating that the HALLMARK DIAMONDS and HALLMARK RINGS marks had been assigned by Diastar in February 2008 to Monica Jain and Anita Jain, and ...


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