The “Sturgis Motorcycle Rally” Circuit Court of Appeals’ Decision
By Jeffrey E. Jacobson, Esq.
Last year, the United States Court of Appeals for the Eighth Circuit ruled on an appeal from the United States District of Court for the District of South Dakota. The Federal Court in Rapid City held a jury trial on Sturgis Motorcycle Rally, Inc. (SMRI) v. Rushmore Photo & Gifts, Inc., JRE, Inc., Niemann, Niemann, Niemann and Wal-Mart Stores, Inc. This has been a very closely watched dispute and involves parties on opposite ends of the spectrum.
This case involved many causes of action. There was evidence of independent vendors selling “Rally” souvenirs and merchandise since the early 1970s. However, the Sturgis Chamber of Commerce never did any licensing of any of its marks until the creation of the “Monahan” logo in the early 2000s. That was their first logo and attempt at legitimate trademark protection. The Chamber then moved forward and obtained registration for “Sturgis Bike Week” and “Take the Ride to Sturgis” with the U.S.P.T.O. The Rally was known by many names besides just “Sturgis” and began to take on a life of its own. In fact, the Circuit Court’s decision mentions that “[t]he Sturgis motorcycle rally is now the largest such rally in the world, bringing several hundred thousand people and many millions of dollars into the region each year.” (Pg. 3) Furthermore, as a result of the 2017 Sturgis Motorcycle rally attendance, there was “a 3 percent increase in tax revenues collected” with “the South Dakota Department of Revenue collecting ‘nearly $1.29 million in taxes from temporary vendors at the motorcycle rally.’” This further substantiates the monetary interest that the Chamber of Commerce had in the continued success and growth of the rally.
In response to the growing interest in “Sturgis” motorcycle rally merchandise, the Chamber created the Sturgis Motorcycle Rally, Inc. (SMRI) for the sole purpose of licensing its trademarks. They then obtained federal trademark registration of the word “Sturgis” in 2011 for several categories of goods, including clothing, merchandise and other souvenirs. However, as a result of the Eighth Circuit’s recent decision, these registrations are now subject to cancellation. In particular, this Court ruled that the trademark licensing program administered by SMRI did not have exclusive rights to “Sturgis,” “Sturgis Rally & Races,” and “Sturgis Motorcycle Rally,” as they had purported to. This is because both the SMRI and the Chamber were not utilizing the marks as a brand or to indicate the source of origin of the goods provided by them to the consuming public. The marks were also considered descriptive.
The Circuit Court also found that SMRI had failed to establish any “secondary meaning” in the word “Sturgis;” and, therefore, was unable to claim this as a valid reason to protect the phrase and to prevent others from utilizing it without authorization from the entity. (Pg. 11) They also concluded that neither “SMRI [n]or its predecessors-in-interest were or are the owner, organizer, or sponsor of the rally or have come to acquire the rally’s intellectual property rights.” (Pg. 23) The Circuit Court decision was later reiterated and further affirmed in February 2019 in the U.S. District Court for the District of South Dakota, Western Division (Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., et. al, Case No. 5:11-cv-05052-JLV (W.D. South Dakota February 14, 2019)).
The recent Circuit Court decision and the subsequent reaffirmation in the South Dakota District Court has wide-spread implications and seems to have opened the door to merchants being able to design their own unique logos incorporating some of these phrases for sale under their own brand. The SMRI demands for licensing fees may also need to be modified or eliminated entirely in light of this new decision. Also, the issue of trademark dilution remains to be determined since the lower court’s jury verdict in favor of SMRI has been vacated. Specifically, the lack of proper brand licensing and notices caused these issues that the SMRI must now deal with. This Firm represents several entities in and around Sturgis; therefore, the statements herein do not represent their opinions.
This information is not intended as legal advice, as an attorney specializing in the field should be consulted as every situation differs and requires careful examination.
©2019 The Jacobson Firm, P.C.