District Court Finds in Favor of Larry Flynt in a Trademark Dispute with his Brother
Jennifer Gaeta | Bloomberg Law
The U.S. District Court for the Southern District of Ohio implied license agreement between Larry Flynt, the owner of Hustler Magazine and his brother, Jimmy Flynt regarding Jimmy’s use of the HUSTLER marks in conjunction with retail stores. Even though there was no signed agreement, the court found that licensee estoppel applied to prevent Jimmy from disputing Larry’s ownership and/or control over the HUSTLER marks. Accordingly, the court granted summary judgment in Larry’s favor on his trademark claims.
Background of the Dispute
Larry Flint instituted the instant action against Jimmy Flynt in an effort to challenge certain HUSTLER trademarks that Jimmy used in connection with his Cincinnati store. Jimmy claimed to be a partner in all Hustler enterprises, however, the parties had agreed that while the litigation was pending, Jimmy would pay a licensing fee into escrow for his continued use of the trademarks at issue.
The parties also had a litigation pending in state court regarding partnership issues, which was dismissed for forum non conveniens. The federal court had agreed to try the case without a jury as an accommodation to the parties. That trial took place in January 2011, and the court entered its findings of fact and conclusions of law in May 2011. The court determined that Jimmy was not a partner and therefore dismissed his partnership claims.
In the instant case, Larry moved for summary judgment and permanent injunctive relief on the trademark claims and on Jimmy’s counterclaims, claiming that Jimmy could not use the HUSTLER name. Jimmy cross-moved, arguing that Larry could not restrict him from using the marks because he was the first one to do so in conjunction with a retail store, he did so with permission and without a license agreement, and that any subsequent agreement was a “sham” transaction.
Hustler’s Corporate Structure
Hustler Enterprises is comprised of many corporate entities. Larry and his companies own the registered HUSTLER mark, which was first used in conjunction with HUSTLER magazine. Larry controls the Larry Flynt Revocable Trust (“Trust”), the Trust and Larry own LFP, Inc. (“LFP”). In 1995, the original and other HUSTLER marks were assigned to LFP. LFP owns LFP Publishing Group, LLC. (“Publishing Group”), and the Publishing Group is the member and owner of LFP IP, LLC, (“LFPIP”) which is the current assignee of the marks, and plaintiff in the instant litigation.
Jimmy and other family members have worked for or run various Hustler entities, at various times, over the last 40 years. In 1997, Jimmy incorporated Hustler News & Gifts, Inc. (“HNG”) and opened a Cincinnati retail store. He claimed to be the sole owner of the store and did not pay Larry in conjunction with the use of this HUSTLER name. Other HUSTLER stores soon followed, and Jimmy became Hustler Entertainment Inc’s (“HEI”) president. This company was responsible for the HUSTLER HOLLYWOOD retail stores, and Larry was the sole owner.
HNG was evicted and moved to a new Cincinnati location under the name HUSTLER CINCINNATI. The landlord contested the lease and the store moved again. After which, Jimmy formed a new corporation and opened another store in 2001 as Hustler Cincinnati, Inc. Jimmy is the sole owner of this corporation as well and did not pay Larry for the right to use the HUSLTER name.
Jimmy then formed Hustler Hollywood Ohio, Inc. (“HH Ohio”) to operate a Hustler Hollywood store in Ohio. Jimmy was the sole owner of this corporation, but this time, Jimmy licensed the use of the HUSLTER name.
In conjunction with his divorce in 2003, Jimmy gave testimony regarding the license agreement and the profits from that store. In his deposition, Jimmy stated that:
Well, you have to understand Hustler is Larry Flynt, you know. Everything that bears that name he has complete control of mind, sole (sic) and body. So when I think of a club, when I think of a store, when I think of a magazine, I think it’s him 100 percent.
LFPIP at 7. In 2004, the parties entered into a licensing arrangement for the Hustler Cincinnati store as well, except that the 2004 agreement itself was not signed. Also in 2004, Jimmy transferred his stock in HH Ohio to HEI for $150,000, deposited that money in the Hustler Cincinnati accounts, and remitted $150,000 in back-dated licensing fees. After that time, Jimmy had authorized Hustler Cincinnati to pay a monthly licensing fee, and continued doing so for years.
The family then started fighting and getting involved in litigation, first between Larry and his nephews. Larry demanded that Jimmy control his sons, or he would cut him off and squeeze him out of business.
Court Finds an Implied License, Applies Licensee Estoppel
The court found that the parties had entered into an implied license based on their conduct. Although Jimmy first used the marks for free, it was undisputed that the relationship changed, and that he started paying for the use of those mark. Jimmy had continued to pay the licensing fee until their relationship soured.
Jimmy did not dispute the licensing arrangement, but instead claimed that it was “naked.” The court found such an assertion conclusory. “Larry also notes that the requisite control required is minimal and is even less where ‘the license parties have engaged in a close working relationship, and may justifiably rely on each parties’ intimacy with standards and procedures to ensure consistent quality, and no actual decline in quality standards is demonstrated.’” LFPIP at 15. Larry further detailed additional quality control measures undertaken by his daughter and other employees, including Jimmy himself in his role as an employee. Moreover, there were no claims that the quality diminished in any way, and at least one court has held that a familial relationship alone is sufficient to constitute control.
The court explained that the licensing arrangement itself is an acknowledgment that Larry owns the marks and that Jimmy does not. This is known as the licensee estoppel, and the court determined that the doctrine applied even in the absence of a signed, written agreement and even though a corporate entity actually owned the marks. Jimmy had also acknowledged that Larry actually controlled the marks in his divorce deposition. Finally, the court found that there was no issue on the confusion element and accordingly, granted Larry’s motion for summary judgment on the trademark claims, denied Jimmy’s motion, and requested that Larry’s counsel submit a proposed injunction.
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