Trademark wars: Expect crackdown on unlicensed products at Sturgis

Publish Date: 
Jun 17, 2011
By Holly J. Wagner

In the world of hardcore motorcycle rallies, does anybody care whether the souvenir T-shirts, doo-rags and shot glasses they pick up are officially licensed products? It depends on who’s doing the talking.

This year’s Sturgis Motorcycle Rally — aka the Black Hills Motor Classic in Sturgis, S.D. — is shaping up as the test of a trademark, and of whether cracking down on unlicensed goods is a good idea for freewheeling events that typically draw a fiercely independent crowd.

Those who’ve been to the Sturgis rally in past years describe piles of tchochke shipped in from China and Pakistan spilling out of every tent and booth. Now, a new organization, Sturgis Motorcycle Rally Inc. (SMRI), has assumed control of the rally’s intellectual property (IP) and says it plans to crack down on vendors who sell merchandise that’s not licensed. That has some vendors and suppliers from past years fired up over what they feel are their rights to produce and sell their own rally-related merchandise and designs.

They may have a case, but it could cost a lot to make it.

Sturgis also appears to be the first domino in a plan to scoop up trademarks for several major rallies. There’s also Daytona, where Hot Leathers owner Jerry Berkowitz, through his Connecticut-based company Good Sports Inc., is fighting another vendor’s claim to the Daytona Beach Bike Week trademark.

In Daytona, Berkowitz is siding with the Daytona Beach Chamber of Commerce. In Sturgis, he was the most tenacious opponent to the Sturgis Chamber of Commerce seeking rally trademarks. Until he wasn’t.

“At the time, I probably didn’t realize the importance of this trademark or I didn’t think that it should happen that way,” Berkowitz tells Dealernews. “But over the years, the chamber of commerce and I really had realized that we had the same interests, in that we were both interested in the health and welfare of the rally, we were both interested in the health and welfare of the greater Sturgis area.

“They were going to take the intellectual property and move it to SMRI, to a nonprofit board that would spend time with all the ramifications of owning this trademark and all the trademarks. The IP does belong in the nonprofit arena and the mission is to promote the health of the rally and the charitable foundation,” he continues.

Some in the industry say all of this activity amounts to a trademark land grab that pushes smaller companies out of business, or at least out of the lucrative rally share of the business. Suppliers we spoke to tell us that all inquiries for Sturgis sublicensing are referred to Berkowitz, and that the terms requested by SMRI are unreasonable.

A broader legal battle is brewing over whether or not anyone can trademark the name of a geographic location, or terms like bike week and motorcycle rally. And Berkowitz may have inadvertently brought it on himself.

Berkowitz is now a board member of SMRI, the company formed to hold the rally’s intellectual property and owner of several recently registered federal trademarks. “Recent” could be a key point if vendors ever challenge SMRI’s trademark in civil or administrative courts.

The Bitter Irony. The key issue in Sturgis and Daytona Beach is whether or not the names of geographic locations (such as Sturgis, Black Hills or Daytona Beach) and events loosely titled rally or bike week are generic, or specific. These trademarks hinge on that question.

SMRI has registered the following marks: Sturgis Bike Week (six sequential registrations covering an exhaustive number of products), Sturgis, Black Hills, and Not For A Long Time But For A Good Time.

Berkowitz has become the fiercest defender of the Sturgis Bike Week trademark based on the argument that the term is not generic. In Daytona Beach, his and the Daytona chamber’s attorneys argue that the other vendor, Consolidated Distributors and Joe Cool Inc., should have their Daytona Beach Bike Week marks invalidated – as generic.

Berkowitz has also filed with the U.S. Patent and Trademark Office (USPTO) to trademark Laconia Bike Week along with an almost random list of terms and slogans related to rallies and motorcycle riding, including Ride or Die, World's Oldest Motorcycle Rally, Ride Forever, Ride Fast Live Hard, Live Free Ride Free, We Ride, and Laughlin 2005 (and every year through 2010).

The strength and value of the trademarks turn on what the holder can enforce. How that will play out remains to be seen. SMRI has already flexed its legal muscle to win a settlement with rally organizers in Sturgis, Ky. In May organizers of the Kentucky rally known as Little Sturgis agreed to change the event’s name to Kentucky Bikerfest.

Dealernews requests for interviews with the Sturgis Chamber of Commerce, City of Sturgis, and SMRI board member Jim Burgess were all referred back to SMRI, board chairman Dean Kinney, and Berkowitz.

If You Can’t Beat ‘Em. SMRI was essentially formed last year when opponents to the Sturgis Chamber of Commerce’s rally trademark bid decided to stop fighting and instead work together. The opponents involved, according to federal records, were Berkowitz/Hot Leathers, Sturgis Bike Week Inc., Three Marketeers, and Sturgis Motorcycles Inc.

“The chamber purchased the intellectual property of Sturgis Bike Week Inc. Then the chamber and the remaining opposers sat down to talk about what [they could do],” Kinney explains. “Everybody learned a lot from each other. There was agreement that the mark was protected [and that] it would be best if those marks were somewhat insulated from politics. We thought it was important that the company not have any shareholders.”

The SMRI board consists of unpaid volunteers, most of whom have some indirect stake in the rally. Board members are:

  • Kinney (chairman), who owns entertainment booking company HomeSlice as well as an interest in the Loud American Roadhouse and some vacation rental properties;
  • Berkowitz, owner of Hot Leathers and Good Sports Inc.;
  • Burgess, part owner of five South Dakota Harley-Davidson dealerships;
  • banker John Johnson;
  • Ross Lamphere, retired teacher and owner of Lamphere Ranch Campground and the Lamphere Ranch;
  • Jamie McVay, Sturgis City Council member and owner of Black Hills Drywall;
  • Karen Simmons, CPA and board liaison to the Sturgis Chamber of Commerce; and
  • Susan Johnson (not related to John Johnson), CEO of Deadwood Central Reservations.

HomeSlice managed the rally’s intellectual property for the chamber when it owned the marks, and manages them now for SMRI – for no compensation, Kinney is quick to point out. Berkowitz became the primary apparel licensor and the only one empowered to grant sublicenses. (He clarifies that the licensing terms are “something that has to go through HomeSlice” for final approval. Berkowitz was working on approving four sublicenses at the time of our interview, but he did not reveal specifics.)

“I went to SMRI and asked how we do this. They said, ‘you are a licensee, you can offer a remedy to this so that these people can design their own graphics and become legitimate and sell licensed merchandise,” Berkowitz says. “The issue that came up most prominently was that there were some apparel dealers that wanted to continue to sell their designs.”

SMRI chairman Kinney says it’s important to protect the quality of rally merchandise and that the trademark enforcement is no threat to mom-and-pop vendors. “I think mom and pops are not producing their own product; they are buying product and selling it here,” he says.

Kinney argues that instead, more expensive rental fees for exhibit space may have strained small vendors. “It has kind of pushed them out of the game or onto side streets where there is not as much foot traffic and the rents are a little bit cheaper. We feel that the variety the mom-and-pop vendors provide is important, and we would like to keep them here. But you can’t blame property owners for getting the most rent they can for their property,” he says.

Chilling Effect of Legal Threats. Some vendors and suppliers say SMRI’s threats of legal action against those who try to sell unlicensed product is already affecting their businesses. Some say they want to fight but cannot afford the $150,000 to $200,000 in legal fees that such a fight would cost.

“There’s people who come in here with a quarter-million dollars worth of stuff,” says wholesale apparel supplier Bob Quinn. “They don’t know what to do this year because they don’t want to get stuff confiscated, or be told they can’t take it off the truck.”

Quinn and others fear that trademark enforcement and limited licenses will cut down on the variety of goods available at the Sturgis rally. “All SMRI is doing right now is offering one-year licenses. It’s just a few guys who, for reasons beyond my understanding, want to control the whole thing,” Quinn says. “Several companies that paid royalties for years have been kicked out the back door. “In years past there have been 700 vendors at the rally. If things had gone the way they wanted it to, they would have three.”

Kent Mortimer, owner of Renegade Classics, has been selling his own T-shirt designs at the Sturgis rally since 1987. He also sells his designs through 28 franchised outlet stores around the country and, until recently, on the enthusiast website BikerOrNot.com.  The website received a cease and desist letter from SMRI attorneys and as a result has stopped selling his shirts, he says.

Mortimer adds that Berkowitz approached him in 2010 and told him it would be the last year he could sell his Sturgis rally shirts without getting a license. “If you call SMRI about licensing, you will get a call from Jerry Berkowitz,” says Mortimer, who maintains that this leaves a competitor in control of whether a vendor can get a license. “He wanted me to pay $1.50 per T-shirt, $2.50 per long sleeve tee, and $3.50 per sweatshirt to Hot Leathers to print my own designs. And Jerry would have to approve all your designs.”

Mortimer hired an attorney, who has sent a letter to SMRI stating Mortimer’s intention to fight any attempt to enforce the mark. “Right now everybody is trying different strategies. Some people are local and don’t think they are going to be bothered because they are local. Some people are trying to get grandfathered in,” he says.

Mortimer adds that he doesn’t object to reasonable licensing fees but that he questions the validity of some of the trademarks. “At any motorcycle event, you’ve always been able to put the city name and the year [on souvenirs]. Now they are saying they own it,” he says. “We may just go back there and sell helmets, leather, boots and other items that don’t have any words on them.

“A lot of other people are going to make shirts that say South Dakota Rally, so it is cutting down on the publicity the [Sturgis] rally gets,” Mortimer adds.

Tom Monahan of Tom's Ts designed the Sturgis Chamber of Commerce’s rally logo back in 1986 and has been printing the chamber’s official Sturgis Rally shirts since that time. His business produces 15 to 20 designs a year and the rally accounts for 65 percent of his annual business. He says he’s always paid a licensing fee, but in the past it was to the chamber.

“We’re just going to wait and see at this point. Things change daily as far is what is going to happen with enforcement of the marks,” Monahan says. “Last I heard, they intend to enforce the marks. Anyone selling things that are not licensed products, they will be confiscated.”

That would be an unpleasant spectacle for riders attending the rally, Quinn notes, “especially if bikers come into town and see ICE [Immigration and Customs Enforcement] agents going into tents and arresting people.”

Quinn owns Express Art in nearby Rapid City. His company wholesales embroidered clothing for company uniforms and local souvenir vendors. Rally items account for a large percentage of Express Art’s business. “We set out to walk the line and not infringe on the trademark. I’m $65,000 behind [in] sales compared to last year. We’ll be out of business before the summer is over unless this turns around,” Quinn says.

“We do a lot of embroidered ladies’ stuff. Nobody else feeds that niche the way we do,” Quinn adds. “We went right to SMRI and said ‘this is what we’ve done for years and this is what we want to do.’ Dean [Kinney] came to me after the meeting and said he thought I had a special situation.

“Then I got a call from Jerry. I told him, ‘As a screen printer, you can do 1,000 shirts an hour. As an embroiderer, I can only do 72.’ He wasn’t sympathetic to that.”

Quinn echoes Mortimer’s assertion that the licensing fee quotes are too high to bear, even though Quinn’s quote was lower: $1 per T-shirt, $1.50 per long-sleeved tee and $2 per sweatshirt. He also thinks SMRI’s claim to the trademarks is weak.

“They’ve over-claimed. They say we can’t use Sturgis. I’ll be damned if I can’t put Sturgis, South Dakota on a shirt. I can put a buffalo and Black Hills on a shirt. But [now] I can’t sell them,” Quinn says. “These guys have destroyed me and I don’t have the wherewithal to fight it.”

That, say trademark experts, is a shame because vendors would probably win if they challenged the mark in administrative and civil courts. “Trademark registration does not cut off rights of prior users,” notes attorney Joseph Dreitler, whose resume includes running the trademark departments at Procter & Gamble and Budweiser. If use is prior to the date the trademark is registered, that user may have rights.

A Challenge in Florida. While SMRI says the Sturgis marks are not generic, attorneys for Berkowitz and the Daytona Beach Chamber of Commerce are mounting the opposite challenge in federal court in Florida and with the USPTO – effectively putting Berkowitz on both sides of the argument.

“We are looking for a court order that says the phrase of Daytona Beach Bike Week is generic and cannot be claimed by anyone,” says attorney Heather Bond Vargas, who represents the Daytona Beach Chamber in that case (USPTO has put the trademark challenge on hold until the civil case is resolved, because the issues in both matters are the same).

Attorney Mario Ceste, who represents Berkowitz’s Good Sports Inc. in the challenge, says he believes the companies that tried to register the Daytona mark may have used fraudulent information to get them. “We believe that somebody has tried to register a trademark, Daytona Beach Bike Week, claiming exclusive prior use, and they have done so on a fraudulent basis, making inaccurate statements to the USPTO,” he says. “We want to make sure that these registrations – Daytona Beach Bike Week or derivatives – that are pending are denied, and any that exist are turned over.”

While Ceste is focusing on the basis of the Daytona Beach marks, he hedges on the matter of generic use. “A lot of people have been using the Daytona Bike Week mark for many, many years,” he says. “There is a lot of usage so I fail to see how they could establish it legitimately.”

Sturgis, Ceste maintains, is different because the Sturgis Chamber of Commerce sought to register the trademark 10 years ago; the Daytona Beach case involves a shirt printer and vendor recently seeking control of the mark.

Berkowitz says the difference is the rallies themselves. Both are long-time events which draw hundreds of thousands of visitors each year, both are largely built around Harley-Davidson riders, and management of both has shifted over the years. But he says the difference in Sturgis is that it’s iconic. “I think that Sturgis is much different than Daytona. I think Sturgis is very iconic,” Berkowitz says. “I’m not so sure that Daytona is what Sturgis is. It’s a different animal. I just think that Sturgis is iconic in its name, and is a whole separate show.”

Trademark Trifecta. It’s an open question as to how the Sturgis and Daytona Beach situations will affect Berkowitz’s efforts to register the Laconia Bike Week mark. If the USPTO determines that Bike Week is generic for Daytona Beach, it could apply the same reasoning to other rallies. Challenges to future Bike Week mark applications seem likely.

Charlie St. Cloud, executive director of Laconia Motorcycle Week, is mystified as to why anyone would want to limit the use of a place or rally name. “As a marketer, I want the name Laconia all over the world,” he says. “We have considered trademarking Laconia Motorcycle Week. What I would do to protect it, then, is to license it for $1 per vendor.”

St. Cloud is not sure what effect the Sturgis trademark dispute will have on the rally, but he prefers to avoid bad blood. “They have lost track of what a motorcycle rally is,” he says. “It is not happening because of One-Eyed Jacks or Buffalo Chip. It’s not special because it’s there. It’s special because of the people who go. I’m there to see people, whether it’s Laconia, Sturgis or Daytona Beach.”

The Laconia rally just celebrated its 88th year. The Laconia Motorcycle Week Association has been running the rally since it took over from the New England Dealers Association in 1991. Berkowitz has a license from the rally association to use its logo on merchandise. Terms of that deal are undisclosed.

The legal rumbling from Sturgis makes St. Cloud wary about Berkowitz’s effort to register a Laconia Bike Week mark, but he doesn’t think it could stick. “We had a guy locally who did that with Gypsy Tour. Then he came after us for using it,” he says. “The court threw it out. He sued the AMA and it never made it to court.”

The USPTO lists 57 live trademarks related to Sturgis; of those, 22 are related to motorcycles or the rally. SMRI, by its own account, owns nine, and one of those was purchased from T-shirt vendor Virginia Rhodes, widely regarded as the rally’s first vendor, for an undisclosed sum.

As with many legal situations, the devil is in the disclaimers. Many of the marks registered to SMRI include a disclaimer carrying the boilerplate language: “NO CLAIM IS MADE TO THE EXCLUSIVE RIGHT TO USE ’STURGIS’ APART FROM THE MARK AS SHOWN.”

“All the disclaimers [means] there is someone watching this,” says attorney Dreitler, who says he is not involved in any rally-related cases. “What it means is that at some point there were a number of people who were able to get it registered, so it is not distinctive. No one had exclusive rights to use it. It appears that the trademark office was letting people do that.”

That won’t stop SMRI from fighting a war of attrition against unlicensed rally goods, Dreitler predicts. “They are going to claim that Sturgis is a trademark and it has secondary meaning,” he explains, adding that a place name and Bike Week could be trademarked if the applicant could show that their use together has taken on special significance as a product source. “That’s the way it’s played and that’s what’s happening. As part of your strategy, you’ve got to go after anyone who’s doing something new.”

Trademark attorney Mark Malek, also not involved in any rally-related cases, says secondary meaning would be hard to prove, but the cost of a challenge can be prohibitive.

“It basically comes down to whether you have the money to pursue it,” Malek says. “All a trademark really is, is a source identifier. You should know that when you buy an SMRI T-shirt, you will know it comes from them. That is not what they are trying to do.”

What form the trademark enforcement efforts might take at the upcoming Sturgis rally is still a mystery. SMRI chairman Kinney is mum on how the organization will handle what it views as on-site violations of the mark.

“Given some of the things that are in the air now, I’d like to think there will not be that much unlicensed product,” Kinney says. “I don’t know that we are necessarily going to broadcast what we are doing about enforcement. People should either sell product that does not require a license, or make sure they are selling licensed product.”

That said, Kinney says he expects SMRI to deploy some sort of patrol force. “We will have teams that go out and review merchandise to see that everything that should be licensed is licensed, and also to educate,” he says. “We are trying to educate before and during the rally. Our legal team will lead that.”

Malek speculates that on-site enforcement of the trademark will amount to SMRI agents doling out cease-and-desist letters to perceived violators.

“You would do that, within that one week. No one will stop selling the T-shirt right then and there,” he says. “You sue them and see how much money they made off use of that mark. It’s how much money can you say is directly related to the trademark itself, and not just the item.”

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