Supreme Court at odds over trademark infringement of overalls logo

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The Wisconsin Supreme Court is at odds over trademark infringement case involving an overalls logo representing a northern Wisconsin resort that was turned into condominiums.

In a 4-3 opinion released on Wednesday, the court analyzed if Wisconsin trademark law permitted an implied assignment of trademarks to a new owner when no other business assets or services are transferred, and whether trademarks are transferred to a condo association when a property is converted to condos.

The case centers on the usage of the Bibbs Resort logo depicting a pair of red bib overalls with a handkerchief hanging out of the back pocket. The Ritters owned Bibs Resort in St. Germain, and in 1998, they converted it to a condominium form of ownership. The condo declaration recognized the Bibs Resort Condominium Association as the entity responsible for operation.

In 2006, the Farrows purchased the resort management part of the business and some of the buildings. After the sale, the relationship between the Ritters and Farrows soured. The Ritters terminated their rental management agreements for the seven units that they still owned, and four other unit owners followed suit. The Ritters then rented out those units and provided services under the name “The Cottages at Bibs Resort” and “Bibs Cottages” using the Bibbs Resort logo.

In 2010, the two owners began a decade-long court battle that included the issue of trademark infringement. The Farrows claimed that they assumed ownership of the logo when they purchased the resort management business and the Ritters infringed on the mark when they used it to represent their condos.

A circuit court granted summary judgment to the Ritters and the Association, and ruled that no one exclusively owned the Bibs Resort marks after the resort was converted to condos. The Court of Appeals affirmed but on other grounds. It ruled that the conversion to condos transferred the logo to the condo association, so the Ritters couldn’t have transferred ownership to the Farrows during the 2006 sale.

The state Supreme Court, in a 4-3 opinion, disagreed. Justice Jill Karofsky — with Justices Rebecca Bradley, Rebecca Dallet and Brian Hagedorn in agreement — wrote that it was a “well-settled legal principle” that trademarks and their associated goodwill pass with the sale of a business.

The majority opinion said the condo association incorrectly linked the Bibs Resort marks to the real property, rather than the resort management services. Under that logic, the association argued that the logo transferred with the resort-to-condo conversion.

“This argument violates the longstanding principle that marks cannot exist separate and apart from the goodwill of the product or service they symbolize: the resort management services,” Karofsky wrote.

Even if the resort marks could be separated from the resort management services, the majority said there was no evidence that the condo’s bylaws gave the association the ability to own any items of intangible property and it was undisputed that the association never provided resort management services.

Karofsky also wrote that the language in the sale documents clearly showed that the Ritters sold the Farrows the entirety of the resort-management business, including exclusive ownership of and rights to the Bibs Resort logo.

With those conclusions, the state Supreme Court reversed the circuit court’s grant of summary judgment and remanded the case to the circuit court for reconsideration.

Chief Justice Pat Roggensack, Justice Ann Walsh Bradley and Justice Annette Ziegler disagreed with the majority’s conclusions.

In her dissent, Roggensack said the majority erred by failing to apply summary judgment methodology and showed a “basic misunderstanding of the law.” Her opinion said the Farrows had a right to use the Bibs Resort name and logo, but not the right to exclusive use.

“And therein lies the problem,” Roggensack wrote. “The right to exclusive use of a tradename or trademark is required to maintain an infringement action under Wisconsin law.”

The majority addressed the dissent’s critique in a footnote, saying the dissent “erroneously conflates trademark use with trademark ownership.” Follow @“WLJreporter”