Since 1938, a motorcycle rally has occurred almost every August in and around the City of Sturgis, South Dakota. It was the brainchild of Clarence "Pappy" Hoel, who in the late 1930s owned the local Indian motorcycle dealership and founded a local motorcycle club, the Jackpine Gypsies. To this day, the Jackpine Gypsies host the motorcycle races around which the rally first began. By the late 1970s, the rally was attracting several thousand people each year to the Black Hills of South Dakota, and the rallygoers had started to attract independent vendors, who sold them really related souvenirs like t-shirts, pins, and other knickknacks. In 1986, Tom Monahan, a local artist and vendor, donated a composite mark for the rally to the Sturgis Area Chamber of Commerce, which had recently accepted a central role in promoting the rally: One of the rally's supporters had joined forces with the Chamber, turning it into the primary source of information for people interested in attending.
MMMMM In 1987, the Chamber debuted a licensing program for the Monahan mark. The mark is in the shape of a circle horizontally bisected by two motorcycles and the word "Sturgis." The words "Black Hills Motor Classic" are written in an arc pressed against the upper bounds of the circle. Filling in the rest of the circle's upper half are ten stars, also in an arc, and the head of a bird of prey in profile, facing right. In its lower half, six buffalo walk along the circle's edge. Written above them, in a curve parallel to the circle's lower edge, are the words "Rally & Races Black Hills S.D." Finally, a couple feathers dangle from each end of the section that bisects the circle. The Chamber advertised that products displaying the mark could be called "officially licensed." The Chamber registered the mark federally in 1996 and, in the 2000s, acquired two word marks that some rally vendors had also registered federally: "Sturgis Bike Week" and "Take the Ride to Sturgis." These three marks are only some of the many words and designs that vendors have used to associate their goods and services with the rally, which has come to be known by many names, including just "Sturgis."
The 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. In 2010, the Chamber assigned its rally-related marks to Sturgis Motorcycle Rally, Inc. (SMRI), an entity it helped create that year. SMRI's sole purpose is to license its marks to others. It, as the Chamber did before it, advertises that the profits from its licensing program will go to support the City of Sturgis. The Chamber used that sales pitch for decades to convince vendors to buy a license to display the Monahan mark on their rally-related goods. Today, however, the licensing program seeks to control virtually all rally-related merchandise, asserting that if a vendor wants to sell an item using the geographic terms "Sturgis" or "Black Hills" in conjunction with the rally, he must first apply for and receive a license from SMRI that will cost him about eight percent of the wholesale price of each item sold.
Paul and Carol Niemann, along with their son Brian Niemann, own Rushmore Photo & Gifts, Inc., a souvenir provider in Rapid City, South Dakota, that for years sold a long line of goods related to the rally, including some that it used to advertise were "officially licensed" even though they were not. With the sole exception of some postcards it once created that displayed the Monahan mark, Rushmore has not asked the Chamber or SMRI for permission to sell its rally-related products, many of which display the word "Sturgis" or the name "Sturgis Motor Classic." In 2011, on receiving a federal registration for the word mark "Sturgis" when used on goods and services related to the rally, SMRI sued Rushmore, the Niemanns, JRE, Inc. (a dissolved South Dakota corporation that Paul and Carol Niemann had owned), and Wal-Mart Stores, Inc. (which had retailed some of Rushmore's rally-related products). In its amended complaint, SMRI alleged that the defendants, through their participation in the selling of Rushmore's unlicensed rally-related products, had violated several provisions of the Lanham Act, see 15 U.S.C. § 1051 et seq., and related South Dakota statutes. The defendants, in their answer, filed several counterclaims against SMRI.
A jury rendered a verdict in favor of SMRI, awarding it $912,500 in damages. The district court largely denied the defendants' motion for judgment as a matter of law, but granted it as to JRE since JRE is a dissolved corporation without any assets. The district court also held that SMRI is estopped by laches and acquiescence from recovering damages from the defendants. The district court entered a permanent injunction against the remaining defendants and awarded SMRI some costs, but not fees. The defendants appeal from the judgment below, and SMRI cross-appeals from several of the district court's orders.
Download Sturgis Motorcycle Rally Inc. v. Rushmore Photo & Gifts Inc.