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For years the problem just hung there, like a snowloading cornice waiting to crack. For a decade, two separate companies employed the Black Diamond apparel trademark without challenging the other’s right to use it. Black Diamond Equipment Ltd. of Salt Lake City and Black Diamond Sportswear Inc. of Barre, Vt., were traversing dangerous ground, and now that ground has given way to an avalanche of legal activity.
The companies are now entrenched in a court battle to determine which will have the right to produce Black Diamond apparel, though it is unclear whether the fight will take place in Utah or Vermont.
In August 2003, Black Diamond Equipment filed a suit asking the U.S. District Court of Utah for a “declaratory judgment” that it was not infringing on the trademark. But U.S. District Court Judge Tena Campbell of Utah has declined to hear the case.
She called Black Diamond’s filing “procedural fencing,” suggesting that Black Diamond Equipment — anticipating that Sportswear was about to file a suit in Vermont — raced to court to gain home-field advantage. She deferred to the Vermont federal court where Black Diamond Sportswear filed a lawsuit in October 2003.
Black Diamond Equipment President Peter Metcalf disputes the procedural fencing claim, and told SNEWSÂ® he will appeal Campbell’s decision in the 10th Circuit Court of Appeals in Denver.
Gary Guggemos, president and CEO of Black Diamond Sportswear, said the case belongs in Vermont because his company is the true owner of the trademark. Guggemos told SNEWSÂ® that his company was issued its trademark on Jan. 9, 1990, while Black Diamond Equipment first registered for its trademark months later in September 1990.
Black Diamond Sportswear attorney James Goggin said, “We’re the ones that have the real case because we have the trademark, and we have the right to sue for infringement.” He said Black Diamond Equipment cannot sue for infringement and may only seek a declaratory judgment, which awards no damages. The logic is that a declaratory judgment is not sufficient to decide the matter.
While Metcalf prepares his appeal, Goggin says he will move aggressively to have his suit heard in Vermont. “The courts there move pretty quickly,” Goggin said, noting that the trial could begin in six months. Metcalf told SNEWSÂ® that his company will ask the Vermont court to stay any action until the Utah appellate court rules.
Metcalf pointed out that when Campbell declined to hear the case, she in no way suggested that Black Diamond Equipment lacks a valid claim over the trademark. She did not rule on the substantive merits of the trademark case; she merely indicated that the case belongs in a Vermont court.
In fact, according to Metcalf, Campbell agreed that there is a valid conflict over the trademark ownership. While Sportswear was first to secure a federal trademark, Metcalf said that for several years it did nothing to challenge Black Diamond Equipment’s use of the trademark. “The trademark system is a self-policing system,” said Metcalf. He claims that Sportswear’s lack of action means that it acquiesced, giving up sole ownership.
Goggin says that his client did not acquiesce, but Metcalf told SNEWSÂ® that once the case goes to trial his company will make an additional argument. “When we get down to the substantive issues, Black Diamond Sportswear not only acquiesced, but it has been trading off our goodwill,” said Metcalf. “Black Diamond Equipment, through huge investment — PR, advertising and trade shows — created the brand value. If you talk to anybody in the (outdoor) industry and ski industry and ask who is Black Diamond, they’ll say it’s us. They may have beaten us to the filing, but they have been trading off our goodwill.”
Metcalf concedes that he could have avoided a lot of headaches if he had filed first for the apparel trademark shortly after forming Black Diamond Equipment in 1989. He says that at the beginning he was simply unaware that another Black Diamond brand existed. Further, companies file for trademarks by category, and each filing costs money. He said his limited budget allowed him to file for categories incrementally, and his money first went toward hardgoods, which was the company’s early focus.
When Metcalf finally learned of the Black Diamond Sportswear brand, he decided to press on, despite a possible conflict.
By 1993, Metcalf was watching his apparel business grow, and he began to think about gaining sole ownership of the apparel trademark. He said that at the time Sportswear had very limited presence in the outdoor market. “I didn’t see Black Diamond Sportswear anywhere and was wondering if they were using the name,” he told SNEWS. “In early 1993, I contacted Gary and asked if he would be interested in selling the mark. But it looked like we wouldn’t have the money he wanted.”
Throughout the late ’90s, and into 2003, Metcalf and Guggemos met several times to try to strike a deal. But negotiations went nowhere.
Metcalf said that for years he considered Black Diamond Sportswear only a small annoyance. “They only did a few million dollars of business a year, and were positioned in lower-end stores,” he said. But his concern grew as Sportswear increased its presence at the Outdoor Retailer trade shows, and the market began to confuse the two brands. “It really came to a head when Black Diamond Sportswear placed product in Costco. We had a huge outcry from customers and our dealer base,” said Metcalf. He said there was not only confusion in the market, but he worried that his company’s brand value was being diminished.
In spring 2003, Metcalf learned that Guggemos was trying to sell the Black Diamond Sportswear business through a business broker. “I approached the broker and said I would like to buy the mark,” Metcalf said. “But (the broker) said they weren’t selling the mark, they were selling the whole business.” Metcalf didn’t wish to buy the whole company, negotiations crumbled, and the avalanche began.
SNEWSÂ® View: First, it’s important to remember that the pending lawsuit only applies to the use of the Black Diamond trademark on apparel. If Metcalf’s company were to lose the case, he wouldn’t have to change the name of his company. Still, defeat would be a stinging blow to Black Diamond Equipment’s bottom line and market position. Metcalf told SNEWSÂ® that apparel “is a huge, important part of our business.” He says that 50 percent to 60 percent of the top specialty dealers selling gaiters and gloves rank Black Diamond Equipment as one of the top three brands in those categories. So, yes, there’s a lot at stake.
Goggin says that if Black Diamond Sportswear were to lose, it would mean that no company could claim exclusive rights to the trademark on apparel. Also, we have to believe that Guggemos will have a much tougher time selling his company under the cloud of a trademark dispute.
Making matters sticky is the whole notion that companies must aggressively police their brands to maintain trademark rights. While the principles of the two companies met several times in an effort to settle the matter, neither did anything for at least a decade to protect their claims.
Our legal eagles specializing in trademark law tell us that Black Diamond Equipment just might have a case on what is known as the “latches” defense, which states the owner of a trademark can’t just sit back and wait for a long period of time knowing infringement is occurring. If a company does sit back, it could be barred from bringing a lawsuit. The question, our legal advisors tell us, and the one the courts will have to decide, is how long is too long. Also, there will likely be a question regarding the sale negotiations and if that event negated the latches defense.