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Salvo Guns LLC v. SilencerCo LLC

United States District Court, D. Utah, Northern Division

December 19, 2017

SALVO GUNS LLC, Plaintiff,
v.
SILENCERCO, LLC, Defendant.

          MEMORANDUM DECISION AND ORDER

          ROBERT J. SHELBY, UNITED STATES DISTRICT JUDGE.

         This case involves a dispute over the name “Salvo.” Plaintiff Salvo Guns holds a trademark on the name, and brought this suit against Defendant SilencerCo after SilencerCo began manufacturing a shotgun silencer it named the “Salvo 12.” SilencerCo contends the suit is baseless because Salvo Guns no longer owns the mark, having sold it as part of the 2014 sale of its Layton, Utah location to a third party. SilencerCo has now moved for summary judgment on this basis. For the reasons below, the court concludes SilencerCo has not met its burden of demonstrating that Salvo sold or does not otherwise own the mark.

         BACKGROUND

         Prior to 2014, Plaintiff Salvo Guns owned and operated a firearms facility in Layton, Utah. The facility featured a shooting range and a retail sales location for firearms and firearm accessories. In 2014, Salvo entered into a contract with Get Some Guns & Ammo-who is not a party to this case-to sell the facility. Get Some, a competitor who was already operating several shooting ranges and retail stores, subsequently began operating the facility under its own name.

         Later that year, Defendant SilencerCo, a local manufacturer of firearm accessories, began producing and marketing a shotgun suppressor it called the “Salvo 12.” SilencerCo attempted to register the mark “SALVO” with the Patent and Trademark Office, but received an initial denial on account of Salvo's already-existing “Salvo Guns” Registration. SilencerCo subsequently filed a petition to cancel the Registration on the basis of abandonment. Salvo responded by filing this lawsuit, which stayed the PTO action. SilencerCo has now moved for summary judgment.[1]

         ANALYSIS

         Salvo's Complaint asserts various federal and state law trademark and tort claims, all of which are premised on the theory that Salvo retained the “Salvo” mark after the sale of its Layton location to Get Some. Salvo contends that Get Some and Salvo never intended to transfer the mark in the sale, as Get Some was interested only in the physical location and assets. SilencerCo contends that regardless of Salvo's and Get Some's subjective intentions, the use of certain language in the sale contract means the mark was necessarily transferred as a matter of law, so Salvo no longer owns it. Alternatively, SilencerCo argues Salvo abandoned the mark. The court addresses each argument in turn.

         Whether the Mark Was Sold to Get Some

         The court first addresses whether the mark was transferred in the transaction between Salvo and Get Some. SilencerCo's primary argument on this point is that the mere use of the phrase “good will” in the sale contract caused the mark to be sold, whether Salvo and Get Some intended that result or not. The court first addresses this argument, and then turns to whether the intent of the parties-as evidenced by the contract language and extrinsic record evidence-was that the mark be sold in the Get Some transaction.

         I. Inclusion of “Good Will” in the Contract

         SilencerCo's primary argument, as discussed, is that the use of certain words in Salvo's contract necessarily caused its mark to be sold to Get Some as a matter law, regardless of what the remainder of the contract or any extrinsic evidence demonstrates about the intent of the contracting parties. Initially, that argument was focused on the inclusion of “good will” in the contract; because the contract included the sale of the business's “good will, ” and because “good will” under Utah law unequivocally includes trademarks, SilencerCo argued, the business name and trademark were necessarily sold in the transaction. This argument evolved, however, and at oral argument SilencerCo's position was that the sale of “good will” plus the contract's sale of the entire business and its inclusion of a covenant not to compete meant, regardless of the contracting parties' intentions, that the mark was necessarily sold. The court will take each argument in turn.

         As discussed, SilencerCo's initial argument was that Salvo's and Get Some's intentions as to whether the Salvo mark would be sold are irrelevant because they choose to use the term “good will” in their contract, which, according to SilencerCo, means the mark transferred as a matter of law.[2] But this presumes that “good will” includes trademarks under Utah law, which is not necessarily the case. In Utah, good will can, but need not include trademarks or tradenames. Indeed, “good will” under Utah law can mean many things. It can be broadly described as “the general public patronage and encouragement which [an establishment] receives from constant or habitual customers, on account of its local position, or common celebrity, or reputation for skill or affluence, or punctuality, or from other accidental circumstances.”[3] It is the “probability that old customers will resort to the old place to seek old friends, and the likelihood of new customers being attracted to well advertised and favorably known services or goods.”[4] It can reside in the business entity itself-“enterprise goodwill”-or in people associated with the entity-“personal goodwill.”[5] It can derive from the location of a business, the name of the business, the people employed by it, or those managing it. In short, “good will” in Utah can mean just about whatever contracting parties intend it to mean. Contrary to SilencerCo's contention, however, it need not necessarily include trademarks or tradenames.[6]

         At oral argument SilencerCo narrowed this argument somewhat, contending that even if inclusion of “good will” in the contract did not itself transfer the mark, the addition of the sale of the entire business plus the covenant not to compete means the mark was necessarily sold, regardless of the contracting parties' intentions.[7] But even this narrowed proposition proves too much. Utah cases state merely that this is the “general rule, ”[8] and they make clear that notwithstanding this general rule a trademark can, depending on the circumstances, be transferred only for limited use, [9] or not at all.[10] Moreover, SilencerCo cannot even invoke this general rule, for as will be discussed below, it is not at all clear that Salvo sold Get Some its entire business.

         In short, SilencerCo has not shown that the intent of the contracting parties in this case is irrelevant to the question of whether Salvo sold the “Salvo” trademark to Get Some. It has not established that “good will” in a sales contract necessarily includes trademarks under Utah law, nor that adding the sale of the entire business plus a covenant not to compete necessarily changes anything, nor that Salvo's contract even meets this standard. Thus, the court turns to the intent of the contracting parties.

         II. The Contracting Parties' Intent

         Having concluded the terms of the contract identified by SilencerCo do not, as a matter of law and without regard to intent, establish Salvo's trademark was sold with its Layton location, the next question is whether SilencerCo has shown that the contracting parties intended that result. To determine intent the court looks first to the language of the contract as a whole.[11] In the absence of ambiguity, the parties' intentions can be ascertained from the contract language alone.[12] But where an ambiguity exists-that is, where a term or provision is capable of more than one reasonable interpretation-the court turns to extrinsic evidence for indicia of intent.[13]If, at that point, the ambiguity persists, questions of fact preclude summary judgment.

         On the question of whether the contracting parties intended that the mark be sold, there are two theories under which SilencerCo might be granted summary judgment: (1) if the contracting parties intended that Salvo's entire business be sold, that, coupled with the inclusion of good will and the covenant not to compete, would establish at least a presumption under Utah law that the Salvo mark was sold as well; or (2) even if the entire business was not sold, if the contracting parties intended that “good will” include the Salvo mark, SilencerCo would be entitled to judgment, as the contract includes “good will” in the sale. The court first addresses whether the contract language unambiguously establishes either of these theories, and then, finding it does not, turns to whether SilencerCo has provided extrinsic evidence sufficient to demonstrate the contracting parties intended either result.

         A. Contract Language

         The first question is whether the contract itself unambiguously establishes that the parties intended Salvo's entire business to be sold, for if that is so, as discussed above, Utah law provides at least a presumption that the Salvo mark was transferred as well.[14] In answering this question the court assesses whether the contract language is “capable of more than one reasonable interpretation because of uncertain meanings of terms, missing terms, or other facial deficiencies.”[15] If so, the contract is ambiguous, and not itself determinative of intent.

         Several aspects of Salvo's contract demonstrate that it could be reasonably interpreted to reflect the parties' intentions to transfer something less than the entire business. Most striking, perhaps, is that nowhere does the contract mention service marks, trademarks, or the transfer of the name “Salvo.” By contrast, the contract is meticulously detailed as to what was sold, listing, for example, one “mop bucket, ” one “mop ringer, ” an “open sign, ” and three “bar code readers, ” among other items.[16] To be sure, explicitly listing the mark is not necessarily a requirement for the mark to be transferred, but it is a factor supporting the reasonableness of an interpretation that it was not.

         Next, the contract allocates the entire purchase price to “Real Estate.”[17] SilencerCo interprets this as Salvo playing “accounting games” for tax purposes. That may be so, but equally reasonable is the interpretation that some aspects of Salvo's business were excluded from the sale-namely, nontangible assets like the company's name and its ability to use that name in connection with other physical or online locations.

         In that vein, the contract contains a noncompete provision that prohibits Salvo from operating a business under a name similar to “Salvo” in Utah for three years.[18] SilencerCo contends this provision supports the notion that the “Salvo” name was sold because this provision serves to provide additional protection by prohibiting Salvo from using similar names. This may be a reasonable interpretation, but similarly reasonable is the possibility that the parties intended Salvo to sell only the Layton location and retain the ability to operate a business using the Salvo name outside Utah, or inside Utah after the three-year window closed. In short, these ...


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