State Supreme Court Win in Dakota Industries, Inc. v. Cabela’s

May 26, 2009

The South Dakota Supreme Court affirmed judgment in favor of Marshall, Gerstein & Borun client Cabela's, the outdoor equipment and clothing retailer, against claims of trademark infringement brought by the plaintiff Dakota Industries, Inc. In the trial court, the plaintiff claimed rights in DAKOTA for a variety of clothing and charged with trademark infringement and state and federal unfair competition based on Cabela's sales of clothing labeled "Dakota Vest" and "Dakota Jacket." After targeted discovery on plaintiff's tax and business records aimed at substantiating the suspicion that the plaintiff had abandoned any rights in DAKOTA, MGB moved for and prevailed on summary judgment with the trial court finding abandonment of the DAKOTA mark due to non-use.

On appeal to the state Supreme Court, the plaintiff claimed that the trial court erred by (1) granting summary judgment while simultaneously denying a motion to compel discovery from Cabela's, (2) imposing the summary judgment burden on the non-movant, and (3) finding abandonment of the South Dakota state trademark registration due to non-use. On May 20, 2009, the South Dakota Supreme Court issued its opinion agreeing with Cabela's defense of the appeal on each issue.

In the trial court, Cabela's had opposed the plaintiff's motion to compel sales information for the accused products on the basis that such information was not relevant to the question of abandonment and therefore not essential to opposing the motion for summary judgment. In addition to confirming Cabela's position regarding the non-essential nature of the requested information, the South Dakota Supreme Court noted that Cabela's correctly argued that sales information would necessarily be limited to sales within South Dakota despite the plaintiff's demand for nationwide sales information since the plaintiff had not plead infringement of its federal registration for DAKOTA. MGB also successfully cancelled the plaintiff's federal registration for DAKOTA before the TTAB in response to the South Dakota state lawsuit as part of its strategy to preempt a possible subsequent federal court trademark infringement lawsuit by the plaintiff. Regarding the parties respective burdens on summary judgment, the Supreme Court found that the trial court correctly applied the initial burden to establish a prima facie case of abandonment on Cabela's and that Cabela's had satisfied that initial burden with its targeted discovery but that the plaintiff had failed to rebut the prima facie case with any evidence of continued used of DAKOTA. The Supreme Court also agreed with the arguments advanced by MGB on abandonment. The plaintiff claimed that the trial court improperly adopted the Lanham Act presumption that three (3) years of non-use results in a presumption of abandonment. In response, MGB argued that even though there was no defined period of non-use for a finding of abandonment in the South Dakota trademark statute, the trial court had only sought guidance from the federal law and found abandonment on the much longer period of non-use of six (6) years established during discovery. The South Dakota Supreme Court agreed with MGB and affirmed summary judgment on the issue of abandonment.

The MGB attorneys in both the trial court and on appeal before the South Dakota Supreme Court were Thomas I. Ross and Gregory J. Chinlund. [Supreme Court of the State of South Dakota #24950 (2009 SD 39)] The full opinion is available below.

Supreme Court Decision