Parties' Use Of A Foriegn Technical Legal Term Creates Presumption That It Is Used In Its Technical Legal Sense
SUNSTAR v. ALBERTO-CULVER CO. (October 28, 2009)
Alberto-Culver is a significant domestic producer of hair and skin-care products. In 1980, it transferred Japanese trademark registrations to Sunstar, a Japanese manufacturer of similar products. The deal required Sunstar to transfer the trademarks to Bank One Corporation in trust for 99 years. Bank One, in turn, licensed them back to Sunstar and was obligated to return the marks to Sunstar after the term of years. As trustee, Bank One could stop the use of the mark if it had reasonable grounds to think that Sunstar committed an act that created a danger to the value or validity of the marks. Alberto-Culver and Sunstar referred to the rights granted as a senyoshiyoken, the Japanese legal term describing a license under which the licensee has the exclusive right to use the marks in its geographic area and can sue infringers in its own name. Sunstar paid $10 million for the license. In 1989, Sunstar asked for permission to use a variant of one of the marks. Alberto-Culver refused. Sunstar ended up paying another $10 million for the rights to use the variant. In 1999, Sunstar again asked for permission to use a variation of one of the marks. This time, when Alberto-Culver refused, Sunstar filed suit. The suit sought a declaration that the requested variation was permitted by the license agreement. At trial, the district court refused to instruct the jury on the legal meaning of the term senyoshiyoken, concluding that it was irrelevant. The jury returned a verdict for Alberto-Culver but awarded no damages. The judge enjoined Sunstar from using the variation of the mark, terminated the agreement as a result of Sunstar's breach and ordered the marks returned to Alberto-Culver. Sunstar appeals.
In their opinion, Judges Posner, Manion and Evans vacated and remanded. The Court first disagreed with the lower court's conclusion that Japanese law was irrelevant. The Court stated that if sophisticated contracting parties use a foreign technical legal term in their contract, the presumption is that it is used in its technical legal sense. The issue for the Court, therefore, was whether the holder of the Japanese senyoshiyoken is permitted to use variants of licensed marks. The Court then criticized the general use of expert testimony to prove the content and meaning of foreign law. Noting that such testimony is not permitted when a federal court applies the law of a state or when the court of one state applies the law of another state, the Court expressed a strong preference for secondary materials over the testimony of expert witnesses. On the merits, the Court noted that American law does not consider a change in a mark's typeface or a modest change in the appearance or wording of a mark a material alteration. Japanese law is the same. Particularly here, where the license was for a period of 99 years, it may have even required modest changes in the mark over time to ensure its continued value and validity. The Court concluded that the holder of a Japanese senyoshiyoken is entitled to make minor changes in the mark. Although the Court expressed its temptation to order Alberto-Culver’s claims dismissed with prejudice, it declined to do so. Sunstar had not requested that relief and Alberto-Culver was not afforded an opportunity to respond. It did, however, vacate the judgments and remand the case.
