As previously reported, North Face sued South Butt for trademark infringement and dilution for using the name THE SOUTH BUTT and an arc designed to evoke the well-known logo for THE NORTH FACE. On the eve of a preliminary injunction hearing, the parties reported that they had settled their claims.
The Court thereafter entered two consent injunctions – one against the South Butt defendants (PDF), and another against a store that sold the allegedly infringing products (PDF). South Butt thereafter abandoned its federal trademark application for THE SOUTH BUTT (PDF), which will result in judgment being entered against South Butt in the trademark opposition proceeding before the Trademark Trial and Appeal Board because North Face did not consent to the abandonment.
So it is all over for South Butt, right? Not so fast. Although the terms of the settlement are confidential, there are a number of red flags suggesting that things may not be what they seem.
First and foremost, South Butt is still selling clothing bearing the accused mark THE SOUTH BUTT through its website. In the absence of North Face’s permission, this would constitute a clear violation of the April 12 consent injunction against the South Butt defendants and subject them to contempt of court proceedings. Given the posture of the case, it is clear that North Face is allowing South Butt to continue selling accused products through its website in this manner.
What should we make of this? It is possible that North Face is allowing South Butt to continue to sell merchandise bearing the mark THE SOUTH BUTT under license from North Face, most likely for a royalty. Alternatively, North Face may be allowing South Butt to run out its inventory of accused products, either with or without a license.
The fact that the disclaimers of affiliation with North Face, such as they were, no longer appear on the website would normally point in the direction of a license. In this unusual case, however, it is possible that the disclaimers were removed because North Face found them offensive and did not wish to draw any attention to its association with South Butt. (According to the Answer (PDF), South Butt’s website carried the following disclaimer: “We are not in any fashion related to nor do we want to be confused with The North Face Apparel Corp. or its products sold under “The North Face” brand. If you are unable to discern the difference between a face and a butt, we encourage you to buy North Face products.”)
Second, the consent injunctions are subject to an important qualifier: “without the express written permission of The North Face.” Thus, the injunctions themselves contemplate that North Face may give written permission for the defendants to use THE SOUTH BUTT as a trademark going forward, and it appears that this has occurred.
Third, the consent injunction against the store provides that the injunction will become permanent “unless a final non-appealable judgment is entered against The North Face” finding that South Butt has not engaged in any trademark violations, and further provides that the injunction shall “immediately dissolve without further order of the Court upon on a voluntary dismissal by Plaintiff of this action against the remaining Defendants.” This language would appear to contemplate that the case might resolve unfavorably to North Face, despite the fact that the parties have already reported the case as settled.
How can this be? As in the case of the dog that did not bark, the court papers contain a significant omission — judgment has not been entered, and North Face’s claims against the South Butt defendants have not been dismissed. Therefore, despite the entry of the consent injunctions, the case remains open and the dispute has not been fully and finally adjudicated. It is possible that the parties are attempting to resolve their claims through means of alternative dispute resolution and have agreed to forgo litigation in the interim. It is also possible that certain settlement terms are subject to time periods which have not yet run, and that a consent judgment or dismissal will be filed at later time as dictated by the settlement terms.
While South Butt may have won this round, it appears to have made some significant concessions to North Face. More importantly, the last chapter of this trademark saga may not have been written. While there is no telling how this dispute will ultimately play out, particularly now that it is out of the public spotlight, fans of South Butt products should probably get them while they can — just in case.