The Patrón Spirits Company filed a lawsuit last week against its previous ad agency, the Reindeer Group, Ltd. and Troy Benton, Reindeer’s founder and president. Patrón’s complaint includes seven claims: trademark infringement, false advertising, violation of the Anticybersquatting Consumer Protection Act (ACPA), a Texas common law claim of trademark infringement, breach of the arrangement and unjust enrichment.
According to the complaint Patrón used Reindeer’s services from 2009 until April 2014, during which Reindeer provided digital marketing services including Google and Facebook ad campaigns.
Surprisingly, Patrón and Reindeer never signed a contract. It appears that they considered putting a proper agreement in writing but never got to it.
It’s quite astonishing that a major company and global brand of Patrón’s caliber would retain a service provider, spend hundreds of thousands of dollars in services without a properly drafted contract. The absence of a binding contract may impede Patrón’s recovery, especially with regards to the domain name, as discussed below.
Domain Name Registrations Can Be Used To Get Leverage
As part of one of Reindeer’s marketing campaign for Patrón, Reindeer used a website <www.patroncocktaillab.com> that Reindeer’s President (Troy Benton) registered in his name. His personal name is listed on the WhoIs record with the domain name registry. Patrón argues that this was contrary to the their “arrangement” with Reindeer. But again, there was no contract. So it may be difficult to prove.
Obviously, this domain name should have been registered in Patrón’s name. After all, it includes Patrón’s brand name and was purchased while Reindeer provided advertising services to Patrón.
At minimum, Patrón should have had a contract that specify that all domain name will be registered in Patrón’s name. Alternatively, Patrón could have purchased that domain name themselves and enbabled access to the corresponding website to Reindeer’s team.
It is not uncommon for disgruntled service providers to use the domain names they registered on behalf of their clients as leverage. Take a look at this article which discusses how an employee created a website incorporating the name of its former employer in the domain name to allege fraud and other wrongdoings after the CEO of that company declined to invest in that employee’s new venture.
In Patrón’s case, withholding the domain name is even more egregious. A contract with a simple clause on point would have likely deterred this type of retaliatory conduct. But without a contract, Patrón has no other option but to petition the court for relief.
False Advertising and Trademark Infringement
To this day Reindeer’s website still conveys the impression that Patrón is a current client of theirs. The homepage of their site reads “Reindeer is the agency of record for all digital creative, social and media planning for the Patron Spirits Company across the United States and United Kingdom.” In close proximity, the Patrón trademark and a screenshot from a Patrón website are displayed.
On the False Advertising claim, Reindeer’s argued that “[t]hese statements are false and misrepresent the nature and characteristics of Reindeer’s services and commercial activities, constituting false advertising in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).”
“Reindeer’s use of [Patrón’s] marks falsely suggests a connection between the two brands, which allows Reindeer to reap the benefits of the highly valuable Patrón name and all of the associated goodwill, but without [Patrón’s] permission. This unauthorized use of [Patrón’s] marks diminishes the exclusivity of the marks, and threatens the marks’ source-identifying significance, and this damage is exceedingly difficult to quantify in monetary terms” Patrón argues in its complaint with regards to its trademark infringement claim.
False advertising is Patrón’s strongest claim. After all, Reindeer’s present tense representation is simply false – Reindeer is not Patrón’s agent. However, the trademark infringement claim is not a slam dunk.
In essence this is a false advertising case. It will be interesting to see how the Texas court analyzes the trademark infringement/false connection claim because there once was a connection between Patrón and Reindeer. Patrón is the former client of Reindeer. Accordingly, it cannot be said that no association exist between the two companies.
I will update on this case as it moves forward.