Protecting the names of nonprofit organizations is just as important as protecting any other brand. If two entities use similar names for similar services or products, the public—including clients, donors, and consumers—can become confused, to the detriment of both the public and the trademark owner.

Recently, Shearman & Sterling helped pro bono client Dress for Success Worldwide (Dress for Success) protect and enforce rights in its name, and in so doing, made new law in the Second Circuit. Dress for Success, a nonprofit organization with 70 U.S. affiliates and 17 international affiliates, provides interview suits and career counseling services to disadvantaged women seeking to re-enter the workforce. Shearman & Sterling won a preliminary injunction for the organization enjoining a former affiliate from using the name and mark “Dress 4 Success” in Los Angeles.

The Shearman & Sterling team that worked on the litigation included Partner Jaculin Aaron, Counsels Adam Noah and Susan Reiss, and Associates Colin Cassedy, Martha Sabo, John Scalzo, and Mary Runkle.

A Complex Relationship
In the late 1990s an organization began operating in Los Angeles under the name Dress 4 Success, allegedly without knowledge of Dress for Success and its use of the name and mark “Dress for Success” in other cities throughout the U.S. Following a dispute as to which entity had superior rights to the name in Los Angeles, Dress 4 Success became the Los Angeles affiliate of Dress for Success in 2001.

In early 2008, Dress for Success terminated Dress 4 Success for cause. Following its termination, the Los Angeles organization resumed use of the “Dress 4 Success” name in Los Angeles. Upon learning of this use, in July 2008 Dress for Success filed a lawsuit in the U.S. District Court for the Southern District of New York alleging trademark infringement and filed a motion for a preliminary injunction.

Dress 4 Success then asserted its own infringement counterclaims against Dress for Success and filed a cross-motion for a preliminary injunction to prevent Dress for Success from opening an office in Los Angeles.

Applying the Merger Doctrine
Dress 4 Success asserted in its counterclaims that based on prior use of the name Dress 4 Success in the late 1990s, it had superior rights to the name in the Los Angeles area. In its motion papers, Shearman & Sterling countered by arguing that any rights Dress 4 Success may have had were lost when Dress 4 Success became a licensee and affiliate of Dress for Success. Shearman & Sterling relied, in part, on the somewhat obscure “merger doctrine,” a theory recognized by courts in other circuits and by a noted trademark commentator, but which presented an issue of first impression in the Second Circuit.

Under the merger doctrine, when a licensee enters into a license agreement, any prior rights that the licensee may have owned in the licensed mark (or a substantially similar mark) prior to entering into the license are merged, by virtue of the license, into the rights of the licensor in the mark.

“We found a long list of cases in various circuits dating back over the past 50 years relating to national organizations such as Elks Lodge, the YWCA, and the Better Business Bureau,” explains Scalzo. Reiss adds, “Under this legal authority, once disaffiliated, a local affiliate can no longer use the name of a national organization because any rights the local affiliate may have had become merged into the rights of the national organization. Applied to this case, we argued that whatever common law rights Dress 4 Success may have posssessed in its mark were extinguished when Dress 4 Succcess became an affiliate of Dress for Success.”

A Purely Legal Argument
Scalzo says the merger doctrine enabled the team to present a purely legal argument, which was advantageous given that Dress for Success was asking the Court to rule in the absence of any fact discovery.

Noah explains, “It allowed us to focus on facts that were not in dispute. The only relevant facts were that the Los Angeles organization had signed the affiliate documents in 2001 and that those documents contained provisions that supported the merger doctrine. The main question for the judge was whether his court should be the first in the Second Circuit to apply the merger doctrine. We felt good about the soundness of the doctrine and, absent disputed facts of any significance, this became a case he could decide solely on the law.”

Even with that clarity, Aaron says the team wanted to be sure there was no question in the judge’s mind. “We had to persuade the judge that he should adopt this rule, based on how deserving our client is, how strong its reputation is,” she explains. “So we filed a substantial amount of documentation demonstrating the strength and reach of the Dress for Success brand though media clips and client testimonials. Some of the stories of the women Dress for Success has helped are very moving.”

Based on the preliminary injunction, the Los Angeles organization is required, during the pendancy of the lawsuit, to stop using the Dress 4 Success mark and its related web address. The parties then entered into a settlement agreement.

“In the materials Dress for Success provides to its affiliates, it is clear that the brand is one of its most valuable assets,” Noah explains. “This is an organization that takes its trademark very seriously and without in-house counsel they just don’t have the resources to protect it. So it’s wonderful that we can provide that for them.”