Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 1 of 13 PageID #:397
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`AGUILA RECORDS, INC., an Illinois
`Corporation, and AGUILA RAID
`PUBLISHING, INC., an Illinois
`Corporation,
`
`Plaintiffs,
`
`v.
`
`NUEVA GENERACIÓN MUSIC GROUP,
`INC., a Texas Corporation, MARTIN
`FABIAN, MARISA L. CABALLERO,
`RENE URBINA, CHRIS URBINA,
`HECTOR URBINA, ERIC URBINA,
`RODOLFO AVITIA, OSCAR URBINA,
`SR. and OSCAR URBINA, JR.,
`
`No. 09 C 3399
`Judge James B. Zagel
`
`Defendants.
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`I. OVERVIEW
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`MEMORANDUM OPINION AND ORDER
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`Plaintiff record company, Aguila, seeks injunctive relief against Defendant band members
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`of Alacranes Musical and their managers based on claims of trademark and copyright
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`infringement. Plaintiffs seek to enjoin Defendants from (1) appearing and performing as, using
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`and/or displaying the name or band logo “Alacranes Musical” in any advertisement and/or
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`promotion of any commercial activity, including but not limited to Internet, radio and/or
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`television appearances and/or any live performance; (2) using or displaying the name or logo
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`“Alacranes Musical” in interstate commerce in the trade dress of any sound recording of any
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`musical composition of the Defendants, including dissemination on Internet web pages or
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`Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 2 of 13 PageID #:398
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`sites; (3) performing and/or recording any musical composition or sound recording of which
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`Plaintiff enjoys copyright protection, and (4) distributing any and all promotional materials,
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`Internet publications or presence, and/or musical records/sound recording packages in trade dress
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`marked with any such logo, depiction or mark and/or constituting a copyrighted work of Plaintiff.
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`For the following reasons, Plaintiff's motion is granted in part and denied in part.
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`II. STATEMENT OF FACTS
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`In 1995, Defendants Oscar Urbina, Sr. (“Oscar Sr.”) and his son Oscar Jr., formed a
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`Duranguense band, and they began playing local dances and parties using the name Alacranes
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`Musical. Oscar Sr., made the arrangements on the bands' behalf of where and for what fee
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`Alacranes Musical would appear. By 1998, some of the dances the band played at each month
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`were organized and promoted by the Urbina's family friend, Pedro Avila. As part of these
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`promotional activities, Avila organized radio interviews and programming features involving the
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`band. In 1999 the band signed a three-record deal with Terrazas Records. From 1999 through
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`2001, while with Terrazas Records, the band started performing at larger venues, ranging in
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`capacity from 1000 to 5000 attendees, opening for larger acts, and playing out of state. Jose Luis
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`Terrazas, owner of Terrazas Records, promoted the band on local radio stations, as well as
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`stations in Mexico, provided record stores and distributors with band posters, and arranged for
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`distribution and sale of other band merchandise (including CDs), all in an effort to increase the
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`group’s exposure. During this time Oscar Sr. managed the band and booked the shows. The
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`band completed the recording of three records with Terrazas, and in 2001, made a record with
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`Dos Records, a company owned by Danny Ortiz. Avila was not involved with any of the
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`arrangements between Alacranes Musical and the two labels.
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`Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 3 of 13 PageID #:399
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`By 2003, Avila had started his own record company, Aguila Records, and he signed
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`Alacranes Musical to his label. On September 9, 2003, Oscars Sr. and Jr. each executed with
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`Aguila Records an artist agreement, which explicitly stated that the signing band member is the
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`"sole owner of all professional names" and grants Plaintiff a license to use the name. The
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`agreement also specifies the relationship between the signing members and Aguila to be that of
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`independent contractors. Shortly after Oscars Sr. and Jr. signed the artist agreement, Avila
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`advised Oscar Sr. that all the other band members would need to enter into commitment contracts
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`with Oscars Sr. and Jr., which they did on September 12, 2003. Paragraph 3 of the commitment
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`contract states that both Oscars Sr. and Jr. are “full owners” of the “association named Alacranes
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`Musical[.]” On September 24, 2003, Oscars Sr. and Jr. and band member Guillermo Ibarra
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`signed an exclusive licensing agreement with Univision Records and Aguila Records.
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`Once the band signed with Aguila, they were on Avila's payroll. He booked the shows,
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`negotiated the terms and fees, made the arrangements and took care of publicity. During the
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`recording process, Avila made mixing suggestions, decided song order, paid for the recording
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`session, and helped the band choose their wardrobe and final CD artwork photo. During the
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`band's time with Aguila Records, several personnel changes were made. Oscar Sr. and Avila
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`discussed and decided on the changes together. In certain instances, Oscar Jr. would audition
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`potential band members, and an Aguila employee present at the audition would make suggestions
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`as to who should be hired to fill the position.
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`On November 14, 2006, Plaintiff’s trademark in the name “Alacranes Musical” was
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`registered by the Untied States Patent & Trademark Office under registration #3,170,684. On
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`April 29, 2008, Plaintiff’s trademark in the stylized depiction of a scorpion with the name
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`“Alacranes Musical” was registered by the Untied States Patent & Trademark Office under
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`registration # 3,416,668. In 2006, Plaintiff recorded and released in interstate commerce the
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`musical composition “Por Tu Amor” on the Alacranes Musical album, A Paso Firme. Plaintiff
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`obtained and registered its trademark in this musical composition and sound recording on July
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`20, 2007, under registration # PA0001374345. In 2007, Plaintiff recorded and released in
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`interstate commerce the musical composition “Por Amarte Asi” on the album, Ahora Y Siempre.
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`Plaintiff obtained and registered its copyright in this sound recording on August 30, 2007 under
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`registration # SR0000610056. In 2008, Plaintiff recorded and released in interstate commerce
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`the musical composition “Dame Tu Amor” on the album, Tu Inspiracion. The copyright on this
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`musical composition and sound recording has not yet been registered.
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`Aguila now seeks to enjoin Defendants from using the Alacranes Musical name and logo,
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`as well as certain songs recorded under the Aguila label. Aguila makes three alternative
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`arguments in support of his assertion that it owns the mark Alacranes Musical. First, it holds
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`trademark registrations for both the name and logo. Second, Aguila claims that Avila’s
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`involvement with the group and its promotion, and his influence over the style and content of the
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`group's act make his company owner of the name and mark. Third, Aguila contends that even if
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`the Urbinas owned the rights to the name at the time they signed with Aguila, Oscar Sr. orally
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`and/or through his conduct assigned the rights to Aguila Records in September 2003.
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`III. STANDARD OF REVIEW
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`A court may issue a preliminary injunction enjoining copyright or trademark infringement
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`if four conditions are met. First, the party seeking a preliminary injunction must pass the
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`threshold tests of demonstrating a likelihood that they will ultimately succeed on the merits of the
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`case and showing that irreparable harm will result if the injunction is denied. See Eli Lilly & Co.
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`v. Natural Answers, Inc., 233 F.3d 456, 461 (7th Cir. 2000). To satisfy "likelihood of success,"
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`movant need demonstrate only a "greater than negligible chance of winning[.]" AM General
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`Corp. v. DaimlerChrysler Corp., 311 F.3d 796, 804 (7th Cir. 2002). If the movant passes those
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`two tests, the court must then consider any irreparable harm that will result to the defendant and
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`whether the injunction is in the public interest. See Jack Guttman, Inc. v. Kopykake Enters., Inc.,
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`302 F.3d 1352, 1356 (Fed. Cir. 2002); Eli Lilly, 233 F.3d at 461. Finally, the court should use a
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`sliding scale approach to weigh all four of the factors against each other, so that the more likely
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`that a plaintiff will succeed on the merits, the less the balance of harms needs to weigh in the
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`plaintiff's favor. Eli Lilly, 233 F.3d at 461; see also Amazon.com, Inc. v. Barnesandnoble.com,
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`Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001).
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`Likelihood of success on the merits
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`To prevail in a trademark infringement action, Plaintiff must establish: "(1) that it has a
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`protectable trademark, and (2) a likelihood of confusion as to the origin of the Defendant's
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`product." Ty, Inc. v. Jones Group, 237 F.3d 891, 897 (7th Cir. 2001) (quoting Int'l Kennel Club
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`of Chicago, Inc. v. Mighty Star, Inc., 846 F.2d 1079, 1084 (7th Cir. 1988)). Defendants do not
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`dispute that Alacranes Musical is a protectable trademark, nor do they dispute the question of the
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`likelihood of confusion where there are two separate groups performing under the same name.
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`They do, however, challenge Plaintiff’s ownership over the mark. Because trademark
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`registration creates a presumption of validity, it is Defendants’ burden to rebut Plaintiff’s claim
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`of ownership. 15 U.S.C. § 115(a).
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`Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 6 of 13 PageID #:402
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`In support of its claim of ownership, Aguila first maintains that the mark in dispute is
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`protected by a valid trademark registration. However, rights in a mark are acquired “through
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`appropriation and use of the mark in commerce.” Rick v. Buchansky, 609 F. Supp. 1522, 1531
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`(S.D.N.Y. 1985); 15 U.S.C. § 1065. The Urbinas maintain that they are senior users of the mark
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`and the first to use it in commerce. Under 15 U.S.C. § 1065, a senior user’s right to use the mark
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`is preserved notwithstanding registration by a junior user. See 2 J. THOMAS MCCARTHY,
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`MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION, § 16:18.50 (4th ed.) (West 2009). The
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`Urbinases began performing as Alacranes Musical in 1995, and they had made four albums prior
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`to signing with Aguila Records. During that time, they did radio promotions and sold Alacranes
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`Musical merchandise. This is strong evidence that the Urbinas are in fact the senior users and
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`that they will be able to rebut the presumption of ownership established by virtue of the
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`registrations.
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`Second, Aguila maintains that it is the lawful owner of the marks by right, since Avila
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`exerted influence over certain aspects of the group's act and image. In support of its argument,
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`Aguila relies on Rick v. Buchansky, 609 F. Supp. 1522 (S.D.N.Y. 1985). However, in that case,
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`the plaintiff-manager literally discovered the defendant-musicians on a street corner and invented
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`the final version of their band name which they adopted after signing the management agreement.
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`The group in question in that case “was formed at [the plaintiff’s] instigation.” Id. at 1532. This
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`is not the case here. The band was formed and the name adopted long before the group signed
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`with Aguila. Although prior to signing, Avila booked the band to play at several of his dances
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`and promoted Alacranes Musical in connection with these performances, this participation does
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`not rise to the level of the influence exerted by the manager in Rick. Plaintiff also posits that
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`after signing, Avila did in fact exert the requisite influence over the group’s content and style to
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`be trademark owner. It is true that Avila did, during that time, pay Defendants a weekly salary,
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`cover their expenses, book the gigs, make recording suggestions, and order the songs on the CDs;
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`however, at the time this occurred, the evidence suggests that Alacranes Musical had already
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`appropriated its name and used it in commerce. Unlike in Rick, there seems to be, at this point,
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`little question of who owned the name when the band signed with Aguila. Assuming that
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`Defendants were indeed the senior users, Plaintiff could only acquire ownership over the mark by
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`assignment.
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`Plaintiffs claim that to the extent Defendants ever did own trademark rights in Alacranes
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`Musical, they assigned those rights to Plaintiff when the band was “transferred” along with the
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`name, to Plaintiff. Plaintiff presents no clear evidence of assignment or transfer of ownership but
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`rather maintains that the agreements are, at best, in conflict with regard to the ownership rights.
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`Oscars Sr. and Jr. each signed an artist agreement declaring that each was the “sole owner” of all
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`professional names, thereby creating two “sole owners,” which Plaintiff maintains is a
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`contradiction in terms. Paragraph 3 of the commitment contract states that both Oscars Sr. and
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`Jr. are “full owners” of the “association named Alacranes Musical,” which conflicts with the sole
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`ownership articulated in the artist agreement. Finally, the Univision agreement may be read to
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`say that the three signers, Oscars Sr. and Jr., as well as Ibarra, are together the “sole owner” of
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`the name Alacranes Musical. Although none of these contracts is ambiguous on its face, when
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`read together, they demonstrate an ambiguity as to ownership of the name. Plaintiffs assert that
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`because of this ambiguity, I should consider parol evidence in order to determine the parties’
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`intentions.
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`Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 8 of 13 PageID #:404
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`Under Illinois law, the artist agreements, seemingly part of the same transaction of
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`signing the band, should be read together. See Pecora v. Szabo, 418 N.E.2d 431, 436 (Ill. App.
`1
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`1981) (“where different instruments are executed together as part of one transaction or
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`agreement, they are to be read together and construed as constituting but a single instrument.”);
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`Acequia, Inc. v. Prudential Ins. Co. of America, 226 F.3d 798, 803 (7th Cir. 2000) (noting the
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`“unexceptionable rule of contract interpretation” that “related documents must be read together”
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`and that this rule may be applied before a court analyzes whether there exists a contractual
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`ambiguity.). When read together, the two agreements are contradictory, since two individuals
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`cannot both be the “sole owner” of the mark. Because of this contradiction, I may look to parol
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`evidence to ascertain the parties’ intent. Farm Credit Bank of St. Louis v. Whitlock, 581 N.E.2d
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`664, 667 (Ill. 1991). However, the parol evidence put forth thus far does not suggest an
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`assignment of ownership.
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`Plaintiff points to the conduct surrounding and following the signing of the band, which it
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`considers to signify a “radical transformation” in the relationship between Avila and the group.
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`According to Plaintiff, the band members became employees of Aguila, and both parties agree
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`that Aguila bore the financial risks associated with performances and album production.
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`However, this conduct does not suggest a transfer of ownership of the band or the trademark
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`rights, and Plaintiff provides no expert testimony in support of its argument that it does. Plaintiff
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` Although it is clear that the artist agreements should be read together, the same cannot
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`be said for the proposition that all of the contracts - the artist agreements, commitment
`agreements, and Univision agreement - should be read together since they are not necessarily part
`of one transaction or agreement. For this reason, I address only the contradiction posed by the
`two artist agreements, which is sufficient for the purposes of considering Plaintiff’s argument
`that parol evidence should be introduced here.
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`Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 9 of 13 PageID #:405
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`also relies Oscar Sr.’s testimony that “I gave [Avila] my group, cleanly.” But the meaning of this
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`statement is far from clear, especially in light of credible accompanying testimony that Oscar Sr.
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`and Avila never discussed transferring ownership of the group or its name, and that the name was
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`sacred to the band. It is just as likely that Oscar Sr.’s statement refers to turning the group over
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`to Avila for management, not ownership purposes. There is little evidence of any meeting of the
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`minds with regard to any transfer of ownership or assignment of rights in the name. For these
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`reasons, there is a substantial chance that Plaintiff will lose on the merits of its claim with regard
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`to the name Alacranes Musical.
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`Furthermore, Plaintiff is unlikely to succeed on its claim relating to the logo. The
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`scorpion logo first appeared on the album Puro Tamborazo, the record the group made with Dos
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`Records. Avila testified to his understanding that when he purchased the master from Ortiz, he
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`was also purchasing the artwork. However, there is little documentation to support this claim. In
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`fact, the original contract between Ortiz and Oscar Sr. memorializes a sale to Ortiz of “one
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`hundred percent (100%) of all of the rights, interests and title to, and in, the Master recording of
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`[Puro Tamborazo].” The agreement makes no mention of artwork or trademark, and there is
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`little evidence to suggest that Ortiz possessed any rights to the logo in the first place. Without
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`such ownership, Dos had no rights in the name to transfer to Aguila.
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`Irreparable Harm and the Balance of Harms
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`At the heart of this dispute is the Defendants’ ability to continue performing and
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`recording under the name Alacranes Musical. Notwithstanding the harm to Plaintiff, it is the
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`irreparable harm to Defendants if the injunction is issued that tips the balance against its
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`issuance. Were I to enjoin Defendants from using the name Alacranes Musical, they would face
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`two options. First, they could negotiate with Aguila to continue working under the label. If such
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`an agreement came to fruition, Defendants would be in business with a promoter who no longer
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`trusts them, most likely resulting in a loss of momentum in a field where any semblance of long-
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`running success depends on it. This could potentially injure both Aguila and Defendants equally.
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`Or, alternatively, Defendants could part ways with Aguila and surrender the name. But it is
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`undisputed that the name of the band is intertwined with its success. As evidenced by the many
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`personnel changes that have taken place over the years, fans are drawn to the ensemble that is
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`Alacranes Musical and not to any specific performers. This option would certainly cause
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`irreparable harm to Defendants, and if it turns out that the injunction was granted in error, it is
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`difficult to see how, after the disruption imposed by the injunction, Defendants could regain the
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`popularity they currently enjoy.
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`However, were I not to grant the injunction, Defendant band members will continue to
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`perform as Alacranes Musical, promoted by Defendant promoters, the abilities of whom are not
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`in dispute. They will most likely continue to grow in popularity and earn income as a result. It is
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`true that Avila will no longer be the exclusive purveyor of Alacranes Musical. As such, Avila
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`may be required to start from square one, building another brand and reputation. Due to the
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`fleeting nature of popularity, such a task may prove to be unsuccessful, and Avila would have
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`lost out on the band’s current notoriety. See Tom Doherty Associates Inc. v. Saban
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`Entertainment Inc., 869 F. Supp. 1130, 1135 (S.D.N.Y. 1994) (“The loss of the opportunity to
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`distribute and market a commodity may constitute irreparable harm.”) (citation omitted)).
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`However, if my denial of the injunction is found to be erroneous, the harm to Aguila is not
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`irreparable, and Alacranes Musical could surely compensate Aguila financially, in the amount of
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`what Aguila would have made had it continued to promote the band. The band name would then
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`Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 11 of 13 PageID #:407
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`be “returned” to Aguila, with the momentum intact, and Aguila would essentially be in the same
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`position it would have been had the injunction been granted. The balance of harms weighs
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`against granting the injunction with regard to the use of the name Alacranes Musical.
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`Moreover, because Plaintiff is paid royalties for public performances of the songs in
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`which it holds copyrights, there is little if any harm to Plaintiff in denying their request for relief
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`as to the compositions. Defendants have removed the songs at issue from the website,
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`eliminating any harm from such usage.
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`Scope of Preliminary Injunction
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`Although Plaintiff does not demonstrate a strong likelihood of success on the merits of its
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`claim, it does demonstrate a "greater than negligible chance of winning," especially in light of its
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`registrations of the name and logo for use on prerecorded compact disks, audio and video disks
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`and cassettes as well as on any merchandise including T-shirts, hats, jackets and shirts. AM
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`General Corp., 311 F.3d at 804. The registrations, along with the presumption of validity that
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`accompanies them, does provide for a stronger likelihood of success. However, the registrations
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`do not cover usage of the name for the purposes of live performance, and where Plaintiff does
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`not have registration, its case, while not fundamentally flawed, is distinctly weaker. For this
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`reason, Plaintiff’s motion with regard to Defendants’ use of the name and mark on prerecorded
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`compact disks, audio and video disks and cassettes as well as on any merchandise including
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`T-shirts, hats, jackets and shirts is granted, and denied as to the remaining relief sought.
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` In fact, Aguila may end up in a better position, if Nueva Generacion is successful in its
`2
`efforts. Depending on the size and capabilities of Nueva Generacion, the band may have access
`to larger venues and audiences than it would have with Aguila, thereby bolstering its popularity
`and resulting in a more advantageous position for Aguila if the injunction is improperly denied.
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`Case: 1:09-cv-03399 Document #: 67 Filed: 11/04/09 Page 12 of 13 PageID #:408
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`Plaintiff argues that once it has established a protectable interest in a mark, it need not
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`demonstrate that “defendant[s’] allegedly confusing use involves the same goods or services
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`listed in the registration[,]” and that any relief granted should extend to any use of the mark that
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`will result in confusion, regardless of whether that use is covered by registration. Applied Info.
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`Scis. Corp. v. eBay, Inc., 511 F.3d 966, 972-73 (9th Cir. 2007) (“In sum, a plaintiff trademark
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`owner must establish a valid, protectable interest in order to proceed to the second prong of the
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`trademark infringement analysis-the likelihood of confusion resulting from the defendant's
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`alleged infringing use.”) (emphasis in original). Plaintiff claims that under Applied Info. Scis.,
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`“[w]hether [Defendant’s] use of [the mark] infringed [Plaintiff’s] protected interest then becomes
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`a question of likelihood of confusion.” Id.
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`This may be true at the permanent injunction stage, once Plaintiff has in fact established a
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`protectable interest in a mark, however this is not the case at this time. As discussed supra, there
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`is a substantial chance that Plaintiff will lose on the merits, even on the marks themselves. For
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`this reason, I need not advance to the likelihood of confusion analysis that is the second prong of
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`the trademark infringement inquiry. It is certainly worth noting that there is no dispute as to the
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`likelihood of confusion in this case, but relief at this stage is not based solely on the likelihood of
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`confusion, but also on the other factors to be weighed in granting a preliminary injunction -
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`irreparable harms and the balance of harms. When those two factors are considered together with
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`the likelihood of success on the merits, there is little support for issuing a preliminary injunction
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`against Defendants’ use of the name in live performance. However, under the sliding scale
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`approach, because Plaintiff has a slightly higher chance of success on the merits where it holds
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`registrations, preliminary injunction is warranted even where the balance of harms does not
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`weigh in Plaintiff’s favor.
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`IV. CONCLUSION
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`Because Plaintiff has demonstrated a greater-than-negligible chance of success on the
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`merits on claims involving registrations, I am enjoining Defendants from using the
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`registered materials for the purposes specified in the registrations, namely on prerecorded
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`compact disks, audio and video disks and cassettes as well as on any merchandise including
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`T-shirts, hats, jackets and shirts. Because Plaintiff has demonstrated a lesser chance of success
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`on the merits on claims not involving registration, and because the balance of harms tips in
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`Defendants’ favor, Plaintiff’s motion to enjoin Defendants from using the name for live
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`performances is denied. Finally, because there is no resulting harm to Plaintiff, its motion to
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`enjoin Defendants from performing copyrighted songs is denied.
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`ENTER:
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`James B. Zagel
`United States District Judge
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`DATE: November 4, 2009
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