Why it matters: On May 30, 2017, a Central District of California judge ruled that coffee company Jammin Java Corporation—which marketed and sold “Marley-branded” coffee beans—must pay the family members of the late reggae artist Bob Marley approximately $2.8 million in trademark infringement damages and unpaid licensing royalties. This is just the latest development in a fraught relationship between the Marley family and the coffee company since the inception of their business dealings in 2012.

Detailed discussion: On May 30, 2017, a Central District of California judge in Fifty-Six Hope Road Music Limited and Hope Road Merchandising LLC v. Jammin Java Corporation ruled that publicly owned coffee company Jammin Java Corp. (JJC) must pay two companies controlled by the widow and children of the late reggae artist Bob Marley (Marley), Fifty-Six Hope Road Music Ltd. and Hope Road Merchandising LLC (collectively, Marley companies), approximately $2.8 million in trademark infringement damages and unpaid licensing royalties related to the use by JJC of Marley-related trademarks to sell “Marley-branded” coffee beans.

The Marley companies are the owners and successors-in-interest of all of Marley’s intellectual property and publicity rights worldwide. The court filings indicate that the idea for the Marley-branded coffee beans was the “brain child” of one of Marley’s sons, Rohan Marley (Rohan), who until recently was a shareholder in and on the board of directors of JJC and is described as a “non-managerial part-owner” in the Marley companies. The court documents detail a separate criminal investigation by the Securities and Exchange Commission (SEC) into an illegal “pump and dump” scheme involving JJC shares in which it was disclosed that the JJC venture was launched after a chance meeting between Rohan and JJC’s former CEO in Los Angeles. More on this later.

According to court filings, in 2012—at the behest of Rohan—the Marley companies entered into a long-term license agreement (first license agreement) with JJC, which granted JJC the exclusive right to use the “Marley Trademarks” (including “Marley Coffee,” “Marley Coffee Stir It Up,” “Bob Marley Coffee” and the Marley Coffee logo) to sell “Marley-branded” coffee beans worldwide. The first license agreement also granted JJC the worldwide non-exclusive right to use the Marley Trademarks in connection with the sale of coffee mugs, glasses and other related “Marley-branded” coffee paraphernalia and coffee production services. The first license agreement had an initial term of 15 years and could be renewed for two additional 15-year terms so long as JJC was not in breach of the agreement.

The court filings detail the royalty payment structure and reporting obligations under the license agreement, which the Marley companies alleged JJC was in breach of almost from the time the first license agreement was signed. The Marley companies terminated the long-term license agreement in June 2016 but “bent over backwards” to give JJC another chance by simultaneously entering into a short-term six-month license agreement (second license agreement) with JJC that required JJC to sign a promissory note for the approximately $300,000 JJC owed in unpaid royalty payments under the first license agreement. The Marley companies alleged that JJC quickly defaulted under the second license agreement as well and it was terminated. In addition, the Marley companies became aware that JJC had allegedly sublicensed the Marley Trademarks in violation of the second license agreement and continued to improperly use the Marley Trademarks after the second license agreement was terminated.

The Marley companies sued JJC in August 2016 in the Central District of California alleging, among other things, trademark infringement, non-payment of royalties and breach of contract, and much complicated legal wrangling ensued. Finally, on May 30, 2017, Judge Stephen V. Wilson ordered JJC to pay the Marley companies almost $2.8 million in damages, consisting of approximately $2.4 million in trademark infringement damages and $372,000 in unpaid royalties.

As a sad corollary to the story, there was a criminal element to JJC as well. As the court documents detail, in November 2015 the SEC announced charges against several “alleged perpetrators” of a $78 million “pump-and-dump” scheme involving JJC’s stock, which resulted in approximately $2.4 million in illicit profits to JJC.

According to the SEC’s allegations in a complaint filed in the Central District of California, JJC’s former CEO “orchestrated the scheme” after meeting and befriending Rohan in Los Angeles. Upon learning that Rohan owned a small coffee plantation in Jamaica, JJC’s former CEO allegedly proposed to Rohan that they create “a large-scale coffee distribution business built on the Marley name.” JJC’s former CEO then allegedly utilized a reverse merger to secretly gain control of millions of JJC shares, which he subsequently spread to the offshore entities controlled by the other individuals charged in the scheme. The SEC alleged that the shares were then “dumped” by the defendants on the public after the stock price soared following fraudulent promotional campaigns. In April 2016, a final judgment was entered in the SEC action, pursuant to which JJC agreed to pay disgorgement and interest of approximately $700,000, and in May 2017 the charged JJC individuals were ordered to pay $1.7 million in disgorgement and interest to settle the charges against them.