ABSTRACT The Eighth Circuit held that a provision for future perpetual trademark licensing lacking many of the customary trademark license agreement terms and conditions represented an unenforceable "agreement to agree" under Wisconsin law. CASE SUMMARY PROCEDURAL HISTORY
Gander Mountain Co. ("Gander Mountain") filed suit against Cabela's, Inc. ("Cabela's"), seeking a declaration that the perpetual licensing provision of their noncompetition agreement signed in 1996 was unenforceable. Cabela's counterclaimed, requesting a declaration that the provision was enforceable and an injunction prohibiting Gander Mountain from using its trademark or confusingly similar marks in its direct-marketing business. The district court granted Gander Mountain's motion for summary judgment on Cabela's counterclaim, holding that the disputed contract provision was unenforceable as a mere "agreement to agree" due to lack of evidence in the record to illustrate the customary form and content of perpetual trademark licenses.
Gander Mountain and Cabela's both sell outdoor recreational, sports, and hunting equipment. In 1996, Gander Mountain was in financial distress and agreed to sell its mail-order catalog division and license to Cabela's the right to use and prevent others from using certain Gander Mountain trademarks for $35 million. Pursuant to that transaction, Gander Mountain agreed not to compete with Cabela's in the direct-marketing business for seven years. The noncompetition agreement contained the Contingent Trademark License ("CTL") provision, which required Gander Mountain to inform Cabela's if it decided to reenter the direct-marketing business after the noncompete period, and gave Cabela's the right to purchase a perpetual, exclusive license to use the trademarks for its own direct-marketing business for $1,000. The CTL provided that a separate written license agreement "in the form and content customary to licenses of the type described" would be arranged if that situation came to fruition.
After the seven-year noncompete period expired, Gander Mountain gave Cabela's written notice of its intent to reenter the direct-marketing business with its trademarks. Cabela's then tendered $1,000 to Gander Mountain and presented a draft license agreement for the perpetual exclusive license (the "Highby Agreement"). Gander Mountain refused to sign the Highby Agreement and brought suit against Cabela's, claiming that the CTL is unenforceable under Wisconsin law.
The Eighth Circuit affirmed the district court's grant of summary judgment in favor of Gander Mountain. The parties disputed the meaning of the CTL's language giving Cabela's the right to a license and providing that such a license would be "evidenced by a separate written agreement in the form and content customary to licenses of the type described above." Cabela's argued that the terms of the license agreement could be determined by the license agreed to in the 1996 transaction, which it asserted was what the parties intended by "in the form and content customary to licenses of the type described above." Gander Mountain contended that the language in the CTL did not provide definite terms and that the 1996 transaction was not sufficient to supply the necessary terms, because a single example of a nonperpetual license agreement could not be determinative of the customary form or content of a perpetual license agreement.
The court held that the CTL terms, when compared to a typical trademark license, did not demonstrate that the parties intended to be bound by a trademark license agreement in 1996. Cabela's expert stated that the Highby Agreement was in the form and content customary of the type of license described in the CTL, but the court noted that his conclusion was not based on an analysis of perpetual trademark licenses' customary form and content generally. Gander Mountain's expert, on the other hand, concluded that neither the CTL nor the Highby Agreement was in the form and content customary for perpetual trademark licenses generally, such as by including a provision for the amount of royalties Cabela's would pay to Gander Mountain for the use of its trademarks. The court agreed, stating that "[t]he parties' intent in 1996 to create a trademark license agreement several years in the future upon the happening of certain events does not overcome the fact that they did not agree to sufficient specific terms nor on how to determine sufficient specific terms to render the CTL an enforceable provision." From this, the court concluded that neither the 1996 license nor the Highby Agreement was in the form and content customary for perpetual trademark licenses.
The Eighth Circuit affirmed the district court's conclusion that the CTL text created an agreement that the parties would negotiate a license agreement in the form and content customary to perpetual trademark licenses, and such an agreement was nothing more than "an agreement to agree." These agreements are unenforceable under Wisconsin law and, as such, the district court's judgment for Gander Mountain was affirmed.
The Eighth Circuit placed great importance on the omission of specific terms and a means of agreeing on terms in the CTL, citing the example of Cabela's failure to include a provision detailing royalties to be paid for its use of Gander Mountain's trademarks in its direct-marketing catalogs. The decision reflects that parties intending to enter into a future licensing arrangement must set out their provisions in a concrete and detailed fashion, and ensure that the content and form of the future license adheres to general industry standards for the type of license at issue, including material terms such as royalties.