Feb. 24, 2021 – The North woods getaway called “Bibs Resort” and its red “bibs” logo was the subject of a recent 4-3 decision by the state supreme court, which ruled that ownership of the tradename and trademark in dispute transferred to a new owner upon sale of the resort.
The decision in Ritter v. Farrow, 2021 WI 14 (Feb. 23, 2021), interprets the Wisconsin Condominium Ownership Act with respect to “intangible” personal property and settles a longstanding dispute on who owns the tradename and trademark in the lakeside resort.
Justice Jill Karofsky wrote the majority opinion – her first since election to the court last year – joined by Justices Rebecca Bradley, Rebecca Dallet, and Brian Hagedorn. Chief Justice Patience Roggensack dissented, joined by Justice Ann Walsh Bradley and Justice Annette Ziegler.
In 1986, Ted and Carol Ritter (Ritter) purchased a lakefront property on Little St. Germain Lake and named it Bibs Resort, and began renting out various units.
The Ritters created a logo, “depicting a pair of red bib overalls with a handkerchief hanging out of the back pocket” and “Bibs Resort” incorporated into the logo.
They managed and marketed the rental properties and various lakeside resort activities through its resort management business. In 1998, the resort was converted to a condominium form of ownership subject to Wisconsin Condominium Ownership Act.
The “Declaration of Condominium,” filed with the register of deeds and transferring the real estate, expressly excluded transfer of the resort management services, which would allow the Ritters to continue to manage the resort under contract.
The declaration gave Bibs Resort Condominium Inc.’s members, the condo unit’s owners, exclusive rights to and a fractional ownership interest in limited common elements, including “all the tangible personal property” required for condo operation.
There was no reference, in the declaration, to conveyance of intangible personal property, which would include goodwill, trademarks or tradenames. At the time of conversion, Ritter was the sole condo association member as the owner of all units.
Over the years, the Ritters sold several units and entered rental management agreements with new owners to market and rent the condo units on the new owners’ behalf. They did so under the Bibs Resort name, and using the Bibs Resort logo.
Resort for Sale
In 2006, Tony and Arlyce Farrow (Farrow) sought to purchase the entire Bibs Resort, including the real estate, the on-site resort bar, and the Ritters’ resort management business to include “all tangible and intangible personal property rights.”
Associated transfer and sale documents were executed and filed, including a “Report of Business Transfer” to the state Department of Workforce Development. That document included “goodwill” and the “Bibs Resort” tradename among the assets transferred.
A joint letter to the revenue department explained that “the management of the resort and some of the buildings were sold to Farrow Enterprises, Inc.” as well as the Bibs Resort tradename, but Bibs Resort Condominium Inc. members still owned rental units.
Farrow, under Farrow Enterprises Inc., assumed management of the resort – including services and marketing under the Bibs Resort tradename – under management agreements with the condo unit owners. But a Ritter-Farrow feud soon transpired.
Resort to the Court
Ritter terminated rental management agreements with Farrow for condo units Ritter still owned, and other unit owners also terminated their agreements with Farrow.
Importantly, Ritter began renting out their units and other condo units using the red bib overalls logo to market the “The Cottages at Bibs Resort” and “Bibs Cottages.”
During that time, Farrow was in the process of registering the “Bibs” and “Bibs Resort” tradenames, and the red bibs logo, with the Wisconsin Secretary of State’s office.
Ritter filed a lawsuit against Farrow, which, according to the state supreme court, “set in motion the decade of litigation that preceded this appeal.”
Joe Forward, Saint Louis Univ. School of Law 2010, is a legal writer for the State Bar of Wisconsin, Madison. He can be reached by email or by phone at (608) 250-6161.
Ultimately, the circuit court ruled the Bibs Resort tradename “became part of” the condo association at the time of the 1998 conversion and individual owners who were condo association members held shared rights to the “Bibs Resort” name and trademarks.
The circuit court granted summary judgment to Ritter Enterprises Inc. and the condo association, Bibs Resort Condominium Inc., and denied the Farrows’ motion for summary judgment on counterclaims of tradename and trademark infringement.
The appeals court affirmed, ruling that Ritter impliedly transferred the “Bibs Resort” tradename and trademark to the condo association in 1998, upon conversion, and could not have transferred ownership to Farrow when selling other resort assets in 2006.
Court of Last Resort
In Ritter v. Farrow, a Wisconsin Supreme Court majority (4-3) reversed the lower court decisions, concluding the “circuit court did not apply the well-settled principles surrounding trademarks and trade names.”
The majority ruled that it was error to grant summary judgment to Ritter and the condo association and remanded the case to reconsider Farrow’s motion for summary judgment on claims of trademark and tradename infringement accordingly.
The majority looked to federal law and treatises for guidance, noting “the state’s jurisprudence on trademark law is ‘undeveloped.’” A trademark, the majority noted, “cannot be sold or assigned unless the associated goodwill is also sold.”
The majority highlighted the “well-recognized” and “universally followed” rule that trademarks and tradenames pass to a purchaser of the physical assets or elements of the business in its entirety.
In this case, the “Bibs Resort” marks represent the resort management services that Ritter provided from 1986 until 2006, when the business was sold, the majority noted.
“During the 20 years that the Ritters provided the resort management services, the Bibs Resort marks were transformed into symbols of the resort management services, including the resort activities and their associated enjoyment,” Justice Karofsky wrote.
“In other words, the Ritters' resort management business built up the goodwill of the resort through activities such as picnics, campfires, and other lakeside recreational events, as well as maintaining the grounds, cleaning the units, and operating an on-site bar, all while using the Bibs Resort marks.”
The condo association argued that when the resort-to-condominium conversion occurred in 1998, the tradename “Bib Resort” and the bib logo trademark were transferred to the association. But the majority did not agree.
“This argument violates the longstanding principle that marks cannot exist separate and apart from the goodwill of the product or service they symbolize: the resort management services,” Justice Karofsky wrote.
“Whether the lakefront property in and of itself drew and attracted guests is irrelevant to the analysis here because the Bibs Resort marks protect, and are associated with, the goods and services that the Ritters provided through their business.”
Intangibles under Condo Act
The majority also disagreed with the appeals court, which had ruled that the transfer of trademarks and tradenames was “mandated” by the Condominium Ownership Act. But the act does not enumerate condo association powers over “intangible” property, the majority explained.
“The legislature, in drafting the Condominium Ownership Act, was fully capable of granting condominium associations the power to own intangible property such as trademarks and tradenames. It did not do so,” Justice Karofsky wrote.
The Condominium Ownership Act leaves associations to exercise other powers, unrelated to real property, through condominium instruments and bylaws.
“Here, even assuming, incorrectly, that the Bibs Resort marks can be separated from the resort management services they represent, there is no evidence that the Bibs Resort condominium's bylaws conferred on the Association the ability to own any items of intangible property and it is undisputed that the Association never provided goods or services in the resort management service industry,” Justice Karofsky noted.
The majority concluded that the tradename and trademark were not transferred to the condo association in 1998, and the Ritters retained ownership at that time.
Even though the Ritters retained ownership of the tradename and trademark in 1998, the majority concluded that they were transferred when the Farrows bought the resort business in 2006, including tangible and intangible personal property.
“Following the ‘old and clear rule, universally followed,’ the Bibs Resort marks and their associated goodwill passed from the Ritters to the Farrows in 2006 with the sale of the resort management business,” Justice Karofsky wrote.
“To summarize, the language in the 2006 documents clearly shows that the Ritters sold the Farrows the entirety of their resort management business, which included the associated goodwill and exclusive ownership of and rights to the Bibs Resort marks.”
The majority remanded the case to the circuit court to reconsider the Farrows’ motion for summary judgment in light of the majority’s decision and analysis.
Chief Justice Roggensack wrote a dissenting opinion, joined by Justices A.W. Bradley and Justice Ziegler, concluding that “the court of appeals' decision that a claim for tradename or trademark infringement sufficient to withstand the summary judgment motion to dismiss has not been made here.”
The chief justice said uncontested facts precluded the Farrows’ claim for tradename or trademark infringement, noting the record showed condo unit owners acquired the right to use the Bibs Resort name and the bibs logo in marketing the cottages for rental.
In order to pursue a claim for infringement of tradename/trademark, the chief justice said the Farrows “must allege material facts sufficient to prove that they have the right to exclusive use of the name, Bibs Resort, and its overalls logo.”
“[T]he undisputed, material facts demonstrated that in 2006 the Ritters no longer had the right to exclusive use of the name, Bibs Resort, or its logo,” she wrote. “The Ritters could not transfer the right to exclusive use of the name or logo to the Farrows.”
The dissenters said “the common law of Wisconsin requires the claimant in an infringement action to prove it has the right to exclusive use,” not shared use, and the majority opinion “gets all tangled up in asserted connections between goodwill and tradenames, which issues are not relevant to the dispute before us.”