Nero Int'l Holding Co. v. Nerotix Unlimited Inc.

695 F.Supp.3d 110

NERO INTERNATIONAL HOLDING CO., INC. and Joseph Valenti, Plaintiffs/Counterclaim Defendants, v. NEROTIX UNLIMITED INC., Annemarie Tyler, William J. Bearden, Nero World, LLC, Defendants/Counterclaim Plaintiffs.

Civil Action No. 21-cv-11302-PBS

United States District Court, D. Massachusetts

Signed September 27, 2023

Atul R. Singh, Pro Hac Vice, Honeah Sohail Mangione, Pro Hac Vice, Ellenoff Grossman & Schole, LLC, New York, NY, Douglas F. Hartman, Hartman Law, PC, Boston, MA, for Plaintiffs/Counterclaim Defendants.

William E. O'Brien, O'Brien Global Law, Westborough, MA, for Defendants/Counterclaim Plaintiffs.

MEMORANDUM AND ORDER

Saris, District Judge.

INTRODUCTION

Live action role playing, or "LARPing," is an interactive game in which participants engage in storytelling and physically act as characters with costumes and props. The participants play according to rules and goals set by the games' organizers. The New England Roleplaying Organization ("NERO") refers to a specific LARP system in which participants live in a fantasy medieval town and act out a live action fantasy adventure.

This action is a heavily litigated trademark and copyright case which raises multiple difficult issues (some poorly briefed) concerning intellectual property rights associated with NERO. Plaintiffs Joseph Valenti and NERO International Holding Co., Inc. filed suit against Defendants William J. Bearden, NERO World, LLC, Annemarie Tyler, and NEROtix Unlimited Inc., alleging violations of federal and state trademark law and copyright law. The principal issue in dispute is determining the rightful ownership of three trademarks (NERO, NERO NEW ENGLAND ROLEPLAYING ORGANIZATION, and RAVENHOLT) and one copyright (9th Edition NERO Rule Book).

Plaintiffs and Defendants have cross-moved for summary judgment on most of the claims and counterclaims in this action. See Dkts. 80, 86, 87, 88. For the following reasons, after hearing, the Court ALLOWS the motions in part and DENIES them in part.

BACKGROUND

The following facts are taken from Plaintiffs' Statement of Material Facts (Dkt. 81) and the Defendants' Statements of Material Facts (Dkt. 86-1 at 4-8; Dkt. 87-1 at 4-9; Dkt. 88-1 at 4-8). These facts are undisputed unless otherwise noted.

I. Origin of NERO

NERO is one system of a LARP game that was started in 1988 by several members, one of whom was Ford Ivey. The founding members ran LARPing events in Massachusetts throughout the 1990's. The Massachusetts NERO chapter became known as "Ravenholt," which is the name of a fictitious town or "duchy" in the NERO game.

After a few years, the group began signing up NERO chapters in different locations across the United States. These initial NERO chapters were based on verbal agreements, rather than on written license agreements. A National Plot Committee was developed to help coordinate plotlines so that players could travel with their "characters" and attend events at different NERO chapters. By 1997, Ford Ivey and his then-wife Maureen Ivey had established a company called NERO International, Inc., which ran NERO events for the Massachusetts chapter and made licensing agreements with NERO chapters in other parts of the country.

II. Valenti Gets Involved

In 1990, Plaintiff Joseph Valenti attended his first NERO event at the Massachusetts chapter and became friends with Ford Ivey. In the following years, Valenti attended several NERO events. In 1997, Valenti entered into a license agreement with NERO International, Inc. and spent approximately ten years running ten to twelve NERO events every year.

One dispute in this action is whether Valenti purchased or licensed the intellectual property associated with the Iveys' company. In 1998, Ford Ivey sought to sell NERO International, Inc. as part of a divorce settlement with his wife. On July 24, 1998, Valenti formed NERO International Holding Co., Inc. ("NIHC") for the purpose of purchasing the Iveys' company. Valenti testified that the Iveys and Valenti executed a formal purchase agreement selling NERO International, Inc. to NIHC, including all intellectual property associated with the company, on August 3, 1998. As part of the agreement, according to Valenti, NIHC granted back to the Iveys a non-royalty license so they could continue operating Ravenholt, the Massachusetts NERO chapter. However, Valenti claims the formal purchase agreement was later destroyed. Plaintiffs have produced a draft agreement with proposed terms that they contend reflects the final agreement. See Dkt. 83-3.

In contrast, Defendants contend that Valenti never purchased the Iveys' business — instead, they claim that Valenti simply licensed the right to use the NERO mark from the Iveys, as supported by testimony from one of the founders of NERO, David Jodoin. Jodoin testified that he remembered "seeing a draft of an agreement" between the Iveys and Valenti, and that the draft referred to a license, not a sale of assets. Dkt. 92-1 at 23.

III. The NERO Trademark

In 1998, Ford Ivey applied to register the NERO trademark with the United States Patent and Trademark Office ("USPTO"). The application matured to registration on August 17, 1999 as Reg. No. 2,270,409. In 2005, an attorney prepared and filed a nunc pro tunc assignment commemorating the fact that Valenti, as President of NIHC, had acquired from Ford Ivey all rights to the NERO trademark registration back in 1998. See Dkt. 83-8. The assignment states:

Joseph Valenti, President of Nero International Holding Co., Inc.... acquired all rights from the "Assignor" identified below, to the Nero® trademark, on August 3, 1998 by Bill of Sale .... [T]his document commemorates that, said Assignor assigned to Assignee, all rights, title, and interest in the NERO® trademark and the good will of the business symbolized thereby.

Id. at 2. The assignment was signed by Ford Ivey in 2005 but backdated to August 3, 1998.

In March 2010, the NERO trademark registration was cancelled by the USTPO due to a failure to file renewal paperwork.

IV. Valenti's Companies

Valenti's company NIHC was first incorporated in 1998 in New York. See Dkt. 83-2. Around this time, Valenti also launched a website at the domain name "nerolarp.com." In June 2002, the New York Department of State dissolved NIHC due to a failure to pay taxes. In February 2005, an attorney filed and created a second New York corporation using an identical name (i.e., "NERO International Holding Co., Inc.").¹ Valenti was not aware a second corporation had been created, as he believed the attorney had simply revived NIHC I. In April 2011, NIHC II was also dissolved due to a failure to pay taxes.

In 2011, Valenti formed another company called NERO Live Adventure Games, LLC ("NLAG") in Pennsylvania to continue his NERO business. However, because Valenti did not complete and file the paperwork correctly, NLAG was not correctly formed. In 2017, Valenti annulled the dissolution of NIHC I and reinstated the company as an active New York corporation.

V. License Agreements

Starting in the early 2000's, Valenti's various corporate entities executed license agreements with chapters across the country. Chapter licensees were granted the rights to use the marks NERO and NEW ENGLAND ROLEPLAYING ORGANIZATION (collectively, "NERO Marks"), NERO game content, and the NERO Rule Book, in exchange for royalty fees. For example, the chapter license agreements typically included the following provision:

Under the License Agreement, Licenser grants to Licensee the right to operate a facility under the service mark NERO, New England Role-playing Organization, and NERO GAME SYSTEM.

Dkt. 83-17 at 3. The license agreements also stated that "Licenser requires the NERO Rule Book ©, and NERO Coins ©, to be purchased exclusively from Licenser or Licenser[']s designated supplier." Id. The average life of a NERO license was approximately five to ten years.

In August 2000, NIHC I executed a license agreement with Rachel Morris so that she could run the Massachusetts NERO chapter. See id. After the dissolution of NIHC I in 2002, Valenti continued to grant licenses to various chapters with NIHC still listed as the licensor, even though the company had been dissolved. See Dkts. 83-18, 83-19, 83-20, 83-21. These license agreements were titled "NERO ® License Offering ©." After the formation of NIHC II in 2005, license agreements with NIHC listed as the licensor continued to be granted to chapters. See Dkts. 83-22, 83-23, 83-24. By 2006, there were about 35 active NERO chapters across the United States. This increased to about 50 active chapters by 2010.

After NIHC II was dissolved in 2011, Valenti began granting licenses to chapters with "NERO Live Adventures Games, LLC" listed as the licensor instead. See Dkts. 83-33, 83-34. After NIHC I was reinstated as an active New York corporation in 2017, Valenti continued to execute license agreements with chapters, although this time with the licensor listed as "Joseph Valenti, operating directly and DBA NERO International Holding Co., Inc." See Dkt. 83-39; see also Dkt. 83-40.

In 2014, Valenti was asked at a deposition if the NERO corporation was still in existence, to which he replied: "Actually it may be in existence. I retired that business in 2009 when I lost everything, and I transferred everything to me." Dkt. 86-2 at 202. Valenti also testified that "a lot of [the] paperwork" associated with the transfer of assets and licenses to himself "got destroyed" because they were not "waterproof or tree-proof." Id.

VI. Bearden and NERO World

William J. Bearden is a fan of LARPing and has been involved with the games since the early 1990's. In April 2006, NIHC licensed to Bearden the rights to run a NERO chapter in Kansas called "NERO Central." See Dkt. 83-24. Bearden registered the website domain name "nerocentral.com" and launched the website to advertise NERO events. Today, the domain name redirects to Bearden's other website named "heroicadventure.co."...