Ocean City's Seacrets has won a federal trademark infringement case against a competitor that was using a similar brand name to market its chain of luxury resorts. The decision in Baltimore's U.S. District Court awards the megaclub $50,000 in punitive damages and a permanent injunction protecting its 'Seacrets' trademark.
The lawsuit, filed two years ago, was an important one for the Maryland megaclub as its seeks to establish a franchise business and underscores its ambitions to expand outside the United States.
In 2008, the Coryn Group, which operates AMR Resorts, sued Seacrets after the U.S. Trademark Trial and Appeal Board canceled its federal registration of the trademark "Secrets" for its luxury resort chain in Mexico and the Caribbean. The board said the two brands were too similar.
Seacrets countersued for infringement and unfair competition and after an eight-day trial last November, a jury upheld its trademark and awarded it $1 in compensatory damages and $265,000 in punitive damages.
Most importantly for the club, it won a permanent injunction barring Coryn from registering the trademark "Secrets" or using it for marketing purposes in the United States.
The case would have gone to a new trial to dispute the punitive damages, but two weeks ago Seacrets agreed to a reduced award of $50,000 in damages.
"We expressly agreed to that reduction because [we] believed the permanent injunction was the most important part of the judgment," said Sam Littlepage, lead counsel for Seacrets.
Protection of its trademark is hugely important to Seacrets as it seeks to franchise the brand and open locations not just in the United States, but in the Caribbean and Latin America, including Jamaica and Mexico, said CEO Leighton Moore last year.
The club opened in 1988 with a capacity of some 100 people and aggressively expanded over the next several years so that by last year, revenue was estimated to be between $25 million and $35 million, according to industry consulting firm Technomic.
With an eye toward expansion, Moore registered the trademark "Seacrets" in 1997, and last June, it successfully got approval to franchise in Maryland. In his application with the attorney general's securities division, Moore said he intends to apply for the same license in as many as 16 states, including California, Hawaii, Pennsylvania, South and North Dakota, Wisconsin, New York and eight other states.
Last week, Gary Figgs, Seacrets' vice president and chief financial officer, said no franchisees had been signed yet.
In a statement, Moore said the court's decision "paves the way for my company to expand and franchise the 'Seacrets' brand to locations throughout the United States."