Mercado-Salinas v. Bart Enterprises International, Ltd.

United States Court of Appeals
For the First Circuit

No. 10-2359

WALTER MERCADO-SALINAS; ASTROMUNDO, INC.,

Plaintiffs, Appellants,

v.

BART ENTERPRISES INTERNATIONAL, LTD; WALTER INTERNATIONAL
PRODUCTIONS, INC.; WALTERVISION PRODUCTIONS, INC.; WALTER MERCADO
RADIO PRODUCTIONS, INC.; WALTER MERCADO ENTERPRISES CORP.;
GUILLERMO BAKULA; ARCANE CREATIVE, LLC; WATERVISION, INC.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. Gustavo A. Gelpí, U.S. District Judge]

Before

Lynch, Chief Judge,
Torruella and Stahl, Circuit Judges.

María D. Bertólez and María D. Trelles-Hernández, with
whom Néstor M. Méndez-Gómez, Pietrantoni Méndez & Alvarez LLP, John
F. Nevares, Pedro Quiñones Suárez, and John F. Nevares and
Associates PSC were on brief, for appellants.
Laura Beléndez-Ferrero, with whom Cristina Arenas Solís,
and Ferraiuoli LLC were on brief, for appellees.

December 20, 2011
 LYNCH, Chief Judge. In 1995, Walter Mercado-Salinas, a

popular psychic and astrologer, and Bart Enterprises entered into

a contract (the "Agreement") for the production and distribution of

materials featuring Mercado's psychic and astrological services.

Under the Agreement, Mercado granted Bart the right to use the

"Walter Mercado" trademark, as well as Mercado's name and likeness.

In 2006, however, a dispute arose when Mercado ceased

providing services and Bart ceased to pay Mercado's monthly

compensation. This led to litigation in federal court in Florida

in which a jury, inter alia, rejected Mercado's claim that he had

validly terminated the Agreement, found that he had violated the

Agreement, and found that Bart owed Mercado no compensation.

In 2009, both parties sought injunctive relief from the

U.S. District Court for the District of Puerto Rico to prevent the

other party from using the "Walter Mercado" trademark. Finding

that Mercado assigned Bart the rights to the trademark in

perpetuity and that Mercado had not validly terminated the

Agreement, the district court denied Mercado's request for

preliminary injunctive relief and granted preliminary injunctive

relief to Bart. Mercado-Salinas v. Bart Enters. Int'l, Ltd., 747

F. Supp. 2d 265 (D.P.R. 2010).

We conclude that the district court did not abuse its

discretion in doing so. We affirm.

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 I.

A. The Agreement

On August 4, 1995, Mercado and Bart signed the Agreement,

under which Bart would develop and distribute materials and

products related to Mercado's psychic and astrological services.

As part of the Agreement, Mercado granted Bart several rights

"during the Term and throughout the Territory" of the Agreement.

The Agreement defines "Territory" as the universe. See Agreement

§ 4, at 5. It defines "Term" to mean "in perpetuity," subject to

a termination provision which, inter alia, allows Mercado to

terminate the Agreement after fifteen days' written notice if Bart

fails to pay Mercado any agreed compensation within sixty days of

the due date.1 Id. § 5, at 5; § 12(a)(iii), at 13-14.

First, Mercado "irrevocably assign[ed] to Bart throughout

the Territory during the Term, all right, title and interest,

including all copyrights" in certain "Preexisting Materials" that

Mercado had previously created for the business entity Jamie Shoop

& Associates Inc. See id. § 1(a), at 2.

Second, Mercado "grant[ed] to Bart the exclusive right

and license during the Term and throughout the Territory to

develop, produce, distribute and copyright in its own name new

1
The termination provision also provides that "Mercado
shall have the right to terminate this Agreement immediately . . .
in the event of a material breach by Bart which remains uncured for
a period of ten (10) days following written notice thereof."
Agreement § 12(a)(ii), at 13.

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materials, in any language, relating to Mercado's psychic and

astrological services" (the "New Materials"). Id. § 1(b), at 3.

Most pertinently, the parties to the Agreement

"acknowledge[d] that the mark 'Walter Mercado' has . . . attained

the status of a common law trademark and service mark" by virtue of

its "use and associat[ion] with the Preexisting Materials." Id.

§ 2(a), at 3. The Agreement then states:

Mercado hereby irrevocably assigns to Bart
throughout the Territory during the Term, all
right, title and interest in and to the Mark,
together with that part of the goodwill of
Mercado's business connected with and
symbolized by said Mark, for use in connection
with the Pre-existing Materials and the New
Materials, if any. Such assignment includes
but is not limited to the right to use the
Mark in connection with Preexisting Materials
and the New Materials in any and all media now
known or hereafter developed . . . , the right
to merchandise and the right to utilize the
Mark in all advertising, promotion and
publicity created in connection therewith.

Id. § 2(b), at 4. Additionally, the Agreement provides:

Bart shall have all rights in the Mark which
are afforded to owners of trademarks and
service marks, including but not limited to
the right to seek and obtain trademark
protection and/or registration of the Mark in
its name, and the right to enforce or defend
Bart’s rights against third parties.2

2
On October 8, 1996, Bart filed an application for the
"Walter Mercado" trademark with the U.S. Patent and Trademark
Office (PTO). Mercado executed an affidavit in connection with
that application on July 11, 1997, stating that he authorized Bart
to register "Walter Mercado," "Walter," and "Walter Mercado
Salinas" as trademarks and that he "granted to [Bart] all rights of
ownership and authority to any and all of the [aforementioned]

-4-
Id. § 2(c), at 4.

Mercado also "grant[ed] to Bart the right and license

during the Term and throughout the Territory to use Mercado's

performance, name, signature, photographs, voice, picture,

likeness, or other indicia of his identity . . . subject, however,

to Mercado's right to prior approve any such use." Id. § 3(b), at

5. The parties agreed that "such approval [is] not to be

unreasonably withheld" and that "[i]f such approval is not

communicated to Bart within forty-eight (48) hours of Mercado's

receipt of the materials, such right of approval shall be deemed

waived." Id.

Finally, Mercado agreed to provide psychic and

astrological services for the creation of the New Materials during

an "Additional Services Period," a ten-year term to be

"automatically extended for additional two (2) year periods at the

option of Bart." Id. § 6(b)(i)-(ii), at 6. "The parties agree[d]

that any and all New Materials or parts thereof created or supplied

trademark names." In October 1997, Mercado also filed with the
Mexican Patent Office an affidavit granting Bart the right to
register the trademark in Mexico. On December 4, 2004, the PTO
cancelled the trademark application "because [the] registrant did
not file an acceptable declaration." See U.S. Trademark
Application Serial No. 75-185030 (filed Oct. 8, 1996). A few
months later, on May 5, 2005, Mercado executed and filed with the
PTO a "Consent of Living Individual" on the "understand[ing] that
consent of a living individual is required in order for a personal
name to be used and registered as a trademark." Bart filed a
second application for the "Walter Mercado" trademark on May 14,
2007. See U.S. Trademark Application Serial No. 77-180667 (filed
May 14, 2007). The application is still pending. Id.

-5-
by Mercado shall be deemed works made for hire as such term is

defined pursuant to the United States Copyright Law . . . or

relevant jurisdiction copyright law . . . ." Id. § 6(b)(iii), at

7. United States copyright law, in turn, provides that the

copyright in a "work made for hire" vests in the employer rather

than the employee. 17 U.S.C. § 201(b). The parties further agreed

that "[i]n the event that any of the results of Mercado's services

are not copyrightable . . . or for any reason are deemed not to be

works made for hire, then . . . Mercado hereby assigns all right,

title and interest in and to the results of his services to Bart."

Agreement § 6(b)(iii), at 7.

In return, "Bart agree[d] to pay to Mercado, in

consideration of all services rendered by Mercado and the use of

the results thereof and all rights granted by Mercado to Bart,"

compensation consisting of a $25,000 base salary per month, $5,000

per month for costumes, $2,000 per month for up to twenty-five

three-minute segments per month, and additional fees contingent

upon gross income from sales in foreign countries. Id. § 6(c), at

7-8.

At the same time, the parties agreed that Mercado "shall

be in no way hereunder prohibited or restricted, for his personal

benefit, from conducting his present business endeavors consisting

of radio, newspaper, magazines and personal consultation related to

psychic activities." Id. § 6(c)(v), at 8.

-6-
 Finally, the Agreement provides that "all grants granted

or assigned by this agreement shall be irrevocable under all or any

circumstances, and shall not be subject to rescission, termination

or injunction. In the case of breach of this agreement by Bart,

Mercado's sole remedy shall be limited to an action at law for

damages." Id. § 13, at 15-16. The parties further agreed that any

disputes under the Agreement would be governed by Puerto Rico law.

Id. § 20(d), at 19.

B. The Florida litigation

In the fall of 2006, Mercado ceased to provide services

for new materials as provided under the Agreement and failed to

appear for scheduled appearances. In November 2006, Bart halted

its compensation payments to Mercado. Mercado formally attempted

to terminate the Agreement by a letter dated November 22, 2006,

citing Bart's failure to pay compensation. Mercado's company,

Astromundo, Inc., also filed with the U.S. Patent and Trademark

Office an application for the "Walter Mercado" trademark. See U.S.

Trademark Application Serial No. 77-047157 (filed Nov. 17, 2006).

This is one of the activities which ultimately caused Bart to seek

injunctive relief against Mercado.

On January 17, 2007, Bart filed suit against Mercado in

the federal court for the Southern District of Florida, alleging

breach of contract and tortious interference with Bart's

third-party contracts. Mercado counterclaimed for breach of

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contract, breach of fiduciary duty, breach of the covenant of good

faith, violation of copyright and trademark laws, unjust

enrichment, and requested injunctive relief and a declaratory

judgment that the Agreement was invalid because its term was "in

perpetuity."

In the meantime, on February 8, 2007, Mercado filed suit

against Bart in the federal court for the District of Puerto Rico.

Mercado again alleged violation of copyright and trademark laws,

and sought injunctive relief and a declaration that the Agreement

was invalid. In October 2008, the Puerto Rico case was transferred

to the Florida district court, and on November 18, 2008, the two

cases were consolidated.

On cross-motions for summary judgment, the Florida

district court held that the Agreement was valid. See Walter Int'l

Prods., Inc. v. Mercado Salinas, No. 07-cv-20136, slip op. at 6-8

(S.D. Fla. Nov. 24, 2008). Importantly, the district court

determined that the Agreement contains two different durational

terms: (1) the term for which Mercado was obligated to provide

services to Bart (the "Additional Services Term"), consisting of

ten years plus optional two-year extensions; and (2) the term

applicable to the assignment of the trademark and other rights (the

"Term"), which is in perpetuity or until termination of the

Agreement. Id. at 7. The district court then determined that

because the trademark was "irrevocably assign[ed] to Bart . . .

-8-
during the Term" and because "the Term of the Agreement ends if

Bart or Mercado exercise their rights to terminate the Agreement,"

the trademark rights would revert to Mercado upon termination. Id.

at 15-16. The district court concluded that the question of

whether the Agreement was properly terminated had to be decided by

a jury before the court could determine who owned the trademark.

Id. at 17.

The consolidated case was tried to a Florida jury in

January 2009. On January 26, 2009, the jury returned a special

verdict finding that Mercado had breached the Agreement by (1)

failing to perform after November 22, 2006; (2) hiring another

exclusive agent; and (3) improperly terminating the Agreement. The

jury further found that Bart had not failed to pay any owed

compensation to Mercado and thus had not breached the Agreement.

On February 4, 2009, the Florida district court entered judgment in

favor of Bart.3

The court did not reach the trademark infringement claim,

stating that "[o]nce the jury found that Mercado, not Bart,

3
The jury also found that Mercado had interfered with
Bart's contracts with third parties. The jury did not find,
however, that Bart had suffered any damages resulting either from
this interference or from Mercado's breach of contract. Therefore,
the district court awarded no damages to Bart. Bart moved for a
new trial on the issue of damages, but the district court denied
the motion. See Walter Int'l Prods., Inc. v. Mercado Salinas, No.
07-cv-20136 (S.D. Fla. Oct. 26, 2009). Bart appealed the district
court's decision to the Eleventh Circuit Court of Appeals, which
affirmed the decision not to award Bart damages. See Walter Int'l
Prods., Inc. v. Salinas, 650 F.3d 1402 (11th Cir. 2011).

-9-
breached the contract and that Mercado had not properly terminated

the contract, the claim for trademark infringement became moot

because, as stated in the order on the motions for summary

judgment, the trademark rights revert to Mercado upon a valid

termination of the agreement." Walter Int'l Prods., Inc. v.

Mercado Salinas, No. 07-cv-20136, slip op. at 22 (S.D. Fla. Oct.

26, 2009).

C. The Puerto Rico litigation

Despite the ruling against him by the Florida court, on

March 20, 2009, Mercado sent Bart a letter demanding payment within

fifteen days of $25,000 per month for the twenty-seven months that

had elapsed between November 2006 and January 2009, amounting to a

total of $675,000. Mercado's letter asserted that "the $25,000 per

month [is] due and payable pursuant to clause 6(c)(i)" of the

Agreement, and that "[t]he obligation to pay such amounts is

independent of any service provided by Mr. Mercado." Mercado

stated he reserved the right to declare the Agreement null and void

pursuant to the termination clause if Bart did not make payment

within fifteen days.

On March 30, 2009, Bart notified Mercado by letter that

it would not pay the requested compensation. Bart asserted that no

compensation was due because, as the Florida court had held,

Mercado had ceased to provide services and thus had breached the

Agreement. Bart also asserted its right to the "Walter Mercado"

-10-
trademark and requested that Mercado stop using the mark to

unilaterally create new psychic and astrological materials.

On May 15, 2009, Mercado sent Bart a letter declaring the

Agreement null and void pursuant to the termination clause of the

Agreement because Bart had not paid the requested compensation.

Having done so, Mercado also declared that the trademark and

publicity rights reverted back to him. Mercado ordered Bart to

cease and desist from using the trademark or Mercado's name or

likeness.

Three days later, on May 18, 2009, Mercado4 brought suit

against Bart5 in the Puerto Rico Court of First Instance. Mercado

alleged breach of contract, trademark infringement, and

infringement of publicity rights. Upon Bart's motion, the case was

removed to the Puerto Rico federal district court. The parties

filed cross-motions for preliminary injunctive relief, each seeking

to prevent the other from using the "Walter Mercado" trademark.

The district court referred the motions to a magistrate

judge for a report and recommendation. The magistrate judge

determined that because the provisions granting trademark and

4
Plaintiffs are Mercado and Astromundo, Inc., a Puerto
Rico corporation. Mercado is the president of Astromundo, Inc. We
refer to the plaintiffs collectively as "Mercado."
5
Defendants are seven business concerns and their
principal, Guillermo Bakula. All of the defendants in the case are
citizens of Florida, except Bart Enterprises International, Ltd.,
which is a citizen of the Bahamas. We refer to the defendants
collectively as "Bart."

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publicity rights contain limiting language such as "in connection

with Mercado's astrological and psychic activities," Bart's

trademark and publicity rights are limited to those materials

developed by or with Mercado during the Additional Services Term.

Once the Additional Services Term ended and Mercado ceased

providing services, the magistrate judge concluded, Bart could no

longer create new products using the trademark. The magistrate

judge recommended that the court grant Mercado's motion for a

preliminary injunction against Bart's use of the trademark or

Mercado's name or likeness in connection with any product that was

created after the end of the Additional Services Term without

Mercado's contribution or approval. Bart could, however, continue

to use the trademark in connection with products or materials

created with Mercado's approval during the Additional Services

Term.

Both parties filed objections to the report and

recommendation. On review, the district court denied Mercado's

motion for a preliminary injunction because Mercado had not

established that he was entitled to trademark protection. Mercado-

Salinas, 747 F. Supp. 2d at 274. First, based on the plain text of

the contract, the district court concluded that Mercado had

perpetually assigned to Bart full rights to the trademark. Id. at

271-72. Applying the doctrine of collateral estoppel, the district

court acknowledged the Florida district court's determination that

-12-
Mercado's assignment of rights was subject to reversion upon

termination of the Agreement. Id. at 272-73. Next, the district

court determined that Mercado did not validly terminate the

Agreement. Id. at 273-74. Because Mercado had ceased to provide

services, Bart had no obligation to pay him compensation and he

therefore had no basis for terminating the Agreement. Id. The

court denied Mercado's request for injunctive relief against Bart's

use of the trademark and Mercado's request for injunctive relief

regarding his publicity rights. Id. at 274.

Finding a likelihood of success regarding Bart's claim to

the trademark, the district court granted Bart's motion for

preliminary injunctive relief. Id. at 275. The injunction

prohibited Mercado from "using the Mark, 'Walter Mercado,' in

relation to all forms of business enterprise, and from representing

to third-parties that Plaintiffs own the Mark." Id. This

injunction was further narrowed.

On motion for reconsideration, the district court amended

the preliminary injunction to bar Mercado from "(1) using the Mark,

'Walter Mercado,' in relation to all forms of business enterprise,

except for business arrangements that commenced prior to June 7,

1995, and (2) representing to third parties that Plaintiffs own the

Mark." Mercado-Salinas v. Bart Enters. Int'l, Ltd., 747 F. Supp.

2d 275, 279 (D.P.R. 2010). The district court's opinion and order

expressly states that "the court's injunctive order relates only to

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commercial use of the trademark."6 Id. It is this more limited

injunction, with that understanding, which is before us on appeal.

Mercado has appealed from the grant of this preliminary

injunction and from the denial of his request for preliminary

injunctive relief.

II.

Before granting a preliminary injunction, a "court must

consider (1) the likelihood of the movant's success on the merits;

(2) the anticipated incidence of irreparable harm if the injunction

is denied; (3) the balance of relevant equities (i.e., the hardship

that will befall the nonmovant if the injunction issues contrasted

with the hardship that will befall the movant if the injunction

does not issue); and (4) the impact, if any, of the court's action

on the public interest." Borinquen Biscuit Corp. v. M.V. Trading

Corp., 443 F.3d 112, 115 (1st Cir. 2006). "In a trademark case,

the key issue is the likelihood of success on the merits because

the other decisions will flow from that ruling." Keds Corp. v.

Renee Int'l Trading Corp., 888 F.2d 215, 220 (1st Cir. 1989).7

6
Bart agrees, acknowledging that Mercado "can use his own
name to identify himself."
7
In a series of cases, this court has employed a
presumption that irreparable harm exists if a trademark holder
demonstrates a likelihood of success in establishing infringement.
See, e.g., I.P. Lund Trading ApS v. Kohler Co., 163 F.3d 27, 33
(1st Cir. 1998). We have recognized there is a question as to
whether this presumption can co-exist with a more recent Supreme
Court case, eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).
See Voice of the Arab World, Inc. v. MDTV Med. News Now, Inc., 645

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 A district court's conclusions on these factors and its

determinations regarding their relative weighting engender

deferential appellate review. See Ross-Simons of Warwick, Inc. v.

Baccarat, Inc., 102 F.3d 12, 16 (1st Cir. 1996). Thus, a decision

to grant a preliminary injunction will stand unless the district

court "mistook the law, clearly erred in its factual assessments,

or otherwise abused its discretion in granting the interim relief."

McGuire v. Reilly, 260 F.3d 36, 42 (1st Cir. 2001); accord

Massachusetts v. Watt, 716 F.2d 946, 947 (1st Cir. 1983) ("[A

party] challenging the issuance of a preliminary injunction must

F.3d 26, 31 (1st Cir. 2011).
In eBay, the Supreme Court held that in considering whether to
issue injunctive relief against use of a patent or copyright,
courts may not "replace traditional equitable considerations with
a rule that an injunction automatically follows a determination
that a copyright has been infringed." eBay, 547 U.S. at 392-93.
Instead, the Court explained that "the decision whether to grant or
deny injunctive relief rests within the equitable discretion of the
district courts, and . . . such discretion must be exercised
consistent with traditional principles of equity, in patent
disputes no less than in other cases governed by such standards."
Id. at 394.
Although eBay dealt with the Patent Act and with permanent
injunctive relief, we have stated that "the traditional equitable
principles discussed by the Supreme Court in eBay apply" in
trademark infringement cases where preliminary injunctive relief is
sought. Voice of the Arab World, 645 F.3d at 31 (concluding that
the principles of eBay applied to a request to preliminarily enjoin
alleged trademark infringement, but declining to decide whether
such principles precluded a presumption of irreparable harm).
We need not decide here whether eBay precludes a presumption
of irreparable harm because Bart has demonstrated enough
irreparable harm that the district court did not abuse its
discretion in granting the preliminary injunction. In any event,
Mercado has not challenged the district court's finding of
irreparable harm, so this argument is waived.

-15-
carry the heavy burden of proving that the district court abused

its discretion.").

Applying this deferential standard at this preliminary

stage of the case, we cannot say the district court abused its

discretion in granting Bart the preliminary injunction entered and

denying Mercado's motion for a preliminary injunction against

Bart's use of the trademark and publicity rights. We do not say

that the issue of the scope of the trademark transferred has been

resolved, only that there was no abuse of discretion as to

preliminary injunctive relief.

Both parties claim ownership of the trademark while

disputing the other's ownership of the same. Specifically, the

parties disagree over whether Mercado licensed or fully assigned

the trademark to Bart under the Agreement.8

We describe the different views. The district court

adopted Bart's view that Mercado fully assigned the trademark to

Bart because the Agreement plainly uses the term "assign." See

P.R. Laws Ann. tit. 31, § 3471 ("If the terms of a contract are

clear and leave no doubt as to the intentions of the contracting

parties, the literal sense of its stipulations shall be

observed."). Section 2(b) of the Agreement states that "Mercado

hereby irrevocably assigns to Bart . . . all right, title and

8
The parties agree that Mercado granted Bart a license to
use his publicity rights in connection with the Preexisting and New
Materials.

-16-
interest in and to the Mark, together with that part of the

goodwill of Mercado's business connected with and symbolized by

said Mark." This unequivocal language is contrasted with Section

3(b), in which Mercado "grants to Bart the right and license . . .

to use Mercado's . . . Name and Likeness."

This contrast in language, the district court noted,

suggests that the parties intended to grant Bart a full assignment

of the trademark. See Russello v. United States, 464 U.S. 16, 23

(1983) (applying the presumption that the use of different words in

different provisions is purposeful and evinces an intention to

convey a different meaning); Nat'l Tax Inst., Inc. v. Topnotch at

Stowe Resort & Spa, 388 F.3d 15, 18 (1st Cir. 2004) (explaining

that language discrepancies between different contract provisions

"may cast light on meaning").

Still, the district court acknowledged language

suggesting otherwise: the text of Section 2(b) includes the

subsidiary phrase "for use in connection with the Pre-existing

Materials and the New Materials." The district court reasoned,

however, that this language is merely purposive and does not

restrict the scope of the assignment. See P.R. Laws Ann. tit. 31,

§ 3475 (providing that unclear language must be construed to

effectuate the meaning of the contract read as a whole). The

magistrate judge had a different view.

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 The district court also noted that the Agreement

stipulates that Bart has the right to register the trademark in its

own name and the right to enforce the trademark in court. Such

rights typically inure to assignees, not licensees. See, e.g., 15

U.S.C. §§ 1051(a)(1), 1127 (allowing an assignee to register a

trademark under its own name with the U.S. Patent and Trademark

Office); Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 159

n.6 (1st Cir. 1977) (stating that an "assignee would have the right

to sue infringers in his own name," whereas a licensee has no

exclusive right to sell a product associated with a trademark and

cannot sue on his own behalf).

There was evidence that the parties took actions

consistent with this reading. Not only did Bart file an

application for the "Walter Mercado" trademark with the U.S. Patent

and Trademark Office (PTO) in 1996, but Mercado filed at least

three documents that ratified Bart's right to do so. In 1997,

Mercado filed an affidavit with the PTO authorizing Bart to use and

register the names "Walter Mercado," "Walter," and "Walter Mercado

Salinas" as trademarks, and "grant[ing] to [Bart] all rights of

ownership and authority to any and all of the [aforementioned]

trademark names." Mercado filed a similar affidavit with the

Mexican Patent Office in 1997 and a "Consent of Living Individual"

with the PTO in 2005. The district court read these actions as

evidence of Mercado's intention to assign the trademark perpetually

-18-
to Bart. See P.R. Laws Ann. tit. 31, § 3472 ("In order to judge as

to the intention of the contracting parties, attention must

principally be paid to their acts, contemporaneous and subsequent

to the contract.").

Mercado, however, urges adoption of the magistrate

judge's reading that the Agreement grants Bart only a limited

license to use the trademark. The magistrate judge concluded that

because the Agreement consistently limits the use of the trademark

to uses "in connection with" the Preexisting and New Materials, the

grant is a limited license. See Agreement §§ 1(a), 1(b), 2(b),

3(b). Consistent with this interpretation, Section 6(c)(v) of the

Agreement allows Mercado to retain several independent business

ventures in "radio, newspaper, magazines and personal consultation

related to psychic activities." See 3 Callmann on Unfair

Competition, Trademarks and Monopolies § 20:63 (4th ed. 2011) ("The

transfer of a trademark also will not be inferred from an

assignment of a business where the assignor continues in the same

line of business after the assignment.").

For our purposes, however, the issue is not whether

Mercado licensed or fully assigned the trademark to Bart, but

whether the district court abused its discretion in issuing

-19-
preliminary injunctive relief. It did not because under either

interpretation, Bart is entitled to an injunction.9 We explain.

The district court plainly did not abuse its discretion

in applying collateral estoppel to the Florida district court's

determination that Mercado's assignment under the Agreement is

subject to reversion upon termination. See Berríos-Romero v.

Estado Libre Asociado de P.R., 641 F.3d 24, 26 (1st Cir. 2011)

("Issue preclusion, or collateral estoppel, forecloses relitigation

in a subsequent action of a fact [or issue of law] essential for

rendering a judgment in a prior action between the same parties,

even when different causes of action are involved." (quoting Puerto

Ricans for P.R. Party v. Dalmau, 544 F.3d 58, 69 (1st Cir. 2008))

(internal quotation marks omitted)).

Collateral estoppel applies when "(1) the issue sought to

be precluded in the later action is the same as that involved in

the earlier action; (2) the issue was actually litigated; (3) the

issue was determined by a valid and binding final judgment; and (4)

the determination of the issue was essential to the judgment."

Rodríguez-García v. Miranda-Marín, 610 F.3d 756, 770 (1st Cir.

2010) (quoting Ramallo Bros. Printing, Inc. v. El Día, Inc., 490

9
Mercado's failure to validly terminate the Agreement also
renders unsuccessful his claim that he is entitled to preliminary
injunctive relief to prevent Bart from using his name and likeness.
Like the rights to the trademark, Bart's rights to license
Mercado's name and likeness were granted in perpetuity and Bart
does not lose those rights without a valid termination of the
Agreement.

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F.3d 86, 90 (1st Cir. 2007)) (internal quotation marks omitted),

cert. denied, 131 S. Ct. 1016 (2011). Mercado and Bart litigated

the issue of reversion upon termination before the Florida district

court, and the Florida court's determination was final at the

summary judgment stage. The issue was essential to the court's

determination that Mercado's trademark claims were moot because

Mercado had not terminated the Agreement. In order to even assert

a claim of injunctive relief, Mercado must demonstrate that he

terminated the Agreement and that the trademark rights reverted to

him.

The district court reasonably concluded that Mercado did

not validly terminate the Agreement. Section 12(a)(iii) of the

Agreement entitles Mercado to terminate the Agreement after fifteen

days' written notice if Bart fails to pay Mercado any agreed

compensation within sixty days of the due date. Mercado argues

that he was entitled to terminate the Agreement in 2006 after Bart

ceased to pay Mercado's monthly stipend. However, under Puerto

Rico law, a party must comply with its own contractual obligations

before it can demand compliance from the other party. See P.R.

Laws Ann. tit. 31, § 3052. A party's breach effectively suspends

the nonbreaching party's duty to tender performance. See id.

§ 3017.

Both the magistrate judge and the district court

reasonably concluded that Bart's obligation to pay Mercado

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compensation is reciprocal with Mercado's obligation to provide

services. The compensation provisions are embedded within Section

6, which discusses Mercado's services, rather than earlier sections

of the Agreement, which discuss the granting of rights.

Structurally, Section 6 begins by cancelling Mercado's prior

services obligations with Shoop & Associates. It then provides for

the "Additional Services" that Mercado is to render and it

concludes with a compensation structure. Read as a whole, Section

6 links Mercado's compensation and Mercado's services as reciprocal

obligations.

Mercado has rendered no services to Bart since November

2006. Because Puerto Rico law demands that Mercado comply with his

contractual obligation to provide services in order to demand

compensation, the district court reasonably concluded that Bart is

relieved from its obligation to pay Mercado compensation. This, in

turn, means that Mercado had no right to terminate the Agreement

and that the trademark rights have not reverted to him. The

district court therefore did not abuse its discretion in denying

Mercado's request for preliminary injunctive relief.

Nor did the district court abuse its discretion by

granting Bart's request for preliminary injunctive relief.10 All

10
Section 13 of the Agreement does not bar Bart from
seeking injunctive relief in this case. Section 13 states that
"all grants granted or assigned by this agreement shall be
irrevocable under all or any circumstances, and shall not be
subject to rescission, termination or injunction. In the case of

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four factors support the district court's decision, even if Bart

only has a license. See Borinquen Biscuit, 443 F.3d at 115.

First, as the district court explained, Bart has

demonstrated a likelihood of success on the merits by showing (1)

that the "mark merits protection" and (2) "that the allegedly

infringing use is likely to result in consumer confusion." Id. at

116. Consumer confusion is established by reference to eight

guiding principles: "(1) the similarity of the marks; (2) the

similarity of the goods; (3) the relationship between the parties'

channels of trade; (4) the relationship between the parties'

advertising; (5) the classes of prospective purchasers; (6)

evidence of actual confusion; (7) the defendant's intent in

adopting its mark; and (8) the strength of the plaintiff's mark."

Id. at 120. This list is merely illustrative; the purpose of the

inquiry is to determine whether "the allegedly infringing conduct

carries with it a likelihood of confounding an appreciable number

breach of this agreement by Bart, Mercado's sole remedy shall be
limited to an action at law for damages."
By its plain terms, this provision precludes Mercado from
seeking to enjoin Bart from using the very trademark that Mercado
granted to Bart. Bart, on the other hand, granted no such
trademark rights to Mercado. Because the provision is limited to
"grants granted" under the Agreement, it cannot operate to prevent
Bart from seeking injunctive relief here. The provision's express
limitation of Mercado's remedies to damages, with no corollary
provision for Bart, bolsters this reading.
In any event, Mercado did not raise this argument before the
district court and it is waived. See Anderson v. Hannaford Bros.
Co., 659 F.3d 151, 158 n.5 (1st Cir. 2011).

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of reasonably prudent purchasers exercising ordinary care." The

Shell Co. (P.R.) Ltd. v. Los Frailes Serv. Station, Inc., 605 F.3d

10, 21-22 (1st Cir. 2010) (quoting Int'l Ass'n of Machinists &

Aerospace Workers v. Winship Green Nursing Ctr., 103 F.3d 196, 201

(1st Cir. 1996)) (internal quotation marks omitted).

The parties each agree that the mark merits protection.

"[T]o be eligible for trademark protection, a mark must qualify as

distinctive," Borinquen Biscuit, 443 F.3d at 116, either inherently

or through acquired secondary meaning, id. at 116-17. The parties

agree that the trademark "Walter Mercado" has a secondary meaning.

The Agreement itself states that "the Mark has attained the status

of a common law trademark and service mark." See Agreement § 2(a),

at 3.

Additionally, there is a likelihood of consumer

confusion. Bart has alleged that Mercado continues to use the

trademark to develop new materials and products with third-party

agents, including a book, a CD, a website, and horoscopes

distributed in several countries in media including periodicals,

television, text messages, and pre-recorded audio and video

messages. The district court reasonably concluded that if Mercado

and Bart are concurrently producing psychic and astrological

products using the Mercado name, Mercado's infringing use of the

trademark is likely to create consumer confusion. The products

rely on the same trademark; they are within the same class of

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astrological and psychic products; and they target the same class

of Spanish-speaking astrological and psychic customers. See

Borinquen Biscuit, 443 F.3d at 120.

Bart has also demonstrated irreparable harm. As the

district court explained, Mercado's continued infringing use of the

trademark has impaired Bart's marketing of its own astrological

products and services. Mercado-Salinas, 747 F. Supp. 2d at 274-75.

Bart also alleges that Mercado has interfered with Bart's use of

the trademark by continuing to represent to third parties that he

owns the trademark. Mercado has, for example, attempted to bill

Bart's contractual partners directly for their use of the

trademark.

Third, the court balances "the hardship that will befall

the nonmovant if the injunction issues" against "the hardship that

will befall the movant if the injunction does not issue."

Borinquen Biscuit, 443 F.3d at 115. We cannot fault the

determination that the balance of hardships tips in Bart's favor.

We note the district court's preliminary injunction as issued still

allows Mercado to engage in the same business enterprises allowed

under the Agreement.

As to the impact of a preliminary injunction on the

public interest, concurrent use of the trademark by Bart and

Mercado may lead to substantial consumer confusion, which is not in

the public interest. See id.

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 Mercado argues that the preliminary injunction is in

error because it potentially prevents him from using his personal

name. However, "[t]here is no doubt that a personal name used as

a trademark may be expressly assigned to another along with the

goodwill symbolized by the mark." 3 McCarthy on Trademarks and

Unfair Competition § 18:32 (4th ed. 2011). "If a person has sold

a business which is identified by his personal name, the name is an

asset which he has sold, and he cannot keep commercial control of

the name and keep the purchase price too. Of course, the seller

can use his own name to identify himself, but he has sold the right

to use the name as a commercial symbol -- a trademark." Id.

(footnote omitted).

The injunction had two narrowing features: it only

limited use of the trademark "Walter Mercado," and it contained an

exception. We have upheld that injunction as not an abuse of

discretion. While Mercado argued the original injunction was too

broad, the court adopted the exception offered and Mercado offered

no specifics beyond that. It can hardly be an abuse of discretion

for the district court not to have sua sponte imposed further

limitations.

III.

We affirm the district court's denial of Mercado's

request for preliminary injunctive relief and its grant of Bart's

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request for preliminary injunctive relief. We remand the case for

trial and further development of the issues.

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