The opinion of the court was delivered by: DENLOW
MEMORANDUM OPINION AND ORDER
The Court conducted a three-day bench trial on June 24, 25 and July 1, 1998, to decide the following issues: (1) whether a contract exists between Plaintiff-Counterdefendant World Championship Wrestling, Inc. ("WCW") and Defendant-Counterplaintiff GJS International, Inc., d/b/a Today's Trendz ("Today's Trendz") that grants Today's Trendz a license to manufacture, sell, and distribute merchandise bearing WCW's trademarks and service marks, and if such a contract does exist, what are its terms; and (2) whether Today's Trendz is otherwise authorized to manufacture, sell, and distribute merchandise bearing WCW's trademarks and service marks.
The Court holds that the parties agreed to and began operations under the terms of the September Deal Memo while they were negotiating the long form Merchandising License Agreement, which would ultimately govern their relationship. The parties never reached agreement on the terms of the Merchandising License Agreement. Accordingly, Today's Trendz had a license to sell WCW merchandise through May 14, 1998, when the September Deal Memo was terminated by WCW. Because no Merchandising License Agreement was ever agreed upon, Today's Trendz is no longer authorized to manufacture, sell and distribute merchandise bearing WCW's trademarks and service marks and is permanently enjoined from those activities.
The Court has carefully considered the testimony of the seven witnesses who testified in person, the one witness who testified by means of deposition, the numerous exhibits introduced into evidence, the written submissions by the parties, and the excellent closing arguments of counsel. The following constitute the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. To the extent certain findings may be deemed conclusions of law, they shall also be considered conclusions. Similarly, to the extent matters contained in the conclusions of law may be deemed findings of fact, they shall also be considered findings. See Miller v. Fenton, 474 U.S. 104, 113-114, 106 S. Ct. 445, 451-52, 88 L. Ed. 2d 405 (1985).
1. WCW is a Georgia corporation which is a wholly owned subsidiary of Turner Broadcasting Systems, Inc. ("TBS"). WCW has its corporate offices in Atlanta, Georgia. WCW is in the entertainment business of arranging and promoting professional wrestling events and selling related merchandise, including T-shirts, hats, and posters. WCW organizes and promotes professional wrestling events worldwide. WCW presents its wrestling matches in arenas, and broadcasts some events on pay-per-view telecasts, cable television, in syndication, and through the sale of home videos of its pay-per-view events. Casey Collins ("Collins"), WCW's Licensing Manager testified at the trial.
2. Today's Trendz is an Illinois corporation located in Bedford Park, Illinois. Today's Trendz is in the business of licensed manufacturing and distribution of novelty merchandise including the production and selling of posters, T-shirts, headwear, and other apparel. Today's Trendz operates its business by focusing on very few licenses at one time. Today's Trendz is a family business owned by Gus Stevens ("Stevens"). His two sons, Scott and Brian, his wife, and other family members are employed in the business. Stevens, his two sons, and Today's Trendz' attorney, Jules D. Zalon ("Zalon") testified at the trial.
3. Leisure Concepts, Inc. ("LCI") is a non-party to this litigation, but played a major role in the events giving rise to this dispute. WCW retained LCI as a licensing agent to negotiate with third parties for the licensing of WCW's trademarks. (Dx 15.) Faith Paige Wall ("Wall"), LCI's Director of Licensing, and Stella Guzman ("Guzman"), LCI's Manager of Contracts Administration, testified at the trial.
4. The Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1332, and supplemental jurisdiction of the parties' state law claims pursuant to 28 U.S.C. §§ 1338(b) and 1367(a).
C. PLAINTIFF'S TRADEMARKS.
5. Through the promotion, telecast, and advertising of its professional wrestling events, WCW has developed and promoted numerous trademarks and service marks, including various names, logos, and slogans related to its professional wrestling business. In addition, WCW has promoted the trademarks and service marks of the professional wrestlers and other entertainers to which WCW has an exclusive license.
6. The following federal trademark or service mark registrations are included among WCW's trademarks and service marks: Reg. No. 1,785,929 for the mark "WCW," identifying entertainment services; Reg. No. 2,089,414 for the mark "WCW MONDAY NITRO," identifying clothing; and Reg. Nos. 2,120,098 and 2,120,099 for the mark "NWO," identifying clothing and entertainment services, respectively. Today's Trendz does not contest the validity of WCW's trademarks or service marks.
7. Since 1988, WCW has sold merchandise, including T-shirts, hats, and posters, bearing WCW's trademarks and service marks.
D. THE SEPTEMBER DEAL MEMO.
8. In early September 1997, Stevens decided to explore the possibility of obtaining an apparel license from WCW. At about the same time, WCW decided to bring its licensing activities in-house and hired Collins as its Manager of Licensing. Collins had taken the position with the understanding that he would retain an outside licensing agent to assist him. He immediately began speaking to LCI about the possibility of becoming WCW's licensing agent.
9. Stevens aggressively pursued an apparel license with WCW. He initially contacted Mike Weber ("Weber"), Director of Marketing at WCW, who told him WCW was bringing in Collins to handle licensing. Stevens later contacted Collins at WCW. Collins referred him to Alfred Kahn, LCI's CEO. Stevens spoke and wrote to both Kahn and Collins and sent them samples and brochures. (Dx 1-3.) Kahn turned the matter over to Wall to handle. Wall was hired by LCI as its Director of Licensing in August 1997, and she was assigned to solicit and develop apparel licenses for the WCW account. Although WCW and LCI did not finalize their agency arrangement until October 22, WCW gave LCI apparent authority to negotiate on its behalf prior to that date.
10. On September 17 Wall sent Stevens a WCW license application which he promptly completed and returned. (Dx 4.) Stevens spoke to Wall on September 18 and followed up the conversation with a written proposal for a license for apparel, posters, headwear, and T-shirt transfers. (Dx 5.) Stevens and Wall continued to negotiate possible licensing terms. Stevens confirmed some of these conversations in writing and he forwarded samples of merchandise and proposed terms. (Dx 5-7.)
11. In September, LCI's procedure was to prepare a Licensing Deal Memo ("Deal Memo") internally, send it to the prospective licensee (Today's Trendz), and then forward it to the licensor (WCW). LCI prepared a Deal Memo and sent it to Stevens on September 26 ("September Deal Memo"). (Dx 10.) The September Deal Memo set forth the major business terms to which Stevens and Wall had agreed. The September Deal Memo was approved by four people at LCI, including the legal department and the CEO, before it was sent to Stevens. (Dx 10.)
12. Stevens promptly executed and returned the September Deal Memo along with a $ 10,000 check payable to LCI. (Dx 11 and 12.) The $ 10,000 constituted a partial advance towards the $ 100,000 guarantee called for by the September Deal Memo.
13. After the executed September Deal Memo had been returned by Stevens to LCI, LCI forwarded it to WCW for its approval. Collins and his boss Weber approved the September Deal Memo and forwarded it to Nick Lambros ("Lambros"), WCW's Executive Vice President, for his review. Lambros had no disagreement with the business terms, but he held up signing the September Deal Memo until a written business plan was approved and a new Deal Memo procedure was adopted. Lambros wanted all Deal Memos to be preliminarily approved by WCW before being sent to licensees. He then wanted to reserve the right to give final approval after the licensee had signed the Deal Memo. In addition, WCW delayed approval of the September Deal Memo with Today's Trendz until it had finalized its own agreement with LCI on October 22. (Dx 15.) Under the agency agreement with LCI, WCW retained LCI to perform a number of services in its behalf, including soliciting licensees and negotiating licensing agreements. (Dx 15, p.8.)
14. Stevens was not informed of Lambros' desire to change procedures. In fact, when Stevens spoke to Wall on October 22, she attempted to maintain his interest and enthusiasm and assured him in writing on WCW stationery that the September Deal Memo "should be signed in the next few weeks." (Dx 14.) On November 21, Wall sent a fax to Stevens, who was vacationing in Maui, advising him of "Great news! Posters will remain as part of the deal . . . A style guide is being sent to you today, so you may begin prod. development . . . You may proceed with designs and they will be reviewed promptly." (Dx 17.) A style guide is a compilation of photographs that can be used for design purposes.
15. At no time after the September Deal Memo was returned by Stevens did LCI or WCW ever indicate to Stevens that there was any disagreement with the terms of the September Deal Memo. Wall did request a slight modification to which Stevens agreed. After conducting a credit check of Today's Trendz, Wall requested that Stevens obtain a $ 75,000 letter of credit payable to WCW to secure a portion of the $ 100,000 guarantee. Stevens contacted his bank and arranged for the letter of credit to be issued. (Dx 21.)
16. Collins never alerted Stevens to any problems with the September Deal Memo. On November 24, Collins sent Stevens a letter expressing WCW's excitement over the opportunity to work together and promised to send the Merchandising License Agreement to Stevens for signature "in the next few weeks." (Dx 18.)
17. On or about December 1, LCI prepared the December Deal Memo under the new methodology and sent it to WCW. (Dx 20.) As Collins explained, the business points were the same as those contained in the September Deal Memo, with minor adjustments in certain dates to account for the delay which had occurred. The December Deal Memo was initialed by LCI and was then initialed by Collins, Weber, and Lambros on behalf of WCW under the heading preliminary approval. (Dx 20.) On December 9, Collins faxed the signature page to Guzman at LCI, who was responsible for forwarding contract documents to the parties and maintaining the contract files. (Dx 23.) Guzman never sent a copy of the December Deal Memo to Stevens. No explanation was provided for this omission. Guzman filed the signature page from WCW along with the September Deal Memo executed by Stevens.
18. LCI's practice was to send out a proposed Merchandising License Agreement only after a Deal Memo had been approved by the parties. Collins assumed that the December Deal Memo had been forwarded to and executed by Today's Trendz when he sent the proposed Merchandising License Agreement to LCI in December. LCI assumed a Deal Memo had been agreed upon when it sent the proposed Merchandising License Agreement to Stevens on December 16. (Dx 25.) Stevens understood that the September Deal Memo had been approved when he received a draft of the Merchandising License Agreement in December. This understanding was ...