Ultra Records, LLC v. Ultra International Music Publishing, LLC

Background

Ultra Records, LLC, an electronic-dance-music record label, sued its former corporate sibling, Ultra International Music Publishing, LLC. Records alleged that Publishing’s continued use of the “Ultra” name after the companies’ separation violated Records’ trademark rights. The claims included federal and state trademark infringement, state-law unfair competition, state-law trademark dilution, and breach of contract.

The parties agreed that a jury would decide liability questions and damages on the contract claim. The Court would then decide Publishing’s equitable-estoppel defense and, if necessary, the appropriate remedies. The jury found that Records had licensed Publishing to use the “Ultra” mark in the music-publishing business; that Records terminated the license effective March 2022; and that Publishing’s continued use breached the license. For the unfair-competition claim, the jury found that Publishing acted in bad faith. For the dilution claim, the jury found that the mark was distinctive and that Publishing’s use was likely to dilute it. The jury found no likelihood of confusion among Publishing’s customers and no damages from the contract breach.

Equitable Estoppel

The Court rejected Publishing’s affirmative defense of equitable estoppel. That defense would have required Publishing to show, under the applicable federal or New York standards, that Records or Sony made a misleading statement or concealed a material fact, that Publishing reasonably relied on it, and that the reliance caused harm.

The Court held that Publishing could not show a qualifying misrepresentation or concealment. Sony’s silence did not amount to concealment because Publishing did not establish that Sony had a duty to speak. The Court also found that the 2012 agreement itself made clear that the parties were supposed to negotiate a nonexclusive, nontransferable license, rather than confirming that Publishing could use the mark without restriction. In addition, the Court concluded that Publishing could have clarified Sony’s position and therefore could not establish reasonable reliance. The Court accordingly rejected the equitable-estoppel defense.

Permanent Injunction

The Court held that Records was entitled to a permanent injunction under the federal trademark statute, New York’s anti-dilution law, and New York contract law. Applying the required factors, the Court found that Records faced irreparable injury because continued use could reduce its control over the reputation of the “Ultra” mark. The jury’s finding that the mark was distinctive and likely to be diluted also supported irreparable harm.

The Court further found that monetary damages were inadequate because Publishing continued using the mark after the license was terminated and had not promised to stop. The balance of hardships favored Records because the evidence indicated that Publishing’s success depended primarily on its founder, employees, and resources rather than the “Ultra” name. The public interest also favored protecting Records’ trademark rights.

The injunction permanently bars Publishing and related persons or entities from using “Ultra” in connection with offering, selling, distributing, marketing, advertising, or promoting music-publishing or music-related goods or services, including on websites, social-media platforms, and other media. The restriction takes effect no later than 5:00 p.m. Eastern time 180 days after entry of the order.

The order allows limited transition uses. Publishing may maintain the ultrapublishing.com domain name for one year after entry of the order, but after the 180-day period it must automatically redirect users to a compliant website with a different domain name. Publishing may also identify itself as “formerly known as Ultra International Music Publishing” on social-media profile pages for 18 months, if the wording is not prominent. Additional exceptions apply to physical sound recordings manufactured before the 180-day deadline and cue sheets connected to licenses executed before that deadline.

Disgorgement of Profits

The Court denied Records’ request to recover Publishing’s profits earned during the infringement period. Records relied only on deterrence, rather than unjust enrichment or compensation for actual damages. The Court found that disgorgement could create an excessive windfall because Publishing had used the name for decades, long before the alleged infringement period, and because the parties’ agreements and conduct had left the scope of Publishing’s rights unclear.

The Court also found insufficient certainty that Publishing benefited from the unauthorized use. Records did not show how to separate any benefit from the name from the benefits of Publishing’s own work. Records agreed that the injunction was sufficient to stop future use, weakening the need for disgorgement as a deterrent. Although the jury found bad faith after March 2022, the Court considered that finding alongside the parties’ long history, unclear contractual arrangements, and mutual failure to negotiate a written license. The Court therefore denied disgorgement.

Disposition

Judge Arun Subramanian rejected Publishing’s equitable-estoppel defense, permanently enjoined Publishing’s market-facing use of the “Ultra” name subject to the stated transition exceptions, denied Records’ request for disgorgement of Publishing’s profits, and retained jurisdiction to implement, modify, and enforce the injunction.