National Association for the Advancement of Colored People, AKA Naacp v. N.A.A.C.P. Legal Defense & Educational Fund, Inc.

Two civil rights organizations contend for the right to use the initials “NAACP” as their trademark. The National Association for the Advancement of Colored People (the Association) alleges that the continued use of the NAACP initials by the NAACP Legal Defense and Education Fund, Inc. (the LDF) constitutes a trademark infringement. 1 The LDF replies that the Association irrevocably granted it the right to use the initials. The LDF also maintains, inter alia, that the Association’s suit is barred by laches. In the district court, both sides moved for summary judgment. 2 The court granted the Association’s motion and ordered the LDF to refrain from using the NAACP initials. Because the district court erred in denying the LDF’s defense of laches, its judgment is reversed.

I. Background

The material facts are undisputed. 3 The Association, known as “the NAACP,” was founded in 1909, 4 and listed among its goals:

to promote equality of rights and eradicate caste or race prejudice among the citizens of the United States; to advance the interests of colored citizens; to secure for them impartial suffrage; and to increase their opportunities for securing justice in the courts, education for their children, employment according to their ability, and complete equality before the law. 5

The Association has sought to achieve its goals through educational work, legislative activity, and litigation. 6 ,

As early as 1936, 7 the Association’s Board of Directors voted to organize a national defense fund to raise money for its litigation program. 8 Besides serving as a means to ensure on-going financing of civil rights litigation, the creation of the LDF provided an important tax advantage. 9 The Bureau of Internal Revenue had ruled that contributions to the Association were not deductible for federal income tax purposes because of the Association’s lobbying *133 work. Hence, the creation of a separate organization to perform the Association’s legal work allowed contributors wishing to support its nonpolitical activities to receive tax deductions. 10

The Association’s Board of Directors was. informed by the New York Secretary of State that a certificate of incorporation could be processed only if the new corporation obtained “consent” from the Association to the use of the NAACP initials. 11 The Association’s Board of Directors then passed the following resolution on October 9. 1939:

BE IT RESOLVED, That the Board of Directors of the National Association for the Advancement of Colored People grant permission for the use of the initials, “N.A.A.C.P.” by the “N.A.A.C.P. Legal Defense and Education Fund, Inc.” and authorize the President and Secretary to execute whatever papers might be necessary to carry out this resolution. 12

The State of New York approved the incorporation of the LDF in 1940. 13

From 1940 to 1957, the LDF served as a subsidiary of the Association. Although funds were kept in separate accounts, all the LDF’s first directors were members of the Association’s board. 14 The Association solicited contributors by explaining that they could help the Association by making tax-deductible contributions to the LDF. 15 Apparently some gifts contributed directly to the Association were placed in the LDF fund, and the contributor was then notified that his contribution was deductible for federal income tax purposes. 16 The allocation of contributions between the LDF and the Association was not based upon who made the solicitation, but upon the purpose for which the money was used — so funds used for lobbying could only go to the Association, while funds used for litigation would go to the LDF. 17

During this initial period, the LDF was under its progenitor’s direct control. The two organizations had common directors, offices, and staff. 18 Throughout the 1940’s and into the 1950’s, the LDF was guided by the Association’s National Office’s policy decisions regarding the handling of litigation. In particular cases, the Association’s Board of Directors’ approval was sought before proceeding. 19 The LDF, as the legal branch of the Association, routinely handled general legal matters of the Association.

In 1957, however, the LDF and the Association mutually agreed to the LDF’s independence. A gradual shift in that direction had suddenly been accelerated by external forces. The U.S. Treasury Department and several Southern state officials challenged the LDF’s tax-exempt status. 20 The *134 Southern state officials claimed that the LDF had too close a relationship with the Association, which was engaged in lobbying and political activities. 21 The U.S. Treasury Department objected to the sharing of board members and the NAACP initials. 22 In response, the Association and LDF decided that the LDF should retain its NAACP initials but should sever all direct connections with the Association. 23 On May 16, 1957, the LDF’s board adopted a resolution that “no person should be a Board member, officer or employee of this corporation who is also a Board member, officer or employee of the N.A.A.C.P.” 24

The board, budget, staff, and program of both organizations were completely separated. 25 The LDF now came under the direct control of its own board of directors. Since 1957, the LDF has spent over eleven million dollars soliciting contributions using the NAACP initials. 26 The LDF continued to function as the Association’s outside counsel, and coordinated its efforts with those of the Association in cases directly involving the Association’s branches and individual members. 27 However, the LDF also sought other clients who had no connection with the Association. 28

The independence of the LDF from the Association was reported to the Treasury Department which never again challenged the LDF’s tax-exempt status. 29 Donations occasionally made to the wrong organization were forwarded to the intended beneficiary. Contributors were instructed about the tax deductibility of their donations, 30 as well as advised about the total separateness of the two organizations. 31

Because such scrupulous organizational separation precluded “direct and formal control of the Inc. Fund [LDF] by the NAACP Board,” 32 cooperation between the two parties relied upon personal ties and common policy interests. But by the 1960’s, however,- tensions between the two organizations became evident, 33 despite the formation of several liaison committees established between 1960-62 and 1965-66. 34 These strained relations resulted from a heightening of direct competition in fund-raising. 35 There was also a dispute over *135 who should take public credit for successful civil rights litigation. 36 Although both organizations publicly attempted to deem-phasize any explicit competition, 37 the tensions between them continued to heighten. 38

In July 1965, the Association’s Board adopted a resolution 39 :

it was VOTED that the Inc. Fund [the LDF] be approached by the Chairman of the Board, the Executive Director, the Treasury, and the Chairman of the Special Contribution Fund for the purpose of requesting the Inc. Fund to voluntarily reincorporate under a name that does not include NAACP; or to bring the Inc. Fund back into Special Contribution Fund status; and, if they refuse to do so, the NAACP should go into court and enjoin them from use of the name NAACP 40

The Association’s Executive Director orally conveyed this request and threat of suit to the Director of the LDF, who rejected the demand. 41 At the Association’s September 12, 1965 meeting, the Association’s Board formally withdrew the language of its resolution threatening suit.

The Executive Director reported that the Legal Committee has suggested that a phrase in the July 2, 1965, minutes [page 4], to wit: “and, if they refuse to do so, the NAACP should go into court and enjoin them from use of the name NAACP,” be stricken from the minutes ____ [B]ecause of the feeling of the Legal Committee that it was impolitic to have such a phrase on record and, additionally, that it would have no standing in court, it was voted unanimously, on motion by Mr. Alexander, duly seconded, that the phrase be stricken from the minutes ____ 42

Thereupon, the Association’s Executive Director told the Director of the LDF that the threatening language had been withdrawn. 43 On February 24, 1966, representatives of both sides met to discuss their relationship. It was suggested again that the LDF change its name but the LDF declined. 44 , .

During the next twelve years, from 1966 through 1978, the Association remained silent concerning the LDF’s use of the NAACP initials. 45 The Association did not give clear notice to the LDF about reserving its exclusive claim to the NAACP initials. There were no negotiations. Cooperative interchanges between the LDF and the Association’s attorneys waned. 46 The Association itself indicated that during this time, the LDF “pursued an independent course of action ... without consultation with the NAACP as to either policy or program.” 47 At least since 1966, the LDF *136 has included a disclaimer on its stationery disavowing any present relationship with the Association. 48 During this period of no negotiations, the LDF continued to build up its goodwill — indeed, these were the salad days for the LDF’s litigation practice. 49 The LDF continued to spend time and millions of dollars in soliciting gifts and recruiting legal talent using the NAACP initials. 50 Many public interest groups now use the term “legal defense fund” in emulation of the LDF’s success. 51

Negotiations were initiated by a letter from the Association to the LDF on December 29, 1978. The correspondence indicated concern about confusion stemming from LDF’s use of the NAACP initials. 52 On June 28, 1979, the Association’s board adopted a resolution that rescinded the resolution of October 9, 1939 and revoked permission to use the NAACP initials. The Association registered the NAACP initials with the Patent and. Trademark Office on January 26, 1982. On May 25, 1982, the Association initiated this suit. 53

The Association alleged that its 1939 resolution granted only a revocable license for use of the NAACP initials, and that the LDF’s continued use of the initials constituted a trademark infringement. In response the LDF maintained that the 1939 resolution was an irrevocable grant, and that estoppel, acquiescence, and laches prevent the Association from belatedly asserting its claim. After a period of discovery, the parties made cross-motions for summary judgment.

The district court noted that the parties “agreed that the passage of time has rendered further illumination of the facts (upon which their differences are principally semantic) both unlikely and unnecessary.” 54 The court held that: (1) the 1939 resolution was. intended as a revocable license to use the NAACP initials; (2) the Association did not lose exclusive control of its initials by acquiescence, estoppel, or laches; and (3) the potential for future public confusion between these two parties as a result of the shared trademark was substantial. The district court thus granted the Association’s motion for summary judgment. The court ordered that an injunction banning the LDF’s use of the NAACP initials would issue upon exhaustion of appeals. It also prohibited the LDF from referring to their former affiliation with the Association two years following this initial injunction. But because we find that the Association’s suit is barred by laches, the district court’s judgment is reversed. 55

II. The Laches Defense

*137 The doctrine of laches 56 bars relief to those who delay the assertion of their claims for an unreasonable time. Laches is founded on the notion that equity aids the vigilant and not those who slumber on their rights. Several aims are served by requiring the reasonable diligence of plaintiffs in pursuing their legal rights. Plaintiffs are encouraged to file suits when courts are in the best position to resolve disputes. As claims become increasingly stale, pertinent evidence becomes lost; equitable boundaries blur as defendants invest capital and labor into their claimed property; 57 and plaintiffs gain the unfair advantage of hindsight, while defendants suffer the disadvantage of an uncertain future outcome.

Here almost thirteen years passed from 1966 through 1978 during which this case was ripe for judgment. Laches may not have been applicable if the Association had pursued negotiations during this time rather than going directly to court. 58 Understandably these two civil rights organizations were reluctant to air publicly a fight among brothers and sisters. But legal precedent requires that this well-meaning motive be objectively evidenced by ongoing negotiation to excuse a stale claim. 59 The Association fails to offer reasons why negotiations were not possible.

A. The Doctrine

The essential elements of laches are well-defined by common law. There are three affirmative requirements: (1) a substantial delay by a plaintiff prior to filing suit; (2) a plaintiffs awareness that the disputed trademark was being infringed; and (3) a reliance interest resulting from the defendant’s continued development of good-will during this period of delay. 60 Courts also look for factors that may negate the invocation of laches by excusing the delay: (1) ongoing negotiations; 61 and (2) conscious fraud or bad faith by the defendant. 62

Laches may bar injunctive relief when the defendant has established a substantial reliance interest. 63 The district court failed to recognize this principle. 64 It *138 is true that “mere delay” by itself does not bar injunctive relief if the defendant did not invest resources that contribute to a trademark’s future value. 65 But injunctive relief may be appropriately barred when the defendant invested substantial labor and capital that builds the trademark’s goodwill. 66 This future property interest, resulting from reliance during the plaintiff's negligent delay, therefore prevents the enjoining of the defendant’s continued use of the trademark.

The district court erred in denying the defense of laches. Although considerable deference is given to the trial judge’s discretion on the question of laches, 67 here the material facts are not in dispute according to both the parties and the district court. 68

B. The Affirmative Requirements

The requirements of laches are satisfied by the facts of this case. First, the Association delayed for almost thirteen years before resuming negotiations over the LDF’s use of the NAACP initials. This length of time is comparable to that in other cases in which the laches doctrine has been applied. 69 While mere delay by itself does not bar injunctive relief, here there was substantial investment by the LDF during this considerable time lapse. Because the Association did not give clear notice of its exclusive claim to the NAACP initials during this hiatus, the Association failed to reserve its rights. Such delay invites reasonable reliance by strengthening the defendant’s belief that its use of a trademark will not be challenged. The cases cited by the district court do not tolerate the length of the delay found here. 70

Second, it is undisputed that the Association had knowledge of the LDF’s alleged infringement. 71 These two organizations knew each other intimately. In 1957, it was a mutual decision to separate and to allow the LDF to retain its NAACP initials. In the 1960’s, the Association was also aware of the direct competition that was developing between the parties. The Association had ample opportunity to resort to a suit. In fact, the Association did threaten litigation, but withdrew its threal. 72

Third, the Association’s conduct gave the LDF reasonable justification to rely on the Association’s inaction, and to invest resources based upon this reliance. We again emphasize that, while mere passage of time does not bar injunctive relief, here the defendant’s use of the NAACP initials resulted from both the plaintiff’s inaction and conduct that encouraged continued use of the trademark. The Association failed to reserve its rights during the twelve year period. Indeed, it had previously agreed to the LDF’s independence without asserting an exclusive claim to the NAACP initials. The prejudice resulting from the reliance interest building during the years of delay *139 in this case was substantial. The LDF continued to develop “[t]he universal esteem in which the [NAACP] initials are held.” 73 The LDF invested substantial labor and millions of dollars in pressing important civil rights suits, soliciting gifts, and recruiting legal talent using the NAACP initials. 74 Because many organizations have names virtually identical to the LDF’s except for the NAACP initials, it is only these initials that distinguish the LDF from its emulators. 75

Courts have never imposed an affirmative obligation upon a defendant to clarify its right to use a disputed trademark during the plaintiff’s delay. 76 The undisputed facts of this case point to the reasonableness of the LDF’s reliance upon the Association’s delay in enforcing its claims. The passing of almost thirteen years without any clear reservation of rights by the Association creates a presumption of reasonable reliance. The Association’s conduct included affirmative acts of encouragement. Besides having agreed to the LDF’s independence, the Association continued as a client of the LDF and did not protest the LDF’s use of the initials despite the LDF’s independent dealings with other clients. Finally, the LDF was aware that the Association had threatened to sue but did not. 77 The LDF’s good-faith reliance was reasonably based upon both the Association’s prolonged passivity and its affirmative acts.

C. The Absence of Negating Factors

The district court correctly indicated that courts tolerate delays if the parties are negotiating a settlement. 78 But the undisputed facts show that from 1966 through 1978 there were no negotiations. In the total absence of negotiations, delay “stemming from an abhorrence of time-consuming and costly litigation” does not preclude laches. 79

Nor was there any evidence presented that suggested bad faith or conscious fraud by the LDF. Indeed, both parties have cooperated in exchanging donations attributed to the wrong organization. The LDF’s disclaimer on its stationery further indicates good faith efforts to reduce any possible public confusion over its use of the NAACP initials. In conclusion, there is an absence of factors that might counsel our hesitation in applying laches.

III. The Lack of Licensing Arrangements

The Association alleges that from 1966-78 the LDF possessed only a revocable *140 license to use the NAACP initials. The Association bases this view upon a nonprofit parent organization’s right to revoke use of its name when an affiliate dissociates itself from the parent. 80 Our review of the case law reveals no separate rule for non-profit organizations. 81 The cases relied upon by the Association involve local chapters of national organizations whose right to use the parent’s name was conditioned — in the organization’s bylaws or charter — on the local’s continued affiliation with the national organization. 82 The agreements between the Association and the LDF contained no such condition.

Even examined in the most favorable light, these cases do not establish that an affiliate’s right to use the parent’s name ceases anytime the parent chooses. Rather, they establish that the affiliate’s-right expires when the affiliation ceases. The parent organization therefore must assert its exclusive claim to the trademark when disaffiliation occurs. Here the affiliation between the Association and the LDF ceased in 1957. Nevertheless, there was mutual agreement to the LDF’s continued use of the NAACP initials as an independent organization.

A revocable license cannot be contrived from the record. Such trademark licensing requires (1) explicit contractual arrangements indicating revoeability; 83 and (2) supervision and controls by the licensor over the licensee. 84 Indeed, there was no contract between the parties which contained the words “revocable license,” much less any exchange of consideration for this alleged license. The record before us is clear that there was no mutual agreement to a revocable licensing arrangement. 85

IV. Conclusion

The National Association for the Advancement of Colored People and the NAACP Legal Defense and Education *141 Fund, Inc. share common ideals and a distinguished common heritage. History suggests that they were jointly responsible for the revolution in civil rights that led to and has been epitomized by the Supreme Court’s decision in Brown v. Board of Education. 86 The passage of time coupled with the reliance between the parties leads this court to conclude that laches bars the injunctive relief sought by the Association. These two great organizations, like brilliant but quarreling family members, must continue to share the NAACP initials with which they were born. The judgment is reversed. The case is remanded to the district court with directions that the suit be dismissed.

So ordered.