## Facts

- The dispute concerned ownership and use of the “Mustang Ranch” service marks associated with a Nevada brothel.
- A.G.E., the prior operator, used marks including “Mustang Ranch” and related variants for brothel services before it ceased operations following criminal proceedings against its owner.
- The federal government seized A.G.E.’s assets, including the marks and the Mustang Ranch buildings, and later sold them through a public auction conducted via eBay.
- L. Lance Gilman purchased the assets at auction and reopened a brothel using the Mustang Ranch marks; defendants emphasized that the purchased buildings and their features were central to the services and atmosphere associated with the marks.
- After A.G.E. went out of business and before defendants’ reopening, the Burgesses and Sherwin Fellen used the Mustang Ranch marks in operating a brothel and claimed Fellen owned the marks with the Burgesses holding an exclusive right to use them for prostitution services.
- Plaintiffs sought declaratory relief recognizing their claimed ownership/use rights; defendants counterclaimed for Lanham Act infringement and unfair competition and sought to stop plaintiffs’ continued use.
- The court decided cross-motions for summary judgment after discovery.

## Issues

1. Whether the government could seize and validly transfer the Mustang Ranch service marks to the auction purchaser in a manner consistent with trademark assignment requirements, including transfer of goodwill.
2. Whether plaintiffs’ post-seizure use of the Mustang Ranch marks, based on their asserted chain of title and interim use, gave them superior rights or instead constituted infringement and unfair competition.
3. Whether defendants were entitled to permanent injunctive relief barring plaintiffs from using the Mustang Ranch marks.

## Decision

- The court ruled largely for defendants on summary judgment.
- The court held that defendants obtained superior rights in the Mustang Ranch marks through the government’s seizure and auction transfer.
- The court rejected plaintiffs’ asserted ownership and exclusive-use theory through Fellen and denied plaintiffs’ declaratory relief.
- The court found plaintiffs’ competing use of the marks in connection with similar brothel services actionable under the Lanham Act and granted defendants protective relief, including injunctive relief against further use by plaintiffs.

## Legal Principles

- Trademarks and service marks are property interests that may be seized and sold; a purchaser can obtain the prior owner’s rights through a valid chain of title.
- A trademark assignment must include the goodwill associated with the mark; transfer of related tangible business assets and the business context may support continuity of goodwill and defeat a “naked assignment” challenge.
- Priority based solely on interim “first use” after another operator ceases business does not defeat a superior chain of title acquired through a valid transfer of the mark and its goodwill.
- Use of identical or confusingly similar marks for the same services by a non-owner is likely to cause confusion and constitutes infringement and unfair competition under the Lanham Act.
- Permanent injunctive relief is appropriate where continued competing use threatens ongoing confusion and impairment of the mark’s goodwill.

## Conclusion

The court concluded that the government’s auction conveyed the Mustang Ranch service marks to defendants together with sufficient goodwill, making plaintiffs’ competing use unlawful; it therefore rejected plaintiffs’ ownership claims and granted defendants relief to protect exclusive use of the marks.


Burgess v. Gilman, 475 F. Supp. 2d 1051 (D. Nev. 2007)