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Sturgis City Council considers allowing open containers downtown during rally
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Sturgis City Council considers allowing open containers downtown during rally

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Sturgis Rally Main Street

Bikes line Main Street in Sturgis during the 80th annual rally in 2020. A public hearing to allow open containers of beer and wine during the 2021 rally is set for May 17.

Open containers of beer and wine on downtown Sturgis streets may become a reality for the 2021 motorcycle rally, after the city council held a public discussion on the matter Monday.

No final decision has been made, but Mayor Mark Carstensen said the proposal calls for the city to sell souvenir cups to rally visitors. Those who wish to walk the streets of downtown Sturgis within certain boundaries during the rally would be able to visit bars and restaurants, fill their glass up and be able to consume beer and wine outside of the businesses.

"Obviously, there's no plan in place yet, but plans have been discussed. I think we can throw out the fact that the city of Sturgis would have locations throughout the rally that would sell the event cups," Carstensen said. "At those locations also, we would work with volunteers and pals where we would ensure that somebody would ID and (give out a) band. It would still be up to the establishment to make sure they are IDing to protect their establishment, their liquor license or mart beverage license."

Proceeds from the selling of the event cups would be retained by the city and then given back as donations to various organizations through Sturgis Rally Charities and to fund an endowment for future donations.

"I truly envision an opportunity by selling cups to make a tremendous impact on the future of the Sturgis motorcycle rally, both in people attending and staying downtown longer without actually moving the needle much on the ground," Carstensen said. "I do understand that people will be drinking on the streets, but in my opinion as you look down the street, they're drinking six inches on the other side of a wall (in bars and restaurants). It would create more of an environment of staying downtown, pacing yourself and enjoying the people watching."

If approved by the city council, the proposed open container permit would last for a nine-day period during the rally and would be allowed between the hours of 10 a.m. to 10 p.m. The proposal calls for the 2021 rally to be a "case study" to see the positive and negative impacts of open containers on the downtown streets.

The proposed plan would allow the Sturgis Police Department, other law enforcement or safety personnel to rescind the open container policy, shut down the sales of the souvenir cups, and post signs that open containers are no longer allowed.

The revenue from the sale of the cups would provide much-needed dollars to Sturgis Rally Charities, Carstensen said. The donations to the organization have suffered over the past few years due to a licensing dispute of the "official" Sturgis motorcycle rally logos and trademarks owned by Sturgis Motorcycle Rally, Inc. (SMRi), a not-for-profit organization established in 2010 to license use of the terms "Sturgis" and "Black Hills" on vendor products sold in relation to the rally.

The city of Sturgis was SMRi's sole licensee for sponsorship and other minor categories. The relationship was established through a licensee agreement between the two parties. Through the agreement, the city was able to use SMRi's trademarked rally logos and other intellectual property for advertising and to sell sponsorship opportunities.

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The revenue from the advertising and sponsorships allowed the city to make substantial donations to charity. The city also paid a royalty fee to SMRi for use of the organization's logos and intellectual property.

However in 2011, SMRi filed a lawsuit seeking to stop Rushmore Photo & Gifts owners Paul and Carol Niemann and their son Brian Niemann from using the word "Sturgis" on rally products it produced and sold.

In 2015, a jury found in favor of SMRi, awarding a judgment of $912,500 in damages but that award was later vacated by a judge.

In 2018, the 8th Circuit Court ruled the use of the Sturgis trademark to be invalid.

Attorneys for SMRi appealed, asking the court to reconsider the ruling. The ruling was upheld and remanded portions of the case back to federal court in Rapid City. In December 2019, a federal judge affirmed the trademark was invalid.

While the city of Sturgis was not involved in the SMRi lawsuit, Sturgis City Manager Daniel Ainslie told the Journal in 2019 that the federal court ruling related to trademark use of the word Sturgis during the annual motorcycle rally will have a “substantial” effect on charitable donations generated by the sales of officially licensed rally products.

The licensee agreement with SMRi was set to end after the 2026 rally. With the court rulings against SMRi's trademarks, the city began establishing its own logo, tagline and marketing.

During Monday's meeting, the city council voted to terminate the licensee agreement with SMRi, and pay a settlement of $400,000 — which is $154,000 less than the $554,400 in royalties the city would have to pay to SMRi.

With the termination of the agreement with SMRi, revenue from the city's own marketing of a logo, and the potential sales of souvenir cups for open containers of beer and wine, Carstensen said it will help the city to increase infrastructure projects, provide an endowment for Sturgis Rally Charities and larger donations to the community.

"We're making a legacy, long-lasting in perpetuity, giving back to our community from basically selling plastic cups," he said. "It'll take a few years, but I believe it is obtainable to create quite a large sum for the charities. I believe it is quite possible for the city of Sturgis to have a new revenue stream to return even more to our citizens from the Sturgis motorcycle rally."

Contact Nathan Thompson at nathan.thompson@rapidcityjournal.com.

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