• It Doesn’t Work That Way

    by  • June 1, 2015 • trademark • 0 Comments

    When we last visited Florida VirtualSchool v. K12, Inc., the Court of Appeals for the Eleventh Circuit certified a question to the Supreme Court of Florida. As a refresher, in Florida VirtualSchool we have a state entity, FVS, enforcing a trademark. The defendants argued, successfully at the trial court stage, that FVS did not have the authority to enforce the trademark rights because by statute that duty fell to the Florida Department of State (DOS). The Eleventh Circuit certified this question to the Supreme Court of Florida:

    Does Florida VirtualSchool’s* statutory authority to “acquire, enjoy, use and dispose of … trademarks and any licenses and other rights or interests thereunder or therein” necessarily include the authority to bring suit to protect those trademarks, or is that authority vested only in the Department of State?

    The Supreme Court of Florida modified the question:

    Does Florida VirtualSchool’s statutory authority to “acquire, enjoy, use and dispose of … trademarks and any licenses and other rights or interests thereunder or therein,” and the designation of its board of trustees as a “body corporate with all the powers of a body corporate and such authority as needed for the proper operation and improvement of the Florida Virtual School,” necessarily include the authority to bring suit to protect those trademarks, or is that authority vested only in the Department of State?

    There are two conflicting Florida statutes in play. Section 286.021 Fla. Stat. (2013) says that

    The legal title and every right, interest, claim or demand of any kind in and to any patent, trademark or copyright, or application for the same, now owned or held, or as may hereafter be acquired, owned and held by the state, or any of its boards, commissions or agencies, is hereby granted to and vested in the Department of State ….

    This is accompanied by a statutory section giving the Department of State specific authority to enforce the rights, § 286.031 Fla. Stat. (2013).

    But meanwhile, the enabling statute for the Florida Virtual School says:

    The board of trustees shall aggressively seek avenues to generate revenue to support its future endeavors, and shall enter into agreements with distance learning providers. The board of trustees may acquire, enjoy, use and dispose of patents, copyrights and trademarks and any licenses and other rights or interests thereunder or therein. Ownership of such patents, copyrights, trademarks, licenses, and rights or interests thereunder or therein shall vest in the state, with the board of trustees having full right of use and full right to retain the revenues derived therefrom ….

    § 1002.37(2)(c) Fla. Stat. (2013).

    The Florida Supreme Court sees the problem, “The enabling statute for the Florida Virtual School and the statutes under which the DOS operates present a tension with regard to the scope of authority granted to the school.”

    And it resolves that tension in favor of Florida Virtual School. “When reconciling statutes that may appear to conflict, the rules of statutory construction provide that specific statute will control over a general statute and a more recently enacted statute will control over older statutes.” In addition, the Florida Virtual School, as a “body corporate,” has all the powers of any other corporation, specifically the power to bring a lawsuit. Under these principles, the Florida Virtual School is a proper party for an infringement action.

    So, with that, the Eleventh Circuit had its answer and the case was remanded to the district court.

    But K12 is not one to give up; it had new ammunition in the Florida state decision. K12 moved to dismiss Count 1 of the Complaint, one for trademark infringement under § 32 of the Lanham Act, on the theory that the registration is invalid because the registrant is, incorrectly, Florida VirtualSchool rather than the State of Florida. Alternatively, K12 moved that the count be dismissed based on the absence of a necessary party, the Secretary of the State of Florida, and it also moved to amend its counterclaim to add a new count for cancellation of the registration because the registration is not owned by the State of Florida.

    The district court was not amused. “Defendants’ arguments are an attempt to create an Gordian knot out of the Florida Supreme Court ruling.” The district court accuses K12 of “picking some decontextualized language within the Supreme Court opinion…. Although the Florida Supreme Court did not specifically address the ownership issue under the Federal Trademark Act, it is reasonable to infer from its opinion that FLVS is the owner of the marks for purposes of protecting its IP.”** The court therefore denied the motions to dismiss and the motion to amend.

    But here’s the thing – K12 is right and the court is utterly wrong. The Supreme Court of Florida said consistently and numerous times that, although Florida VirtualSchool has the authority to enforce the trademark, the State is still the trademark owner:

    • “Each statute addresses trademarks that are owned by the State”
    • “Specifically at issue is the field of operation for the school with respect to the trademarks it acquires on behalf of the State”
    • “We hold that the Florida Virtual School is authorized to file legal actions to protect the trademarks that it acquires on behalf of the State”
    • “The legislative grant to the board of trustees of ‘all the powers of a body corporate and such authority as is needed for the proper operation and improvement of the Florida Virtual School’ necessarily incorporates the ability to protect the trademarks that the school has acquired on behalf of the State”

    Clearly, in the Florida state court view, the State owns the trademarks and Florida VirtualSchool can enforce them. But that only speaks to the authority granted by state law; if that structure doesn’t comport with the requirements of federal law that’s just tough noogies. Just ask the Russian entity licensed to use the state-owned Stolichnaya brand.

    Under the Lanham Act, only the owner of the trademark may register it, 15 U.S.C. § 1051 (“The owner of a trademark used in commerce may request registration of its trademark”) and only a registrant may invoke § 32 as a basis for a claim. So the count for cancellation certainly states a claim, as does a motion to dismiss any count under § 32 of the Lanham Act.  Florida VirtualSchool, as a non-owner, would likely have standing to bring a trademark infringement claim under § 43(a) of the Lanham Act, a count which it also brought, but asking for joinder of the trademark owner itself is routinely granted.

    Perhaps there is a theory that Florida Virtual School is an instrumentality of the State of Florida and therefore the state is, in fact, the owner, analogous to a situation where the registration was erroneously granted to a division of a company rather than legal person. Or perhaps there is a theory that the State is an exclusive licensee with standing under Section 32, even though the State of Florida is the actual owner. But in general we keep rigid lines between legal persons, and there is nothing here that suggests we can just ignore the fact that Florida Virtual School is a “body corporate” separate from the State of Florida when that’s the very structure the Supreme Court of Florida relied on in deciding that Florida Virtual School had the authority to bring the infringement claim. If nothing else, it is a theory that requires more investigation before being so summarily dismissed.

    Florida Virtual School v. K12, Inc., No. SC13-1934 (Fla. Sep. 18, 2014).
    Florida Virtual School v. K12, Inc., No. 12-14271 (11th Cir. Nov. 17, 2014).
    Florida Virtual School v. K12, Inc., No. 6:11-cv-831-Orl-31KRS (M.D. Fla. May 4, 2015).

    * Bear with me on the use of both “Florida Virtual School” (with a space) and “Florida VirtualSchool” (no space). The enabling statute creates “Florida Virtual School,” but the entity does business as “Florida VirtualSchool.” I used what I thought was most appropriate in context.
    ** The court consistently uses “IP” when the only “IP” at issue is a “trademark.” Which perhaps is a clue how this case turned out so wrong.

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