Property, intangible

Yoiks. So you license someone your trademark and have this language in the license agreement:

[L]icensee hereby acknowledges the validity of the licensed mark and the exclusive ownership of the licensed mark by licensor, whether or not registered or recorded. Licensee agrees that it will not, at any time during the term of the License or thereafter, directly or indirectly challenge, contest or aid in challenging or contesting the validity or ownership by Licensor of the Licensed Mark, or the title or registration thereto or recording thereof, whether now existing or hereafter obtained.

….

(a) upon the termination of the license … neither licensee nor any of its affiliates nor any other owner, operator or occupant of the hotel shall have the right, by virtue of this agreement or otherwise to continue using any licensed mark in the name of the hotel, in the operation, management or promotion of the hotel, or otherwise, and licensee and such other persons immediately shall cease and desist from any such use. Licensor shall have the right, at licensee’s expense, to remove from the hotel any signs or other indicia of any connection with the licensor or with the licensed mark.

(b) Licensor shall have the right (which right shall survive the termination of the license) to seek injunctive or other relief as may be available at law or in equity in a court of competent jurisdiction to enforce the provisions of this section and its other rights under this agreement.

The licensee then continues to use the mark after the license agreement ends and you sue it for trademark infringement. You should be home free on a trademark infringement theory, right?

According to the Supreme Court of New York, nope. (And for those of you not familiar with the New York court system, entertainingly the Supreme Court is the lowest court.) Waterscape is the trademark owner, 70 West the licensee, and the license was for continued use of a hotel name on the same premises:

I find that Waterscape has failed to establish its entitlement to a preliminary injunction. Waterscape alleges that it has a common law trademark of “Cassa Hotel” and related and derived names, and has been using the term earlier than any other party. However, it has not provided sufficient evidence supporting these allegations to demonstrate ultimate success in its underlying infringement claim….

Waterscape points out that 70 West contractually acknowledged Waterscape’s “ownership” of the Mark, and agreed to stop using the Mark upon termination of the license agreement. This contractual language does not constitute sufficient evidence that “Cassa Hotel” is indeed trademarked to Waterscape, that a trademark infringement likely occurred, or that Waterscape has suffered irreparable harm. Rather, Waterscape may have a sound breach of contract claim against 70 West (I note that 70 West claims that there was an oral/implied agreement for it to continue using the “Cassa Hotel” name after the license agreement term expired), and Waterscape may be able to pursue monetary damages from any such breach. The parties’ contractual language, however, is not dispositive of Waterscape’s request for a preliminary injunction.

Well, except for the part where licensee acknowledged the validity too. and likelihood of confusion foregone when a licensee is no longer licensed. But what I think we have here is a demonstration of the significance of burden of proof. So the license agreement may prohibit the licensee from bringing an affirmative defense of invalidity, but the licensee may still point out that the plaintiff has failed to meet its initial burden of proof on all elements of its claim. Validity was pled, but the defendant made enough noise about the distinctiveness of “Cassa” that the court bought it.

I have to think about how to revise that license paragraph to avoid this. It does not appear that a state trademark registration in New York provides any evidentiary benefits (your state results may differ), and a federal registration seems like overkill for a hotel in a single location. Hmmm.

Waterscape Resort LLC v. 70 West 45th Street Holding LLC, Index No. 651214/2014 (N.Y. July 17, 2015). Docket here (after Recaptcha).

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