Property, intangible

Here’s a drafting lesson: if you’re granting rights to a trademark, you should have the trademark rights.

That sounds like an obvious lesson, but I’ll bet it happens all the time, in the same way it happened to defendant Worldwide Entertainment Group. I’ll bet a lot of you have done it.

The plaintiff Adria MM Productions, Ltd. is a Croatian company. Worldwide Entertainment Group is a Florida corporation that promotes and organizes musical events, including the Ultra Music Festival in Miami. Worldwide Entertainment and Adria entered into a license agreement for Adria to promote an “Ultra” event in Croatia. The trademark license grant was:

Ultra hereby grants to AMM, during the Term of this Agreement, the non-exclusive and limited right to use, in the Territory, those certain Proprietary Marks, namely “Ultra Europe,” “Ultra Europe: Croatia – Split/Hvar Edition,” “Road to Ultra,” Ultra’s distinctive “U” device logo or any other mark deemed appropriate by Ultra for time to time.

The agreement also said:

All marks used, registered, or to be registered in the Territory … shall be the exclusive property of Ultra.

While the parties were renegotiating a new license agreement, Worldwide Entertainment issued a Notice of Continuing Default for various wrongs and terminated the agreement. Adria then investigated, learned that the trademarks had never been registered in Croatia, and sued Worldwide Entertainment for various claims, including for a declaratory judgment that the agreement was void for lack of consideration because the trademarks were not registered.¹

In Croatia, “[o]wners of trademarks have no rights absent registration and may not file lawsuits to protect their rights under the Trademark Law” (the court quoting Trademarks Throughout the World § 38:30). Adria claimed that Worldwide Entertainment therefore had nothing to license and there was no contract. However, Croatia is a member of the Paris Convention and it therefore affords protection to well-known marks. This is where the Paris Convention comes to the rescue:

to the extent that Worldwide Entertainment can prove that the Marks qualify as “well-known” marks under the Paris Convention in Croatia, Worldwide Entertainment’s right to “use” protection endows it with the right to license the Marks to Adria Productions. Put differently, Worldwide Entertainment’s abstention from filing a lawsuit in Croatia against Adria Productions for unauthorized use of the Marks would be valid consideration because it is a promise to do something that Worldwide Entertainment was not already obligated to do.

Or said another way, in a footnote,

Adria Productions states that this argument amounts to Worldwide Entertainment stating: “We don’t currently have rights to the Marks, but we might be able to bring a lawsuit, and we might be able to get those rights.” While Adria Productions attempts to make light of this argument, it is in fact the case.

I am curious though; this looks like a US view of the meaning of a trademark license. The court considered the choice of law issues presented:

Worldwide Entertainment is correct that Florida law governs the Agreement. But Florida, as part of the United States, is subject to the “territoriality doctrine.” Each law will thus be applied where appropriate to the Court’s analysis—i.e., to the extent that construction of the Agreement is being disputed, Florida law will apply; but to the extent that the ownership of the Marks is being disputed, the “territoriality doctrine” will apply.

So while the court considered the fact that in Croatia registration is the grant of rights, it didn’t go the next step and consider how a trademark license is viewed. In the United States, trademark rights exist because of use, and the grant of a non-exclusive license is understood as simply an agreement to forebear from suit, not a transfer of a property right. But what about in Croatia? If a trademark registration is the property right, and a license a transfer of property, then there was nothing transferred. I’d be curious to hear how Croation law would view the validity of this agreement.

Nevertheless the lesson here is, when licensing a trademark, it’s probably a really good idea to have registered it. There are a lot of first-to-file countries out there.

Adria MM Prods., Ltd. v. Worldwide Enter. Group, Inc., No. 17-21603-CIV-MORENO (S.D. Fla. Sep. 6, 2018).

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