The newshas beenabuzz with Allergan, Inc,’s assignment of the patents in the highly lucrative “Restasis” dry-eye drug to the Saint Regis Mohawk Tribe and in turn receiving an exclusive license back. The transfer was so that the validity of the patents could not be challenged in an inter partes review because of the tribe’s sovereign immunity, with the tribe moving to have the IPR dismissed.
Meanwhile, Allergan had sued a number of companies for patent infringement. There was no question that the lawsuit would proceed, but the court has already expressed some thoughts on the validity and impact of the transfer.
The procedural posture is that the court ordered the parties to brief whether the tribe should be added as a co-plaintiff in the infringement suit, with the court concluding that it should be. The decision was really a pragmatic one:
While it is important to ensure that any judgment in this case will not be subject to challenge based on the omission of a necessary party, the Court is not required to decide whether the assignment of the patent rights from Allergan to the Tribe was valid in order to resolve the question whether to add the Tribe as a co-plaintiff. Instead, the Court will adopt the safer course of joining the Tribe as a co-plaintiff, while leaving the question of the validity of the assignment to be decided in the IPR proceedings, where it is directly presented.
But the court was not shy in expressing its opinion on the shenanigans:
The Court has serious concerns about the legitimacy of the tactic that Allergan and the Tribe have employed. The essence of the matter is this: Allergan purports to have sold the patents to the Tribe, but in reality it has paid the Tribe to allow Allergan to purchase—or perhaps more precisely, to rent—the Tribe’s sovereign immunity in order to defeat the pending IPR proceedings in the PTO. This is not a situation in which the patentee was entitled to sovereign immunity in the first instance. Rather, Allergan, which does not enjoy sovereign immunity, has invoked the benefits of the patent system and has obtained valuable patent protection for its product, Restasis. But when faced with the possibility that the PTO would determine that those patents should not have been issued, Allergan has sought to prevent the PTO from reconsidering its original issuance decision. What Allergan seeks is the right to continue to enjoy the considerable benefits of the U.S. patent system without accepting the limits that Congress has placed on those benefits through the administrative mechanism for canceling invalid patents.
If that ploy succeeds, any patentee facing IPR proceedings would presumably be able to defeat those proceedings by employing the same artifice. In short, Allergan’s tactic, if successful, could spell the end of the PTO’s IPR program, which was a central component of the America Invents Act of 2011. In its brief, Allergan is conspicuously silent about the broader consequences of the course it has chosen, but it does not suggest that there is anything unusual about its situation that would make Allergan’s tactic “a restricted railroad ticket, good for this day and train only.” Smith v. Allwright, 321 U.S. 649, 669, 64 S. Ct. 757, 88 L. Ed. 987 (1944) (Roberts, J., dissenting).
Although ultimately not deciding anything about ownership, the court discussed two different reasons the tribe might not own the patents. First was the possibility that the transfer was against public policy, comparing it to unlawful tax shelters and payday lending schemes:
Although sovereign immunity has been tempered over the years by statute and court decisions, it survives because there are sound reasons that sovereigns should be protected from at least some kinds of lawsuits. But sovereign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities. It is not an inexhaustible asset that can be sold to any party that might find it convenient to purchase immunity from suit. Because that is in essence is what the agreement between Allergan and the Tribe does, the Court has serious reservations about whether the contract between Allergan and the Tribe should be recognized as valid, rather than being held void as being contrary to public policy.
The fact that the tribe gained something didn’t mean it wasn’t a sham:
Allergan argues that the transactions are legitimate because the Tribe has offered consideration in the form of its agreement not to waive its sovereign immunity before the PTO and in exchange has received much-needed revenue from Allergan. But such circumstances are frequently encountered in sham transactions, such as abusive tax shelters. The straw parties who perform the service of making the transaction appear to have economic substance, when it actually does not, are providing a service, for which they are ordinarily well compensated. Nonetheless, the transaction is disregarded if it is contrary to the policies underlying the relevant laws.
The second ownership question was whether the license-back to Allergan was so complete that it was a virtual assignment of the patents to Allergan. If so, then the tribe wasn’t actually the owner and couldn’t be joined:
Allergan argues that the Tribe retained substantial rights, including the right to practice the patents for research, education, and other non-commercial uses, and the first right to sue third parties not related to Restasis bioequivalents. The Court has examined the documents provided by Allergan and regards the question as a close one. Some provisions of the exclusive license, such as the limitations on Allergan’s rights to as particular field of use—specifically, to practice the patents in the United States for all FDA-approved uses—give the Tribe at least nominal rights with regard to the Restasis patents. It is, however, questionable whether those rights have any practical value. There is no doubt that at least with respect to the patent rights that protect Restasis against third-party competitors, Allergan has retained all substantial rights in the patents, and the Tribe enjoys only the right to a revenue stream in the form of royalties.
But, as noted, the court added the tribe as a plaintiff. And the same day found the patents invalid as obvious as dismissed the suit.
This case is reminiscent of the Righthaven copyright trolling scheme, which created jurisprudence that I maintain has impaired the transferability of copyrights reaching well beyond the trolling problem the court was trying to fix. The ultimate decision on the validity of this transfer may have an equally far-reaching impact.
I previously wrote about a puzzling case, Small Justice LLC v. Xcentric Ventures L.L.C., with the defendant better know as Ripoff Report. The First Circuit has now grappled with it, although based on a revised district court opinion amended with a highly consequential footnote.
To distill it down as much as possible, a lawyer, Goren, got a bad review on Ripoff Report written by one DuPont. Goren went to state court where DuPont defaulted and Goren had the court assign the copyright in DuPont’s postings to him. Goren then assigned the copyright to Small Justice and sued Ripoff Report for defamation and related claims, as well as for a declaration of copyright ownership and copyright infringement. I’m writing only about the copyright part of the case; you can read about the Section 230 part of the case here.
The various opinions are about what kind of ownership interest Ripoff Report has in the post. The First Circuit, quoting the district court, summarizes the original holding:
First, the District Court concluded that the plaintiffs’ copyright infringement claim failed because the District Court determined that DuPont had “transferred copyright ownership to Xcentric by means of an enforceable browsewrap agreement.” According to the District Court, DuPont made that transfer pursuant to the Ripoff Report’s terms and conditions, which provided, in part, that a user of the site agreed to “grant … to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute” the user’s posting.
Let’s pause here. The district court recognized, correctly, that an exclusive license is an ownership interest. However, despite the clear wording in the “browsewrap” agreement that Xcentric was only granted an exclusive license, the district court also said that “DuPont ceased to be a holder of copyright and had no remaining rights to assign to Goren pursuant to Goren’s Superior Court action.” The court thus did not distinguish between the ownership of a partial interest (an exclusive license) and the ownership of the entire interest (an assignment). Maybe the court thought that the license was so complete that nothing was retained by Goren, but if so it would have been nice to mention that.
Even if 17 U.S.C. § 204, D. 64 at 9, 21 n. 22, applies, the ultimate result here is the same. Section 204 provides that the transfer of a copyright is achieved only with an affirmative action on the part of the transferor, stating that “[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or note or memorandum of transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” 17 U.S.C. § 204. Assuming a written and signed conveyance was required here, the browsewrap agreement was insufficient because it did not require the user’s affirmative assent, instead relying on the user’s use of the ROR as an expression of assent. See Murphy v. Lazarev, 589 Fed. Appx. 757, 765 (6th Cir. 2014) (explaining that “[a] written and signed conveyance is necessary to use copyright material”); cf. Metro. Reg’l Info. Sys., Inc. v. Am. Home Realty Network, Inc., 888 F. Supp. 2d 691, 696, 708 (D. Md. 2012), aff’d, 722 F.3d 591 (4th Cir. 2013) (enforcing online subscription agreement executed by users containing an exclusive assignment of copyright to uploaded photographs). Evaluated under Section 204, Xcentric did not acquire an exclusive license to the Reports by way of the terms and conditions, and DuPont, as the author of the Reports, retained copyright ownership. Even so, DuPont conveyed a nonexclusive, irrevocable license to Xcentric to display the Reports by means of the check box. Section 204’s requirements are inapplicable to a nonexclusive license because it is not a “transfer of copyright ownership” under 17 U.S.C. § 101. See Murphy, 589 Fed. Appx. at 765 (stating that “a nonexclusive license may be granted orally, or may be implied from conduct” because “a nonexclusive license is not a transfer of ownership under 17 U.S.C. § 101 and is not, therefore, subject to the writing requirement of § 204”) (internal quotation marks and alterations omitted). Under this scenario, Xcentric is not the owner of the copyright to the Reports, but it may display them in perpetuity. Accordingly, summary judgment still enters in Xcentric’s favor.
So with a footnote, the district court went from Xcentric as owner of the full copyright to a nonexclusive license.
On appeal the First Circuit affirmed the copyright claims. As to the copyright infringement claim, Small Justice didn’t argue on appeal that Xcentric’s publication was outside the scope of the nonexclusive license, but rather there was no nonexclusive license because (i) there was no consideration for it or (ii) it was unenforceable on public policy grounds, because posts might be libel per se yet Ripoff Report promises not to remove them.
As to consideration, that was Ripoff Report’s publication of the post. The public policy argument was WTF: “[T]he plaintiffs offer no basis for concluding that this public policy provides a reason to hold the nonexclusive license itself invalid. The fact that one holds such a license does not in and of itself protect one from liability for libeling another. Furthermore, even assuming that DuPont’s postings were per se libelous, no aspect of copyright law protects the holder of such a license from liability for libel, and nothing in the District Court’s opinion suggests otherwise.”
Which leaves us with Small Justice’s declaratory judgment claim that it was the copyright owner of the posts. Small Justice alleged error in the district court’s statement that Xcentric was a copyright owner, but given the new footnote the district court hadn’t held that: “[r]ather, the District Court appears to have concluded only that Xcentric is not the copyright holder.” And one with a valid license to publish the material.
Even among the many cases we’ve blogged, this case stands out as particularly noteworthy because it exposes an ugly interface between copyright and reputation management. Goren didn’t want copyright ownership to “promote the progress of science.” Like the doctors in Medical Justice’s decrepit program to pre-acquire the copyrights to unwritten reviews of their patients, the real goal of copyright ownership was to suppress the content. To me, this turns copyright law on its head, by making our society dumber, not smarter. Jessica Silbey and I are co-authoring a paper on how and why copyright has emerged as a reputation management tool of choice, and the paper prominently features this case as an example. The fact that the appeals court reached a satisfying outcome is nice. However, the fact it took four years of litigation to reach this result, when most defendants would have given up long ago, is symptomatic of copyright law’s overreach. We need to build industrial-grade doctrines in copyright law to prevent its misuse as a reputation management tool.
I don’t know if the outcome – the inability to suppress critical content resulting from intertwined contract law, licensing law, assignment law, and the special case of protecting Aleksandr Solzhenitsyn’s copyrights – was the system working as it should, albeit in an unforeseen way, or a happy accident.
Small Justice LLC v. Xcentric Ventures LLC, Nos. 1501506, 16-1085 (1st Cir. Oct. 11, 2017).
Small Justice LLC v. Xcentric Ventures LLC, Civil Action No. 13-cv-11701 (D. Mass. Sep. 30, 2015) (adding footnote).
The addition does not appear to be reflected in any published version of the opinion. It is not in the LexisNexis version of the opinion nor does the docket reflect that the opinion was reissued with the addition. ↩
There is a chicken-and-egg problem with patent ownership and a patent infringement claim. I’d guess that most patents are assigned, that is, since under US law it is the natural person who is the inventor, patents will generally be assigned to a business for exploitation. That underlying assignment, a contract, is therefore a creature of state law, not patent law, and jurisdiction in the contract dispute is with the state court. Of course, patent infringement is exclusively within the jurisdiction of the federal courts. So what happens if the ownership issue is predicate to an infringement claim?
The Federal Circuit in First Data Corp. v. Inselberg to the rescue. Inselberg had been the original patent owner but he assigned the patents to Bisignano, who then became the CEO of First Data. (I’ll use “Bisignano” to refer to both of them.) This case caption is for a declaratory judgment case, meaning that the parties’ respective positions are flipped.
Inselberg later claimed that the assignment to Bisignano was invalid and thus First Data an infringer, at one point sending Bisignano a draft state court complaint with a claim for patent infringement. Bisignano thereafter filed an action in federal court seeking a declaratory judgment that he was the owner of the patents and First Data not an infringer. Inselberg filed a complaint in state court on various tort theories and asking for a declaration that he was the true owner of the patents. Bisignano counterclaimed in Inselberg’s state law case for a declaratory judgment of non-infringement and invalidity of one patent, and also removed the case to federal court. Now with both suits in federal court, Inselberg filed a motion to dismiss Bisignano’s complaint, filed a motion to dismiss First Data’s counterclaims in the removed state court lawsuit, and filed a motion to remand the state law claims back to state court. The federal district court concluded that Inselberg’s claims were all state law claims and did not require any interpretation of federal (i.e., patent) law. The federal district court also held that because Inselberg sought to invalidate the assignment agreement, he had conceded Bisignano was the current owner of the patents. If at some point Inselberg regained ownership of the patents he might be able to ultimately bring a patent infringement claim, but since it was conditional there was no current federal jurisdiction. Bisignano appealed.
The district court relied on Jim Arnold Corp. v. Hydrotech Systems, Inc., 109 F.3d 1567 (Fed. Cir. 1997), in reaching its conclusion. Jim Arnold states:
Until ownership is restored in the assignor, there can be no act of infringement by the assignee. Federal question jurisdiction must exist at the time the complaint is filed for a federal court to exercise authority over the case, and without first receiving equitable relief that restores to the assignor title to the patent, any claim of ownership by the assignor will be unfounded. Further, because an action to rescind or cancel an assignment is a state-law based claim, absent diversity jurisdiction it is to a state court that plaintiffs must look in seeking a forfeiture of the license.
Bisignano claimed that more recent Supreme Court jurisprudence, Arbaugh v. Y&H Corp., 546 U.S. 500 (2006), and Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010), clarified the difference between jurisdictional questions and merits questions, and under current jurisprudence the ownership question was one on the merits and should not have been dismissed.
But the district court had it right:
First Data and Bisignano are correct that in recent years the Supreme Court has clarified the difference between merits issues and jurisdictional issues arising from federal statutory requirements. For example, in Arbaugh, the Court explained that courts should determine whether Congress “clearly states” that a threshold limitation on a statute’s scope is jurisdictional; if Congress does not frame a statutory limitation as jurisdictional, “courts should treat the restriction as nonjurisdictional in character.” Arbaugh, 546 U.S. at 515-16. But the Supreme Court also acknowledged an exception: if a claim invoking federal question jurisdiction under 28 U.S.C. § 1331 is “immaterial and made solely for the purpose of obtaining jurisdiction” or is “wholly insubstantial and frivolous,” then the court can dismiss the claim for lack of jurisdiction.
The holding in Jim Arnold “fit squarely within” the exceptions the Supreme Court described in Airbaugh. Quoting Jim Arnold:
To invoke the jurisdiction of a federal court under § 1338, it is necessary that plaintiff allege facts that demonstrate that he, and not the defendant, owns the patent rights on which the infringement suit is premised. Furthermore, this allegation of ownership must have a plausible foundation. Federal jurisdiction cannot lie based on allegations that are frivolous or insubstantial. Thus, if plaintiff cannot in good faith allege such facts because, absent judicial intervention to change the situation, under the terms of a contract or deed of assignment the rights at issue are held by the defendant, federal court is not the place to seek that initial judicial intervention.
(Emphasis in original.) The standard applied in Jim Arnold therefore continues to apply in assignment cases and was correctly applied here. And even without applying Jim Arnoldper se, there was no non-frivolous theory of federal jurisdiction at this point in time, given Inselberg’s concession that he did not currently own the patents. Back to state court.
for goods and services related to boxing. Pro Boxing’s priority is no later than the constructive first use date for the first application, October 22, 2012, although the original application claims its use began in 1993.
The owner of the trademark licensed to Moreno is non-party Deportes Casanova, a Mexican company that owns a trademark registration in Mexico for the CASANOVA mark. Pro Boxing sold CASANOVA boxing gloves made in Mexico from 1987 or 1988 until 1990, which it purchased from a vendor. It then began to manufacture CASANOVA boxing gloves a few years later when the vendor said that the gloves he had been buying were no longer available.
Moreno claims that Deportes Casanova has had US rights in CASANOVA from as early as 1979, when Rocky Balboa wore them in the first Rocky film:
However, Moreno’s license from Deportes Casanova is dated 23 July 2013.
First up in any TTAB proceeding is standing. I applaud the TTAB on one standing challenge, frivolous in my view, which is Pro Boxing’s argument that because the license didn’t talk about quality control it was a naked license and Moreno therefore didn’t have standing. SHE IS A RESELLER: “we find the quality control and consideration aspects are inherent in this particular license agreement because Moreno is buying the licensed products from Deportes Casanova and simply re-selling them.”
The bar for standing is low and the Board concluded licensee Moreno had surmounted it, with a long string cite for those of you needing precedent to explain standing of a licensee.
But that was only part of the battle; the next step, in the Board’s view, was for Moreno to prove that she had priority over Pro Boxing. Framed this way, you spot the problem – Moreno’s rights arose only in 2013 when she became the Deportes Casanova exclusive licensee, a date after Pro Boxing’s rights arose. Desportes Casanova might have priority over Pro Boxing, but can Moreno rely on that priority in her own stead?
Although we have not had occasion to address this precise issue, we have encountered several cases in which a licensor and licensee were joint plaintiffs, and each was required to establish its own priority. For example, in Chicago Bears Football Club, the Chicago Bears Football Club owned a pleaded registration, and joint opposer NFL Properties was the licensing agent. Both opposers proved their priority, the Club via ownership of pleaded registrations properly made of record as well as evidence of sales, and NFL Properties via merchandise sales, and they jointly prevailed in their likelihood of confusion claim. The aforementioned Chemical New York case also involved two plaintiffs: an owner of the pleaded registrations, and a licensee who was unable to prove its own priority through use. The Board sustained the opposition based solely on the claim of the opposer who owned the pleaded registrations. Whether a licensee can assert priority based on use by the licensor of the licensed mark, as Moreno asserts, is an issue of first impression for the Board.
It is well-settled that use of a mark by a licensee inures to the benefit of the trademark owner. This is so because use of a mark by a related company inures to the benefit of the party who controls the nature and quality of the goods or services offered for sale in connection with the mark. Moreno has provided no authority for the converse principle, i.e., that use of a mark by the controlling trademark owner inures to the benefit of the licensee, and we are aware of none. Allowing a licensee to claim priority for itself in an inter partes proceeding based on the licensor’s use of the mark (whether through the license or otherwise), could result in a licensee being able to claim de facto ownership of the licensed mark. The license agreement, relied upon by Moreno and reproduced above, states that it gives Moreno “no ownership rights in the Intellectual Property [i.e., the marks] other than the license granted hereby.” Due to this express disavowal of any transfer to Moreno of ownership rights in CASANOVA, we cannot view the license as tantamount to an assignment of the mark, which might have allowed Moreno to assert whatever priority rights Deportes Casanova may have in the United States in the mark CASANOVA. We find that Moreno, a mere licensee, cannot rely on her licensor’s use to prove priority.
No, simply no. I understand that the Board relies on the litigants for their framing of the issue and relevant law, but it should also observe the controlling precedent whether or not the parties have located it. And there is precedent here on at least all 3 3/4’s with this case, Jewelers Vigilance Committee, Inc. v. Ullenberg.
There are two Jewelers Vigilance decisions by the Federal Circuit, one on standing and one on the merits, both reversing the Board. And it’s pretty much exactly the same fact pattern, except that the plaintiff, Jewelers Vigilance, was a trade association, where here the plaintiff is an exclusive licensee. In the first Jewelers Vigilance decision, the Board held that the trade association didn’t have standing to assert a claim that the registration of the mark “Forever Yours DeBeers Diamond Ltd.”
by defendant Ullenberg would cause the trade association harm on the basis that it was likely to be confused with the unregistered trademark DEBEERS owned by non-party DeBeers Consolidated Mines Limited and used by members of the trade association.
The Federal Circuit reversed the Board on standing:
The Board, in effect, by requiring JVC [Jewelers Vigilance] to possess a proprietary interest in the name DeBeers in order to have the requisite standing to bring an opposition proceeding under sections 2(a) or 2(d), confused a merits determination — whether Ullenberg is entitled to registration of its mark — with a standing determination — whether JVC has a right to bring the opposition proceeding.
…
There is no question that a trade association, having a real interest in the outcome of the proceedings, may maintain an opposition without proprietary rights in a mark or without asserting that it has a right or has an interest in using the alleged mark sought to be registered by an applicant. This is true irrespective of the grounds upon which the opposer relies in asserting the nonregistrability of applicant’s mark.
Jewelers Vigilance Comm., Inc. v. Ullenberg Corp., 823 F.2d 490, 492, 493 (Fed. Cir. 1987) (“Jewelers Vigilance I”).
On remand, the Board held that Jewelers Vigilance did not state a claim under Sections 2(a) or 2(d) of the Lanham Act because Jewelers Vigilance did not allege it had a proprietary interest in the mark. The Federal Circuit reversed and remanded again with instructions to grant summary judgment in favor of Jewelers Vigilance:
[T]he mandate of this court [in the first opinion] was intended as an express direction to the board to consider the parties’ evidence on the issue of false association and likelihood of confusion between Ullenberg’s and [DeBeers Consolidated Mines, Ltd.]’s respective uses of DEBEERS. Nevertheless, because the board is no doubt well aware that it has no option but to comply with the mandate of this court, we will assume the board somehow misunderstood that mandate and will proceed to address the basis for its holding, which appears to rest on a misapplication of Otto Roth to the facts of this case.
…
The Otto Roth analysis does mean that someone must have proprietary rights in the name DEBEERS, but such rights need not reside in the opposer if the opposer otherwise has standing to bring the opposition.
Jewelers Vigilance Comm., Inc. v. Ullenberg Corp., 853 F.2d 888, 892, 893 (Fed. Cir. 1988) (“Jewelers Vigilance II”).
The Board has misframed this case by describing it as a matter of Moreno’s priority. Moreno is not asserting her own rights; rather, she may and is asserting the rights of Deportes Casanova: “[P]ersons to whom Congress has granted a right of action, either expressly or by clear implication, may have standing to seek relief on the basis of the legal rights and interests of others, and, indeed, may invoke the general public interest in support of their claim.” Jewelers Vigilance I at 493.
So what’s up, Board? It held that Moreno had standing, but then made the same mistake it made in Jewelers Vigilance, holding that she had to own the proprietary rights too. That is plainly not true under both Jewelers Vigilance I and II. And if a trade association, with a more attenuated relationship to a mark than a licensee, doesn’t have to own the rights to succeed in an opposition, why should a licensee?
Moreno v. Pro Boxing Supplies is a precedental decision but one that looks pretty wrong to me. I would like to see the Board withdraw its opinion and ask the parties to brief the application of Jewelers Vigilance to the facts here.
Section 2(c) of the Trademark Act requires a “written consent” for the registration of the name of a living individual. Is a trademark assignment a consent? Apparently so.
“Jordan Maxwell” was the pen name of Russell Joseph Pine. Jordan Maxwell is a self-proclaimed “preeminent researcher and independent scholar in the field of occult / religious philosophy.” In 2010 he assigned something to an individual named Josef Dolezal.1 After years of confusion and an abandonment of the application, applicant Momentum Development LLC finally managed to show that Dolezal subsequently assigned the rights to it and the application was therefore filed by the right party.2
Section 2(c) pertains to marks that are not only proper names, but also surnames, shortened names, nicknames, and pseudonyms. Consent is required where the individual is publicly connected with the business in which the mark is used, meaning that there would be a public association between the goods and the persona. That was the case here: there were 17 DVDs showing that Jordan Maxwell was an author or speaker within the field where the JORDAN MAXWELL mark is used. So, although a pseudonym, it would be understood as a reference to Mr. Pine.
The Board then had to decide whether the assignment was also a consent. Where there is a document but without explicit consent
there must be a relinquishment on the part of the individual granting consent, of the right to commercially exploit his or her name as a trademark or service mark, as well as an affirmance of property rights in favor of the party claiming to have received the consent.
That was the case here:
[T]he terms of the 2010 Assignment between Russell Pine and Josef Dolezal are beyond a mere “consent to use” situation. In paragraph “B],” Russell Pine assigns to Josef Dolezal “all Seller rights, titles and interests in and to any and all : Trademarks whether registered or not and the right to obtain registered trademarks in United States Patent and Trademark Office….” In paragraph “A],” Russell Pine agrees that this assignment is “all inclusive and without reservation by Seller of any right, title, Interest or use, whether now existing or subsequently arising.” By these terms, Russell Pine has expressly acknowledged that his marks, including the mark JORDAN MAXWELL, is [sic] the property of Josef Dolezal and that no rights have been reserved by Mr. Pine. Despite the fact that the mark JORDAN MAXWELL is not specifically identified in the agreement, we find that it is the intended property subject to the assignment. The only intellectual property mentioned in the agreement are the “jordanmaxwell” domain names, each of which is essentially the name JORDAN MAXWELL plus “www” and the top level domain name indicator. Moreover, the fact that Russell Pine asserts that he “has made a good faith effort to list in Attachment 1 the Intellectual property being transferred,” but no additional property has been listed, supports that JORDAN MAXWELL is one of, if not the only, trademark assigned under the agreement. Finally, Applicant contends that Josef Dolezal has been using the pseudonym JORDAN MAXWELL since March 30, 2010 on a series of DVDs bearing the name ….
To read the assignment as failing to evidence consent would essentially eviscerate the purpose of the 2010 Assignment, and have a deleterious impact on policy involving assignment of trademarks as intellectual property.
I wonder what will happen if Russell Pine opposes. The Board acknowledges “We note that on a different record developed in an inter partes proceeding, a different result could be reached.” The documents are naive, so it’s hard to tell what rights Russell Pine thought he was giving up.
In re Momentum Development LLC, Ser. No. 85826122 (TTAB Sept. 6, 2017).
Pine and Dolezal also have an ongoing dispute in state court involving this assignment, although it wasn’t a factor in the Board’s decision in this ex parte appeal. ↩
And back to Dolezal. And then back to Momentum Development. I have no idea. ↩
What a confusing ownership case (which perhaps means that the wise reader stops right here). Errors on every level, at the end of the day unrecoverable.
The parties are Paradise Biryani, Inc. (PBI), Paradise Biryani Express, Inc. (Express), and Biryani Point Paradise LLC (PBB) on one side, and Paradise Hospitality Group, LLC (PHG) on the other.
The applications and registrations on the other side were for the word marks PARADISE BIRYANI POINTE and PARADISE INDIAN CUISINE, filed by Narsing Raj Gowlikar (Raj), who was a shareholder in Express. The application for the logo form of the PARADISE BIRYANI POINTE mark
was filed about a year later, this one in the name of BPP.
The two applications for PARADISE BIRYANI POINTE, word form and logo, registered, but PBI’s application for PARADISE INDIAN CUISINE is still pending. Everyone’s applications and registrations are for restaurant services. The four registrations are the subjects of four separate cancellations, all consolidated. Note in particular that the petitions to cancel the PHG registrations were filed by PBI, not Express.
The PARADISE BIRYANI POINTE registrations have a troubled ownership history. After the PARADISE BIRYANI POINTE word mark registered, it and the PARADISE INDIAN CUISINE application were assigned. The cover sheet for the assignment was from Raj to PBI, d/b/a Paradise Biryani Pointe, but the actual assignment document itself was an assignment from Raj to Express.
Because the application for PARADISE INDIAN CUISINE was refused, in March and April 2012 PBI petitioned to cancel the PHG registrations on the basis that they were likely to be confused with PBI’s registrations for PARADISE BIRYANI POINTE and the pending application for PARADISE INDIAN CUISINE. In October, 2013, the TTAB denied summary judgment, stating there was a genuine dispute of material fact as to whether PBI was the proper petitioner and proper owner of the pleaded marks. On March 7, 2014, PBI tried to change the record ownership in the two registrations by filing Section 7 Requests asking for the name of the owner to be changed. For the word mark, the request stated:
The full legal name of the corporate entity which holds Reg. No. 4,047,868 is Paradise Biryani Express, Inc. d/b/a Paradise Biryani Pointe. In everyday parlance among those familiar with the company it is referred to as ‘Paradise Biryani, Inc.’ Narsing Raj Gowlikar, the sole owner of Paradise Biryani Express, Inc. d/b/a Paradise Biryani Pointe, was unaware that this distinction might be important when he retained counsel to protect the PARADISE BIRYANI POINTE Mark he has worked so hard to establish. As a result, all parties involved have simply been referring to the shorthand ‘Paradise Biryani, Inc.’ when the proper Paradise Biryani Express, Inc. d/b/a Paradise Biryani Pointe should have been referenced. Pursuant to TMEP 1201.02(c) this is a correctable error. Furthermore, this error was made by the registration owner in good faith, therefore we respectfully request that the Registrant’s name be corrected accordingly.
The full legal name of the corporate entity which holds Reg. No 4,208,745 should have been listed as Paradise Biryani Express, Inc. d/b/a Paradise Biryani Pointe. Narsing Raj Gowlikar, the sole owner of Paradise Biryani Express, Inc. d/b/a Paradise Biryani Pointe and BPP, was unaware that this distinction might be important when he retained counsel to protect the PARADISE BIRYANI POINTE + Design Mark he has worked so hard to establish. As a result, all parties involved have simply been referring to ‘Paradise’ as an overall term for both companies when the proper Paradise Biryani Express, Inc. d/b/a Paradise Biryani Pointe should have been referenced in the application itself. Pursuant to TMEP 1201.02(c) this is a correctable error. As this was an inadvertent error by the registration owner, made in good faith, we respectfully request the registration certificate be corrected accordingly.
Several days later PBG filed petitions to cancel the two PBI registrations on the basis of abandonment and non-ownership.
The PTO denied PBI’s Section 7 requests because the registrations were the subjects of an inter partes proceeding.1 PBI then tried with the TTAB, filing a motion to correct the name of the owner for the PARADISE BIRYANI POINTE registration and PARADISE INDIAN CUISINE application on April 11, 2014. The Board denied the motion on May 7, 2014, stating that it had no jurisdiction.
On April 16, 2014, the logo registration was assigned from BPP to Express. On May 8, 2014, PBI finally tumbled to the right way to fix the problem with the word marks, doing what should have been done at the outset, which was to simply file a corrective assignment, correcting the error in the original cover sheet. Which means that we finally have the two registrations in suit, plus the application, all owned by Express.
And it brings us to the present opinion. The Board starts with PHG’s cancellation of the PARADISE BIRYANI POINTE registrations. Based on the evidence, the Board held that Raj was not the owner of the word mark, nor was Briyani Pointe Paradise, LLC the owner of the logo mark, at the time the applications were filed. Raj and his wife incorporated Express in New Jersey in 2007 and Express “ran” this first restaurant. Subsequent Paradise Biryani Pointe restaurants are franchises, each separate LLCs, and franchise agreements entered into before the appications were filed listed Express as the licensor. Raj was also not the sole owner of Express; instead he owned it with his wife and, for a period of time, a third person.2 The two Express registrations were therefore cancelled on the basis that they had not been filed by the owner.
Next are PBI’s petitions to cancel the PBG registrations, based on the now-cancelled registrations and the pending application. Recall that these cancellations were filed by PBI, not Express.
Q. Now, is there a Paradise Biryani, Inc.?
A. [Raj] Paradise Biryani Express, Inc., that’s a parent company doing
business as Paradise Biryani Pointe. There was a clerical error, I
guess. Express was missing. But Paradise Biryani Express, Inc., is
the complete name when I formed the company in 2007, January
29th. And again, I did a DBA immediately after one week also. So we
do as business as –
Q. I believe what you just said – could you just repeat what you just said
about a clerical error?
A. Yeah. When we assigned or when we filed, there was Express
missing, but the company name Paradise Biryani Express, Inc.,
That’s the parent which I formed.
And easily enough for the Board, “In view of this testimony, we find that PBI is a nonexistent entity that does not have standing to maintain the cancellation proceedings against PHG.”
Final score: 4 for Paradise Hospitality Group (5 if you count the pending application) – 0 for Paradise Biryani Express, Inc.
This ownership stuff matters. The owner must file the application, the application doesn’t create ownership. And non-existent entities can’t file lawsuits.
The Board also had another thought on this effort: “We would be remiss if we did not point out that these types of errors are among those listed
as ‘non-correctable’ in TMEP § 1201.02(c).” ↩
The opinion doesn’t explain the relevance of this, but I assume
it is to avoid the very messy law around ownership of trademarks as
between a person and the entity that the person solely owns. See In re
Hand, 231 USPQ 487 (TTAB 1986)(“if facts were presented to show that an individual ownership of a corporation was so complete that the two legal entities ‘equitably constituted a single entity,’ then sufficient control by the individual with use by the corporation inuring to the individual’s benefit would be found.”) ↩
Gosh I love this case. Don’t get me wrong, I think it’s resoundingly wrong, but what a fascinating way to get there.
Plaintiff Quantum, Inc. sells natural health products. It owned the registered trademark MigreLief for “nutritional supplement containing feverfew and other natural ingredients for relieving headaches.” The trademark was registered in 1996, a date I find significant but that the court didn’t mention.
Migrelief application specimen
In 2002, Quantum and defendant Akeso Health Sciences, Inc. entered into an agreement where Quantum would purchase “Patented Formula” tablets from Akeso for sale in certain trade channels and in return Quantum granted Akeso a license to use the MigreLief trademark for Akeso’s own sales of the product. It was a fairly informal agreement, a two-page letter, with an ambiguous term but at least 30 months long. It also included a provision that Akeso could purchase the MigreLief trademark on certain conditions, the trigger also ambiguous.
From late 2004 though 2015 the parties continued to do business and tried to negotiate a new deal but never reached a written agreement. There were continuing allegations of improper sales by Quantum through the wrong channels but the companies nevertheless continued to work together.
MigreLief 2016 specimen
Finally, on November 30, 2015, Akeso told Quantum it was terminating the 2002 agreement, stopped selling the pain reliever to Quantum, and said that it “was exercising its right to purchase the MIGRELIEF trademark.” Quantum thereafter refomulated and sold a product without feverfew under the MigreLief trademark.
There are two court opinions on the ownership of the trademark. The first was on a motion for summary judgment by Quantum that the 2002 agreement expired on October 31, 2004, countered by claim by Akeso that the 2002 agreement remained in effect until Akeso terminated it on November 30, 2015. This is the relevant part of the agreement:
• For the thirty months, starting on March 1, 2002, Quantum will have all sales and marketing rights for the patented product currently known as Migra-Lieve, and any future formula modifications, for the Health Food and Natural Product Store Class of Trade including GNC stores, and, non-exclusive rights to sell the product over the internet. After the initial thirty months have passed, Quantum may, at its option, extend this agreement for additional two year periods, as long as it thereafter purchases 450,000 tablets per quarter (7,500 bottles at 60 pills per bottle). [Akeso] may cancel this agreement with 60 days notice if Quantum does not meet its minimum sales commitment. Quantum will have the right to sell out remaining inventory. Quantum will have 60 days to remedy a cancellation.
• If [Akeso] chooses to cancel this agreement it may continue to use the trademark by purchasing all rights to the trademark from Quantum for $25,000 within ninety days of cancellation.
Quantum claimed that the agreement had a 30 month duration unless Quantum extended it, which both parties agreed it did not do. Quantum also argued that Akeso could only cancel the agreement (and thereafter exercise its right to buy the trademark) if Quantum failed to meet its commitments during a two-year extension period, but there weren’t any two-year extensions. Akeso’s view was that the agreement had no duration and it was only the exclusivity that ended after 30 months. Akeso also claimed that the right to buy the trademark was independent of the two-year extensions. The court decided:
Upon examination of the plain language of the provisions at issue within the context of the 2002 Contract as a whole, I conclude that the language of the relevant terms of the contract is subject to only one plausible and sensible interpretation and is, therefore, unambiguous. Consequently, it is not necessary consider the extrinsic evidence submitted by either party to resolve the meaning of contract [sic]. I further conclude that the plain language of the contract supports only the conclusion that the 2002 Contract expired, in its entirety, on October 31, 2004.
So Akeso doesn’t get to exercise the opportunity to purchase the trademark as described in the 2002 agreement. But that’s not the end of it; Akeso argued that the parties’ relationship continued after 2004 with an implied contract on essentially the same terms as the original agreement, including the right to purchase the trademark. The second decision is the court’s opinion and order after a trial.
The jury returned a verdict that the parties had an implied contract to transfer the MigreLief trademark to Akeso for $25,000; however, the court decided that the transfer of the trademark was an equitable issue to be decided by the court and therefore treated the jury verdict as advisory. It nevertheless still concluded:
Although it is clear that the parties both intended for Akeso to end up owning the trademark, they never reached a final agreement as to the details of the transfer. The Court is exercising its equitable power to fill in what it considers to be, within the greater context, minor details of the agreement. … The Court agrees with the jury’s conclusion that there is clear and convincing evidence that there was an implied contract to transfer the MigreLief trademark to Akeso. However, the Court does not agree that Akeso proved by clear and convincing evidence that the implied contract dictated transfer of the trademark for $25,000 and, therefore, the Court’s final decision on Akeso’s Ninth Counterclaim departs from the jury’s advisory verdict on that issue.
So, whoa. Let’s start with some law of implied-in-fact contract, as explained by the court:
Like an express contract, an implied contract is based on mutual expressions of assent. That assent and the terms of the parties’ agreement may be inferred from the parties’ conduct. An implied-in-fact contract can also arise when a written agreement expires and, without more, the parties continue to perform as before. Depending on the conduct of the parties, the implied contract might incorporate some or all of the terms and conditions of the expired express contract. However, the contract must be definite in all material aspects, with nothing material left to future negotiation.
The evidence reflects detailed negotiations from 2005 through 2007 trying to reach a new deal. It is clear that a trademark assignment and license-back were always contemplated, but only as part of much bigger deal. At one point there was a 14-point deal memo that outlined exclusive channels, non-exclusive channels, means to ensure distributors observed the restrictions, minimums required for automatic renewal, delivery windows, pricing, and a trademark assignment with an assignment-back in the case of expiration or Quantum’s breach. The document said specifically, though, “this document is not the final agreement,” so it is only a non-binding framework for what the ultimate terms would be. And the devil is in the details; anyone who does deals knows that they are whole beasts, you don’t know what concessions ultimately will be made to get to a final agreement. A draft distribution agreement was circulated but it wasn’t ever signed. As drafted, the trademark assignment was a separate document and apparently never created, so we don’t know what it ultimately might have said about termination or reversion.
The parties again tried to negotiate a new deal in the 2014-2015 time period, by which time it looks like Quantum had a change of heart. Rather than offering a assignment it offered a license. Akeso rejoined “In the original agreement, Akeso had the open ended right to purchase the trademark for $25,000. If we draft a new agreement, I would like for Akeso to continue to have that right. Akeso will agree that if it purchases the trademark, then Quantum will have the right to use it in the markets that it is licensed to sell MigreLief. (In essence, it is just flipping the roles of each of the companies).” An internal Quantum email said “we won’t do this.”
So I am at a loss to understand how the court could conclude that any implied-in-fact contract was “definite in all material aspects.” But:
The Court has weighed, evaluated, and considered all the evidence presented at trial and all of the arguments of counsel. … The Court concludes that Akeso has established by clear and convincing evidence that the parties had an implied-in-fact contract that included an agreement to transfer the MigreLief trademark to Akeso. Furthermore, the Court, invoking its equitable powers, concludes that the parties’ intent is best accomplished by setting fair and reasonable monetary consideration for the transfer of the MigreLief trademark at $100,000.
Why $100,000? That number was mentioned in an earlier draft of the deal memo, prepared by Quantum:
Trademark Transfer: Upon signing of a new agreement, Quantum will transfer registration of the MigreLief trademark to [Akeso] and [Akeso] will license the right to use the trademark back to Quantum. If [Akeso] cancels this agreement for any reason other than breach, [Akeso] will transfer the trademark registration back to Quantum immediately or pay Quantum a fee of $100,000.
However, the signed version of the deal memo said:
Trademark Transfer: Upon signing of a new agreement, Quantum will the transfer registration to the MigreLief trademark to [Akeso] and [Akeso] will license the right to use the trademark back to Quantum as long as Quantum remains a licensee. If [Akeso] cancels this agreement for any reason other than breach or expiration, [Akeso] will transfer the trademark registration back to Quantum.
The court, in my view wrongly, used this draft language as the value Quantum had placed on an unrestricted transfer:
Although, the July 2005 Agreement memo draft was just that, a draft, it communicates Quantum’s willingness to transfer the MigreLief trademark to Akeso for no money upon the signing of a final agreement and assigns a $100,000 retention cost for Akeso to keep the trademark with no strings attached. I recognize that neither the subsequent signed September 2005 Agreement Memo prepared by Quantum or the Distribution Agreement prepared by Akeso and revised by Quantum contain the $100,000 fee. These documents all do, however, contain provisions that would, upon finalization of the contemplated future agreement, transfer the trademark to Akeso. These documents, as well as the parties’ entire prior history, are totally inconsistent with David Shaw’s trial testimony that “it was always in my mind to control that mark.” The specification of the $100,000 sum indicated Quantum’s valuation for a no-strings-attached transfer of ownership at a time in close proximity to three written documents that were either prepared or edited by Quantum and that reflect Quantum’s willingness to transfer the trademark to Akeso. The terms of the July 2005 Agreement Memo draft, the September 2005 Agreement Memo, the detailed October/November 2005 Distribution Agreement and David Shaw’s redline edits of that document, though not binding in and of themselves, adequately convey the parties’ intentions regarding the trademark. These written documents, supported by the evidence presented at trial of the value of the brand to each party and of each party’s conduct vis-à-vis each other and the trademark, itself, satisfy this Court that the sum of $100,000 is a fair amount to give effect to both parties’ intentions.
Now, I am not privy to trial testimony or the trial exhibits not on PACER, several of which appeared critical to the court’s thinking. So I am missing a lot of color one would have seen at trial. And the jury found in favor of the transfer. But based on the summary judgment exhibits, Quantum was consistent that the only way the trademark would not revert to it at the end of the relationship (at which point Quantum could also no longer distribute the Akeso patented formula) would be Quantum’s own breach of the agreement. This is not inconsistent with Quantum saying “it was always in my mind to control that mark” – if you know that the only reason you won’t get it back is your own breach, well then you figure you just won’t breach, so it is entirely within your control. The deal memo mentioning the $100,000 isn’t inconsistent with the concept because the deal memo didn’t address termination. Nor does the absence of a reversion in the 2005 draft distribution agreement mean that Quantum was willing to entertain a sale at Akeso’s sole discretion, because the document was missing the incorporated trademark assignment agreement. The court seems think these omissions are meaningful but I don’t think they are, they are just how things go when doing deals. So $100,000 as the valuation of the trademark when we don’t know the conditions for reversion is just spit-balling and, in my view, another way in which material terms are missing.
The assignment, license-back and reversion structure is a rational business choice. For years the parties had border disputes over distribution channels, so putting Quantum at risk of losing of the trademark seems like a pretty good way to keep Quantum in line. From Quantum’s viewpoint, it had owned the trademark for years before applying it to the Akeso product and ultimately would be able to get it back when the relationship ended, so there was no harm in allowing Akeso to own it temporarily. But instead what appears to have happened is that the court plucked the trademark out of Quantum’s hands entirely, ignoring that the transfer was conditional in one shape or form.
There are valid reasons to be sympathetic to Akeso. Akeso invested heavily in the marketing of the product, Quantum admitting that Akeso was responsible for “gaining confidence for the brand among health professionals and consumers.” Akeso had extended the brand, adding MigreLief +M, Children’s MigreLief, and MigreLief Now, while Quantum only sold the original product. The court noted “Without MigreLief, the name attached to its primary product line, Akeso would lose its significant investment in the brand and, potentially would have to rebuild its entire business.” Perhaps so, although there is no mention of what happens to Quantum when it loses the brand.
I think the reason I am so shocked by this opinion is that the deal was never done – and if we can’t count on the status quo remaining until both parties have assented to the same terms, then what? It’s why we create writings, it’s why the deal memo said expressly it was not the final agreement. The parties didn’t reach a formal agreement and both of them proceeded at their own peril. I don’t have a lot of sympathy for someone who continues to walk further out onto thin ice.
I do see one way where this is a rational analysis, and perhaps it’s what the court was thinking, just not expressed in the opinion. Based on the evidence, any implied-in-fact contract would have included a provision that the trademark reverted to Quantum if the agreement ended for anything but Quantum’s breach. And the breach was admitted: “The parties agree that they had an ongoing enforceable agreement regarding sales channels and that Quantum breached that agreement.” So I suspect what may be going on here is that the court understood, but did not state, that the implied-in-fact contract would have allowed Akeso to keep the trademark if Quantum breached, and Quantum did.
But there is still one gaping problem with this rationale for an assignment: “Assignments shall be by instruments in writing duly executed.” Lanham Act § 10, 15 U.S.C. § 1060. There is no writing.
Trademark registrations can be transferred in ways other than by assignment, like inheritance, or the disposition of corporate assets through organizational change or bankruptcy as some examples. The Lanham Act also provides that “the court may determine the right to registration … and otherwise rectify the register with respect to the registrations of any party to the action.” Lanham Action § 37, 15 U.S.C. § 1119. So a court can decide that the record owner isn’t the true owner and order a transfer. Or, a court could order the assignment of a trademark registration as a remedy, in a collection case for example. But those aren’t assignments per se, those are judicial acts authorized by the Lanham Act or other laws. Here though, the question the court was answering expressly was whether there was an assignment in an admittedly unwritten, implied-in-fact contract. So I think the supposed assignment, at least on the reasoning given, is not valid because it is not in writing. If a judicial opinion that there is an assignment in an implied-in-fact contract is a proxy for the writing that Section 10 requires, then the rule has been swallowed.
It’s pretty official at this point, once a trademark registration is “mature,” that is, more than five years old, the registration cannot be challenged on the basis that the original application was not filed by the then-owner of the mark. The 6th Circuit, in an unpublished opinion, reached this conclusion and we now have the same in the Western District of Texas.
It’s a confusing fact pattern, in part because the relevants facts begin in 1968 for a trademark in use since 1919. The challenged registration, the one that the plaintiff claimed was not filed by the then-owner, registered in 1987. I’ll convey only those facts relevant to this particular issue, but its far more complicated that what I’ll describe.
The original business associated with the trademark RITTER, including an older registration, was for both medical and dental products. The owner, who we’ll call Liebel-Farsham to reduce confusion, decided to split the businesses and on November 18, 1986 it assigned the RITTER trademark for the non-dental medical products to defendant Midmark.1 By agreement between Liebel-Farsham and Midmark, six days later Liebel-Farsham filed the trademark application in dispute.2 In 1988, after the trademark was registered, Liebel-Farsham assigned the registration to Midmark.
Fast forward to 2015 when SPFM filed its declaratory judgment suit and Midmark counter-claimed alleged infringement of the registration in question. SPFM filed a motion for summary judgment that the registration was invalid because the application wasn’t filed by the owner of the trademark. The district court held, as had the 6th Circuit, that this was not a basis for cancellation:
Although a party’s registration of a trademark with PTO’s principal register shall be prima facie evidence of the registrant’s ownership of the mark, a party does not acquire ownership of a trademark through registration. Pointedly, a trademark application that is not filed by the owner is void. While most cases speak in terms of fraudulent procurement, rendering the registration void makes it unnecessary to establish fraud. If Liebel-Flarsheim was not the owner of the RITTER mark when the it filed for the ‘997 Registration, the ‘997 Registration is void.
That that being said, Midmark contends, and SFPM does not dispute, that the ‘997 Registration achieved incontestable[3] status pursuant to Section 15 of the Lanham Act after 5 years of registration (in 1992). 15 U.S.C. § 1065. While it would appear that a void registration could be cancelled at any time, such does not appear to be the law. Title 15 U.S.C. § 1064 of the Lanham Act limits the ability to challenge a mark that has been registered for five years. Under § 1064(3), petitions for cancellation of a mark registered for five years may be brought only for a limited set of reasons, including fraudulent registration or if the mark has become generic. NetJets Inc. v. IntelliJet Group, LLC, 678 Fed.Appx. 343, 348 (6th Cir. 2017). Void ab initio, the basis of SPFM’s summary judgment claim, is not one of these reasons; thus, no basis exists for cancellation of the ‘997 Registration, at this point, based upon the fact that Liebel-Flarsheim did not own the RITTER mark applied for the trademark. See id.
(Some internal quotation marks, ellipses and citations omitted.)
It has been suggested that Section 14 should be amended to allow cancellation at any time on the basis that the application was void ab initio. I disagree. A registration can still be cancelled at any time if the registration was procured fraudulently, a challenge that is still pending in this case. So the inability to challenge the registration because it was filed by the wrong entity is only where it was an innocent (or at least non-fraudulent) error. Further, if any Declaration of Continuing Use was filed by the wrong entity, the registration lapses, so the ownership error has to be corrected within the first six years. Even further, if the trademark registration being asserted isn’t presently owned by the registrant, then the person wrongly claiming to own it doesn’t have standing for the infringement claim. So allowing a challenge on the basis that the application was filed by the wrong entity will only capture cases where there was a non-fraudulent error, the error was corrected within the first six years, and the current owner is the owner of the underlying rights.
In this case the error was made 30 years before the challenge and the registration has been renewed twice by the correct owner. Surely there must be some point in time where an innocent error in an application should not be a basis for cancellation. This is perhaps even more reasonable than the other bases for which Section 14 forecloses a challenge: likelihood of confusion, merely descriptive or deceptively misdescriptive, primarily geographically descriptive or primarily geographically deceptively misdescriptive, and primarily merely a surname. Those bases have far more to do with protecting public interest than initial ownership, but also can’t be used to challenge a mature registration. A challenge to an innocent error corrected long ago is a waste of resources.
The current dispute is between companies who claim rights from the two successor companies in the two different fields. ↩
Consider also that this application was filed before one could file intent-to-use applications, which may have played a role in electing to have the predecessor company file the application. ↩
I join John Welch’s drumbeat – “incontestable” does not refer to the mere passage of five years, which is when Section 14 kicks in. “Incontestability” occurs after the necessary declaration has been filed and only provides an affirmative right to use. 15 U.S.C. § 1065. The court’s citation to Section 15 is therefore irrelevant. ↩
Lawn Managers, Inc. v. Progressive Lawn Managers, Inc. is about a trademark and a divorce, a case we’ve visited before. Where we last left it, the federal court was abstaining to allow the parties to figure things out in family court. As it turns out that order was vacated; on reconsideration the court concluded that the trademark rights were not implicated in the state court proceedings and therefore it could proceed.
So we get to the gist of the case. While married, Randy Zweifel and Linda Smith were 50-50 owners of Lawn Managers. In the marital settlement agreement, incorporated into the divorce decree, Linda gave her share of the Lawn Managers business to Randy and in return:
5.06 Development of New Business Linda will establish a new lawn care company using the name Progressive Lawn Managers, Inc. doing business as Lawn Managers. The parties agree that Linda may use the name Lawn Managers for a period of time no longer than two years from the date of dissolution of marriage. At the end of two years from the date of dissolution of marriage, or sooner if Linda wishes, Linda will use the name Progressive Lawn Managers, Inc. and will discontinue using the name Lawn Managers.
* * *
8.01(8) Enforcement and Construction of Terms The terms of this Agreement are expressly intended to be construed as contractual, with reference to RSMo. Section 452.325, as amended, and therefore nonmodifiable, except as may otherwise be expressly noted ….
* * *
8.02(3) Review and Modification of This Agreement No modification or waiver of any of the terms of this Agreement shall be valid unless it is in writing and signed by both parties and where necessary, approved by a court of competent jurisdiction as required by law.
(Asterisks in original.) Linda ultimately did end her use of “Lawn Managers” but Randy did not like Linda’s logo for Progressive Lawn Managers:
(Ed. note: I’m with Randy on this one. Pretty hard to read “Progressive.”)
Lawn Managers said it had withdrawn its consent for Linda to use the names “Lawn Managers” and “Progressive Lawn Managers” and alleged that Linda’s continued use of “Progressive Lawn Managers” infringed its trademark.
So, can you do that? For the court,
A threshold question in deciding this motion for summary judgment is whether the rights granted in the marital and post-dissolution settlement agreements are licenses, consents, or assignments.
It was a matter of contract intepretation under Missouri law. “Plaintiff would have the court construe the rights grantted by the marital settlement agreements to be terminable at will.”
Indeed, as a general rule a contract without a definite duration expressed or implied are terminable by either party with reasonable notice. This, though, was incompatible with rules governing marital settlement agreements:
Where a perpetual contract in a commercial relationship, for instance, is not favored by public policy, marital settlement agreements exist in an entirely different context: they involve not just contractual but also family law considerations, and they are ratified and enforced in state court divorce proceedings. Missouri law provides that a divorce court’s order distributing marital property is “a final order not subject to modification.” The divorce court in this case did not find the parties’ separation agreements unconscionable; it incorporated them into the divorce and post-marital judgments, and the terms of the agreements are binding.… Therefore, in this case, the general rule that a contract without a definite duration is terminable at will simply does not apply. Instead, the express mention of a limited duration as to defendant’s right to use “Lawn Managers” implies that the next sentence granting defendant the unqualified right to use “Progressive Lawn Managers” grants a perpetual right.
But what kind of rights did Linda get? The court accurately sussed it out:
The court must determine the precise nature of these rights, however, as either an assignment, license, or consent. An assignment occurs when one party assigns rights of ownership in a mark to the other. A license occurs when one party grants another party the right to use a mark it owns in return for consideration. In a license, the licensee is engaging in acts which would infringe the licensor’s mark but for the permission granted in the license. In a consent, on the other hand, the consentee is permitted to engage in defined actions which do not infringe the consentor’s mark, and the agreement implicitly or explicitly recognizes that. Whereas a license brings the parties together into a common public image and a joint enterprise, a consent agreement keeps the parties apart at a defined distance. A license integrates, while a consent differentiates. As the Seventh Circuit observed in a seminal trademark case, a consent agreement “is not an attempt to transfer or license the use of a trademark, or any rights therein, or in any word thereof, but fixes and defines the existing trademark of each, that confusion and infringement may be prevented.” Waukesha Hygeia Mineral Springs Co. v. Hygeia Sparkling Distilled Water Co., 63 F. 438, 441, 1895 Dec. Comm’r Pat. 208 (7th Cir. 1894).
For purposes of this motion, and based on the undisputed facts presently before this court, the agreements in question fall into the following categories. Randy granted Linda a license to use the name “Lawn Managers” until December 31, 2014. Use of the name “Progressive Lawn Managers” does not appear to have been assigned because no facts indicate that Randy owned rights to that mark. Instead, it was a consent, for the purpose of defining the existing marks of both parties to avoid confusion and infringement. This purpose was not explicitly stated in the agreements, but it is implied in the description of “Progressive Lawn Managers” as the unrestricted, perpetual name of Linda’s new and separate business. The agreements in question gave plaintiff the right to the name “Lawn Managers” and defendant the right to the name “Progressive Lawn Managers.”
(Internal quotation marks and citations omitted, they were to McCarthy.)
With this sorted out, the court reached the various issues raised on summary judgment. It carefully differentiated the use of the word mark “Progressive Lawn Doctors” (the only trademark addressed in the settlement agreement) from the logo, allowing the claims against the logo to proceed. Progressive Lawn Manager’s naked licensing defense (the marital settlement agreement being the naked license) survived a challenge on the basis of licensee estoppel; in the Eighth Circuit there is only estoppel for registered trademarks, the licensee is not estopped if the challenge is not inconsistent with the licensee’s rights under the license, and anyway here is it Progressive Lawn Care raising the defense, not the licensee, who is Linda.1
The court said it was “premature” to consider the licensee estoppel, but even without it I will be very surprised if temporary permission to use a trademark as part of a divorce settlement is deemed a naked license.
I wonder why Linda just didn’t change the logo.
Lawn Managers, Inc. v. Progressive Lawn Managers, Inc., No. 4:16 CV 144 DDN (E.D. Mo. July 27, 2017).
In a puzzling statement, the court characterized a case in the New York Supreme Court, which is the lowest level of court in New York, as by “the Supreme Court.” The case held that the licensee may claim that its own license was the naked one. ↩
Oneida Group, Inc. v. Steelite International U.S.A. Inc. is a demonstration of how our jurisprudence is essentially useless in deciding trademark ownership claims. The dispute is over ownership of the trade dress in the highly successful “Botticelli” and “Nexus” tableware patterns, part of Oneida’s “Sant’ Andrea” line:
BotticelliNexus
The tableware is considered premier and sold to hotel, cruise lines and fine dining establishments. Botticelli is Oneida’s number one product. The tableware is manufactured by non-party Royal Porcelain of Thailand; Royal Porcelain sells the plates exclusively to defendant Tablewerks and Oneida buys the dinnerware from Tablewerks. Oneida sells directly to a few customers but largely does business through dealers. Oneida had been buying from Tablewerks for nineteen years on an exclusive basis, that is, Tablewerks had a policy that one product went to one customer but there was no written agreement memorializing that practice. The owner of Tablewerks testified that the policy was good for both companies.
Steelite [had] acquired substantially all assets, intellectual property, and other rights of Tablewerks.… Please be advised that … Steelite intends to self-distribute all product produced by Royal Porcelain under the Royal Porcelain back-stamp. While we are advised that there is no contractual relationship between [Oneida] and/or its affiliates [], on the one hand, and Tablewerks and/or Royal Porcelain on the other, in an effort to facilitate a seamless transition, Steelite is prepared to accommodate [Oneida]… .
Steelite also said it would fulfill all existing purchase orders on the current pricing terms; not object to Oneida’s sale of its current Royal Porcelain inventory; respect Oneida’s intellectual property such as the “Sant’ Andrea” name and back-stamp; and asked that Oneida similarly honor Steelite’s intellectual property.
All hell broke loose, with Oneida having to field customer inquiries expressing confusion and losing $1 million in sales in two months’ time. Oneida sued, claiming that it owned the trade dress in the plate designs.
Already we can see that this case doesn’t fit well into standard manufacturer-distributor framework. The manufacturer, Royal Porcelain, is a non-party that, by contract, supplied exclusively to Tablewerks. We can view it as Tablewerks in the role of manufacturer, but the facts still aren’t that simple. Two men, David Queensberry and Martin Hunt, founded the design firm Queensbury Hunt, renowned for designing tableware. The firm designed both products. Queensbury and Hunt assigned the Botticelli design to Tablewerks, receiving royalties in exchange, and Tablewerks filed two designpatents for the tableware. Queensberry Hunt also “assigned [Nexus] to Royal Porcelain and Tablewerks” and the “copyright … to Royal Porcelain.” (The distinction isn’t relevant in the decision, but quoted for accuracy.) Tablewerks (not Royal Porcelain or Oneida) paid Queensberry Hunt a running royalty on the designs. When Steelite acquired Tablewerks, it acquired all the intellectual property rights that Tablewerks had. In sum, Royal Porcelain and/or Tablewerks owned the design patent rights and copyright in the tableware design, a point Oneida did not dispute.
The court describes the ownership situation thus: “Oneida, Steelite, and Tablewerks are all distributors. The manufacturer of the dishes, Royal Porcelain, is not a party to the action. Oneida claims that it owns trade dress rights, and that those rights are superior to not only to Tablewerks, but also to the manufacturer, Royal Porcelain. Oneida has never had an agreement with Royal Porcelain. Oneida claims that it has a contract with Steelite [sic, Tablewerks?], which is discussed below, but for purposes of this analysis, Oneida has not claimed that it has a contractual relationship which confers ownership of intellectual property rights.”
The court nevertheless applied the test commonly used for manufacturer-distributor relationships:
As a general rule, where a manufacturer and exclusive distributor contest the ownership of a trademark and no agreement controls, it is the manufacturer who presumptively owns the mark, even where the manufacture is located outside the United States.
However, where, as here, the goods pass through a distributor’s hands in the course of trade and the distributor gives them the benefit of its reputation or of its name and business style this presumption may be rebutted. In order to determine whether a distributor can rebut the presumption, a court should consider the following factors: (1) which party invented and first affixed the mark onto the product; (2) which party’s name appeared with the trademark; (3) which party maintained the quality and uniformity of the product; and (4) with which party the public identified the product and to whom purchasers made complaints. In addition, a court may look at which party possesses the goodwill associated with the product, or which party the public believes stands behind the product.
(Internal brackets, quotation marks and citations omitted.) Apparently the court assumed, without stating so expressly, that for purposes of the presumption Tablewerks was the manufacturer.
As to who invented and affixed the mark onto the product, Oneida claimed to have collaborated with Queensberry Hunt in the design but the facts, as weighed by the court on a motion for preliminary injunction, were that Oneida had not. As to which party’s name appeared with the trademark, the “back-stamp” on the dinnerware is “Royal Porcelain” and “Sant’ Andrea,” but it didn’t include the word “Oneida.” Oneida’s name didn’t appear on the packaging either and the court didn’t think that Oneida’s name in the marketing literature was relevant. [Ed. note: totally disagree with that, I think it’s highly relevant.]
The court thought that all the remaining factors were “inextricably intertwined” and so considered them together. And here we have more complexity—Oneida is only a step in the distribution chain, so who is the “public” that matters, is it the ultimate purchaser or Oneida’s dealers? The only evidence from an end user was from the Director of Food and Beverage at Marriott, who changed his testimony between the TRO and the preliminary injunction. His declaration for the TRO was that Botticelli and Nexus were “synonymous” with Oneida; however he later amended his declaration to say that Botticelli and Nexus were “marketed by” Oneida. There was also testimony that a number of end users, including Royal Caribbean Cruise Line, Marriott, Carnival Cruise Lines, KLM Airlines and Northwest Airlines, made multiple visits to the Royal Porcelain factory in Thailand. Oneida’s own evidence on its customer interactions showed “that Oneida is a distributor. The summary shows that 95% of the calls did not relate to quality—they related to ordering the plates.” Oneida offered a warranty, but a dealer testified that he often fielded complaints about the tableware and offered a warranty too.
Oneida had weak evidence that it controlled the quality of the goods; it tested them but:
it is unclear to the Court what the purpose of Oneida’s testing is, but there was no evidence that, after testing, Oneida communicated with Royal Porcelain or Tablewerks to augment the dishes in any way. So although it is clear Oneida tests the quality of the dishes, Oneida has not made a sufficient showing at this juncture to claim that it in any manner maintains the quality of those dishes.
So while Oneida succeeded in obtaining a temporary restraining order, it failed to obtain a preliminary injunction. Steelite is now selling the patterns under the “Belisa” and “Vortex” brands.
As disruptive to Oneida’s business as this is, I don’t have too much sympathy for Oneida. First off, not having an exclusive contract for the supply of a leading product that you’ve been selling for 15 years seems, um, short-sighted. Which is perhaps why, before Steelite bought Tablewerks, Oneida had already been working on finding a replacement for Royal Porcelain.
Reading the decision, I don’t have any doubt that the outcome is right. There was a lot of evidence that before the lawsuit Oneida didn’t think it was the owner of any rights. It produced an IP Matrix listing Tablewerks as the owner of the Botticelli and Nexus designs with Oneida having distribution rights. Oneida referred a potential infringement to Tablewerks to deal with. Oneida told customers it was creating a “Botticelli-like” design—if it owned the design it wouldn’t have had to inform customers that the design might change.
But I’m less interested in the outcome than how we get to it. This case exposes the inadequacy of the jurisprudence for deciding ownership. The standard manufacturer-distributor test may be adequate for the simple world where one party purchases from an unrelated manufacturer, but the factors were of little service in assessing ownership in this complex situation. Take for example which party’s name appeared with the trademark and with which party the public identified the product. First off, although considered different factors, they are at least related, if not the same—the consumer will presumably cue from what information the parties have given them. The name on the product is, though, useful as evidence of what the parties thought. The labeling doesn’t happen by accident; product labels and packaging are created and approved. But even so, here it’s of little use because we have “Royal Porcelain,” the manufacturer but who nobody claims is the owner, associated with the mark “Sant’ Andrea,” a mark no one disagrees is owned by Oneida, although there is no evidence of consumer association of “Sant’ Andrea” with Oneida. So labeling does nothing to help us out here.
Control over the quality of the goods is generally considered the fundamental signifier of ownership. It might make sense as the most relevant question of all if we made the consumer’s interest in getting consistent quality of product the primary interest. But we don’t always consider it primary (looking at you, Kevin!, (Hein Online paywall)), and I’m not sure that consumer interest should override the parties’ interests. But even if it does, what does “quality control” mean really? A manufacturer of course has a quality control role, but the party with the competing ownership claim may equally control quality by choosing who the manufacturer will be. That type of quality control is the genesis of the quality control (versus source) concept of trademark ownership stated in Menendez v. Holt, 128 U.S. 514, 520, 9 S. Ct. 143, 144 (1888)—the mark “La Favorita” evidenced “that the skill, knowledge and judgment of Holt & Co. had been exercised in ascertaining that the particular flour so marked was possessed of a merit rendered definite by their examination and of a uniformity rendered certain by their selection.” “Quality control” can be exercised on different levels, as it was here, so merely identifying “quality control” as a factor gives us evidence but no idea how to consider it.
Who the public associates with the mark can range from “no one,” to multiple parties (labels commonly have more than one name on them), to, as here, a company that appears not to own any rights. Complaints are likely to be made all the way up the distribution chain; one most likely complains to the person with whom you have the direct relationship. And what about companion intangible rights, should we have a doctrinal preference that all the intellectual property rights be consolidated in one owner? That traditionally hasn’t been true; often copyright and trademark ownership are different, sometimes creating a stalemate, where, for example, a logo designer tries to enforce copyright against the trademark owner.
The current doctrines extract evidence, but at the end of the day we don’t know what relevance any of the evidence has or how to weigh it. I don’t have any answer, still working on it.
Oneida Group, Inc. v. Steelite Int’l U.S.A. Inc., No. 17-cv-0957 (E.D.N.Y. May 10, 2017)(preliminary injunction) Oneida Group, Inc. v. Steelite Int’l U.S.A. Inc., No. 17-cv-0957 (E.D.N.Y. March 14, 2017)(temporary restraining order)
