Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Two Band Members Heave a Sigh of Relief

    I have written several times before (caution recursive link) about the copyright infringement lawsuit over the highly-successful “Jersey Boys” musical, based on the band the Four Seasons. Briefly, the widow of an author of an unpublished biography of one of the band members, Tommy DeVito, claimed infringement of the book. It’s very convoluted with just about every argument over copyright authorship it is possible to have.

    It has ended for two of the defendants, band members Valli and Gaudio, with the simple holding on judgment as a matter of law that the plaintiff did not prove that these two defendants had an intent to copy the allegedly infringed work:

    As discussed on the record, … although infringement does not require a willful intent to violate a copyright as required for enhanced damages, it still requires an intent to copy even if the copier does not realize that the copying violates a copyright. There was no evidence adduced at trial indicating that Valli or Gaudio knew that the writers had copied from the Work in creating Jersey Boys.

    Needless to say no willful infringement either. The jury trial continues for the rest of the defendants.

    Corbello v. DeVito, No. 2:08-cv-00867-RCJ-PAL (D. Nev. Nov. 17, 2016)

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  • Round and Round

    We have one of my favorite things, a chain of title case, and one about a band name to boot. Usually band name cases are pretty ugly, about a bunch of people getting together without any legal formalities. But this is not that case.

    We have the 80’s glam band RATT (official website – or is it this one?),

    successful enough that in 1985 the five members, Crosby, Pearcy, Blotzer, DeMartini and defendant Juan Croucier, entered into a formal Partnership Agreement. The partnership could register the band trademarks, which it did. No partner could transfer any part of their interest in the partnership without the unanimous consent of all the partners nor could a member be kicked out without the unanimous consent of the other partners. The agreement also provided that a member could withdraw from the partnership on three months’ notice.

    There was no dispute that Crosby was properly expelled. In 1992 Pearcy hand-wrote a document on a napkin:
    wbs-inc-v-croucier-pearcy-departure

    It’s difficult to make out, but it says something about “departure from RATT … And that I’m leaving the band.” A few years later Pearcy disavowed having written the napkin, but also said that he had voluntarily withdrawn from the band and denied that the partnership stll existed.

    In 1992, DiMartini’s lawyer sent a letter addressed to the partnership saying “This letter will constitute formal notice that Warren DeMartini is no longer a member of the recording and performing group professionally known as ‘RATT’, effective as of the date hereof.”

    In January 1997, Blotzer and Pearcy sent Croucier a “letter of expulsion” expelling him from the RATT Partnership. Later that year Blotzer, Pearcy and DiMartini executed a Bill of Sale and Agreement that conveyed all of the rights in the trademarks to a new entity, the plaintiff WBS, Inc. The transfer was recorded at the PTO.

    Then we have our usual conflicts between various members or former members of bands, each claiming that others shouldn’t be using the name of the band, and the predictable trademark infringement lawsuit, this one against Croucier for call himself “RATT’s Juan Croucier.”

    Croucier attacked WBS’s ownership of the band trademarks. First we have WBS testing out the sure-fire loser that one cannot challenge ownership of an inconstestable mark; the court’s analysis on that point was pretty incomprehensible but nevertheless it is accurate that one may indeed challenge the validity of the underlying assignment of ownership, even if the trademark is incontestable.

    We therefore reach the crux of the problem. In 1992 both Pearcy and DiMartini did SOMETHING with respect to their membership in the Partnership and/or the band. But we’re at a summary judgment. As to the napkin-scribbling and later disavowal:

    Although a reasonable trier of fact could not conclude, on this record, that the napkin alone sufficed to signify or inform the other members of the RATT Partnership of Pearcy’s voluntary departure from the Partnership,[1] it does, in conjunction with his 1995 disavowal of the continued existence of the Partnership, create a triable issue of fact as to his partnership status at the time of the 1997 assignment to WBS.

    The meaning of DiMartini’s letter was also ambiguous enough that the court couldn’t grant summary judgment:

    The letter is sufficiently ambiguous to, as Croucier acknowledges, create an open question regarding DeMartini’s withdrawal. The letter refers only to DeMartini’s withdrawal from the band RATT, with no mention of the RATT Partnership, and does not strictly comply with the requirements of the Partnership Agreement, as it does not provide three months advance notice and, arguably, to the extent it was not copied to Pearcy, did not inform all of the other partners of DeMartini’s intent. The letter was, however, addressed to the RATT Partnership. Although the bulk of the evidence appears to suggest that DeMartini did not intend to withdraw from the Partnership, a trier of fact might conceivably conclude otherwise.

    But there was one factual issue on which the court could grant summary judgment. You will have noticed that the letter by which Croucier was supposedly kicked out2 was signed only by Blotzer and Pearcy but the Bill of Sale, only a few months later, was signed by three members, Blotzer, Pearcy and DiMartini. In either case, to expel a member or to sell a partner share, all partners had to participate. WBS took the position in the litigation that DiMartini had never resigned from the partnership. But, he hadn’t signed Croucier’s expulsion letter, so Croucier wasn’t expelled. And if Croucier wasn’t expelled, then the assignment from the partnership to WBS was defective because it lacked his agreement. Thus the partnership, not WBS, owns the trademarks, meaning WBS failed to prove one of the elements of its infringement claim, ownership of a mark. Summary judgment for Croucier on the Lanham Act claims.

    WBS, Inc. v. Croucier, No. CV 15-07251 DDP (JCx) (C.D. Cal. Nov. 8, 2016).

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    1. I’m not sure why not – because the salutation wasn’t for the partnership but was to the band’s then-manager? ↩
    2. Pearcy declared to the court that he never signed it. ↩
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  • Read It Twice

    Boy, is it hard to write an effective invention assignment for an employment agreement.

    First, under US law only a natural person can be an inventor, not a juristic person. When you have an employee whose job is inventing, the solution is to create an automatic assignment to the employer, which is generally done when an employee is first hired.1 Every employer should know by now to use the words “hereby assigns” rather than “shall assign” in its invention assignment agreements. With “shall assign” the employee has only a duty to assign, so if the employer never follows through with the document the employee will remain the patent owner (and will undoubtedly use the rights in some way adverse to his former employer, causing all sorts of havoc).

    But it’s more complicated than that. The legal conclusion that there can be an automatic assignment doesn’t really square with how patents are prosecuted. The patent application has to be filed by the inventor, the natural person. The employer will want the patent prosecution history to reflect the assignment from the employee to the employer. So the employment agreement accommodate this desire too, by obliging the employee to sign all necessary documents and appointing the company as an attorney in fact if the employee refuses to do so.

    But wait, there’s more. A number of states statutorily prevent employers from overreaching on a claim of invention ownership. California has typical language:

    (a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

    (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

    (2) Result from any work performed by the employee for the employer.

    (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

    So this limitation finds its way into employment agreements too.

    Which brings us to PerdiemCo, LLC v. Industrack LLC. The inventor of the patents-in-suit, Darrell Diem, was employed by a third party, Time Domain, at the time of his invention. Diem had signed an invention assignment agreement with the following language:

    I hereby assign to Company my entire right to all the Work Product, which Work Product is and will be the sole and exclusive property of Company; provided however, that I shall not be required to assign to Company any invention that I developed entirely on my own time without using Company’s funds, equipment, materials, facilities or trade secret information except for those inventions that either: (i) relate at the time of conception or reduction to practice of the invention to Company’s business, or actual or demonstrably anticipated research or development of Company, or (ii) result from or are related to or suggested by any Company research, development or other activities, including, without limitation, any work performed by me for Company.

    (Emphasis in original.) The agreement also provided that “in the event Employee is required to give testimony or take other actions that require more than, for example, a signature on an assignment document … the Employee shall be compensated on an hourly basis….” and required the an employee “cooperate with Company … in the procurement and maintenance of Company’s rights in Work Product, including, but not limited to, patents and copyrights … [and] sign all papers which Company may deem necessary and desirable for vesting Company … with such rights.” (Ellipses and brackets in original.)

    Diem admitted at a deposition that he conceived and developed the inventions claimed in the patents-in-suit while employed by Time Domain. Defendant Geotab therefore challenged PerdiemCo’s ownership of the patents, asserting that they had been automatically assigned to Time Domain by operation of the employment agreement and PerdiemCo therefore did not have standing.

    So, was there language of automatic assignment? Check, “Mr. Diem’s Assignment Agreement with Time Domain unambiguously creates an automatic assignment of Mr. Diem’s ‘Work Product.’ ” But the agreement then introduced an ambiguity, by continuing “I shall not be required to assign ….” What exactly was it that didn’t get assigned? Was it all inventions that were independently created, with only a future duty to assign those that nevertheless “relate at the time of conception or reduction to practice of the invention to the Company’s business”? Or instead are those, the ones that that fall into the exception to the exemption from assignment, automatically assigned?

    As a “patent” ambiguity in the agreement it was the court’s, not the jury’s, role to construe the meaning of the agreement. The court held that the assignment provision did not automatically assign everything Time Domain was entitled to own, but instead there was only a duty to assign a subset of it:

    The Assignment Agreement as a whole suggests that inventions Mr. Diem conceives or develops without using Time Domain’s resources are not automatically assigned to Time Domain. The third paragraph of the Agreement relates to Mr. Diem’s continuing obligations should his employment be terminated. This paragraph provides that “in the event Employee is required to give testimony or take other actions that require more than, for example, a signature on an assignment document … the Employee shall be compensated on an hourly basis ….” The fourth paragraph of the Agreement requires Mr. Diem “to cooperate with Company … in the procurement and maintenance of Company’s rights in Work Product, including, but not limited to, patents and copyrights … [and] sign all papers which Company may deem necessary and desirable for vesting Company … with such rights.

    These provisions suggest that certain Work Product is not automatically assigned to Time Domain. If all Work Product automatically transferred to Time Domain, it would be unnecessary for Mr. Diem to sign any paper to vest Time Domain with rights. This interpretation is consistent with the well-established rule of contract construction that any ambiguity in a contract must be construed against the drafter of the contract, which in this case is Time Domain. Accordingly, the Court finds that Mr. Diem’s independent inventions are at most subject to a future obligation to assign, depending on whether those inventions meet the relatedness requirements defined by the Agreement.

    (Emphasis in original, citations omitted.) Having decided that there was no automatic assignment of independently created inventions, in this case it didn’t matter whether or not the inventions were related to Time Domain’s business, because the facts were that Time Domain never obtained an assignment.

    Well, fudge. The language that the court relied on to decide that something must be subject to a future assignment isn’t there because there was this special subset of inventions, it is just standard belt-and-suspenders language to ensure that the employee cooperates in assigning all inventions. And indeed, the attempt to add language protecting an employee’s interest consistent with statutory law was poorly drafted, and we live and die by our document drafting. I’m not suggesting that the court’s legal conclusion was wrong, but it certainly was contrary to any sensible employer’s intention. Time to go back and re-visit those assigment provisions.

    Perdiemco v. Industrack LLC, Case No. 2:15-CV-00727-GRG-RSP, 2:15-CV-0027-JRG-RSP, 2016 U.S. Dist. LEXIS 141935 (E.D. Tex. Oct. 18, 2016) (report and recommendation), adopted by Case Nos. 2:15-CV-00727-GRG-RSP, 2:15-CV-0027-JRG-RSP (E.D. Tex. Nov. 1, 2016).

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    1. Of course at that point nothing has been invented, and there is also a school of thought that one simply cannot assign a future invention. ↩
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  • Never Underestimate the Value of Section 7

    We have a case at the intersection of band names and zombie marks, clearly one for which the melody lingers on.

    In 1997 there was a jam session at SXSW that included the band Los Lobos. In 1998 some of the SXSW performers created a Grammy award-winning album called Los Super Seven; petitioner Daniel Goodman was executive producer and respondent Steven Berlin, a member of Los Lobos, was the sole producer on it. Goodman went on to create two more albums by the band “Los Super Seven,” one in 2001 and one in 2005, although each album had different band members. Goodman was the executive producer on all three albums but Berlin was the producer on only the first two. In 2000 Goodman registered the LOS SUPER SEVEN trademark for both records and entertainment services but the registrations lapsed in 2008 and 2010 for failure to file the Section 8 affidavit.

    In 2010 Goodman learned that Berlin was promoting concerts to be performed by “Los Super Seven” and sent Berlin a cease and desist letter (p. 25). A few months later Berlin filed an application to register LOS SUPER SEVEN for entertainment services, which registered in 2012. Goodman filed a petition to cancel the registration in 2013.

    los-super-seven-specimen
    Specimen

    Based on these facts I suspect you would jump to the conclusion that Goodman succeeded on the petition. Goodman was the only common thread through the three original albums and had registered the trademark. Berlin was clearly leveraging the original “Los Super Seven” by promoting the concert as the “return of Los Super Seven.” But you’d be wrong.

    There are probably two pieces that are critical to a finding in favor of Berlin and the consequent dismissal of the petition to cancel. First was Goodman’s failure to oppose the Berlin application, allowing Berlin’s trademark to register. This gave Berlin a prima facie presumption that he is the owner of the trademark. Thus, rather than an even playing field, Goodman has to establish by a preponderence of the evidence that instead he had prior rights in the mark.

    Which he couldn’t do. Notably, the Board agreed that Goodman was associated with the mark and, despite some evidence in his agreement with RCA to the contrary, the Board accepted arguendo that Goodman had been the owner. However, look at the timing – the last album was in 2005. The Board noted that

    subsequent to release of the third “Los Super Seven” album in 2005, there is very little, if any, evidence showing Petitioner was involved with either musical recordings or entertainment services offered under the mark LOS SUPER SEVEN. As noted, supra, Petitioner’s two registrations were cancelled by the Office for either a failure to renew or failure to file an affidavit of continued use (or excusable nonuse). There is also no evidence corroborating Petitioner’s blanket assertions that his failure to maintain the registrations was due to “inadvertence and mistake”; or that the three “Los Super Seven” albums are still “commercially available”; or that he is in the “planning stages” of a fourth “Los Super Seven” album that “will be supported by a promotional tour.” Indeed, there are no statements from third parties or documentary evidence to indicate that Petitioner was involved in promoting either live performances or musical recordings under the mark LOS SUPER SEVEN since 2005.

    Section 45 of the Trademark Act provides that a mark is abandoned when “its use has been discontinued with intent not to resume use. Nonuse for three consecutive years shall be prima facie evidence of abandonment.” 15 U.S.C. § 1127. Inasmuch as Petitioner’s registrations were cancelled in 2008 and 2010 and to the extent he is now relying on common law rights in the mark, we note that the statutory presumption of abandonment applies not only to registered marks but also “to a party’s unregistered common-law mark.” Miller Brewing Company v. Oland’s Breweries [1971] Limited, 548 F.2d 349, 192 USPQ 266, 267 (CCPA 1976). In this case, a presumption of abandonment has been created based on Petitioner’s failure to account for any trademark use since 2005. Petitioner has not rebutted this presumption. Specifically, Petitioner has not only failed to introduce sufficient evidence that he was actually using the mark in the three years since 2005, but he has not established that the period of nonuse was excusable and that he had an intent to resume use of the mark.

    Thus even if Goodman had rights in the mark in the past, he abandoned them and there could be no present day likelihood of confusion.

    Goodman v. Berlin, Cancellation No. 92057241 (TTAB Oct. 12, 2016). HT to John Welch, TTABlogger extraordinaire for the decision.

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  • The Subsidiary Standing In

    Lately we’ve been seeing an increasing number of trademark cases that revolve around the relative rights of different members of the same enterprise: a family of companies asserting a family of marks theory in Wise F&I v. Allstate Ins. Co., different chapters of the Salvation Army allowed to register similar trademarks in In re The Salvation Army, and a trademark abandoned when it was owned by a subsidiary holding company rather than by its operating company parent in Noble House Home Furnishings,LLC v. Floorco Enterprises, LLC.

    These cases, all TTAB proceedings, are hard to reconcile. Sometimes they treat the family members as a single entity and sometimes not. There is now another case, in the district court, to add to the mix. While I might not rely on a district court to necessarily get a fine nuance of trademark law right, right or wrong it adds to the confusion.

    The substance of the trademark dispute in N.J. Physicians United Reciprocal Exchange v. Privilege Underwriters, Inc. isn’t important, except for a rare defense that comes into play. One of the claims against the defendant was for dilution under state law, but the defendant owned a federal trademark registration:

    pure_logo

    Section 43(c)(6) of the Lanham Act provides that one is immune to a claim of dilution under state law if the accused owns a federal trademark registration for the offending mark.

    Except it wasn’t the defendant that owned the registration, it was owned by the defendant’s wholly-owned subsidiary. That presented no obstacle for the court though, below is the court’s full explanation:

    Plaintiff’s argument is easily disposed of. As the parent, Defendants, generally, have standing to bring or oppose trademark infringement suits on behalf of their wholly-owned subsidiary because the “damage to the subsidiary will naturally lead to financial injury to [the parent].” Dalton v. Honda Motor Co., 425 Fed. Appx. 886, 890 (Fed. Cir. 2011) (citations and quotations omitted); see Jewelers Vigilance Comm., Inc. v. Ullenberg Corp., 823 F.2d 490, 493 (Fed. Cir. 1987) (“a parent corporation has standing to oppose on the basis of a mark owned and controlled by its subsidiary”); Lipton Indus. v. Ralston Purina Co., 670 F.2d 1024, 1029 (1982) (noting that the court has found standing to protect a subsidiary’s mark). Based in part on that principle, for the purposes of trademark registration, Title 15 U.S.C. § 1051 provides that the “owner of a trademark used in commerce may request registration of its trademark on the principal register ….” 15 U.S.C. § 1051. In turn, § 1201.03 of the Trademark Manual of Examining Procedures elaborates upon the requirements of that statute and states that as between parent and subsidiary corporations, ownership of a mark is a matter to be decided by the parties. See Trademark Manual, Section 1201.03(b); see also 1 J. McCarthy Trademarks and Unfair Competition, Section 16.13(c). In that regard, when a subsidiary company is wholly-owned and controlled by a parent corporation, such as is the case here, the trademark can be treated as “the common property of the parent and the subsidiary corporation.” Borden, Inc. v. Great Western Juice Co., 183 U.S.P.Q. (BNA) 570 (T.T.A.B. 1974); Ithaca Industries, Inc. v. Essence Communications, Inc., 706 F. Supp. 1195, 1207 (W.D.N.C. 1986). Thus, because Pure Risk Management is a wholly-owned subsidiary of, and controlled by, Defendants, the ownership of the PURE Designation is treated as common property between these entities for trademark purposes. In that respect, Plaintiff’s state law claim for trademark dilution is barred by § 1125 as the PURE Designation is registered with the USPTO; Plaintiff’s Third Claim for Trademark Dilution under New Jersey state law is dismissed.

    To say that “the ownership of the PURE Designation is treated as common property between these entities for trademark purposes” is certainly an overstatement and not supported by the cited cases. The cases stand only for the proposition that the parent-subsidiary relationship is such that the parent has a real interest in the outcome of a dispute involving its subsidiary, i.e., that it has standing. The cases recognize that a parent suffers from harm visited on its subsidiary, but that doesn’t mean that the parent has all the substantive arguments available to it that its subsidiary would have.

    The statement in the TMEP and McCarthy that “ownership of a mark is a matter to be decided by the parties” doesn’t stretch that far either. Yes, of course it’s true that a company can structure ownership of its assets any way it likes, but that doesn’t mean that the structuring cannot also have consequences – if corporate form is so easily ignored, then there would be no reason for such careful crafting of complex corporate enterprises for tax and liability purposes.

    This is an unpublished decision, an expedient toss-off, probably with no ramifications beyond the private dispute between the parties. But a number of years ago the IP holding company model was popular as a tax savings vehicle and is still being used today, in my view without adequate consideration of the effect it might have on the validity of the trademark assets. This case is an example of what I suspect is going to be an increasing numbers of cases involving trademarks owned by IP holding company subsidiaries. Time will tell what the consequences will be.

    N.J. Physicians United Reciprocal Exch. v. Privilege Underwriters, Inc., No. 15-6911 (FLW) (D.N.J. Oct. 18, 2016).

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  • Update: All the Wrong Reasons

    Update: I previously reported on Sebastian Brown Prods. LLC v. Muzooka Inc., a fairly routine trademark priority dispute with a troubling holding. In it, the district court wrote out the last sentence of Section 10 of the Lanham Act, essentially holding that an intent-to-use application cannot be assigned until the trademark is in use. As I explained in more detail in a Trademark Reporter Commentary, that is an incorrect interpretation of Section 10.

    The plaintiff’s case was dismissed with prejudice but it succeeded in reviving its case on reconsideration. The plaintiff argued that there was no binding interpretation of Section 10 in the circuit or the district and, had it known what standard the court would ultimately apply, it would have submitted more evidence. The court therefore gave the plaintiff leave to try.

    But the effort was, correctly, for naught. The court’s (incorrect) legal standard required that Sebastian Brown Products show it had goodwill in its trademark before the intent-to-use trademark was assigned, defining “goodwill” as use of a mark “in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.” Sebastian Brown had scant evidence of any use before the assignment, a few emails, a few conversations, and a few Skype recording sessions. “[T]hese new allegations do not plausibly demonstrate that Miller used the mark in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind. To the contrary, the activities that Plaintiff alleges are analogous to uses of a mark that the Ninth Circuit has held insufficient to convey trademark rights.”

    I guess that’s what appeals are for.

    Sebastian Brown Prods., LLC v. Muzooka, Inc., No. 15-CV-01720-LHK (N.D. Cal. Oct. 11, 2016).

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  • Cutting to the Chase

    Props to the bankruptcy court in the Eastern District of North Carolina for cutting through to the meat of a trademark ownership dispute.

    We have a company, B6USA, Inc., doing business as “BaySix,” in Chapter 11 bankruptcy. B6USA was formed in March 2005 and was solely owned by Katherine D. Hite, who was also president, secretary and treasurer of the corporation. She was married to defendant Stephen M. Hite, who had no ownership interest in the corporation and was not an officer or director. Nevertheless, both parties agree that he was heavily involved in the formation of B6USA, served as its manager or chief operating officer from its inception until he left the company in September, 2016, and was actively involved in its operations. B6USA was formed after the closing and dissolution of TRG, Inc., a company that Mr. Hite owned and that had been in the same business. TRG “apparently suffered from its own financial difficulties at that time” and its business operations were blended into B6USA. Mr. Hite said that his wife owned B6USA so it would be a woman-owned business, but that she had very little involvement in the day-to-day operations.

    Mr. Hite claimed that he originated and controlled the “BaySix” trademark well before B6USA was formed. He said he and a deceased business partner first created the name 20 years again and that it was originally used by his first company Bay Six Group, Inc., then subsequently by TRG and B6USA. Needless to say, there was no license agreement and no trademark registration, or at least not one before the bankrupty petition was filed.

    The Hites had marital difficulties and in January, 2016 Mr. Hite formed a new company, Baysix Group, LLC, while still working for B6USA and without Mrs. Hite’s knowledge. On September 6, 2016 B6USA filed a voluntary petition for a Chapter 11 reorganization and on September 8, 2016 B6USA fired Mr. Hite. Mr. Hite then contacted B6USA customers and obtained new orders, sold products under the “BaySix” brand, removed inventory and assets from the B6USA warehouse, and funneled orders placed on the B6USA website to his new company. He also filed several trademark applications for “BaySix” formatives. So we have a dispute over who owns the BAYSIX trademark.

    The court paused briefly to recite the standard for determining whether one has sufficient use to establish common law rights in a trademark as described in Emergency One, Onc. v. Am. Fire Eagle Engine Co., a point that is largely irrelevant. When there is a dispute where two different entities claim to own a single trademark, there can’t be a question of who started using the same mark first.

    But no harm, the court didn’t let incorrect legel doctrine get in the way of the proper finding on the facts. I can’t summarize the legal conclusion any better than the court did itself, so I’ll just quote:

    [T]he plaintiff did establish, and Mr. Hite cannot escape, that among other things he never used the name and marks individually in commerce, but rather moved the use from company to company over many years; that he voluntarily contributed the name to B6USA when it was formed in 2005; that for ten years he actively, even enthusiastically, used the name and marks in an on-going and then successful business (B6USA) that he believed or considered to be his own (as shown by the $1.00 stock purchase option he says existed); that he created confusion in the marketplace by secretly using the same or substantially similar names and marks at around and after bankruptcy was filed by B6USA; and that unlike B6USA, the LLC does not have an established and protracted time-line of parallel use of the name and marks. While open questions remain for trial, and it remains to be seen whether either party can meet its full burden for entry of a permanent injunction, at least at this early stage of the case B6USA has demonstrated a significantly greater likelihood of success on the merits than Mr. Hite.

    And be still my heart, the court also recognized that allowing the status quo to continue and not force one or the other to stop with a preliminary injunction was an unacceptable outcome:

    Furthermore, even if neither party presented clear evidence necessary to meet its burden, but instead evidence of determination of likelihood of success was largely advocated on the lack of contrary evidence from the other side, the court would still find itself in a position where it cannot allow the status quo (mutual use of the same term) to continue due to the clear evidence of public confusion resulting from dual use. Fortunately, the Seventh Circuit established a “tie-breaking determiner” under similar circumstances. See TMT North America, INC. v. Magic Touch GmbH, 124 F.3d 876 (7th Cir. 1997).

    Denying both parties injunctive relief … “is not a comfortable posture for the Court to assume” because it “is tantamount to holding that both parties are free to offer their products for sale in the same marketplace.” Johanna Farms [Inc. v. Citrus Bowl, Inc.], 468 F. Supp. [866] at 882 [(E.D.N.Y.1978)]; see generally 4 [J. Thomas] McCarthy, [McCarthy on Trademarks and Unfair Competition] § 31:10 [(4th ed. 1997)]. The law therefore allows the senior user’s claim to be revived from estoppel if the senior user can show that “inevitable confusion” would result from dual use of the marks.

    …

    Because the plaintiff has established a likelihood of showing that it owns the name due to first use in commerce (as between the two parties) plus years of exclusive use with the active participation and agreement of the other party, the court does not need to adopt the Seventh Circuit “tie-breaker” test. However, … as an alternative basis, the court finds that, in addition to B6USA being the senior user as between it, the LLC and Mr. Hite individually, the parties have shown not only a likelihood of confusion but the existence of marketplace confusion in fact that must be addressed until further and better evidence can be presented.

    Mr. Hite is therefore enjoined from doing business as BaySix Group, operating a website at “baysixusa.com” or holding himself out as affiliated with B6USA.

    B6USA, Inc. v. Hite, Adv. Proceeding No. 16-00149-5-JNC (Bankr. E.D.N.C. Oct. 13, 2016)

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  • Choice of Law and Copyright Ownership

    RCTV International Corp. v. Rosenfeld is a exhaustive examination of how US copyright law applies to works of foreign origin. Plaintiff Radio Caracas Television RCTV C.V. is a Venezuelan television company that created the telenovela series “Juana La Virgen”1. RCTV Caracas hired defendant Perla Farias De Eskinazi (“Farias”), also Venezuelan, on four different annual contracts to write scripts. The show was first broadcast in 2002.

    RCTV Caracas licensed the rights to RCTV Miami for use everwhere but Venezuela. In 2013 RCTV Caracas registered the copyright in the United States and sued Farias and her agent, claiming that media company Televisa approached RCTV to terminate its contract because Farias’ agent told it that RCTV did not have the rights to the show. RCTV brought claims under the Copyright Act and for intentional interference with a business relationship, tortious interference with contract, fraud, and unfair competition. The court bifurcated in order to try the issue of ownership of copyright first.

    What I like about the decision is that the court very carefully parses out each step of the creation and ownership of the works, deciding at each step of the way what law applies, US or Venezuelan. As the court describes, the various cases in which foreign law is implicated have generally conflated the legal analysis. No conflation here.

    So the first step was to decide what law controlled ownership at inception and, by application of that law, who owned it. Nimmer takes the view that ownership should be decided under U.S. law, called “national treatment”; however, Itar-Tass News Agency v. Russian Kurier, Inc., 153 F. 3d 82, 88-92 (2d Cir. 1998) held that, because copyright is a form of property, under the Restatement (Second) of Conflict of Laws § 222 ownership should be determined by the law of the state with “the most significant relations” to the property and the parties.

    With a thorough analysis, as well as observing that the 11th Circuit has a controlling opinion, the RCTV Int’l court agreed with the rationale in Itar-Tass and that Venezuelan law applied:

    [I]n this case, there is no dispute that the works at issue for the contracts between 2000 through 2002 were created by Venezuelan nationals, in Venezuela and pursuant to Writer’s Agreements executed in Venezuela. In addition, the Agreements executed between 2000 and 2003, included a Venezuelan choice of law clause. As such, Venezuela, and thereby its laws, has the most significant relation to the copyrights and the parties. Thus, Venezuela is the country of origin and provides the law for determining initial ownership of the copyrights.

    The plaintiffs argued that Venezuelan law was similar in effect to the US “work made for hire” provision where ownership initially vests in the employer, but the court said not so:

    Plaintiff’s argument is unpersuasive. Article 59 of the VCL states that “[i]t shall be presumed . . . that the authors of works created in the course of employment relations . . . have assigned to [the hiring party] . . . the exclusive right to exploit [the work].” Black’s Law Dictionary defines an “assignment” as “[t]he transfer of rights or property.” Black’s Law Dictionary defines a “transfer” as “[a]ny mode of disposing of or parting with an asset or an interest in an asset” as well as “[t]o convey or remove from one place or one person to another.” In other words, the plain meaning of the word “assign” is for one person to give up their ownership in something and give it to someone else. By using the word “assigned,” Article 59 is thus defining the hiring party as a subsequent owner of the right of exploitation, not its initial owner.

    (Emphasis and brackets in original; citations omitted.) So Farias was the initial owner, but the Venezuelan statute says that the employee is presumed to assign it to the employer. The next choice of law question therefore was what law, US or Venezuelan, applied to the assignment. The court held that here, too, Venezuelan law applied.

    The wrinkle in the case was two seemingly-conflicting provisions in Venezuelan law on the timing of termination of ownership. Article 52 says:

    The assignment of the author’s exploitation rights in his future works shall be valid if those works are specified individually or by genre; the assignment shall be effective only for a maximum period of five years counted from the date of the contract, even where the latter has specified a longer period.. . .

    However, Article 59 says:

    It shall be presumed, unless expressly agreed otherwise, that the authors of works created in the course of employment relations or on commission have assigned to the employer or commissioning party, as the case may be, without limitation and for the entire duration thereof, the exclusive right to exploit them ….

    Based on testimony by experts in Venezuelan copyright law, the court concluded that the express language of Article 59, “without limitation, for the entire duration thereof,” was meant to override the provision in Article 52.

    If you have a foreign ownership situation go to this case first; my summary is very brief but the court’s opinion is exceptionally thorough. The parties said at the outset that they would seek immediate appeal, which probably explains the court’s attention to detail.

    RCTV Int’l Corp. v. Rosenfeld, No. 13-23611-CIV-SIMONTON (S.D. Fla. Sept. 30, 2016)

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    1. CW Network made a US version of the show, “Jane the Virgin,” I suspect part of the motive for the lawsuit. IMDb says that Farias had also been a writer for Jane the Virgin. ↩
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  • A Family of Marks with Different Owners

    The “family of marks” concept in trademark law is a difficult one to win. We all understand the concept, which is that consumers realize that when trademarks share a similar trait, like restaurant food products that start with “Mc,” the goods come from the same source. Proof of a family of marks is challenging, though. As explained by the TTAB:

    To assert ownership of a family of marks a plaintiff must allege, and ultimately prove: (1) prior use of marks sharing a recognizable common characteristic; (2) that the common characteristic is distinctive (i.e., not descriptive or highly suggestive or so commonly used in the trade that it cannot function as the distinguishing feature of any party’s mark); and (3) that prior to the defendant’s first use (or constructive first use) of its involved mark, plaintiff’s marks have been used and advertised in promotional material or in everyday sales activities in such a manner as to create common exposure and thereafter recognition among the purchasing public such that the common characteristic is itself indicative of a common origin of the goods or services. See, e.g., Truescents LLC v. Ride Skin Care, LLC, 81 USPQ2d 1334, 1337-38 (TTAB 2006).

    It becomes even more challenging when it isn’t the same entity that owns the family of tradmarks. In Wise F&I, LLC v. Allstate Insurance Co., Wise F&I is the parent of Vehicle Services Administrator LLC, Administration America LLC, and Financial Gap Administrator LLC. Wise F&I owns registrations for WISE F&I and ONWISE, Vehicle Service Administrator owns registrations for TIREWISE and WISECARE, Financial Gap Administrator owns a registration for GAPWISE, and Administration America owns registrations for THEFTWISE, ID THEFTWISE, and ETCHWISE.

    Both parties relied on J&J Snack Foods Corp. v. McDonald’s Corp., which decided one of the aforementioned “Mc” cases. J&J Snack Foods says marks constituting a family must be “composed and used in such a way that the publc associates not only the individual marks, but the common characteristic of the family, with the trademark owner” (emphasis in original). Allstate argued this means it has to be the same company. Wise F&I retorted that J&J Snack Foods referred also to public recognition of “a common origin of the goods,” and that we know from In re Wella it is possible for corporate family members to be considered a single source. In In re Wella (“Wella I”),1 the Federal Circuit reversed a refusal to register a trademark owned by the German parent corporation because it was likely to be confused with its U.S. subsidiary’s registration:

    The question is whether, despite the similarity of the marks and the goods on which they are used, the public is likely to be confused about the source of the hair straightening products carrying the trademark “WELLASTRATE.” In other words, is the public likely to believe that the source of that product is Wella U.S. rather than the German company or the Wella organization. If the Wella family of marks connotes to consumers only a single source for all Wella products, namely the Wella organization, it is difficult to see how Wella A.G.’s use of the mark “WELLASTRATE” would cause confusion as to source because of Wella U.S.’s use of other Wella marks.

    On remand, the Board interpreted the holding:

    Clearly, the Court views the concept of “source” as encompassing more than “legal entity.” Thus, in this case, we are required to determine whether Wella A.G. and Wella U.S. are the same source or different sources….

    The companies of In re Wella were the same source, based on a declaration by an executive vice president of the U.S. sub stating that the parent owned substantially all the outstanding stock of the subsidiary and “thus controls the activities and operations of Wella U.S., including the selection, adoption and use of the trademarks.” In re Wella A.G., 5 USPQ2d 1359, 1361 (TTAB 1987) (“Wella II”), rev’d on other grounds, 858 F.2d 725, 8 USPQ2d 1365 (Fed. Cir. 1988).

    In re Wella has heretofore only been applied in the registration context to overcome a § 2(d) refusal. But the Board agreed the sole source concept was relevant here too, to establish a family of marks:

    We agree with Opposers that in the context of the “family of marks” inquiry, the concept of common origin (“source”) may encompass more than one entity. In view of the Wella I and Wella II decisions, it logically follows that related entities can rely on a family of marks as a basis for a Section 2(d) claim – notwithstanding the fact that the pleaded marks are not all owned by a single entity – if the complaint contains sufficient factual allegations that they are related, and that there is unity of control over the pleaded marks such that the marks are indicative of a single source, and all of the other elements for pleading a family of marks are satisfied.

    However, Wise F&I hadn’t pled there was a unity of control between the opposing entities. It also failed to plead two of the elements of a family of marks, that “Wise” is distinctive and that the public associates the common characteristic with a single source. Wise F&I also hadn’t pled confusion with any single trademark, only the family of marks. Wise F&I was given leave to replead its family of marks theory as well as to allege confusion with the marks individually.

    Wise F&I v. Allstate Ins. Co., Opp. No. 91226028 (TTAB Sep. 23, 2016).

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    1. In re Wella is getting a workout; the Board recently held that different Salvation Army entities could own registrations that use “Salvation Army.” ↩
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  • Isn’t It the Corporate Secretary’s Job …

    Isn’t it the Corporate Secretary’s job (and in this case, the same person was also the General Counsel) to make sure that documents are signed by the right entity? In East West Bank Co. v. The Plubell Firm LLC, not once, but twice the Corporate Secretary, Douglas Krause, executed trademark maintenance documents for the wrong entity, then doubled-down by stating that it was only a name change when it wasn’t. And that’s how you lose a registration that you are asserting in a cancellation action.

    It was a registration for EAST WEST BANK, applied for in 1993 in the name of East-West Federal Bank FSB and registered in 1996. In July 1995, East-West Federal Bank converted from a federal savings bank to a California state commercial bank. Nevertheless, the Section 8 & 15 was signed in 2002 in the name of East-West Federal Bank and a Section 8 & 9 was signed in 2006, also in the name of East-West Federal Bank.

    Perhaps finally realizing there was an error, East West Bank filed a second Section 8 and 9, changing the name of the owner from East-West Federal Bank to East West Bank. Upon receiving an office action because East West Bank had not shown its chain of title, East West Bank recorded a Change of Name with the PTO. Rather than filing any government document showing the change (as would exist if there truly was a name change), East West Bank relied on an affidavit signed by the Mr. Krause that "The Corporation’s name has been changed and is now called East West Bank."1 The PTO accepted the new Section 8 and 9.

    There is no doubt that a document filed in the name of the wrong entity is void:

    Only the current owner of a registration can file an affidavit or declaration of use or excusable nonuse, and the law is clear that a predecessor in interest is not eligible to make such filings…. Hence, if the party who filed the affidavit or declaration was not the owner of the registration at the time of filing, and if there is no time remaining in the grace period, the registration will be cancelled…. Moreover, even if it is assumed that the person who signed declaration had authority to sign for the true owner, that fact is irrelevant if the declaration is filed by an entity that does not own registration [sic].

    East West Bank argued that East West Bank’s ownership was by operation of law and therefore East West Bank could act in the name of East-West Federal Bank. As explained by the Board:

    Petitioner counters that contrary to Respondent’s assertions, the post-conversion entity East West Bank is the same legal entity as the pre-conversion entity East-West Federal Bank but simply under a different name. Relying on both federal and California state banking law, Petitioner contends that following the conversion from a federal savings to a state commercial bank in July 1995, East West Bank automatically succeeded to all rights and property of East-West Federal Bank by operation of law, effectively dispensing with the requirement of conveying or changing the name and title of any assets and documents, including trademarks registered with the USPTO. Petitioner maintains that any reference in writing to East-West Federal Bank, even after the conversion, is deemed a reference to Petitioner without any further action; hence, Mr. Krause’s signature on any post-registration maintenance documents under the designation East-West Federal Bank essentially constitutes a signature on behalf of East West Bank. As a consequence, Petitioner asserts that it did not need to file any assignment or conveying documents for Registration No. 2025824 with the USPTO following the conversion.

    The TTAB didn’t see it the same way:

    Despite his critical role as signatory of the post registration maintenance documents, Mr. Krause was not called as a witness at trial. Rather, portions of his discovery deposition are of record. His statements regarding the charter conversion are not a model of clarity, although ultimately he took the position that Petitioner underwent a name change. Thus, in the absence of any corroborating written documentation, Mr. Krause’s discovery deposition is not, standing alone, sufficient to support Petitioner’s position. We therefore look to the initial and subsequent articles of incorporation for East West Bank authenticated by Petitioner’s witness Ms. Woo, Legal and Executive Assistant of East West Bank. Article I of the initial Articles of Incorporation or East-West Bank dated July 24, 1995 states "[t]he name of this Corporation is East-West Bank." The only reference to East-West Federal Bank in the initial articles of incorporation appears in Paragraph IV ("Capital Stock"):

    Upon the effective date hereof, each of the 100,000 outstanding shares of East-West Federal Bank, f.s.b. stock is hereby reclassified and reconstituted as 1,100 shares of common stock of the corporation.

    Hence, it appears that as of July 24, 1995, East-West Federal Bank ceased to exist as a separate legal entity. This is confirmed by the provisions set forth in the California Financial Code stating that "[w]hen a conversion becomes effective: The converting depository corporation shall cease to exist." Thus, despite statements in Mr. Krause’s discovery deposition of a mere name change and continuation of the same legal entity, the articles of incorporation show otherwise — that as of July 1995 East-West Federal Bank ceased to exist because there was a change in legal entity. This is consistent with the statutory  provisions governing California banking conversions.

    The Section 8 Declaration of Use was therefore considered not filed and the registration cancelled.

    I think the argument can be rejected in another way. As described by the Board, East West Bank has a flawed syllogism. Whether the legal rights are transferred is not the same thing as who is performing a legally binding act. No one challenged the premise that East West Bank was the successor to East-West Federal Bank trademarks, whether by operation of law or otherwise. But that wasn’t the issue, the issue was whether a particular document was signed by the owner of the trademark. East West Bank argued that under a conversion, "reference to such national banking association in any contract, will, or document shall be considered a reference to the State bank [. . .]" (p. 27). But saying that the successor has the same rights as the predecessor doesn’t mean that one gets to perform new legal acts in the name of the former owner (whether it still exists or not). When the bank repossesses my car, I surely hope that the buyer at auction isn’t allowed to take a loan out in my name because the DMV still has me listed as the owner. Trustees for bankrupt estates sign as trustee even though they are exercising control over the estate’s assets, same with the administrator of a deceased person’s estate, same with power of attorney. It strikes me as odd, and unlikely, that the banking statute would permit it without any nod to the fact that it’s a new entity acting on behalf of another.

    There also is an interesting discussion of use in commerce of a service mark. The target of East West Bank’s petition to cancel didn’t fare so well either; she failed to prove use of her mark. From the description it looks like a lot of evidence, but in the Board’s view not showing use, just advertising. The Board cited to a number of places in the respondent’s deposition where she talked about using it in “marketing,” which the Board distinguished from use. The Board noted that the respondent gave opaque answers at her deposition and with better evidence it might have found use, but didn’t on the evidence it had.

    East West Bank Co. v. The Plubell Firm LLC, Cancellation No. 92053712 (TTAB Sept. 8, 2016)

    1. I’m not sure why they bothered with the affidavit; recording a name change with the PTO only requires the cover sheet. TMEP 503.03(b) (4th edition).↩


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