Property, intangible

August 1, 2016

The 2d Circuit Is Part Way There on Eden Toys
I have long complained about a defense that comes up in copyright cases, originating with the Second Circuit’s Eden Toys, Inc. v. Florelee Undergarment Co. Eden Toys involved a challenge to standing based on the timing of of an exclusive license. The case has heavily-quoted language about the challenge:

In this case, in which the copyright holder appears to have no dispute with its licensee on this matter, it would be anomalous to permit a third party infringer to invoke this provision against the licensee.

Eden Toys, and Billy-Bob Teeth, Inc. v. Novelty, Inc., a 7th Circuit decision that reached the same conclusion, were cases involving written transfer of ownership. I object to this line of cases based on the general concept that the plaintiff has the burden of proof on ownership of copyright, so it is fair game for a defendant to put the plaintiff to its proof.

Which brings us to the Second Circuit opinion in Urbont v. Sony Music Entertainment, (district court opinion blogged here) wherein plaintiff Urbont hoped to have the same rule apply in a work made for hire situation. Urbont created the work, the Iron Man music theme, to be used by Marvel Comics:

also later used by Marvel Comics in its 2008 film:

Urbont had a history of pursuing infringement claims and licensing the work, including a settlement with Marvel where Marvel conceded Urbont’s ownership. Urbont argued that Sony Music, as a third party any the ownership dispute, did not have “standing” to challenge whether the song was a work made for hire.

But the Court of Appeals for the Second Circuit disagreed:

This Court has not explicitly decided whether a third party to an alleged employer-employee relationship has standing to raise a “work for hire” defense to copyright infringement. See Psihoyos v. Pearson Educ., Inc., 855 F. Supp. 2d 103, 117 n.7 (S.D.N.Y. 2012) (“Courts have not dealt with this issue extensively, but the few decisions to address the issue at all have generally found that a defendant does have standing to challenge ownership on this basis.”). We have, however, implicitly permitted the use of the “work for hire” doctrine defensively by third-party infringers to refute a plaintiff’s alleged ownership of a copyright. See Aldon Accessories Ltd. v. Spiegel, Inc., 738 F.2d 548, 551-53 (2d Cir. 1984), abrogated on other grounds by Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730 (1989)3; see also Easter Seal Soc. for Crippled Children & Adults of La., Inc. v. Playboy Enters., 815 F.2d 323, 333 (5th Cir. 1987) (explaining that “[t]he ‘work for hire’ issue in Aldon Accessories arose as a defensive tactic adopted by a third-party infringer to dispute the validity of the plaintiff’s copyright”). The Eleventh Circuit has explicitly held that a third-party infringer “does have the right to assert a [work-for-hire] defense.” M.G.B. Homes, Inc. v. Ameron Homes, Inc., 903 F.2d 1486, 1490 (11th Cir. 1990).

The Ninth Circuit, on the other hand, has rejected third-party standing under the “work for hire” doctrine, at least where both potential owners of the copyright are parties to the lawsuit and the issue of ownership is undisputed as between them. Jules Jordan Video, Inc. v. 144942 Canada Inc., 617 F.3d 1146, 1157 (9th Cir. 2010). In Jules, the panel reasoned, inter alia, that the purpose of the “work for hire” doctrine is “to establish ownership of a work as between a commissioning party or employer on the one hand and the commissioned party or employee on the other.” 617 F.3d at 1157. Thus, “[i]t would be unusual and unwarranted to permit third parties . . . to invoke [the ‘work for hire’ doctrine] to avoid a suit for infringement when there is no dispute between the two potential owners, and both are plaintiffs to the lawsuit.” Id. The panel noted that third-party infringers are not permitted to avoid suit for copyright infringement by invoking 17 U.S.C. § 204(a), a statute of frauds provision requiring contemporaneous memorialization of a copyright transfer, and it considered the reasoning behind that doctrine to be equally applicable in the “work for hire” context. Id. (citing Imperial Residential Design, Inc. v. Palms Dev. Grp., Inc., 70 F.3d 96, 99 (11th Cir. 1995)).

Urbont argued for the 9th Circuit approach. However, in addition to distinguishing the cases on their facts, the court distinguished the assignment situation from the work made for hire situation:

Section 204(a), a statute of frauds provision for copyright transfers, was designed to “protect copyright holders from persons mistakenly or fraudulently claiming oral licenses.” Eden Toys, 697 F.2d at 36 …. Section 204 thus furthers the ordinary purpose of the statute of frauds: “[j]ust as requiring a written contract prevents enforcement of a nonexistent obligation through the exclusion of fraudulent, perjured, or misremembered evidence, requiring a writing for enforcement of a copyright assignment enhances predictability and certainty of ownership by preventing litigants from enforcing fictitious agreements through perjury or the testimony of someone with a faulty memory.”

Unlike Section 204, which concerns the memorialization of an ownership transfer, the “work for hire” doctrine guides the determination of ownership rights as between employers and employees or independent contractors. A plaintiff in a copyright infringement suit bears the burden of proving ownership of the copyright, however, whether such ownership is challenged by an ostensible employer or by a third party. Indeed, even courts that have precluded third parties from challenging a plaintiff’s ownership rights under the statute of frauds provision in Section 204 have permitted those parties to challenge the validity of the underlying ownership transfer.¹ We thus conclude that third parties to an alleged employer-employee relationship have standing to raise a “work for hire” defense against a claim of copyright infringement.

(Most internal citations omitted.) Ok, so I’m happy that the court allows Sony to force Urbont to prove his ownership, but it is based on a false distinction. Let’s review the text of Section 204(a):

A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

This section doesn’t have any language to suggest it has applicability beyond its intended statute of frauds effect in an inter partes dispute, or that it bars a third party from arguing that the facts relating to a supposed transfer matter. I prefer my operative language in statutes to be a bit clearer than that. Like “a person who is not a party to a instrument of conveyance may not challenge its validity.” Or something like that. But neither section, 204 nor work made for hire under 101, have anything to say about the situation.

In Eden Toys, a decision interpreting the fairly new Copyright Act of 1976, the argument was that there had been a valid oral transfer of an exclusive license, something that was permitted under the Act of 1909 but that the new § 204(a) did not allow. The court remanded for the district court to decide whether a later agreement was a post hoc writing ratifying the oral transfer, stating for the first time in the Second Circuit (at least that circuit, maybe everywhere, but I didn’t work that hard to research it and if you have a beef with my conclusion put it in the comments) that the writing could come after the transfer. The Eden Toys court then mused, in the most irrelevant of dicta, “In this case, in which the copyright holder appears to have no dispute with its licensee on this matter, it would be anomalous to permit a third party infringer to invoke this provision against the licensee.” I read it as “well, of course this section allows the writing to come after the agreement, don’t waste my time,” or at least “don’t bother me with this ridiculous collateral attack that is sure to fail,” but which instead has turned into a defense of breathtaking scope.

Oh, and Urbont won reversal of the district court’s summary judgment against him that the song was a work made for hire; remanded.

Urbont v. Sony Music Entertainment, No. 15-1778-cv (2d Cir. July 29, 2016).

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
1. I think Ron Coleman might understands this distinction. I do not. ↩
copyright

assignment, Billy Bob, Billy-Bob Teeth, Copyright Act of 1909, Section 204, Sony, Urbont, work made for hire
July 28, 2016

A Blessing in Disguise

Whole Foods lost a New York tax decision to the tune of $3.5 million, but in my opinion that’s a small price to pay to avoid a decision inconsistent with ownership of the WHOLE FOODS trademarks.

Whole Foods Market Group, Inc. (WFMG), a Delaware corporation, is the operating company that distributes and sells natural and organic food products at retail stores in the US. Whole Foods Market IP, LP (WFMIP), a Delaware limited partnership, owns the trademarks, trade names and other intangible assets. Both companies are owned and controlled by Whole Foods Market, Inc.

WFMG pays royalties to WFMIP for the right to use trademarks and other intellectual property in its retail operations. WFMG deducted the royalty payments from its federal income tax returns and the same amount was included in WFMIP’s federal taxable income.

There were two ways that WFMG could have filed its New York taxes, either as a combined report with WFMIP or filing separately and adding the royalty payments back in to its income to calculate its New York entire net income. WFMG did it the latter way but the Division of Taxation challenged the decision, claiming that WFMG should have filed a combined report with WFMIP.

A combined report must be filed when the companies are related and engaged in a unitary business, which wasn’t disputed, and where there are substantial intercorporate transactions between them. WFMG argued that, by adding the royalty payments back into its New York return, there were no qualifying intercompany transactions. WFMG further argued that doing so did not “give rise to distortion, such as where one corporation proved management, corporate, administrative and logistical services to a related corporation at cost without reimbursement.” In other words, WFMG argued that WFMIP did not provide any management, corporate, administrative, or logistical support to WFMG.

And there we have the definition of a naked license. What WFMG argued was that WFMIP had nothing to do with WFMG except to passively receive royalties. But a trademark owner can’t be uninvolved in the use of its trademarks or it’s a naked license that leads to a judgment that a trademark is abandoned.

Instead the tax court held that, merely based on percentages alone (i.e., that more than 50% of WFMIP’s income was from WFMG royalty payments) the two companies should have filed a combined return.* Had they done so the tax obligation would have been $2.5 million higher, which through interest and penalties ended up at $3.5 million owed to New York.

But $3.5 million is a small price to pay when, had it gone the other way, there would be a legal opinion holding that trademark owner WFMIP did not exercise quality control, sweet future evidence that the WHOLE FOODS trademarks were abandoned.**

In re Whole Foods Market Group, Inc., DTA No. 826409 (N.Y. Div. Tax App. July 14, 2016). Thanks to Matthew Hintz for giving me a copy of the opinion.

Disclaimer: I’m not a tax attorney, so if I have mischaracterized anything about the opinion please let me know.

*For the three years being audited, about 56-57% of WFMIP’s income was royalty payments, which begs a question for me—where did the rest of the income come from?

** I think that would be a foolish outcome, of course they’re not abandoned. But it’s a risk until the 9th Circuit and other circuits that follow it get their law straightened out.

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

trademark

holding company, tax

July 26, 2016

It Just Seems Wrong UPDATE

Update: The 9th Circuit has affirmed, in an opinion that only further confuses matters. The analysis is this:

Trademarks are assignable.
Co-existence agreements are enforceable.
Contracts are assignable unless doing so changes the terms or the document says otherwise, and neither is the case here.
Therefore, the co-existence agreement was assignable.

I have no idea why the first two propositions are mentioned at all, since they have nothing to do with the conclusion. Oh well.

But we have been taught a lesson. When drafting a co-existence agreement, good drafting practice should already have you capturing everything that is material to the rationale for allowing co-existence—territory, goods and services, appearance of the mark—the failure of which will be a material breach; don’t rely on anything extrinsic to the contract for your assurances that there won’t be confusion, like the nature of the business of the other party. The agreement should be non-assignable – that is certainly always my desire, but it’s not always possible, sometimes carving out when the business as a whole is transferred, or that it may be assigned to an affiliate company. Another thing that was lacking in the Crazy Horse co-existence agreement was termination of the agreement after a period of non-use of one of the marks. That should be in your standard form too, but the time period can sometimes be quite long because one trademark owner doesn’t want the other party taking advantage of any residual goodwill after the first has ceased using its mark. Now I will probably add an express provision that the agreement cannot be assigned apart from the trademark, which must be in use.

Is anyone else troubled by this case or is it just me?

Russell Road Food & Bev., LLC v. Spencer, No. 14-16096 (9th Cir. July 22, 2016)>

Original post below:

I don’t know whether this case is an unintended consequence or an ill-considered strategy. In any case, I think the outcome is wrong.

We have four different parties using somewhat different trademarks for strip clubs.* Their relative order of priority, and the marks, is this:

Owner	Marks	Priority date
Spencer (defendant)	CRAZY HORSE CLEVELAND CRAZY HORSE MEN’S CLUB PLATINUM HORSE BOOK PARK	1978
Carl Reid (non-party)	CRAZY HORSE PURE GOLD’S CRAZY HORSE	2001 2004
Crazy Horse Too A Gentlemen’s Club (non-party)	CRAZY HORSE TOO GENTLEMEN’S CLUB	2001
Russell Road (plaintiff)	CRAZY HORSE III	2009

Although Spencer was the first (of these parties at least) to use a CRAZY HORSE variant, Reid was the first to file, followed by Crazy Horse Too A Gentlemen’s Club (“CHTAGC”). Spencer then filed his application for CRAZY HORSE in 2008. It was refused registration because of a likelihood of confusion with the Reid registrations, and there was a warning that it might be refused if the then-pending application filed by CHTAGC registered. In 2009 the trademark application filed by CHTAGC was also refused registration because of the Reid registrations, so CHTAGC filed petitions to cancel the two Reid registrations. Reid and CHTAGC entered into a consent agreement and the cancellations were dismissed.

The consent agreement provided that CHTAGC could use and register CRAZY HORSE TOO GENTLEMEN’S CLUB and any mark that included the phrase CRAZY HORSE, provided that the mark did not contain the phrase PURE GOLD’S. The Agreement was binding on the parties’ successors.

In 2010 Spencer opposed the CHTAGC application and CHTAGC abandoned it, so the CHTAGC mark ultimately was never registered. Spencer’s wholly-owned company Crazy Horse Consulting then acquired the Reid CRAZY HORSE registration (but not the PURE GOLD’S CRAZY HORSE registration) by assignment and Spencer admitted he was aware of the consent agreement. Thereafter the refusal of the Spencer application was withdrawn.**

Which brings us to the suit. In 2010 Plaintiff Spencer and Defendant Russell Road Food and Beverage, a company entirely unrelated to CHTAGC, engaged in licensing negotiations, but they broke down. In 2012 CHTAGC assigned the consent agreement, but not any underlying trademark rights or business, to Russell Road. The next day Russell Road filed a declaratory judgment action of non-infringement against Spencer.

Russell Road filed a motion for summary judgment on the basis that the consent agreement permitted its use of the CRAZY HORSE mark, and it worked. The court held

The Consent Agreement … was a contract whereby Reid consented to a defined usage of the CRAZY HORSE mark. Defendants do not dispute that Russell Road’s use of the CRAZY HORSE III design mark is permitted by the terms of the Consent Agreement….

Defendants dispute that CHTAGC’s assignment of the Consent Agreement to Russell Road was a valid and enforceable assignment. Specifically, Defendants assert that CHTAGC’s trademark assignment [sic-no trademark was assigned, just a consent agreement] to Russell Road is unenforceable because CHTAGC did not transfer any good will. Again, Defendants’ arguments are premised on the misplaced notion that CHTAGC sought to assign ownership rights in the CRAZY HORSE trademark to Russell Road. However, because CHTAGC did not acquire any ownership rights in the CRAZY HORSE mark, its assignment of the Consent Agreement could not have purported to either. Instead, CHTACG assigned its contractual right under the Consent Agreement to use the CRAZY HORSE mark in a defined manner to Russell Road.

Defendants do not otherwise dispute that the Assignment Agreement is a valid assignment of CHTACG’s contractual rights under the Consent Agreement. Moreover, there is no indication that the Assignment Agreement was otherwise prohibited by law. Here, the Consent Agreement does not contain any language prohibiting assignment. In fact, it actually contemplates that the agreement would bind assigns. Nor is there any indication that the Assignment Agreement materially changed the terms of the Consent Agreement. Accordingly, the Court finds that CHTACG’s assignment of its rights under the Consent Agreement to Russell Road is valid and enforceable.

So let’s review what happened here. Spencer was the most senior user of the mark; no one seemed to dispute that. But, he was late to the registration game and there were a couple of registrations and applications that he had to get out of the way. With respect to the Reid registrations he was pragmatic; he took an assignment of the CRAZY HORSE registration but left Reid with PURE GOLD’S CRAZY HORSE, which apparently was an arrangement to everyone’s satisfaction. He didn’t take an assignment of the consent agreement, but, as the court rightly found, he took the Reid registration subject to the continuing right of CHTAGC to use CRAZY HORSE TOO GENTLEMEN’S CLUB.

But the mischief began when CHTAGC assigned a bare consent agreement, without any underlying trademark rights, to another party. There were some unusual aspects to this consent agreement that allowed this to happen. First, as the court notes, the agreement was assignable. Typically, because of the personal services nature of trademarks, one wouldn’t allow an assignment of a trademark-related agreement without approval from the other contracting party, or at least permit an assignment only with a transfer of the entire business too. Second, the agreement didn’t have any termination provision. It looks like Crazy Horse Too shut down in 2005 and wasn’t reopening until 2013—had there been a termination provision based on cessation of use of the mark, there wouldn’t have been any agreement to assign. Third, we have an agreement that was perhaps written more broadly than it needed to be; the parties were really thinking about CRAZY HORSE TOO A GENTLEMEN’S CLUB and PURE GOLD’S CRAZY HORSE as their respective marks, yet the agreement covered any use of CRAZY HORSE by CHTAGC.

But even given that, it doesn’t seem right in principle that one can assign a trademark consent agreement without also obtaining any of the rights to which it pertains, like an assignment of any underlying trademark rights, or succeeding to the business of the original party to the contract. From a brief review of McCarthy’s, it looks like, in the cases involving successor companies (Waukesha Hygeia Mineral Springs Co. v. Hygeia Sparkling Distilled Water Co., 63 F. 438 (7th Cir. 1894) and T & T Mfg. Co. v. A. T. Cross Co., 587 F.2d 533, 537, 201 U.S.P.Q. 561 (1st Cir. 1978)), the successor companies had acquired the business and were selling goods identical to those sold by the original party to the agreement. But that wasn’t the case here, and instead we have a case where an co-existence agreement is free-floating, apparently indefinitely, for the use of anyone who can get their hands on it.

The Waukesa case had a similar fact pattern, i.e., the assignee acquired a trademark subject to consent agreement and then tried to escape the legal effect. But, unlike here, in Waukesha the party against whom enforcement of the agreement was sought had no preexisting rights independent from those which it acquired. Here, Spencer hadn’t needed the underlying trademark rights for the registration it acquired because he had independent, senior rights. I therefore find it a surprising outcome that Spencer could have conceded all his far senior rights by gaining a trademark registration he didn’t even really need. If one steps completely into the shoes of your predecessor company and all rights accrue from the acquired trademark that might make sense, but Spencer didn’t do that.

Spencer, as the senior user, likely didn’t need to get an assignment of the Reid trademark registration—he could have instead simply asked Reid to voluntarily surrender it. By acquiring the registration, though, Spencer could avail himself of the legal advantage of an earlier registration date than the one he would have with his own, later-filed application. Without the benefit of hindsight it seems a reasonable decision about how to manage his own trademark prosecution, although it looks like a bad decision now.

Had the court used the consent agreement as guidance to decide when the various uses of CRAZY HORSE were confusing (because we see there are many, many strip clubs named CRAZY HORSE), I would be fine with it. Spencer also had previously failed in his attempt to get a preliminary injunction because he was not in the Las Vegas territory, which I also don’t disagree with. But to say that one can just buy the bare right not to be sued for trademark infringement is, in my opinion, crazy.

Russell Road Food and Beverage, LLC v. Spencer, No. 2:12-CV-01514-LRH-GWF (D. Nev. May 6, 2014).

*Excellent footnote alert: “Courts have alternatively referred to these businesses as ‘nude dancing establishments,’ ‘gentlemen’s clubs,’ and ‘exotic entertainment’ establishments. See, e.g., City of Erie v. Pap’s A.M., 529 U.S. 277, 283 (2000). The Court here follows the conventions of Circuit authority in adopting the term ‘strip club.’ See, e.g., E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., 547 F.3d 1095, 1097 (9th Cir.2008).”

**As of this writing, the Spencer application was published, then opposed by the Crazy Horse Memorial Foundation, an opposition which the Crazy Horse Memorial Foundation then lost.

The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

trademark

coexistence agreement, consent agreement, Crazy Horse, declaratory judgment, priority

July 25, 2016

How to Steal a Trademark

Progressive Emu, Inc. v. Nutrition & Fitness, Inc. is mostly a dispute about paying for emu oil, but there’s also a trademark claim involved. In 2000 Progressive Emu began developing an emu oil pain cream and added blue coloring to it, “thus birthed ‘Blue Emu.’” Nutrition & Fitness (NFI) was then “brought on board to introduce Plaintiff’s cream to mass markets.” Progressive Emu disclosed the formula for the Blue Emu product to NFI under a confidentiality agreement. NFI placed its first order for “Super Strength Blue-Emu” on May 3, 2002 and that same day filed an application to register the trademark BLUE-EMU for “topical ointment for use in relieving joint or muscle pain.” A week later, the parties executed a Letter of Intent in which they agreed to jointly own “any current and future trademarks of products that contain [Progressive] Emu Oil.”

The parties then entered into a Sales and Marketing Agreement that expressly superseded the Letter of Intent. It did not mention anything about ownership of the BLUE-EMU trademark.* In a 2013 opinion, the court rejected Progressive Emu’s argument that it was half-owner of the BLUE-EMU trademark for a simple reason:

Pro Emu’s claim to partial ownership of the BLUE EMU trademark is ineffectual because the Letter of Intent was superseded in 2003. Pro Emu could have insisted otherwise. If it had done so, no one knows whether its insistence upon joint ownership would have created an insurmountable obstacle to the Agreement or the Agreement would have contained the language Pro Emu wants the court now to insert. If there were any doubt about the parties’ intent on this subject, Pro Emu has never objected to NFI’s claim of ownership of the trademark or asserted that it had any type of ownership interest during the parties’ eight year course of performance. Neither the Agreement nor any other agreement between the parties provides for joint ownership of the BLUE EMU trademark.

Progressive Emu thereafter changed course, amending its complaint to add a claim for cancellation of the BLUE-EMU trademark, by now incontestable, on the theory that NFI’s declaration that it was the owner of the mark, and that no one else had the right to use the mark, was fraudulent. Consider the timing of the application; NFI filed it the same day it ordered from Progressive Emu “Super Strength Blue-Emu” and shortly before entering into a Letter of Intent that said the trademark would be owned jointly.

But a fraud count was nowhere close to possible; not because the standard for fraud is very high, but because NFI hadn’t done anything wrong:

To prevail on its fraud claim at trial, Plaintiff would need to establish by clear and convincing evidence that Guy [Defendant’s chairman] knew or believed that another organization had a right to use the mark. As a matter of law, Plaintiff has failed to produce evidence sufficient to meet this standard. Guy could not have known or believed that Plaintiff had a right to use the mark when Plaintiff actually had no such right, either by contract or under the common law.

First, Plaintiff did not have a contractual right to use the mark at the time of filing. Any contractual right could have only materialized when the parties executed a Letter of Intent, which did not occur until one week after Defendant submitted its registration application (and nearly a month after Guy executed the accompanying affidavit).

Plaintiff likewise did not possess a common-law ownership right in the Blue Emu mark when Guy submitted his registration application to the Trademark Office. Common-law trademark rights are appropriated only through actual prior use in commerce. This Circuit applies a two-part test to determine whether a party has demonstrated prior use. The party claiming a right must present evidence showing first, adoption, and second, use 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. Here, Plaintiff allegedly invented the name “Blue Emu” and circulated it to potential partners, so the “adoption” prong of the prior-use test is satisfied for purposes of summary judgment.

Plaintiff’s right to the mark, however, collapses on the second prong, which requires “use in a sufficiently public way.” This Court has previously explained that the use prong was satisfied when “the distribution of the mark was widespread . . . , members of the targeted public actually associated the mark with the product to which it was affixed, the mark served to identify the source of the product, and other potential users of the mark had notice that the mark was in use in connection with the product.”

None of these factors is present here. The only sale at the time of filing was to Defendant itself, and that occurred on the day of filing. Plaintiff argues that this constitutes using the mark in commerce. Aside from the temporal issues with this argument, Plaintiff never actually distributed the product to the public. Indeed, it contracted with Defendant for the express purpose of selling the product on the mass markets. And the sale of goods to a partner fails to establish a common-law mark under this Circuit’s precedent….

In sum, Plaintiff cannot show that it had a right to the blue Emu mark when defendant submitted its trademark application.

There’s nothing wrong with the reasoning, it was an outcome that Progressive Emu allowed to happen by failing to nail down the trademark ownership in the agreement since it hadn’t established common law rights. But as the district court said, it may have been something that Progressive Emu knowingly conceded in negotiations because it couldn’t make a deal otherwise. Or it was an oversight, but we hew to the deals we strike, well-crafted or not.

Progressive Emu raised a licensee estoppel theory on appeal, but it wasn’t brought below so the appeals court didn’t entertain the argument.

Progressive Emu, Inc. v. Nutrition & Fitness, Inc., No. 14-13485 (11th Cir. July 19, 2016).

Progressive Emu, Inc. v. Nutrition & Fitness, Inc., No. 2:12-cv-01079-WMA (N.D. Ala. June 25, 2014).

Progressive Emu, Inc. v. Nutrition & Fitness, Inc., No. 2:12-cv-01079-WMA (N.D. Ala. June 7, 2013).

* The agreement said that Progressive Emu “hereby grants to NFI, and NFI hereby accepts, an exclusive, non-transferable right and license to use the JEI trademarks listed in Exhibit A hereto.” There is no Exhibit A to the copy of the agreement available on PACER and no discussion by the court about whether BLUE-EMU might have been on it.

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trademark

Blue Emu, common law, joint ownership, priority
July 18, 2016

It’s All About the Facts

Who the true trademark owner is, as between a member of an LLC (or shareholder of a close corporation) and the entity that the person owns, can be a vexing question. When there are only one or two owners of an entity the lines are very blurry—see here and here and here and here and here for examples.

And now we have another example. Opposer Dina DiCenso and Applicant Dave Wallin started a tattoo business. Wallin is a tattooer and DiCenso had been one of his clients. DiCenso contributed the start-up capital as a loan, found a rental property and signed the lease, personally guaranteeing it. She proposed some names and Wallin chose “Eight of Swords” and designed the logo:

Eight of Swords, LLC (a co-opposer) was organized in New York on May 20, 2009. DiCenso prepared the Articles of Organization, Wallin signed them as “Member,” Wallin was the registered agent, DiCenso paid the filing fee personally, and DiCenso filed them. DiCenso later prepared and signed the Certificate of Publication listing herself as Managing Member. DiCenso also registered and personally paid for domain name registrations.

Things fell apart, as they do. In 2010 DiCenso petitioned a New York court to dissolve the LLC, which Wallin opposed. On January 13, 2011, the court denied DiCenso’s petition and ruled that DiCenso’s interest in the LLC “is minimal, and … is certainly less than 20%, and may be as little a 1% to 5%.” The court also ruled that DiCenso “does not have authority to go to the business and run it or manage it in any way at all.” However, DiCenso was entitled to a share of revenue from the business.

Thereafter, on July 18, 2011, Wallin filed the application for the Eight of Swords logo in his name personally, not in the name of the LLC. DiCenso opposed, personally and on behalf of Eight of Swords, LLC.

Standing could have presented an interesting problem, sidestepped by the TTAB. The opposition was filed in the names of DiCenso and the LLC. According to the opposition (footnote 1), “DiCenso is currently involved in bringing a derivative action in the Supreme Court of the State of New York, Kings County. Because that particular form of pleading is is not available in the Trademark Trial and Appeal Board, we are filing this opposition on behalf of DiCenso and Eight of Swords to approximate a derivative filing.” The Board found that because DiCenso was a co-founder with at least a minimal ownership interest in, and is due revenue from, the LLC she is not a “mere intermeddler” and therefore has standing. Only one party needs to have standing, so the Board did not address the LLC’s standing.

As expected, Wallin claimed that he was the owner of the trademark and the LLC was his licensee. It would probably, though, be a good idea to have some evidence to support it:

[W]e view the activities of each party prior to the July 20, 2009 opening of the business as a typical collaboration between two individuals who jointly are starting a business, i.e., a partnership or joint venture: Wallin was to be primarily responsible for performing tattoo services, but DiCenso found and leased the rental property for the business, prepared the paperwork to formalize the legal entity, and loaned the business virtually all of the start-up capital, among other things. While DiCenso’s ownership interest is “minimal” and she is not authorized to manage the LLC’s current operations, the New York Supreme Court determined that her interest is more than 0%, and Wallin’s is less than 100%.

There is no evidentiary support for Wallin’s repeated assertions that he licensed the mark to the LLC or that he obtained sole ownership rights through any such purported license. Wallin testified that he never signed a license agreement with the LLC, and the record is devoid of any details concerning a purported oral license.

In addition, Wallin’s assertion that he “was the sole managing member and majority owner” of the LLC when he “determined that the LLC would license the Mark from Wallin” is contrary to evidence of record: DiCenso signed the LLC’s May 20, 2009 lease and the June 17, 2009 Certificate of Publication as a “Managing Member” of the LLC, and the January 13, 2011 Order from Judge Demarest, which proclaimed Wallin “the sole managing member” and majority owner of the LLC, is not retroactive to the May 20, 2009 formation of the LLC, and it does not mention a license of the mark by Wallin to the LLC.

So, “there simply is no evidence that Wallin individually owned the mark when he filed the application. The application therefore is void ab initio.”

HT to John Welch for the opinion.

DiCenso v. Wallin, Opposition No. 91208299 (TTAB July 12, 2016).

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

trademark

licensee, licensor, managing member, partnership, related company, Section 5, sole shareholder, void ab initio
July 11, 2016

All the Wrong Reasons

In a recent Trademark Reporter Commentary, I went on a tirade about a two district court cases that, in my view, misinterpreted Section 10 of the Lanham Act. Section 10 generally prohibits assignment of intent-to-use applications “except for an assignment to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing.” The two courts held that there had to be a trademark in use before it could be assigned, a legal conclusion I argue is contrary to both the statutory language and the policy decisions underlying the exception. But your can read the article for the full argument.

One of the cases I criticized was Sebastian Brown Prods. v. Muzooka, Inc. The Sebastian Brown Products court said that “an ‘ongoing and existing’ business to which a mark pertains requires at least some use of the mark in commerce. This is simply another way of stating that the mark must have accrued goodwill before the mark may be validly assigned.” The plaintiff hadn’t provided any evidence of use, so the court dismissed the complaint with prejudice. The plaintiff moved for reconsideration asking for another opportunity to fix the problem, which the court granted.

Alas, not because the court realized it had erred on interpreting Section 10. No,

In the instant motion, Plaintiff relies on the text of § 1060(a)(1) and associated legislative history to argue that the Court should alter its interpretation of § 1060(a)(1). Not only were these arguments available to Plaintiff at the time of the Court’s order, the Court considered these issues in detail in the order dismissing the FAC.1 See Muzooka II, 2016 U.S. Dist. LEXIS 33483, 2016 WL 949004, at *8-11. Accordingly, reconsideration on this basis is not warranted.

But the plaintiff was successful with an argument that, had it known what view of Section 10 the court was going to take, it would have presented evidence in support of that view, evidence it had:

The Court agrees that Plaintiff has shown a material difference in fact from that presented on the motion to dismiss. In support of the instant motion, Plaintiff offers significant evidence that Miller engaged in a variety of activities not presented during the briefing on the motion to dismiss, including signing a written agreement with a recording studio while using the Muzook Mark; contacting “numerous” and “many” people in the recording industry using the Muzook Mark; and discussing the Muzook Mark at the San Francisco MusicTech Summit IX. This evidence is relevant to whether the Muzook Mark accrued goodwill prior to Miller’s assignment of the Muzook Mark to Plaintiff. While Plaintiff could have presented this evidence during the motion to dismiss, Plaintiff is correct that, at the time of the motion to dismiss, neither the Ninth Circuit nor any district court within the Ninth Circuit had interpreted the legal requirements of § 1060(a)(1). In addition, the Trademark Trial and Appeal Board had issued conflicting authority on the meaning of § 1060(a)(1). Thus, the scope of § 1060(a)(1)—and the type of allegations needed to satisfy § 1060(a)(1)—was unclear. In light of the newly presented evidence, the Court is persuaded that granting Plaintiff leave to amend Plaintiff’s Lanham Act claim is not necessarily futile. For this reason, the Court agrees with Plaintiff that Plaintiff’s Lanham Act claim should be dismissed with leave to amend to allege newly presented facts, rather than with prejudice.

You take the win anyway you can get it.

Sebastian Brown Prods., LLC v. Muzooka, Inc., No. 15-CV-01720-LHK (N.D. Cal. July 5, 2016).

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trademark

goodwill, intent-to-use, Section 10, Trademark Reporter
June 27, 2016

Dodged a Bullet

Awhile back I titled a blog “Pay Attention to This One.” People did.

You can read in more detail about the facts in the appeals court opinion blogged here, but the crux is that an inventor had an oral agreement with his employer that he would be paid a bonus for his inventions in exchange for his assignment of the patents to his employer. After several years the employer said that it was restructuring the bonus program so stopped paying, but the inventor in good faith continued to assign the patents while waiting for the company to put a new program in place. The company never did, the inventor sued, and convinced the appeals court that he could elect rescission of the patent assignments. The Supreme Court of North Carolina then heard the case on discretionary review.

I commented that “the result is pretty eye-opening” and apparently others agreed. The North Carolina Chamber of Commerce, North Carolina Association of Defense Attorneys, North Carolina State University, Qualcomm, Cisco Systems, Microsoft, and Cree filed amici briefs in the case and the Supreme Court of North Carolina has reversed.

There are other issues in the case that take up most of the opinion (North Carolina Wage and Hour Act and North Carolina Retaliatory Employment Discrimination Act). This is the rescission part (citations and quotation marks removed):

Finally, we address defendants’ argument that plaintiff is not entitled to rescission. Defendants argue that plaintiff is not entitled to rescission because monetary damages provide plaintiff with an adequate remedy, and because rescission would return plaintiff to a status quo that never existed. We agree.

Rescission is an equitable contract remedy that differs from its legal counterparts. While legal remedies generally compensate the non-breaching party as if there were no breach, rescission treats both parties as if there were no contract. As with all equitable remedies, rescission will not lend its aid in any case where the party seeking it has a full and complete remedy at law. A party may pursue rescission only if there is a material breach of the contract going to the very heart of the instrument.

The Court of Appeals incorrectly applied the test for rescission. The court held that Scenera’s failure to pay plaintiff his patent bonuses was prima facie evidence of a material breach, and, because defendants breached the contract materially, plaintiff could pursue rescission. But, rescission cannot be the remedy for every material breach. A party may pursue rescission only when a material breach occurs and all legal remedies falls short of compensating the injured party for its loss.

Here, although defendants materially breached their contract with plaintiff, monetary damages sufficiently compensate plaintiff for his loss. Plaintiff’s entire claim is that defendants owe him $5,000 to $10,000 for each patent he created while employed at Scenera. Defendants owed plaintiff no other obligation under the contract, and monetary damages provide plaintiff with a full and complete remedy.

To hold otherwise would seriously undermine the rationale of the hired-to-invent doctrine. As this Court explained in Speck, an employer takes a risk when hiring an employee to invent, because the employer has no guarantee of a return on its investment. If an employee is hired to invent but could later rescind that agreement and claim ownership of inventions made during his or her employment, the employee would end up in a far better position, and the employer in a far worse position, than when the parties reached their original bargain. The employer’s risk would increase exponentially, thereby discouraging businesses and universities from undertaking valuable research efforts that could benefit our State and Nation.

For these reasons, the Court of Appeals’ holding that plaintiff may pursue rescission is reversed.

Morris v. Scenera Research, LLC, No. 429PA13 (N.C. S. Ct. June 10, 2016).

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patent

assign, assignment, hired to invent
June 20, 2016

Why You Have That Employment Agreement Gobbledygook
Plaintiff Advanced Video Technologies has been around the block a few times already. AVT claimed to be the successor to a patent for a video codec. It had successfully asserted the patent against other defendants but ran into some problems when trying to sue HTC Corp., Blackberry and Motorola Mobility. Its first attempt failed because there was a missing link in the chain of title, meaning AVT didn’t actually own the patent. AVT didn’t appeal but instead had a receiver appointed for the sole purpose of transferring the ownership of the patent. The receiver assigned the patent to AVT and AVT started over again with HTC, Blackberry and Motorola Mobility.

Just a cast of characters first, there are many players to keep straight:
- Infochips was the original employer of the inventors but it went out of business before the patent application was filed;
- Woo was an inventor who bought the Infochip assets;
- Woo assigned the assets to AVC, a predecessor to plaintiff AVT (“C” is before “T” in the alphabet, just keep that in mind when reading).
- Epogy was the entity that supposedly owned the patent but didn’t, thus breaking the chain of title the first time around.
It’s actually more complicated than that, but that’s enough for our purposes.

This time, the challenge was that one of the three inventors, Vivian Hsiun, had not assigned her ownership of the patent to her employer. Under current Federal Circuit jurisprudence, an absent inventor means that the court lacks prudential standing for the lawsuit.

Here is the language from her employment agreement:

If you can’t read it, it says:

I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and will assign to the Company all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company.

I agree that my obligation to assist the Company to obtain United States or foreign letters patent, copyrights, or mask work rights covering inventions, works of authorship, and mask works, respectively, assigned hereunder to the Company shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate for time actually spent by me at the Company’s request on such assistance. If the Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign letters patent, copyrights, or mask work rights covering inventions or other rights assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyrights, and mask work rights with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have infringement [sic] of any patents, copyrights, or mask work rights resulting from any such application assigned hereunder to the Company.

When the patent application was prosecuted, Hsiun refused to assign the invention. Instead, Woo (or as the court referred to him at one point, “hapless Woo”) filed a declaration with the Patent Office, attaching “a copy of the agreement whereby the omitted inventor agreed to assign this invention and the documentation wherein the rights in said agreement were purchased by me.” The Patent Office ultimately granted the patent.

The knowledgeable reader has already spotted the problem with this assignment – it’s an obligation to assign, not a present assignment of a future right. The court gives a thorough run-down on the law of the language of assignments as laid out in Arachnid, Inc. v. Merit Indus., Inc., Speedplay, Inc. v. Bebop, Inc., Filmtec Corp. v. Allied-Signal Inc., and Regents of Univ. of N.M. v. Knight. The plaintiff tried various textual arguments but none that stuck—I leave it to the readers to review that part of the opinion for themselves.* And it doesn’t matter what Woo said to the Patent Office:

Woo’s declaration to the patent office did not confer title to Hsiun’s share of the invention/patent on AVC — any more than AVT’s belief that AVC had passed title to the patent to Epogy turned that assertion from error to truth. See Advanced Video Techs., 103 F. Supp. 3d at 424. What Woo may have believed (or hoped) about the ownership issue is irrelevant because — as has been said before in the context of this dispute — saying so does not make it so. The question is whether, as a matter of law, Hsiun’s signature on her Employment Agreement operated to assign her one third share in the invention to Infochips, AVT’s predecessor in interest twice removed. If it did not, then no matter what Woo said to the Patent Office, AVC did not own 100% of the ‘788 invention by assignment at the time it obtained the patent.

But I think the more interesting part of the opinion is the court’s discussion of the administrative provisions baked into the employment agreement. We’ve all seen it and may have signed it, the provisions meant to be a backstop for the very situation of an uncooperative inventor. In this case there were two mechanisms that could have been used to solve the problem.

First, AVC, when prosecuting the patent, could have forced Hsiun to cooperate. But “[r]ather than sue Hsiun for specific performance of her contractual obligation to assist in the obtaining of the patent — an obligation that expressly extended beyond the term of her employment with Infochips — AVC chose to pursue the patent application without her.”

Second we have the power of attorney. Come to find out, “[u]nder the law of agency, … rights under the power of attorney clause are best characterized as an agency coupled with an interest (or, as it is referred to in the Restatement, as a ‘power given as security’ (Restatement (Third) Of Agency § 3.13 (2006)).” This is where (1) the agency is held for the benefit of the agent and not the principal, (2) the agency is created to secure the performance of a duty to the agent or to protect a title in him, and (3) the agency is created at the same time the duty or title is created or is created for consideration. It’s irrevocable (or else the principal could avoid its exercise by just revoking it). So who knew this boilerplate actually has a whole legal doctrine and all behind it?

Problem was, (bold by the court):

[N]either Woo nor AVC ever signed Hsiun’s name, either to a patent application or to any assignment of her interest in the invention. Instead, Woo asserted to the PTO that Hsiun had assigned her interest in the patent to Infochips back in 1992, by virtue of her signing the Employment Agreement. As detailed above, that assertion was (like so many of the assumptions made by AVT and its various predecessors in interest) factually and legally erroneous.

HERE’S THE LESSON: If you have a power of attorney for an uncooperative inventor, exercise it. Don’t rely on the assignment language, whatever it may be, sign the assignment as attorney-in-fact for the missing inventor.

AVT expended every effort to find some way to make it work but the court, with great thoroughness and in many paragraphs, speaking very slowly with repetition to make sure that AVT understood, explained why none of AVT’s theories would fly. First, any thought that the power of attorney gave AVT present rights wasn’t going anywhere:

So the only possible way for AVT to have acquired whatever rights AVC had as a result of its ownership of the Employment Agreement was if the recently appointed Receiver assigned AVT those rights. But the Receiver only assigned AVC’s rights in the ‘788 Patent, and the Employment Agreement’s enforcement provision are not rights in the patent, even though they are not wholly unrelated to the patent. Assigning AVC’s rights in the ‘788 patent did not effect an assignment of its rights in Hsiun’s Employment Agreement.

So what comes next? Do we go through this exercise yet again? Does AVT go back to the Court of Chancery and ask for the appointment of yet another Receiver?

No, we don’t. Because there is nothing left for AVC (or a Receiver for AVC) to assign. As Defendants correctly argue, the agency coupled with an interest by its terms was good for one thing and one thing only — it existed for the limited purpose of obtaining the patent. That is, it permitted the holder of the power, the agent, to sign applications and do all other lawful things that were necessary in order to get the PTO to issue a patent. But the patent has already been obtained. It issued in 1998. The patent has not been cancelled. The patent exists. There is no need to “obtain” it — even though the PTO was operating under a mistaken premise when it issued the patent to AVC alone.

(Emphasis in original.)

The Employment Agreement also “quitclaimed” Hsiun’s infringement claim, so AVT argued her absence didn’t implicate standing. Shot down again:

For the same reason as explained above, AVT has no interest in this quitclaim. The quitclaim rights arise under the Employment Agreement; they are not part and parcel of AVC’s rights under the ‘788 patent. Because AVC never transferred the Employment Agreement to anyone, AVT has no rights that arise by virtue of the Employment Agreement. Whatever powers the quitclaim conferred upon AVC were never transferred to AVT.

And once again, returning to the Court of Chancery to obtain further assignment of AVC’s assets would be unavailing. By its terms, the quitclaim applies only to patents that Hsiun assigned to the Company in accordance with the obligations she undertook in the Employment Agreement. The ‘788 patent is not such a patent. Hsiun had an undoubted contractual obligation to assign the patent to Infochips or (the Court is assuming) to its successors in interest who had the benefit of the Employment Agreement. Hsiun breached her contract when she refused to execute the assignment in 1995. But her breach did not work an assignment, and Woo and AVC never sued to compel Hsiun to live up to her obligations. Therefore, the quitclaim could never, by its terms, apply to the ‘788 patent.

If you haven’t gathered yet, the court was clearly very displeased that AVT brought this suit at all:

Woo and AVC had a strong case for breach of contract against Hsiun when she refused to sign the assignment. They chose not to bring that lawsuit. AVT argues here that Infochips’ and its successors had the right to sign Hsiun’s name to a patent application and to assign her interest in the invention; but neither AVT, nor Woo or AVC before it did either of those things. Instead, they did exactly what AVT did during all the years when it was bringing infringement actions while aware of a potential defect in its title to the patent: Woo declared that AVC owned Hsiun’s interest and toughed it out, hoping that no one would ever mount a challenge. Unfortunately for AVT, someone has mounted a challenge.

The dismissal is with prejudice. AVT expended considerable effort to cure the defect in title that proved fatal the last time around, but the court made no secret of the fact that the issue of Hsiun’s partial ownership of the patent was still lurking, unresolved. AVT has not cured this defect…. The time to clear up the question of Hsiun’s interest in the invention, and hence in the patent, was during the patent application process — not today, two decades later.

The defendants got their attorneys’ fees on the first failed lawsuit – I’d say it’s a slam-dunk for them this time around too.

Advanced Video Techs. LLC v. HTC Corp., No. 15 Civ. 4626 (CM); No. 15 Civ. 4631 (CM); No. 15 Civ. 4632 (CM) (S.D.N.Y. Jun 14, 2016).

* For the very sharp lawyer, the Hsiun agreement was signed in 1992. Film-Tec, which for the first time clearly stated that there could be a present assignment of a future invention (a conclusion that the Supreme Court has criticized and for which there is currently a petition for certiorari pending), was decided in 1991. I doubt that many human resource departments update their agreements on such a fine point so quickly, so you can’t be too hard on the company for having this currently disfavored language.

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patent

assignment, chain of title, employment agreement, missing inventor, power of attorney, prudential standing, standing
May 17, 2016

More INTA fun!

And don’t forget also the e-Trademarks Listserv reception, another popular event where those of us who ordinarily commune via email can actually meet in person!

See you at B.B. King’s Blues Club, (9101 International Dr. Suite 2230), Tuesday, May 24 from 5-8 pm. You can sign up here or through the QR code on the tag!

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Uncategorized
May 16, 2016

Pick Your Story

When you have one theory for one court, and a different theory for a later one, it probably isn’t going to turn out too well.

In the latter suit before the Trademark Trial and Appeal Board, Weber-Stephen Products, LLC, famous maker of grills, petitioned to cancel the registration for a stylized “Q” trademark owned by RKS Design International, Inc.:

The registration for the Q mark had a history. In 2002, RKS and Thane International Inc. entered into a Production and Exclusive Marketing Agreement. The agreement authorized Thane to manufacture and sell grills and provided that

If you can’t read it, it says (OWNER being RKS):

1. Warranties & Covenants.
1.1 … THANE will, at its sole expense, apply, in the name of OWNER, for a trademark for the name “Q” … .
***
5. Grant of Rights.
5.1 Ownership of Property and Copyrights. THANE acknowledges and agrees that OWNER is the owner of all Product rights including patents, and copyrights for the Product and any names for the Product for which OWNER applies for a trademark. THANE is the sole owner of all rights, including copyrights and trademarks for the Infomercial, any and all Thane Materials, Product tooling, the Customer List and any name for the Product for which THANE applies for a trademark, except for the “Q” mark which shall be owned by OWNER.

But of course Thane registered the trademark in its own name.

Several years later RKS sued Thane for trademark infringement of the Q mark in two different courts (I don’t know why they did it twice, although there are motions relating to change of venue and personal jurisdiction in the record). The parties ultimately settled, with Thane executing a nunc pro tunc assignment of the Q mark to RKS effective on March 5, 2002, the effective date of the manufacturing Agreement and nine days before the original trademark application was filed. RKS also filed a malpractice suit against its law firm. Throughout all of these affairs, RKS steadfastly maintained that Thane’s application for the Q mark should have been filed in RKS’s name.

Preceding the litigation, Thane had entered into a settlement agreement with Weber, allowing Weber to have a co-existing “Q” mark. In the infringement lawsuits between RKS and Thane, RKS considered Weber an infringer and, while we don’t have the details about how it reached this point, Weber ultimately filed the petition to cancel the registration now owned by RKS.

Sharp readers will have spotted the problem—as stated by the TTAB in the cancellation, “If the applicant does not own the mark on the application filing date, the application is void.” RKS therefore changed its tune, filing a new nunc pro tunc assignment voiding the earlier one and changing the effective date to one after the registration date of the original application.

Yeah, it didn’t work. RKS’s argument was that “the parties’ intent, as shown by the plain language of the agreement, Mr. Sawhney’s trial testimony, and the parties’ conduct, was for Thane, the only party authorized to use the mark under the Agreement, to perfect rights in the trademark registration and subsequently assign those rights to RKS.” But

We are not persuaded by RKS’ argument. First,* an entity that intends to use a mark must still be an owner of the mark to satisfy Section 1051 of the Trademark Act. The foregoing is true even if the application was initially filed as an intent-to-use application. …

Second, not every entity which has an intent to use a mark is an owner of the mark. A non-exclusive licensee may have an intent-to-use a mark in commerce, but it is not an owner of a mark. The same holds true for an exclusive licensee.

Third, RKS’ argument ignores key provisions of the PEM Agreement. …

Fourth, RKS’ argument is inconsistent with its claim of ownership made several times in the past. …

Weber asked RKS about its change in position in its Interrogatory No. 45:

45. Explain why there is a difference between the allegations of ownership of the Q Logo in RKS’ California and Oklahoma litigation filings, and the answers in this cancellation proceeding.
ANSWER: … RKS states that the different allegations of ownership stems from advice of counsel and in order to comport with reality.

This brief response does not offer a satisfactory explanation for RKS’ change in position, but rather suggests an attempt to dodge the strong evidence that RKS considered itself as the owner of the Q Mark at the time Thane file its application. It appears to us that after RKS settled with Thane, and the dispute with Weber commenced, that RKS changed its position and re-interpreted the PEM Agreement to provide that Thane was to obtain a trademark registration for the Q Mark and then transfer the registration to RKS. Thus, in view of the suspicion we have about RKS’s “story” which is in now advantageous [sic] to RKS in this proceeding, but which is not consistent with RKS’ positions in the past, the glib response to Interrogatory 45, and the reasons provided above, we find that the owner of the mark at the time the application for the Q-Mark was filed was not Thane, and that the application which matured into the ‘586 registration was void ab initio.

This was just disaster upon disaster in decision-making. I hope all decent trademark lawyers out there would have realized from the moment they saw the first application that it was irretrievably void. The rub, though, was in the dates: (1) March 14, 2002, Thane ITU application filed; (2) December 17, 2002, first use date by Weber; (3) March 1, 2003, first use date by Thane. If Thane’s ITU application failed, then Weber was the senior user. Nevertheless, why RKS elected to go after Weber, rather than quietly coexist, is beyond me.

Harrison Ford as Weber:

Thanks to John Welch for the case.

Weber-Stephen Products LLC v. RKS Design Int’l, Inc., Cancellation No. 92054172 (TTAB May 10, 2016).

* You know you’re in trouble when the tribunal counts the ways you are so wrong.

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The 2d Circuit Is Part Way There on Eden Toys

A Blessing in Disguise

How to Steal a Trademark

All the Wrong Reasons

Dodged a Bullet

Why You Have That Employment Agreement Gobbledygook

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