Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Maybe Invented, But Not Used

    Trademark ownership isn’t susceptible to an easy rubric. In The American College of Veterinary Sports Medicine and Rehabilitation v. Lyons, it might have appeared to the registrant, Lyons, that the facts were in her favor based on traditional elements considered when deciding ownership. But, looking at the big picture, the TTAB found otherwise.

    In 1999 Dr. Robert Gillette and defendant Sheila Lyons discussed at a conference the prospect of a board certification for treating athletic animals. Between 1999 and 2002 he, Lyons and four other veterinarians were on an organizing committee to form a specialty that would be sanctioned by the American Veterinary Medical Association (AVMA). By 2002 they were using the name “American College of Veterinary Sports Medicine and Rehabilitation” as the name of the intended specialty organization. They continued to work on the organization after Lyons, for reasons the Board said had no bearing on the case, was dismissed from the committee in July 2004. About a year later, in May 2005, Lyons filed an application to register THE AMERICAN COLLEGE OF VETERINARY SPORTS MEDICINE AND REHABILITATION. When it was refused registration on the basis of geographic descriptiveness, she amended he application to allege first use in December, 1995 and first use in commerce in June, 1996, both dates before her first conversation with Dr. Gillette. The trademark was registered.

    ACVSMR v Lyons specimen
    Specimen

    Meanwhile the work of the committee continued, and the AVMA recognized the American College of Veterinary Sports Medicine and Rehabilitation provisionally in June 2011. It certified the first veterinarian in 2012. Now, over 115 veterinarians have been certified and there are 13 active residency programs.

    There is another application and a district court proceeding you can read about in more detail in the opinion, but this opinion is solely about who owns the trademark “American College of Veterinary Sports Medicine and Rehabilitation.” The TTAB describes the law to be applied to ownership disputes, noting that the same standards apply to registrations on the Supplemental Register also:

    In cases such as this, where an individual and a corporation have a prior relationship, the issue of whether the individual or the corporate entity is the owner of the mark must be determined on a case by case basis dependent on the particular facts adduced in each case.

    In making this determination, we are guided by the fundamental purposes of trademark law, which are to secure to the user of a mark the good will it has developed in the public mind, and to secure to the public the ability both to identify and distinguish the user’s goods or services from those of others, and to hold the user responsible for the consistency and quality of those goods or services.

    Consistent with these underlying purposes, the main factors determining ownership of a mark are the parties’ intentions or expectations (as objectively evidenced), who the public associates with the mark, and to whom the public looks to stand behind the quality of goods or services offered under that mark. Even though these sources vary in their expression and enumeration of elements to consider, they have these main factors in common: “All three interests—contractual expectation, responsibility for the quality of the goods and services, and consumer perception should play a role in deciding who owns a mark.” P. Chestek, “Who Owns the Mark? A Single Framework for Resolving Trademark Ownership Disputes” 96 Trademark Reporter 681, 701 (May-June 2006).

    [Internal citations and quotation marks omitted – except one, of course.]

    The Board cited extensive evidence that Lyons’ work was all directed towards creating a Board certification through the AVMA, not towards using the mark independently. The only real wrinkle for the petitioner was that Lyons had proposed an “American College of Veterinary Sports Medicine and Rehabilitation” in 1995, before the specialty group was ever formed. But in the document where she proposed the specialty she spoke about it in the future tense, “will go forward,” “will be modeled after,” “a main research center will be established and satellite facilities will follow ….” The Board concluded

    This is not use in commerce. “A service must be a real activity. A mere idea or concept, e.g., an idea for an accounting organizational format or a recipe for a baked item, is not a service.” TMEP § 1301.01(a)(i). The same holds true for early preparations to use a mark. Even if Respondent made some early use of the mark between its conception and her contact with Dr. Gillette in 1999, that alone does not suffice to establish ownership. “In a dispute over priority of use for a mark requiring secondary meaning, mere priority of use (as for technical trademarks) is insufficient. It is the party who first achieved trademark significance in the mark through secondary meaning who is the senior user of such a mark.”

    There was no secondary meaning in this early use, so no mark.* Lyons had also never mentioned to the rest of the committee that she had this early use nor had any of them heard of it; instead they thought they originated the name. Thus, “between 1999 and 2004, Respondent’s actions, undertaken in concert with the rest of the organizing committee, inured to the benefit of Petitioner. From that point forward, Petitioner’s use of the mark resulted in acquired distinctiveness of the mark in Petitioner.”

    Finally, consumers identified the petitioner with the mark, not Lyons. All organization going by “American College of Veterinary …” are affiliated with AVMA and Lyons had no students enrolled in educational services or a certification program.

    Lyons may have thought that her clear first use of the term was a slam-dunk on ownership but it wasn’t. There may have been other ways to get to this same outcome – abandonment or fraud, perhaps. It was less than perfect facts for non-ownership but I believe the most principled rationale for the result. Lyons didn’t own the mark; she hadn’t used it herself, allowed the committee to adopt it without mentioning she thought it was hers, and only complainied about it when she was no longer associated with the group. Indeed trademark doesn’t work that way.

    American College of Veterinary Sports Medicine and Rehabilitation v. Lyons, Cancellation No. 92053934 (TTAB, March 17, 2016).

    *The district court proceeding also held that another application by Lyons should not register because the mark was not distinctive.

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  • Owning an Invention vs. Owning a Patent

    What is the difference between owning an invention and owning a patent? In University of S. Florida v. CoMentis, more money.

    A former employee of the University of South Florida (USF), Michael Mullan, invented technology related to Alzheimer’s disease. He assigned the patents to the Alzheimer’s Institute of America (AIA), who sued various defendants in three different lawsuits in California, Pennsylvania and Oklahoma. The Pennsylvania defendants argued that AIA didn’t have standing to bring the infringement suit because of Mullan’s status as employee of USF [Word doc] when he invented the technology. The court agreed, so USF moved to intervene so it could counterclaim on ownership. The court allowed intervention but only on the “issue of whether or not [USF] waived its rights in the invention claim[ed] by … Mullan.”

    All the defendants in the three suits then settled with USF by making a guaranteed payment with the possibility of a contingency payment. The condition that triggered the contingency payment was this:

    USF v Comentis clipIf you can’t read it, it says:

    (b) Contingent Payment. Within thirty (30) days after the date USF has notified Licensee in writing that: (i) by order of a court of competent jurisdiction binding upon AIA and from which no further appeal or challenge may be taken, it has been determined that USF did not waive its ownership interests in the Asserted Patents and has held at all material times a valid ownership interest in said patents

    So we have a situation where USF was allowed to intervene because of its potential ownership of “inventions” and a settlement agreement with a condition based on a court’s decision on ownership of “patents.” They aren’t the same:

    Neither party directs the Court to law clearly resolving the issue of whether or not ownership in invention necessarily leads to a presumption—rebuttable or otherwise—of ownership in patent. It is indisputable, however, that a difference exists both in basic definition and in law.[fn6]

    [fn6]See generally 35 U.S.C. § 101; General Information Concerning Patents, USPTO (Oct. 2014), http://www.uspto.gov/patents-getting-started/generalinformation-concerning-patents. Likewise, the Florida Administrative Code was drafted with appreciation of the difference. Fla. Admin. Code r. 6C4-10.012(3)(c) consistently refers to a state university’s right to its employee’s “inventions and works.” The word “patent” is not used interchangeably with these terms. The only times “patent” is referenced is with regard to the making of patent applications or separate “patent rights.”

    The Middle District of Florida held that the Pennsylvania court did not decide whether USF had an ownership interest in the patents. This lawsuit, one for breach of contract, was a last gasp; USF already tried to get the Pennsylvania court to issue a declaration that it owned, not just the inventions, but the patents too, and the court declined..

    In theory, because it wasn’t expressly decided in Pennsylvania USF isn’t barred from another try:

    USF makes multiple attempts to direct this Court’s attention to the intent of the parties at drafting. USF seems to suggest that it was dishonest of CoMentis to agree to the contingency language if CoMentis knew that it was “impossible for the Court in the Pennsylvania Action ever to determine that USF had a valid ownership interest in the Asserted Patents.” USF’s grievance in this regard is disingenuous. First, the settlement agreement plainly states that a court of competent jurisdiction binding on AIA must give an order determining USF’s ownership rights—not that the Eastern District of Pennsylvania must give such an order. There were two other actions involving the AIA patent dispute. In addition, the Eastern District of Pennsylvania alluded to the fact that USF is not foreclosed from engaging in further litigation against AIA to establish its rights.

    But I have to assume that AIA and USF entered into a settlement agreement too, so a suit against AIA is off the table. Well-played, CoMentis.

    Univ. of S. Fla. Bd. of Trs. v. CoMentis, Inc., No. 8:15-cv-01544-EAK-AEP (S. D. Fla. March 1, 2016).

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  • All I Know Is YOU Don’t Own It

    The Trademark Trial and Appeal Board is a tribunal of limited jurisdiction. All it has to decide is whether a particular applicant or registrant may own a registration for a particular trademark. In other words, it doesn’t have to decide who wins as between two parties, but rather just has to decide whether one party can satisfy the conditions for registration. And sometimes I think they must be grateful for their limited jurisdiction because it makes their job a little easier.

    DeFord Bailey LLC v. Bailey is that kind of case. If you couldn’t guess from the caption, it’s a family matter. DeFord Bailey, Sr. was, according to the opinion, a “harmonica virtuoso inducted into the Country Music Hall of Fame and remembered as the first African American performer on the Grand Ole Opry.” He died intestate and unmarried in 1982 so his three children were his sole heirs. One of them, DeFord Bailey, Jr., was the progenitor of the three parties involved in the lawsuit. DeFord Jr. formed the opposer, DeFord Bailey LLC, with one of his granddaughters and assigned all intellectual property rights he had in the name “DeFord Bailey” to the LLC. He died is 2013 and his granddaughter became the sole owner of the LLC.

    On April 26, 2011 two of DeFord Jr.’s sons, Carlos DeFord Bailey and DeFord Bailey III, applied to register the trademark DEFORD BAILEY for harmonicas under Section 1(a) of the Lanham Act, claiming a date of first use April 11, 2011.

    DeFord specimen cropped v2

    In 2012, Carlos signed a “Name and Likeness Licensing Agreement” with the LLC allowing him to sell harmonicas and T-shirts. Carlos testified that he sold harmonicas for the first time at a “rose garden ceremony” after he signed the agreement, although had given them away before that. The agreement provided that:

    DeFord Bailey Name and Likeness clip

    If you can’t see the image, it says in part:

    Except for the license granted hereunder and as otherwise provided herein, … [Carlos Bailey] acknowledges and agrees that it will not have any right, title or interest in or to the Licensed Property, and [Carlos Bailey] shall not make any claim of ownership or interest in or to such Licensed Property.

    Which was the end of the matter for Carlos Bailey; the Board held that “We therefore deem it appropriate to hold him bound by his clear contractual representation that he claims no right, title or interest in the applied-for mark. Therefore, he cannot properly claim ownership of the applied-for mark.”

    As to DeFord III’s interest,

    His representations about the Application and the applied-for mark remain contradictory and muddled. The record includes documents signed by him stating that he was unaware of the Application at issue and had not authorized its filing. He then gave conflicting testimony about whether he signed those documents. After initial repeated denials, he ultimately admitted that he did sign them but claimed that he may have done so only because of a request by his father. As to the Application itself, the file record shows that it was filed electronically, and contained electronic signatures using the method of names appearing in between forward slashes. The signatures on the Application by Mr. Benjamin [the applicants’ attorney], Carlos Bailey, and DeFord Bailey, III are required to have been “[p]ersonally enter[ed]” in accordance with Trademark Rule 2.193(c)(1). 37 C.F.R. § 2.193(c)(1). DeFord Bailey, III offered testimony casting doubt as to whether he actually signed the Application, whether he authorized its filing in advance, and if so, whether he knew and understood what he was signing. He testified that he never met the attorney who filed the trademark application until the testimony deposition and stated twice that his first phone conversation with the attorney took place after the Application was filed. DeFord Bailey, III responded to a question about how he authorized Mr. Benjamin to file the Application by stating “By being DeFord Bailey and I had signed off – somebody said I signed off, which I didn’t realize I had signed off on.” Overall, we find that DeFord Bailey, III’s testimony regarding the Application and the applied-for mark lacks reliability, reflects that he made no use of the applied-for mark in connection with the use-based Application or otherwise, shows that he relies only on the use by Carlos to support rights in the applied-for mark, and ultimately fails to support his joint ownership of the applied-for mark. Based on his testimony, coupled with the documentary evidence in which, after the filing of the Application, he disavowed any knowledge of it or involvement in it, we conclude that DeFord Bailey, III cannot properly claim ownership of the applied-for mark.

    So Carlos and DeFord III were not owners of the use-based application for DEFORD BAILEY for harmonicas.

    But what do we NOT know about this situation?

    • What rights DeFord, Sr. started with – did he have any trademark rights? There’s no mention of a trademark use by the LLC. The LLC’s opposition was based on Section 2(a), false endorsement, and 2(d), likelihood of confusion. The false endorsement might be viable but not likelihood of confusion if the LLC didn’t use LEFORD BAILEY as a trademark.
    • Whether DeFord Jr., and therefore the LLC, was the only owner of whatever rights there were – DeFord, Jr. was one of three heirs and there’s no mention of what interest the other two might still have.
    • The subject application was filed and Carlos and DeFord, III formed their own corporation about a month before the LLC was formed. Had DeFord, Jr. meant for his sons to have the rights?

    DeFord Bailey LLC v. Bailey, Opp. No. 91209857 (TTAB Jan. 14, 2016)

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  • What the Paperwork Says

    Marilyn logoHere’s an utterly confusing situation, which I suppose is why there has been an arbitration, two lawsuits, and an appeal to the 9th Circuit with an unpublished decision. People, get the paperwork right.

    The situation involves Camelot Hair Care Products LLC, a woman named Nina Parkinson, and Robanda International Inc. A person named Tony Parkinson was the President of Camelot Hair Care Products, although he is not a party. Camelot made what I can personally attest to are fine hairbrushes, sold under the MARILYN trademark.

    The documents we have are:

    • An assignment of the MARILYN trademark from Camelot to Nina Parkinson effective September 30, 2010.
    • An Asset Purchase Agreement whereby Robanda purchased the assets of Camelot effective December 1, 2008.
    • A license to the MARILYN trademark from Parkinson to Robanda in a letter also dated December 1, 2008.

    The APA purportedly assigned the trademark, in about as badly-worded an agreement as I’ve ever seen:

    1.2 Purchase and Sale of Assets. Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller at Closing all of Seller’s right, title and interest in and to all of the assets identified herein and on the attached Schedule 1 and designated as (the “Assets”) [sic], with the following limitations …

    (c) All rights, title and interest in and to the trade names, logos, copyrights, service marks, trademarks, (with limitations as identified in section 1.2 [sic, 1.3?]) licenses, and the gooodwill associated with the Business listed on Schedule 3 (the “Intangible Property”).

    1.3 Transfer of Purchased Assets. Five (5) years after the closing date, Seller will assist Buyer in any manner necessary for the transfer to Buyer of the ownership of the assets, contracts and commensurate rights, trade names, logos, copyrights, service marks and trademarks. During this five (5) year term Buyer shall license all rights for use and distribution thereof under a separate agreement attached as Exhibit 1 and described Trademark License for their exclusive* and uninterrupted use. Five (5) years after the closing date and upon completion of the payments as specified in Article 3, Buyer shall own outright, without limitation, all such rights, titles and interest identified herein.

    There are no exhibits in the agreement filed with the court, but I believe it is safe to assume that the letter dated December 1, 2008 is the Trademark License referred to in the APA. It says:

    This letter will authorize [Robanda] to have complete and free use of the Marilyn® trademark for a period of five years from this date without compensation or consideration paid to me as its registered owner.

    You have purchased the inventory and goodwill of the Marilyn brand from Camelot and entered into an arrangement to use the services of Tony Parkinson from a period of 5 years from this date … Upon the final payment made to Mr. Parkinson,** I will immediately assign and transfer the trademark to Robanda.

    (Emphasis added.) There is also recitation of quality control, although we don’t know whether Robanda ever complied with the terms.

    Let’s summarize here. We have Camelot assigning the trademark and registration (defined as separate assets in the document) to Parkinson, without reservation, on September 30, 2008. We then have, on December 1, 2008, Camelot also presently assigning (or maybe not assigning for five years) the trademark to Robanda. Then we have a “license” from Parkinson acknowledging that Camelot had assigned the trademark and the goodwill to Robanda, but then also saying that Parkinson will assign the trademark in five years.

    The first lawsuit, filed on March 1, 2013, was Robanda suing Parkinson for a declaration that it owned the MARILYN trademark with some blurriness around the legal basis, assignment-in-gross or naked license. The suit was dismissed without prejudice based on licensee estoppel; the five-year license period had not run so Robanda was estopped from bringing the lawsuit.

    On September 23, 2013 Parkinson sued Robanda for trademark infringement. Robanda moved to dismiss on the basis that Parkinson was not the owner of the MARILYN trademark because the original assignment was an invalid “assignment in gross,” i.e., an assignment of the trademark without the goodwill. The district court granted the motion in a hearing without a written opinion and without leave to amend. The Court of Appeals for the Ninth Circuit affirmed, characterizing it as a failed assignment/license-back:

    Without attempting to construe these agreements or resolve any inconsistencies at this stage of the proceedings, the district court determined that the assignment to Parkinson was an invalid assignment in gross because she did not allege that she ever sold products under the Mark and admitted that Camelot sold the business assets to Robanda. That cannot, however, be the end of the inquiry because we have previously upheld a trademark assignment even when someone other than the assignee possessed and distributed the business assets associated with a trademark. E & J Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir. 1992). In fact, it is a “well-settled commercial practice” to engage in what is referred to as an “assignment/license-back” agreement—a transaction in which Company A assigns a trademark to Company B, but continues to utilize the trademark under a license with Company B. Id. Such agreements are valid so long as the transfer “does not disrupt continuity of the products or services associated with a given mark,” such as when the assignee receives sufficient information “to continue the lure of the business” that had been established prior to the assignment. Id. at 1289-90.

    Admittedly, the circumstances in the case before us are different from the ordinary assignment/license-back agreement because the agreements here involve three parties instead of only two. Our inquiry, however, should functionally be the same: did the transaction as a whole “disrupt the continuity of the products or services associated with a given mark”? Id. at 1290.

    As currently alleged, the complaint fails to show that a disruption did not occur. Unlike the assignment/license-back agreement that we upheld in Gallo, Parkinson has not alleged that she was provided with “information ‘sufficient to enable [her] to continue the lure of business [Camelot] had been conducting under the [Marilyn Mark]’” or that she had any related expertise that would allow her to appropriately maintain the quality of the Mark through her license to Robanda. Id. at 1289. Without such allegations, it is impossible to conclude—especially in light of the contradictory statements in the contracts forming this three-party agreement—that Parkinson received a valid assignment. We agree, therefore, that the dismissal was not improper.

    However, over a dissent, the appeals court instructed the district court to allow Parkinson to amend the complaint to allege facts showing that she had maintained control sufficient to ensure continuity of the mark. The dissent would not have granted leave to amend; Parkinson’s letter said that Camelot assigned the goodwill to Robanda and none of the other agreements contradicted that.

    It’s unfair of me to criticize the Court of Appeals opinion; it is unpublished and kicks the case back to the district court for a do-over. But I don’t find the legal analysis well-reasoned or the license letter particular damning. There was a clear assignment of the trademark and its registration on September 30, 2008 from Camelot to Parkinson; nothing in the record ties this transaction to the later APA. Therefore, no matter what the APA says, Camelot could not have thereafter assigned the trademark to Robanda. Sure, fraud in the inducement in the APA for claiming to assign a substantial asset it didn’t own, and perhaps even some kind of equitable relief to undo the assignment† since it’s a good guess that Nina Parkinson and Tony Parkinson were working cooperatively and it was all part of some big picture not apparent in the opinions. But the APA could not have effected a legal assignment of the mark.

    Parkinson was the owner of the trademark and, by letter, licensed it to Robanda. That’s the only document that matters. So what if the letter says that Camelot assigned the goodwill to Robanda; saying it doesn’t make it true, nor do I suspect either Camelot or Parkinson would say that the assignment was anything but unconditional. Instead, this is, not an assignment/license-back as characterized by the appeals court, but an assignment from Company A to Person B and a license from Person B to Company C, with an assignment from Person B to Company C after five years, conditioned on full payment to a third party to the agreement, Person D. The court made it a lot harder that it really is.

    But back to the district court and we’ll see what happens.

    Parkinson v. Robanda Int’l, Inc., No. 14-55028 (9th Cir. Feb. 26, 2016).
    Parkinson v. Robanda Int’l, Inc., No. 13-CV-7029-R (C.D. Calif. Nov. 25, 2013), transcript and order.
    Robanda Int’l, Inc. v. Parkinson, No. 13cv490 BTM(BLM) (S.D. Calif. Aug. 6, 2013) (show cause).
    Robanda Int’l, Inc. v. Parkinson, No. 13cv490 BTM(BLM) (S.D. Calif. Aug. 29, 2013) (final dismissal).

    * Yeah, which it couldn’t do, seeing as it had already granted perpetual use to Plasticos Vandux de Colombia S.A. in 2004, in exchange for assignment of the registration Vandux had obtained for the MARILYN mark to Camelot. But we’ll just skip over that.

    ** Further drafting travesty. Camelot is who gets paid, not Tony Parkinson.

    † I just made that up. I have no idea whether it’s possible. That’s the beauty of writing a blog, you can just make it up. But you should disclose that you did. Unlike here.

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  • Secondary Source Marks and Abandonment

    UPDATE: The parties settled, divvying up the brands.

    I haven’t written about “zombie” or “heritage” marks in a long time. I last wrote in 2011, about a suit involving department store brands that Macy’s acquired and rebranded, abandoning the original names of Marshall Field’s, I. Magnin, Burdine’s, Kaufmann’s, Lazarus, Meir & Frank, Rich’s and Strawbridge’s. Macy’s created a “Macy’s Heritage Shop” where it sold T-shirts and tote bags sporting the store names. Macy’s also filed trademark applications for T-shirts and tote bags.

    Defendant Strategic Marks is in the business of trying to revive “zombie” brands, or brands that have been abandoned but still have name recognition with consumers. It filed trademark applications for the department store names and started a “Retro Department Stores” website, selling T-shirts with the retro branding on them. Macy’s sued in two different lawsuits.

    The opinion is on a motion for partial summary judgment, with Strategic Marks arguing that the use of the department store brands on T-shirts and tote bags is ornamental, not use as a mark.

    Macy’s successfully defended the validity of the marks on a theory of “secondary source,”explained this way:

    It is a matter of common knowledge that T-shirts are “ornamented” with various insignia, including college insignias, or “ornamented” with various sayings such as “Swallow Your Leader”. In that sense what is sought to be registered could be construed to be ornamental. If such ornamentation  is without any meaning other than as mere ornamentation it is apparent that the ornamentation could not and would not serve as an indicia of source. Thus, to use our own example, “Swallow Your Leader” probably would not be considered as an indication of source.

    The “ornamentation” of a T-shirt can be of a special nature which inherently tells the purchasing public the source of the T-shirt, not the source of manufacture but the secondary source. Thus, the name “New York University” and an illustration of the Hall of Fame, albeit it will serve as ornamentation on a T-shirt will also advise the purchaser that the university is the secondary source of that shirt.*

    The court concludes that Macy’s trademarks use on T-shirts and tote bags is not ornamental because the marks are associated with the department stores:

    Simply because a store has ceased operations does not mean that its proprietor or owner does not maintain a valid interest in the registered trademark of the business. A trademark can still exist and be owned even after a store closes.[fn2] If an accused infringer uses the mark, a consumer may still be confused as to whether the owner of the trademark authorized or licensed the infringer…. Where as here the mark is arbitrary and has a well-known association with a source (as here) rather than constituting some generic term without any such association, and particularly where “TM” appears next to the mark or the accused products, the marks are not ornamental.

    [fn2] Although a valid mark may legally be abandoned, 15 U.S.C. § 1127, a claim of abandonment is not asserted here.

    Wait, what? If the department store doesn’t exist anymore (putting aside for the moment that there wasn’t an abandonment theory before the court), meaning there is no primary use of the mark, how can the secondary source justification for the validity of the mark on promotional goods still apply?**

    Take for example BURDINE’S. Wikipedia reports that the name for department stores was dropped in 2005. The application for T-shirts and tote bags was filed in 2012 at a time when the department store registration was still active, having been renewed in 2003. The examining attorney expressly relied on the registration for department store services, for a brand that hadn’t been used for almost 10 years, when allowing the application for T-shirts and tote bags: “The mark [for T-shirts and tote bags] has become distinctive of the goods as evidenced by ownership of U.S. Registration No. 1799777 on the Principal Register for the same mark for the same or related services.”

    So we have a successful strategy for indefinitely extending the lifespan of a zombie brand—put the logo on a few cheap T-shirts before the facially valid registration expires and claim it is a secondary source mark when there is no use of the mark for its primary goods or services.

    * The Patent and Trademark Office will register a mark on this theory too. TMEP § 1202.03(c).
    ** We’ll also ignore “arbitrary.” Several of the marks were originally refused registration because they are surnames.

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  • The Security Interest Quiz Answer

    I previously offered a quiz asking you to decide who, between a secured party and a licensee, owned the rights in an improved version of software.

    And the answer is — Pro Marketing, owner of the security interest. I missed it, but it is a straightforward answer.

    The key is that the collateral included rights that Priva “now has or at any time in the future may acquire.” The improvements to the software, even though created after the security agreement was signed, therefore were also collateral securing the loan.

    Cyber Solutions argued that as soon as the modification of the SKSIC tecnology was completed it immediately became the property of Cyber Solutions, so the ownership never passed through Priva’s hands and therefore never became part of the collateral.

    But Cyber’s argument rests on an erroneous reading of the License Agreement. Article 5.2 states that Priva “agrees to assign and agrees to assign in the future” its rights in any modifications to the SKSIC technology. This provision does not instantly grant any rights to Cyber; rather, it implicitly recognizes that Priva itself will acquire rights that it must then assign. See, e.g., Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359, 1365 (Fed. Cir. 2010) (“[C]ontract language stating that a party ‘agrees to assign’ reflects a mere promise to assign rights in the future, not an immediate transfer of expectant interests.”).

    The License Agreement, in other words, acknowledges that Priva might develop certain updates, modifications, or improvements to the SKSIC technology, and that, in doing so, it will acquire the rights to those updates, modifications, or improvements. Only after this initial acquisition of the rights does the License Agreement provide for the assignment of those rights to Cyber. The License Agreement therefore contemplates that any rights in updates, modifications, or improvements to the SKSIC technology will in fact first become the property of Priva.

    ….

    This result should come as no surprise to Cyber because it knew at the time that it executed the License Agreement that such an outcome was possible. The License Agreement itself acknowledges the existence of Pro Marketing’s security interest, and the bankruptcy court explicitly noted that Cyber was “assuming the risk” that its rights under the License Agreement “might be disrupted” by Pro Marketing’s Security Agreement.

    Cyber evidently determined that this risk was worth taking, and it cannot escape the consequences of its decision to enter the License Agreement simply because it is now unhappy with the outcome.

    There was a second reason Priva owned TRSS – Pro Marketing’s Security Agreement didn’t permit Priva to give assets away in the first place. The Security Agreement said that Priva could not transfer “any Collateral, any interest therein or any Proceeds thereof, nor waive or release any right with respect thereto, without the prior written consent of [Pro Marketing.]” The definition of “Collateral” includes “Copyright Licenses,” defined expansively in the agreement as

    all agreements providing for the granting of any right in or to any Copyright (whether [Priva] is licensee or licensor thereunder) and the granting of any right in any derivative work based upon any Copyright, together with . . . any other rights or privileges to use or practice any Copyright or arising under, or corresponding or relating to, any of the foregoing.

    Priva therefore did not have the authority to assign ownership of the copyright in TRSS in the first instance.

    Cyber Solutions Int’l, LLC v. Pro Mktg. Sales, Inc., No. 15-1359 (6th Cir. Jan. 11, 2016) (unpublished).

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  • A Security Interest Quiz

    Priva Technologies didn’t do well in its business. It financed its business, first, by taking a loan and granting a security interest in assets, including in its software, and second, as part of a reorganization, by assigning the improvements in the software to a licensee. Then it shuttered. Who owns the improvements?

    The original technology was a microchip encryption technology known as the Secured Key Storage Integrated Circuit (SKSIC). Priva first obtained a secured loan from defendant Pro Marketing, granting Pro Marketing a first-position lien on all its assets. The agreement defined “Collateral” as

    all types or items of personal property owned by [Priva], whether now owned or hereafter arising or acquired, and wherever located, or in which [Priva] now has or at any time in the future may acquire any right, title or interest, including, without limitation, all of the following property . . . (xv) all Intellectual Property;

    In turn, “Intellectual Property” was defined as

    all rights, priorities and privileges relating to intellectual property . . . , including without limitation the Copyrights, the Copyright Licenses . . . , and all Goodwill associated with or arising in connection with any of the foregoing.

    Despite the loan Priva still had to file for bankruptcy and, as part of its reorganization, and over Pro Marketing’s objections, the bankruptcy court allowed Priva to enter into a Design Service and Intellectual Property License Agreement with plaintiff Cyber Solutions International. Priva was to license SKSIC and create a second generation product for Cyber Solutions. The license agreement provided that

    [a]ny updates, modifications or improvements to the Licensed Technology [i.e., SKSIC] developed by [Priva] and paid for by [Cyber] shall be the property of [Cyber.] [Priva] agrees to assign and agrees to assign in the future (when any such updates, modifications, or improvements to the Licensed Technology are first reduced to practice or first fixed in a tangible medium, as applicable) to [Cyber] all right, title and interest in and to any and all updates, modifications, or improvements to the Licensed Technology (and all proprietary rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by [Priva], either alone or jointly with others, during the period of Design Services engagement with [Cyber].

    The license agreement recognized that SKSIC was subject to Pro Marketing’s security interest.

    Priya developed a new product known as Tamper Reactive Secure Storage (TRSS). The parties do not dispute that TRSS is an “update, modification or improvement” of the SKSIC technology.

    Priva still couldn’t make a go of it and ceased operations. Who owns the TRSS technology? Answer in a few days.

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  • STOLI Is Back

    This is my sixth post (recursive link) about the STOLI case. The defendant, Spirits International B.V., claims to own the STOLI and STOLICHNAYA trademarks as a result of privatization during the collapse of the Soviet Union and is listed as the owner of the trademark registrations. The Russian government, acting through state entity Federal Treasury Enterprise Sojuzplodoimport (FTE), claims to be the true owner of the trademarks and has sued to regain record ownership of the US trademark registrations and for infringement. Two lawsuits and 11 years later, FTE has made it through the initial motion to dismiss stage and, just maybe, will reach the substantive basis for its claim.

    Thus far the case has only been about standing. The first suit was dismissed because FTE itself admitted that the Russian government, not it, was the owner of the trademarks. Since the only claims were under Section 32 of the Lanham Act, which may only be asserted by the owner of the trademarks, the case was dismissed.

    FTE and the Russian government thereafter executed a formal assignment of the US trademarks and sued again. The district court nevertheless held that under Russian civil law, FTE was not an entity that was allowed to own trademarks. The court, though, admitted “In the short run, the parties to this action could benefit from a de novo appellate review of this decision—I have little doubt that FTE will seek such review.”

    Which they did, and they won. Russia had decreed* that FTE was to have all rights to the trademarks in the US:

    Decree P version

    If you can’t read it, it says, quoting the opinion, “[State Property Management] is to conclude with [FTE] an agreement on transferring to the said enterprise the rights of the Russian Federation to trademarks containing verbal designations “Stolichnaya” and/or “Stoli” used on the territory of the United States (on all territories subject to the jurisdiction of the United States of America).” And that direction was carried out with a formal assignment.

    It was a simple matter of comity:

    Under the principles of international comity, United States courts ordinarily refuse to review acts of foreign governments and defer to proceedings taking place in foreign countries, allowing those acts and proceedings to have extraterritorial effect in the United States.

    The Decree and Assignment were indisputably acts of a foreign government. The declaration of a United States court that the executive branch of the Russian government violated its own law by transferring its own rights to its own quasi-governmental entity (FTE) would be an affront to the government of a foreign sovereign. Even an inquiry into whether Russian law permitted the Assignment is a breach of comity. “So long as the act is the act of the foreign sovereign, it matters not how grossly the sovereign has transgressed its own laws.” Banco de Espana v. Fed. Reserve Bank of N.Y., 114 F.2d 438, 444 (2d Cir. 1940).

    The court distinguished this outcome from the first lawsuit, which likewise interpreted the relationship of the parties under Russian law:

    We concluded in FTE IV that the United States has an interest in enforcing “its own trademark laws within its borders” and “the Lanham Act’s express [standing] requirements.” FTE IV, 726 F.3d at 82. But in this case, the question of standing depends on whether an agency of a foreign sovereign has been endowed by that government with all the rights and powers it claims over the Marks. Whether those rights, if validly assigned, prevail against alleged infringers is very much an issue confided to the United States courts; the distinct question whether the government of a foreign sovereign has effectively and legally allocated its rights and powers among its agencies and instrumentalities under that foreign sovereign’s law, is not. Considerations of international comity precluded the district court from adjudicating the validity of the Assignment.

    FTE also won under the acts of state doctrine, which “‘precludes any review whatever of the acts of the government of one sovereign State done within its own territory by the courts of another sovereign State.’ First Nat. City Bank v. Banco Nacional de Cuba, 406 U.S. 759, 763, 92 S. Ct. 1808, 32 L. Ed. 2d 466 (1972).”

    So it goes back to district court, where there is still plenty of heavy lifting to go on the substantive case. From what I can tell, the basis for FTE’s Section 32 theory is a claim of ownership of three trademark registrations that the defendant fraudulently had transferred to it. While FTE has proved, as been it and Russia, it is the trademark owner, it still has to prove that it is the owner as between it and Spirits Int’l B.V. So in step one of its Section 32 infringement claim it will have to prove ownership of the registrations, then in step two prove infringement. However, FTE stated in its complaint that PepsiCo was an authorized distributor and the errant chain of title started when PepsiCo assigned the trademarks to Allied Domecq. Parts of the chain of title are so old that the underlying documents aren’t available, but the online record shows that PepsiCo was the owner of all, right title and interest before the allegedly wrongful assignment. There also is a matter of the renewals, which were filed by the defendant, so query whether these registrations are valid. And if not valid, then is there a claim for infringement under Section 32? And what about abandonment, or confusion, has any vodka been distributed by FTE since the wrongful transfer?

    Federal Treasury Enter. Sojuzplodoimport v. Spirtis Int’l B.V., No. 14-4721-cv(L), 15-152-cv (XAP) (2d. Cir. Jan. 5, 2016).

    *The translation in the linked copy is the defendant’s translation; the court quoted the plaintiff’s translation.

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  • ACPA and Standing

    It is a simple result, but not one that is forgone. An entity, HELP.org, LLC, owned a domain name, directorschoice.com. A company called Director’s Choice, LLP,* brought a Uniform Domain Name Resolution Policy proceeding against HELP.org for cybersquatting and won. Russ Smith, who owns Help.org, transferred the domain name to his own name and filed a complaint in federal court under the Anticybersquatting Consumer Protection Act challenging the UDRP result. Did Smith have standing, or is HELP.org the only entity who can file the ACPA?

    Assuming a domain name registration is a type of property like a patent, trademark or copyright, it wouldn’t necessarily be true that Smith could step into the shoes of HELP.org. If one assigns a patent, trademark or copyright, the assignor must also assign any claims for past infringement before the assignee will have standing for the past claim, so it was a reasonable theory by Director’s Choice.

    The court characterized it as a question of statutory standing, aka prudential standing, and according to the statute:

    A domain name registrant whose domain name has been suspended, disabled, or transferred under a policy described under clause (ii)(II) may, upon notice to the mark owner, file a civil action to establish that the registration or use of the domain name by such registrant is not unlawful under this chapter. The court may grant injunctive relief to the domain name registrant, including the reactivation of the domain name or transfer of the domain name to the domain name registrant. [15 U.S.C. § 1114(2)(D)]

    … Plaintiff clearly falls within the meaning of this phrase: he is the current “domain name registrant” of , and his domain name was ordered transferred by the NAF panel that decided the UDRP case brought by Director’s Choice….

    To the extent Defendant argues that the provision must be read to mean that the person who files the civil suit must have been listed as the “domain name registrant” at the time of the UDRP decision, the Court does not agree. The statute states only that “[a] domain name registrant whose domain name has been suspended, disabled, or transferred” may file a civil action. Thus, if A was the domain name registrant at the time of the UDRP decision, A may, of course, sue under a plain reading of 15 U.S.C. §§ 1114(2)(D)(v). But contrary to Defendant’s contention, the statute does not permit only A to sue. The UDRP decision binds A and anyone else with whom A is in privity, such as B. If registration of the domain name was later transferred to B, B would fall within the meaning of “domain name registrant whose domain name has been suspended, disabled, or transferred.”

    Hmmm. Well, the patent, trademark and copyright statutes just name the “patentee,” “registrant,” and “legal or beneficial owner” as the one with standing for a claim. None use language that excludes other potential claimants or mention timing. The interpretation, though, is that the right is owned exclusively and a past infringement claim is a separate right, so it isn’t necessarily transferred with the underlying right. I don’t know if this is the wrong outcome, but the analysis is wanting.

    Smith v. Director’s Choice, LLC, No. 15-00081 (JBS/AMD) (D.N.J. Nov. 30, 2015).

    *The opinion refers to the defendant throughout as Director’s Choice LLC, but all the PACER references, the UDRP decision, and the trademark registration are all for Director’s Choice LLP.

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  • “By Operation of Law” Addendum

    I recently chided a court for not recognizing that one of the parties was claiming ownership of copyright “by operation of law,” specifically “under the operation of California law … governing partnerships, promoters, agents, fiduciaries and cofounders, not as a question of employment, work for hire … or joint work.”

    The court never reached the partnership law theory in the Swipe and Bite case I was writing about, but I was pleased that my post prompted a North Carolina colleague to tell me about a case where copyright ownership by the operation of partnership law was the principal theory. It involved American Idol contestant Chris Daughtry and his former band, Absent Element, who sued Daughtry for their share of Daughtry’s proceeds from his post-Idol use of the band’s songs. Daughtry twice removed the case to federal court and twice* the former band members successfully won remand back to state court, with the federal court agreeing that the dispute over the copyright in the songs and their proceeds was a matter of state law, not federal law.

    In my view, Coe Ramsey and Charles Coble of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. did a stellar job of explaining the partnership-based theories. They were kind enough to allow me to share the plaintiff’s opposition to Daughtry’s motion for summary judgment explaining them.

    The court denied Daughtry’s motion but, alas for me (although undoubtedly good for the parties), the case settled before trial so we do not have a court’s opinion of the theory. I believe it is a valid one; copyright is an asset and should be subject to the same laws that allocate ownership of all other types of assets in partnerships. There is, though, a 9th Circuit opinion that, in the alternative, rejected a joint venture theory: “Given the ease with which joint ventures may be alleged and proved under the law of many states, acceptance of this argument would fatally undermine the Copyright Act’s written instrument requirement.” Konigsberg Int’l, Inc. v. Rice, 16 F.3d 355, 358 (9th Cir. Cal. 1994). But surely partnership law is not so indeterminate, nor are copyrights such an unusual type of asset, that they deserve exceptional treatment.

    Memorandum of Law in Opposition to Defendant’s Motion for Summary Judgment, Andrews v. Daughtry, No. 12 CVS 5236 (N.C. Sup. Ct. Guilford Cty. Feb. 13, 2015).

    *Andrews v. Daughtry, 2013 U.S. Dist. LEXIS 24355 (M.D.N.C. Feb. 22, 2013); Andrews v. Daughtry, 994 F. Supp. 2d 728 (M.D.N.C. 2014)

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