Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • IP Rights and NDAs

    You have someone sign an NDA that says this:

    Chico NDA clip 2

    If you can’t read it, it says

    4. Beverly Johnson shall not directly or indirectly acquire any interest in, or design, create, manufacture, sell or otherwise deal with any item or product, containing, based upon or derived from the information, except as may be expressly agreed to in writing by Wink Intimates by Andrea Clair.

    The product in question was a women’s combination brassiere and tank top.

    Bra

    Beverly Johnson, who was in Canada, was hired to help reduce the invention to practice. She ended up adjudged as an unnamed joint patent inventor, despite the fact that she testified she didn’t think she was one.* Once it was decided Ms. Johnson was an inventor, the parties raced to get an assignment of her interest and the accused infringer, Chico’s, won.

    What effect does the language in the NDA have? The patent owner, Wink, argued that the language meant that Ms. Johnson abandoned her inventorship interest and therefore could not assign it to Chico’s.

    Although federal law applies to the validity of a patent assignment, this situation did not involve an assignment. Transfers other than by assignment are governed by state law, so here the court applied Canadian law. And relying on the parties’ Canadian law experts, the court held that under Canadian law there was not an abandonment—not because of the law of abandonment, but because the agreement didn’t contemplate inventorship:

    At the time Johnson entered into this agreement, no one thought she was a co-inventor. The parties viewed Johnson as the owner of a bra-making store/school that assisted Clair with developing her invention further. Concerned that Johnson might assist other cami bra producers in the same manner using information gained during their relationship, Clair had Johnson execute the agreement. The language therein does not indicate in any way that Johnson maintained rights to the patents-at-issue. And it certainly does not indicate that Johnson was “giving up,” “deserting,” or “relinquishing” such rights. Johnson agreed to not design, create, manufacture, sell, or otherwise deal with competing items or products using information gained from Clair. Nothing more, nothing less.

    Wink’s arguments to the contrary are unpersuasive. Wink argues that the words “[a]ny ‘item or product’ cover intellectual property,” including the patents-at-issue. As [Chico’s expert] explained, determining the meaning of words involves “a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement.” The purpose of this agreement is clear: Clair did not want Johnson discussing information gained during their relationship with others, or using that information to help others develop similar cami bras. The parties viewed their relationship as client and consultant, not co-inventors waiving ownership rights. It is not feasible to conclude that the parties intended “any item or product” to mean future patents.

    The NDA that Ms. Johnson signed specifically referred to the first patent application, so Wink characterized her agreement as a “willingness to surrender a potentially valuable right to work on the invention.” Instead the court found “Johnson could not have intended to abandon her ownership rights if not a single party to the agreement believed she possessed such rights.”

    So once we have the defendant as a joint owner of the patent, not all inventors are joined as plaintiffs, as is required for standing for a patent infringement suit, and the case goes away.

    Ok, so now when I review an NDA I will have to make sure that, if an ownership interest does arise in the course of the relationship (despite the agreement saying that none will), the agreement says what happens to that interest …

    Chico’s FAS, Inc. v. Clair, No. 2:13-cv-792-TFtM-38MRM (M.D. Fla. Dec. 1, 2015).

    *If you’re skeptical, as I was, read the opinion. She was totally an inventor.

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  • Open Source and Free Software 2015: Benefits, Risks and Challenges

    On December 16, 2015 I will be participating in the annual PLI seminar on open source and free software in San Francisco. I’ve participated before, but I’m especially excited this year because PLI is devoting a full hour to trademarks, which I consider a demonstration of the rising recognition of the significance of trademarks in free software. I hope to see you there.

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  • “By Operation of Law”

    I’m seeing what I believe is a misunderstanding of the statutory section describing transfer of copyright. Section 204(a) of the Copyright Act, titled “Execution of Transfers of Copyright Ownership,” says

    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.

    But there have been a couple of cases lately that only contemplate the possibilities of a signed writing or a work made for hire, ignoring that the Copyright Act expressly acknowledges that copyright ownership may be determined “by operation of law.”

    For example, “by operation of law” can be the result of the division of property in a divorce, inheritance, bankruptcy, or the distribution of assets on an entity’s dissolution. No signed writing is required in these cases.

    But there are a couple of cases that leave me puzzled. First we have Estate of Shaw v. Marcus. Ownership of photographs was resolved through a verbal settlement in open court that was transcribed, but it was never reduced to a written agreement. The agreement was:

    An entity will be formed…. The name of that entity will be the Shaw Family Archives…. That entity shall own and take possession of, in a manner set forth below, all of the photographs involved in this litigation. . . . That includes each and every photograph shot by either Sam Shaw or Larry Shaw during the course of their respective careers [or] lifetimes .ll together with those photographs taken by third parties which either of them claim as being owned by them via some gift or sale from a third party, all subject to claims by third parties.

    Many legal shenanigans and years later, on a motion to dismiss in a later intra-family dispute, the court had to decide what the legal effect of the 2002 verbal agreement was. Here we go:

    1. Legal or Equitable Transfer

    a) It is plausible that the 2002 Settlement is an enforceable transfer.

    It is plausible that the 2002 Settlement transferred copyrights to Shaw Family Archives. Copyright Act § 204(a) sets forth the prerequisites for transferring a copyright:

    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.

    17 U.S.C. § 204(a). The principal purpose of the writing requirement …

    Wait, what? The court is considering whether a transcription of a verbal ageement meets the requirements for a signed writing? Surely that’s not what we would normally think of as an “instrument of conveyance” or “writing.” It goes on:

    b) The allocution satisfies the signature requirement.

    The Court also rejects Shaw Family Defendants’ argument that the transcript cannot satisfy § 204(a) because it was not signed. Signature requirements are typically imposed to ensure that parties to an agreement have the present intention to adopt or accept a writing. Here, the court’s allocution at the end of the 2002 Settlement transcript serves that very purpose. The Judicial Hearing Officer personally addressed Larry, Edie, Meta, and David at the end of the proceedings and asked each in turn whether they “heard the terms of the stipulation,” “discussed it with” counsel, and “agree with it,” and each party said “yes.” There is no genuine question concerning the parties’ intent to be bound by the terms expressed on the record—it was the single most unambiguous manifestation of intent in the entire transcript. The Court will not dismiss on this basis.

    Well yes, they intended to be bound, but is an allocution a “signature” under the Copyright Act? A lot of things can be a signature, emails for example, or a “continue” button, but at least justify for me how a spoken word meets the definition of “signature.”

    And these contortions were probably unnecessary, because the verbal agreement was most likely the basis for a binding act by a court. Aren’t the events in 2002 more likely to be a transfer of copyright “by operation of law” rather than a signed writing?

    In the second case we have a plaintiff making an argument that there was a transfer of the ownership of copyright in source code 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.” Procedurally the plaintiff, Swipe & Bite, was trying remand to state court a claim that was removed to federal court on the basis that the claim arose under copyright law. For whatever reason Swipe & Bite, as the master of its claims, didn’t want federal jurisdiction. It expressly disclaimed all authorship theories (which would indeed arise under copyright law) in favor of a theory that there was a transfer by operation of law. But for some reason the court didn’t see it,

    Swipe & Bite’s claims involve Defendants. alleged wrongful taking of code, along with other company property, determining ownership is required in order to resolve their claims. See id. ¶¶ 37, 65, 71, 75, 90. Swipe & Bite expressly disclaims software ownership based on the work-for-hire doctrine, but provides no other legal basis to claim ownership of the code written by Defendants. See id. ¶¶ 18, 23. As in JustMed, there is no written agreement as to ownership alleged, and ownership will turn on the application of the work-for-hire doctrine.

    Uh – no. The plaintiff did provide another legal basis, the law “governing partnerships, promoters, agents, fiduciaries and cofounders.” One remedy for a breach of a fiduciary duty is forfeiture, i.e., the court could hold that the copyright is owned by Swipe & Bite notwithstanding who the author was or whether there was a signed writing. The court messed this one up.

    Estate of Shaw v. Marcus, No. 7:14-cv-3849 (NSR); No. 7:14-cv-5653 (NSR) (E.D.N.Y. Sept. 22, 2015).

    Swipe & Bite, Inc.v. Chow, No. 15-cv-03997-JST (N.D. Calif. Nov. 23, 2015).

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  • What Went Wrong?

    Recently I’ve been thinking about the US rules of contract interpretation versus the approach used in other countries, UK law in particular. As I understand it, under UK law the courts have more latitude in interpreting the language of the agreement to derive what the parties intended than what we allow under US law.

    Which brings me to Canon Inc. v. Tesseron Ltd. I am puzzled by the case; I have no doubt that the outcome was the diametric opposite of what one party, Tesseron, intended.

    Tesseron licensed Canon Inc. (“CINC”) to some patents for printing presses. CINC and its affiliates were licensed for sales made to them by their suppliers and released them for past infringement. CINC was allowed to sublicense the patents to future affiliates so long as the future affiliate was not a “major competitor” of Tesseron.

    Canon U.S.A., Inc. (“CUSA”) was at all relevant times an affiliate of CINC. CINC claimed to have orally licensed the patents to CUSA and after the suit was filed CINC licensed CUSA in writing retroactively.

    In March 2010 CINC acquired majority ownership of Océ N.V. and in 2013 merged it into new Canon entity, Canon Solutions America, Inc. (“CSA”). Océ and its two subsidiaries were major competitors of Tesseron, so CSA could not be sublicensed to the Tesseron patents. Instead, in order to sell the printers, CSA ordered Océ printers from CUSA and CUSA purchased the computers from subsidiary Océ GmbH.

    So what we have is CINC doing exactly what Tesseron tried to preclude in the agreement, that is, directly competing with Tesseron and claiming that the competing products were licensed under the Tesseron patents. Did it work?

    Yes. To start, the concept of retroactive license was perfectly fine. Tesseron argued that under Ethicon, Inc. v. U.S. Surgical Corp. a license could not be granted retroactively, but Ethicon, its predecessor, Shering Corp. v. Roussel-UCLAF SA, and its successor, STC.UNM v. Intel Corp., (blogged here) were all cases involving licenses from co-owners of the patents, not sublicensing arrangements. And, “Ethicon was careful to acknowledge that certain retroactive licenses of patent rights have been enforced for patents with sole owners,” citing Studiengesellschaft Kohle, m.b. H. v. Hercules, Inc., 105 F.3d 629, (Fed. Cir. 1997).

    Since there was no legal bar to a retroactive license, “whether a license or sublicense may have retroactive effect depends upon whether the licensor has conferred that right. That is a question of contract interpretation.” Here, the agreement did indeed contemplate that CINC would be allowed to grant licenses retroactively:

    Section 3.01 of the Agreement extinguishes liability for any claims against CINC “and all of the Affiliates [that] have been made, might have been made or might be made at any time prior to the Effective Date.” Indeed, since CINC may issue a sublicense to Affiliates it acquires at any time during the term of the Agreement (as long as later-acquired Affiliates were not major competitors of Tesseron as of the Agreement’s effect date), and the Agreement grants such an Affiliate the full measure of rights under Section 2.01, the Agreement necessarily authorizes retroactive sublicenses.”

    Now that CUSA is properly sublicensed under the patents, exhaustion steps in to bring it home for CINC. There was no dispute that the products were sold by CUSA to CSA and any subsequent sales were protected by the doctrine of patent exhaustion. However, CSA made offers to sell before actually purchasing the printers:

    The defendants are correct that an offer to sell is a distinct act of infringement separate from an actual sale. Making the offer a separate act of infringement serves to prevent generating interest in a potential infringing product to the commercial detriment of the rightful patentee.

    CSA’s offers to sell the patented systems did not violate 35 U.S.C. § 271(a) so long as all of the systems it did sell were purchased from CUSA or another licensed entity. Any other result would eviscerate CUSA’s license, in particular its retroactive effect. The defendants’ argument is premised on its contention that CUSA was not a properly licensed seller of the patented products. Accordingly, since the sales by CUSA were non-infringing sales, these sales exhausted defendants’ patent rights in the printers. Any offer to sell the printers was an offer to sell non-infringing printers.

    So CSA’s printers did not infringe the Tesseron patents, despite the clear intention of Tesseron to avoid exactly this situation.

    I can’t figure out where this went off the rails, if it did. I also wonder whether the outcome would have been different under a different legal system’s rules for contract interpretation, like the UK. Thoughts? Or was there an obvious mistake in the contract drafting that you would have caught?

    Canon Inc. v. Tesseron Ltd., No. 14cv5462(DLC) (S.D.N.Y. Nov. 19, 2015).

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  • The Exemplar Case For Why Joint Trademark Ownership is Bad

    According to McCarthy, “[w]hen there is a dispute over who owns a trademark, the worst possible solution is to allow mark ownership to be shared among the warring parties.”

    That is in the lastest opinion on the the YOGI marks, which I’ve written about many, many, many times before. The cases revolve around the rights to the name and likeness of the late Yogi Bhajan, spiritual and religious leader of the Sikh religion in the United States. His wife, Bibiji Inderjit Kaur Puri, called “Bibiji” throughout the various opinions, sued the Golden Temple of Oregon for infringement of the marks YOGI and YOGI TEA and they stopped paying royalties, and she sued the trustees of the Yogi Bhajan Administrative Trust (“YA Trust”) for breach of trust and related claims, for trademark infringement, and for a determination by the probate court on ownership of the marks.

    The latest opinion is in the case Bibiji brought accusing the YA Trust of trademark infringement. Only a legal procedure buff could love this opinion; most of it is whether the theories of judicial estoppel and collateral estoppel prevent Bibiji from arguing anew before the Central District of California district court that she is the sole owner of the trademarks (they do).

    Where it therefore stands is Bibji and the YB Trust are co-owners of the trademarks. Bibiji nevertheless tries to argue that the YA Trust is an infringer but that’s pretty simple, an owner of a mark, even if only a co-owner, can’t infringe (and also in this case, dilute) its own mark. The case cited by Bibiji, Durango Herald, Inc.v. Riddle, 719 F.Supp. 941 (D. Colo. 1988), says that one joint venturer cannot take an asset of the joint venture and exploit it to the detriment of the other joint venturer – but here we don’t have a single joint venture, instead there are two co-owners.

    So where it ends up is that Golden Temple of Oregon, the original accused infringer, now has a license from the YB Trust. The YB Trust license was very clear that it does not abrogate any rights Bibiji may have in the trademarks and Golden Temple offered Bibiji the same terms it gave YB Trust, but she refused.

    Although it is now clear Golden Temple doesn’t need a license from Bibiji, Golden Temple is worse off than your typical non-exclusive licensee because Bibiji can also go license the mark. But, unlike in the case of a non-exclusive license, here the two co-owners can enforce entirely different standards of quality, driving the marks down an almost certain path to genericism (“Honey, do you want the Golden Temple yogi tea or the Eternal Sunrise yogi tea?”). Indeed, the worst possible solution.

    And I have never seen this before in an opinion: “Not intended for publication,” yes, but not this specific:

    This Order is not intended for publication. Nor is it intended to be included in or submitted to any online service such as Westlaw or Lexis.

    Even the court is sick of this one.

    Puri v. Yogi Bhajan Administrative Trust, No. CV 11-9503 FMO (SHx) (C. D. Calif. Oct. 30, 2015)

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  • Infringement Without Confusion?

    It’s a simple case, but simple doesn’t mean you get to take shortcuts on the legal rationale.

    At the end of 1998 Ford and ThermoAnalytics entered into a License Agreement for RadTherm software for heat mapping. In the agreement, FGTI (Ford Global Technologies, Inc.) granted ThermoAnalytics an exclusive license to develop and commercialize “FGTI Licensed Software” in exchange for royalties, with the RadTherm software scheduled as FGTI Licensed Software. The agreement provided that “FGTI … shall have ownership of all copyright, trade secret, patent, trademark and other intellectual or industrial property rights therein or associated therewith.” There was also this “Trademark Notice” clause:

    Ford agreement clip 3 If you can’t see the image, it says

    All trademarks and trade names identifying FGTI Licensed Software or FGTI or Ford businesses are, and will remain the exclusive property of FGTI and Ford respectively. [ThermoAnalytics] shall not take any action that jeopardizes the Marks, and acquires no rights in the Marks except in the limited use rights specified below. [ThermoAnalytics] shall be limited to using the Marks exclusively to advertise and promote FGTI Licensed Software.

    In 2000, ThermoAnalytics released version 5.0 of RadTherm but claimed it was an entirely different work than the previous versions, created under a program with the US Army. Nevertheless ThermoAnalytics continued to pay royalties to Ford for 13 more years, finally terminating the agreement in March, 2014. ThermoAnalytics informed Ford that Ford did not have a copyright ownership interest in the existing version of the software but it nevertheless called the new software “RadTherm,” even after the lawsuit was filed. ThermoAnalytics had also registered the RADTHERM trademark in 2000.

    Ford brought suit against ThermoAnalytics. The first claim for relief alleged that, under § 43(a) of the Lanham Act:

    ThermoAnalytics’ use of the RADTHERM trademark was “likely to confuse, mislead or deceive customers, purchasers and members of the general public as to the origin, source, sponsorship or affiliation of Defendant’s RADTHERM IR Software, and is likely to cause such people to believe in error that Defendant’s RADTHERM IR Software products and services have been authorized, sponsored, approved, endorsed or licensed by Ford.

    It also brought claims for cancellation of ThermoAnalytics’ trademark registration, breach of contract, and a declaration that Ford was joint owner of the copyright in the software.

    It’s a fairly easy contract interpretation to find that Ford owns the RADTHERM trademark:

    The language of the Agreement is plain. Section 12, the “Trademark Notices” of the Agreement, in relevant part states, “[a]ll trademarks and trade names identifying FGTI Licensed Software or FGTI or Ford business (the “Marks”) are, and will remain the exclusive property of FGTI and Ford respectively.” In Exhibit 1 of the Agreement, “RadTherm” is listed as “FGTI Licensed Software.” Section 8.1, titled “Ownership of Software,” states that “FGTI, or its licensees or assigns shall have ownership of all copyright, trade secret, patent, trademark and other intellectual or industrial property rights therein or associated [with FGTI Licensed Software].” When Section 12, Section 8 and Exhibit 1 are read together, it appears the text of the Agreement clearly grants ownership of the RADTHERM mark to Plaintiffs.

    (Emphasis in original.)

    But it’s after that where things go wrong. From there, the court found infringement (internal citations and quotation marks omitted):

    The Lanham Act creates a private cause of action to protect trademarks and trade dress where there is a likelihood of confusion between the defendant’s mark and the plaintiff’s protected mark. Typically, where an ex-licensee continues to use the licensed trademark, the continued use by itself creates a likelihood of confusion under the Lanham Act.

    Here, Defendant terminated the License Agreement on March 1, 2014. Section 11.1 of the Agreement, “Effects of Termination,” states “the obligation to pay Royalties to FGTI shall survive until Licensee ceases to market, sell, and support the FGTI Licensed Software, Licensee Licensed Software or Jointly Owned Software.” However, despite sending its last royalty payment in March of 2014 and being given a written demand to cease use of the Trademark in February of 2014, Defendant continued to use the RADTHERM mark until April of 2015. In fact, during oral argument, Plaintiffs revealed to the Court that, despite “officially” changing the name of the software to TAITHERM, Defendant still uses the original name, RADTHERM, as a reference for its newly branded software on Defendant’s website. It’s even used in the URL. Therefore, Plaintiffs have provided clear and substantial evidence of unauthorized use to establish liability. Defendant has brought no evidence or defense sufficient to raise a genuine issue of material fact as to liability. Accordingly, the Court will grant Plaintiffs’ Motion with regard to this Count.

    (Emphasis added.) It sounds simple enough on its face but the court missed a pretty significant step – Ford did indeed establish unauthorized use, but where was the liability? The only liability under the Lanham Act is for confusion but the court took a shortcut on that. Indeed, “typically, where an ex-licensee continues to use the licensed trademark, the continued use by itself creates a likelihood of confusion under the Lanham Act.” But this isn’t the “typical” case; the case law arose with respect to the franchise model, where the breaching party is an ex-licensee holding over and there is use of the same trademark by other licensees. Yes, in that situation there is absolutely confusion. But this was not that “typical” case, Ford did not have its own RADTHERM software. Instead, for fifteen years the only software distributed under the trademark RADTHERM was ThermoAnalytics’ software. What Ford product, exactly, was ThermoAnalytics sofware supposed to be confused with? There wasn’t any.

    I have no problem finding that, by contract, FGTI was the owner of the RADTHERM trademark and that ThermoAnalytics had to cease using the trademark when the agreement terminated. I also agree with the court’s conclusion that, because by agreement the RADTHERM mark could be used only to advertise and promote FGTI Licensed Software, the use of the mark for a different codebase was a breach of contract. But, I do have a problem with the theory that there was a Lanham Act violation, because there can’t be any confusion. Some may consider it a flaw that the Lanham Act doesn’t provide a claim for ownership per se (I do), but there isn’t one, there are only legal claims for confusion.

    Ford ended up owning a share of the copyright in the software too, also as a matter of contract. The agreement provided that “The Parties agree that all works of authorship created or derivative works created with respect to Jointly Owned Software under this Agreement shall be deemed ‘joint works’ under the Copyright Act and that all copyrights for such works of authorship shall jointly belong to FGTI and Licenses ….” (Emphasis in original.) ThermoAnalytics’ argument that only derivative works would be jointly owned didn’t fly:

    The word “or” signals to the Court that there is a difference between “works of authorship” and “derivative  works.” The Court finds that the Agreement extends to “all derivative works created with respect to Jointly Owned Software” (e.g. the Original Software) and “all works of authorship created with respect to Jointly Owned Software.” Therefore, the Agreement covers the Disputed Software if it was created with respect to the Original Software.

    Despite Defendant’s contention that the Disputed Software was wholly original, the evidence points to the contrary. At oral argument, Defendant’s counsel stated the inspiration for the Disputed Software was the Original Software. The Disputed Software served the same function as the Original Software. Defendant held out the Disputed Software as being a new and improved version of the Original Software for over a decade. Defendant even represented to the general public that the Disputed Software was owned by Plaintiffs. Finally, in 2012, Defendant re-affirmed the Agreement when it signed the Amendment, confirming that Sections 4.3 and 11.1 of the Agreement still applied to the Disputed  Software.

    Defendant has brought evidence demonstrating that the Disputed Software was not derivative. But Defendant has not brought evidence demonstrating that the Disputed Software was created without respect to the Original Software. Accordingly, the Court finds that the Disputed Software is covered by the Agreement as a joint work.*

    At the end of the day the contract did what it was supposed to do. Ford is the owner of the copyright and trademark for the RADTHERM software and absent the agreement it wouldn’t have owned either. But what Ford did accomplish with its faux Lanham Act claim was federal jurisdiction. The only claims here were for breach of contract and this case should have been in state court.

    Ford Motor Co. v. TheroAnalytics, Inc., Case No. 15-cv-13992 (E.D. Mich. Oct. 28, 2015).

    * With this, though, the court created inconsistent holdings. The contract provided that ThermoAnalytics could only use the RADTHERM mark to advertise and promote FGTI Licensed Software, so ThermoAnalytics’ use on software that it claimed wasn’t FGTI Licensed Software was held a breach. But if the Disputed Software was, in fact, FGTI License Software as a matter of contract, then ThermoAnalytics wasn’t in breach wnen it used the RADTHERM trademark to advertise and market it.

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  • A Proper Copyright Assignment

    I have called Righthaven the gift that keeps on giving. In Righthaven, the plaintiff tried to obscure the fact that there wasn’t a true copyright assignment by putting the relevant terms in different agreements. Righthaven, a copyright troll, eventually got whacked for it by the 9th Circuit. Now, when defendants see any kind of retained rights in an assignment agreement they challenge it as defective in light of Righthaven.

    But we have a good analysis from a Massachusetts court. Non-party Sheila Wolk assigned the copyright in a number of her works to plaintiff Robert Sarvis. Sarvis found infringing copies on the defendant Polyvore’s website, sent a DMCA notice to the site, and ultimately sued.

    Wolk assigned the copyrights to secure a line of credit with language that was unequivocal and complete. Wolk:

    exclusively, absolutely and unconditionally and irrevocably assigns, transfers, sets over, and conveys to Robert H. Sarvis… (“Assignee”) all of Sheila Wolk’s right, title, and interest throughout the universe in and to that certain original material referred to as the Art Images listed and described in Exhibit A attached hereto, including, without limitation, the copyrights therein in the United States of America, and all copyrights and property rights therein and elsewhere throughout the universe, and further including without limitation any and all versions of said Art Images and all copyrights in such other versions…. The rights hereby granted to the Assignee include, without limitation, the right to do any and all acts or things necessary or appropriate to protect the rights granted hereunder, including the copyrights, and to institute any actions for such purpose in the name of the Assignee, Assignor, or both of them.

    But the agreement also included a reversion, if “(1) The Line of Credit is paid in full including as interest due; and (2) The Line of Credit is terminated by Robert Sarvis or Sheila Wolk; and (3) A one time payment by Sheila Wolk to Robert Sarvis of $1,000.00.”

    The pro se plaintiff also made some statements in his complaint and DMCA notice that weren’t in his best interest to make. In the complaint he said he had the “right to initiate copyright infringement actions to protect his collateral.” And in the DMCA notice he sometimes characterized the copyright as still owned by Wolk:

    “(1) “Polyvore … and its Internet Users” continue to copy “the registered art of Sheila Wolk without authorization in violation of her copyrights”; (2) plaintiff is “authorized to act on behalf of the copyright owner, Sheila Wolk”; and (3) plaintiff “has a good faith belief that” Polyvore’s use “is not authorized by the copyright owner, Sheila Wolk.”

    Polyvore moved to dismiss claiming that Sarvis didn’t have standing to bring a copyright infringement claim.

    But the court disagreed. There was nothing wrong with the assignment:

    “[T]he rights granted” included “without limitation” the ability to institute a lawsuit. Construing this language in its ordinary sense, the parties transferred the copyrights and property rights to plaintiff exclusively (including, but not limited to, the right to bring a lawsuit) and gave Wolk the ability to revert the transfer back to her by paying the line of credit in full or $1,000 or otherwise terminating the line of credit.* The Rule 12(c) or 12(b)(1) record therefore sufficiently establishes that plaintiff is the owner of the copyrights to the art images listed in exhibit A of the assignment.

    Polyvore claimed that the right of reversion was materially indistinguishable from the language in the Righthaven agreements, but the court disagreed:

    The language in the Righthaven assignments “provided that, ‘subject to [Stephens Media’s] rights of reversion,’ Stephens Media granted to Righthaven ‘all copyrights requisite to have Righthaven recognized as the copyright owner of the Work for purposes of Righthaven being able to claim ownership as well as the right to seek redress for past, present, and future infringements of the copyright … in and to the Work.’ ” Righthaven LLC v. Hoehn, 716 F.3d at 1168. The assignments were, however, subject to a previous agreement between the parties stating that, “Despite any Copyright Assignment,” the assignor “shall retain… an exclusive license to Exploit the Publisher Assigned Copyrights for any lawful purpose whatsoever and Righthaven shall have no right or license to Exploit … other than the right to proceeds in association with a Recovery.” …

    Here, there is no indication that Wolk and plaintiff entered into prior agreements that limited the rights granted to plaintiff under the assignment or automatically endowed Wolk with an exclusive license and ability to exploit the copyrights…. Unlike the language in the Righthaven agreements, there was no indication that the parties intended to convey only a right to sue. Moreover, the language that the “assignment will revert” if Wolk paid the line of credit, paid plaintiff $1,000 or terminated the line of credit refers to an event that takes place, if at all, after the transfer of the copyrights has already occurred. In short, under the agreement, Wolk transferred the copyrights and property rights in the art images exclusively to plaintiff. Wolk’s right to obtain a reversion of the assignment does not eviscerate the parties’ expressed intent to transfer the copyrights, but it does give her the ability to have the copyrights revert, i.e., reconveyed, back to her if she paid plaintiff $1,000, terminated the line of credit or paid the line of credit in full. Polyvore’s analogy of plaintiff to a creditor with a right to repayment and the copyrights as collateral that “does not change hands” is inapt because Wolk transferred title to the copyrights and property rights to plaintiff.

    Sarvis v. Polyvore, Inc., No. 12-12233-LTS (D. Mass. Aug. 24, 2015) (Magistrate Report and Recommendation, adopted by the court in docket entry 100, Sep. 14, 2015).

    * The requirements appear to be conjunctive, but that doesn’t change the analysis.

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  • Never Underestimate the Burden of Proof

    Trademark examining attorneys occasionally make mistakes and often the error can’t be challenged once the trademark is registered.* In Vujovic v. Octop there was a clear procedural error and it was most likely outcome determinative.

    Two people worked together at a company called “Octop.” The opinion doesn’t have much information (because most of the evidence wasn’t admissible), but we can gather that Aleksandar Vujovic and Ramona LaFountain worked together as Octop, had a falling out, and each filed applications to register the mark OCTOP for similar services.

    The examination error is that the second-filed application was not refused under Section 2(d) and so it became a registered trademark. That shouldn’t have happened:

    Although the Vujovic later-filed application should have been held up pending a determination on the conflicting, earlier-filed Octop application, it was sent to publication and then issue. As noted recently in the case of In re House Beer, LLC, 114 USPQ2d 1073, 1075 (TTAB 2015):

    When the marks in two or more pending applications filed by different applicants appear to be sufficiently similar that they may ultimately require a refusal of registration under § 2(d), they are considered “conflicting applications.” It is USPTO policy to process conflicting applications in the order of their filing dates (or effective filing dates), such that the application having the earliest effective filing date will be the first to proceed toward publication for opposition (if it is eligible for registration on the Principal Register) or toward registration if it is eligible for registration on the Supplemental Register. Trademark Rule 2.83(a), 37 C.F.R. § 2.83(a); TMEP § 1208.01. As for the conflicting applications that have later effective filing dates, the assigned examining attorneys will suspend action until the earlier-filed application either matures into a registration or is abandoned. 37 C.F.R. § 2.83(c); TMEP § 1208.01.

    Despite this serious procedural mishap, § 2(d) of the Trademark Act makes no allowance for the filing date of the application underlying Vujovic’s claimed registration. Having his federal trademark registration in hand, Vujovic is entitled to the presumptions of Section 7(b) of the Act, including the validity of his registered mark and of the registration of the mark, of his ownership of the mark, and of his exclusive right to use the registered mark in commerce on or in connection with the services specified in the certificate.

    So rather than having an opposition and a suspended application between two warring owners, we have an opposition and a cancellation.

    Which made all the difference. The Board acknowledged that the “one most critical fact” was that the second-filed application was entitled to the presumptions of a registered trademark, with the result that the attempt to cancel it failed:

    [E]ven if we were to consider the authenticated documents for the truth of the matter asserted, we find no admissions which go to material facts relating to ownership by either party. Hence, despite the arguments made in Petitioner’s brief in support of cancellation, in the face of Vujovic’s Section 7(b) presumptions as to his ownership of the mark, this evidence of record is insufficient to establish Petitioner’s case that Vujovic is not the rightful owner of the OCTOP mark.

    And given that both parties were claiming rights to the same mark, Vujovic’s success in his opposition to the Octop application was a virtual given: “with identical marks as well as identical, overlapping or closely related services, we find an obvious likelihood of confusion.”**

    Thus, the outcome in Vujovic’s favor may have been entirely due to the procedural error during examination.

    But, I wouldn’t read too much into the nonprecedential opinion; the real flaw in the case was that there was very little admissible evidence, and what evidence there was was largely irrelevant. But the decision highlights the advantage of a registration.

    The opinion is also notable for its most awesome use of imagery for the evidence. Just look at page 9.

    Vujovic v. Octop, Opp. No. 91210908, Can. No. 92058642 (TTAB Sept. 29, 2015).

    *See AS Holdings, Inc. v. H & C Milcor, Inc., 2013 TTAB LEXIS 388, *11, 107 U.S.P.Q.2D (BNA) 1829, 1833 (TTAB Aug. 6, 2013) (whether amendment by applicant to the original drawing was a material alteration of the original drawing could not be challenged in an opposition); Melwani v. Int’l Whisky Co., 2011 TTAB LEXIS 403, *11-12 (TTAB Dec. 21, 2011) (The failure to republish the application is an ex parte procedural issue which does not form the basis for a claim before the Board); Flash & Partners S.P.A. v. I.E. Manufacturing LLC, 95 USPQ2d 1813 (TTAB 2010) (issue of compliance with application signature requirement is an ex parte examination issue not a basis for a claim); ER Marks, Inc. v. Quarles Petroleum, Inc., 2007 TTAB LEXIS 660, *5 (TTAB May 30, 2007) (whether specimen of use is acceptable is an ex parte examination issue and does not constitute a valid ground for cancellation); Saint-Gobain Abrasives Inc. v. Unova Indus. Automation Syst. Inc., 66 USPQ2d 1355, 1359 (TTAB 2003) (ex parte question of the sufficiency of the description of the mark not be a ground for opposition or cancellation) ; Phonak Holding AG v. ReSound GmbH, 56 USPQ2d 1057, 1059 (TTAB 2000) (failure to enforce requirement of filing of foreign registration is examination error and not a ground for counterclaim for cancellation) ; Marshall Field & Co. v. Mrs. Fields Cookies, 11 USPQ2d 1355, 1358 (TTAB 1989) (insufficiency of the specimens, per se, does not constitute grounds for cancellation); Century 21 Real Estate Corp. v. Century Life of Am., 10 USPQ2d 2034, 2035 (TTAB 1989) (adequacy of specimens is solely a matter of ex parte examination).

    ** “Not surprisingly, an analysis of the du Pont likelihood of confusion factors — designed for cases in which the litigation is usually between two unrelated entities that may happen to be using similar marks in connection with related goods or services — is ill-suited for situations in which two parties are disputing ownership of the same trademark once shared. See Pamela S. Chestek, ‘Who Owns the Mark? A Single Framework for Resolving Trademark Ownership Disputes,; 96 TRADEMARK REPORTER 681 (2006).” [Yes, that is a shameless plug. Ed.]

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  • Copyright and Egyptian Law

    Jay-Z’s win in a copyright infringement suit has been widely reported. Jay-Z obtained a license to use an Egyptian work written by Baligh Namdi called “Khosara, Khosara” in “Big Pimpin”:

    Namdi’s heir, Fahmy, sued Jay-Z claiming that “Big Pimpin” was an unlawful derivative work, infringing both the moral and economic rights in Khosara, Khosara.

    Moral rights protect an author’s personal or moral interests in a work, protecting “the presumed intimate bond between authors and their works.” Under Egyptian law they include “the right to prevent modification considered by the author as distortion or mutilation of the work” and are inalienable and perpetual, so Fahmy was the owner of them.

    But according to Jay-Z’s Egyptian law expert, the moral rights claim arises under Egyptian law and the claim must therefore be asserted in Egypt:

    Q: [If] somebody uses [your copyright] in a way that violates your moral rights under Article 143, what is your recourse? What do you do?

    A: It’s not that he uses the right in a way that violates my moral rights. He uses the rights and I am not listed. I have the right to go into Egypt before an Egyptian court and ask it to enforce my — right to be recognized as the original author or I have the right to go in Egypt if I think that the new work mutilates my original work, I have the right to go and ask the court ant to — and to object before court the use of such right.

    Q: To get an injunction of some sort?

    A: Yes.

    (Emphasis in original.) So a US court is not the place for a claim under Egyptian law. And the United States doesn’t recognize moral rights in this type of work, so there was no cognizable claim for infringement of moral rights.

    As to the economic rights, there was a 2002 agreement (after the alleged infringement started in 1999), not involving the chain of title from which Jay-Z obtained his license—so this isn’t a license defense, it’s a challenge to Fahmy’s standing.* Fahmy conceded that the 2002 agreement assigned of some rights, but not all of them. This is a translation of the agreement:

    I, Osama Ahmed Fahm[y] [plaintiff] … in person and in my capacity as the representative of the heirs of the late [Baligh Hamdi] hereby assign to Mr. Mohsen Mohammad Jaber … and to whoever he selects, the right to print, publish and use the music of the songs stated in this statement [including Khosara, Khosara] on all currently known audio and/or visual of videos, performances, records, cassette tapes, and cartridges in addition to all the modern technological and digital means such as the internet, telephones, satellites, or any other means that may be invented in the future including musical re-segmentation and alteration methods while maintaining the original segment of the music. This authorization grants Mr. Mohsen Mohammad Jaber solely/or to whoever he selects, the right to publish and sell these songs using all the means available in all parts of the world. I do hereby approve, by signing this authorization to pledge not to dispose once again of this music, or republish, sell, or present them to any other individual, company, authority, or institution.

    I do hereby further state that by signing this authorization and waiver of these pieces of music to Mr. Mohsen Mohammad Jaber, I would have authorized him solely and/or whoever he selects, fully, and irrevocably the right to use this music in whatever way he deems necessary. Mr. Mohsen Mohammad Jaber or his successors are solely the owners of the financial usage rights stated in the [Egyptian] Law. No. 82 FOR THE YEAR 2002, for the pieces of music listed hereinafter in the Arab Republic of Egypt and the whole world, and the use includes all the usage means and methods whether those currently  available or those that will be inventedd [sic] in the future and whether it was audio, visual or audiovisual including the new digital and technology means during the whole legal protection period specified by the law….

    Mr. Mohsen Mohammad Jaber and his successor become the sole publisher of the melodies of these songs in all the current publishing means and in any way he deems whether it was direct or indirect. Mr. Mohsen Mohammad Jaber also has the right to transfer all these rights or some of them or dispose them to another company or institution using any trademark he selects….

    [Plaintiff] received the amount of 115,000 (only one hundred fifteen thousand Egyptian Pounds) for this waiver and declaration while maintaining our rights in respect of the public performance and mechanical printing.

    And that looks like a pretty clear assignment to me. The court found that the statement that “Mr. Mohsen Mohammad Jaber or his successors are solely the owners of the financial usage rights stated in the [Egyptian] Law. No. 82 FOR THE YEAR 2002, for the pieces of music listed hereinafter” to be an assignment of all economic rights, including the right under Egyptian law to make “adaptations” (i.e., derivative works).

    Fahmy’s arguments to the contrary all failed. As required by Egyptian law the agreement described an explicit and detailed indication of each right to be transferred, the extent and purpose of the transfer, and the duration and place of exploitation. The plaintiff argued that the rights transferred must be described specifically, but there is no comprehensive list of rights in Egyptian law, so where the intent is to transfer all rights “the most effective means, if not the only effective means, for a copyright owner to transfer ‘all’ of his economic rights is to state simply that he is transferring ‘all’ economic rights.”

    Fahmy had retained “rights in respect of the public performance and mechanical printing,” but under Egyptian law this was the right to receive the royalties, not any retained ownership of the copyright. The U.S. has a similar system; artists can retain the right to receive a royalty, which makes them a “beneficial” owner of the copyright but without legal ownership. So Fahmy didn’t own the copyright and therefore did not have standing to bring a copyright infringement claim.

    Prior post here.

    Fahmy v. Jay-Z, No. 2:07-cv-05715-CAS(PJWx) (C.D. Cal. Oct. 21, 2015).

    *What the court didn’t appear to consider is what happens under Egyptian law to the right to sue for past infringement when the copyright is assigned. Under US law, any claim for past infringement remains with the owner of the copyright at the time of the infringement unless it is expressly assigned. Hmmm.

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  • Working Around Incontestability

    Once a trademark is incontestable, its validity cannot be challenged except on certain limited bases. Is “void ab initio” one of them? “Void ab initio” isn’t listed in the statute as a basis for challenge, but the defendant in NetJets Inc. v. IntelliJet Group, LLC found a workaround.

    The plaintiff registered its trademark, INTELLIJET, for computer software for managing aircraft leasing and sales and the registration was incontestable. But the software was only used internally by NetJets, although it also described the software’s functionality in newsletters to its customers and demonstrated the software on tours of its facility. The lower court held that that the trademark was abandoned because it had not been used in commerce,* but the Court of Appeals for the Sixth Circuit saw some other possible use of the mark and reversed:

    NetJets did, in fact, put forward evidence that it has sold the Intellijet software itself, rather than the private-plane services, to two external customers: Marquis Jet Partners and National Private Air Transport Services Company Limited…. The questions about the nature and existence of these licenses are nonetheless sufficient to call into question whether NetJets was marketing software, under the INTELLIJET mark, to other private-plane companies. In light of the dynamics of the private-plane industry and the nature of the software product, a reasonable jury could find such limited market involvement to nonetheless reflect a “bona fide use … in the ordinary course of trade,” 15 U.S.C. § 1127, and that NetJets had therefore not abandoned the mark.

    The lower court was instructed to consider on remand “whether there was a separate defect in the ownership of the mark other than abandonment.”

    “Void ab initio” was offered by the defendant as another defect, but we have the problem of incontestability. Which turns out to not be a problem, because for a mark to be incontestable the requirements of incontestability have to be met, in this case use of the mark for five years after the date of registration, July, 1995.** But, there were no sales to external customers for the five years of 1995-2002, so the conditions of incontestability weren’t satisfied. The registration could therefore be challenged on the basis that it was void ab initio and, indeed it was invalid, since the software was not being sold at the time the use-based application was filed.†

    But wait – wasn’t it really just a defect in the application, which was erroneously filed for software rather than for the aircraft sales and leasing services? If so, then NetJets would have common law rights in the service mark. But too late for that argument; the court previously held that the software was “the conduit through which NetJets provides its services.” According to Trademark Manual of Examining Procedure § 1301.02, “A term that is used only to identify a product, device or instrument sold or used in the performance of a service rather than to identify the service itself does not function as a service mark.” (Emphasis in original.)

    NetJets Inc. v. IntelliJet Group, LLC, No. 14-3118 (6th Cir. Feb. 20, 2015).
    NetJets Inc. v. IntelliJet Group, LLC, No. 2:12-cv-00059 (S.D. Ohio Oct. 13, 2015).

    • According to the district court, non-use can be an abandonment: “As Defendant acknowledges in its motion for summary judgment, most cases of alleged abandonment of a trademark involve a situation where the owner was at one point making commercial use of the mark. Abandonment may also be established, however, through proof that a registrant is not using or has never used its mark in commerce. See e.g. Imperial Tobacco Ltd. v. Philip Morris Inc., 899 F.2d 1575, 1579-82 (Fed. Cir. 1990) (finding abandonment of mark on basis of nonuse).”

    ** The court said the trademark was registered in July 1995, but the trademark record says the appliication was filed in December, 1995 and granted in December, 1996. The claimed date of first use was July, 1995.

    † See the Fourth Commandment, “Don’t invoke a registered right that you are not prepared to lose.”

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