Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • It Doesn’t Work That Way

    When we last visited Florida VirtualSchool v. K12, Inc., the Court of Appeals for the Eleventh Circuit certified a question to the Supreme Court of Florida. As a refresher, in Florida VirtualSchool we have a state entity, FVS, enforcing a trademark. The defendants argued, successfully at the trial court stage, that FVS did not have the authority to enforce the trademark rights because by statute that duty fell to the Florida Department of State (DOS). The Eleventh Circuit certified this question to the Supreme Court of Florida:

    Does Florida VirtualSchool’s* statutory authority to “acquire, enjoy, use and dispose of … trademarks and any licenses and other rights or interests thereunder or therein” necessarily include the authority to bring suit to protect those trademarks, or is that authority vested only in the Department of State?

    The Supreme Court of Florida modified the question:

    Does Florida VirtualSchool’s statutory authority to “acquire, enjoy, use and dispose of … trademarks and any licenses and other rights or interests thereunder or therein,” and the designation of its board of trustees as a “body corporate with all the powers of a body corporate and such authority as needed for the proper operation and improvement of the Florida Virtual School,” necessarily include the authority to bring suit to protect those trademarks, or is that authority vested only in the Department of State?

    There are two conflicting Florida statutes in play. Section 286.021 Fla. Stat. (2013) says that

    The legal title and every right, interest, claim or demand of any kind in and to any patent, trademark or copyright, or application for the same, now owned or held, or as may hereafter be acquired, owned and held by the state, or any of its boards, commissions or agencies, is hereby granted to and vested in the Department of State ….

    This is accompanied by a statutory section giving the Department of State specific authority to enforce the rights, § 286.031 Fla. Stat. (2013).

    But meanwhile, the enabling statute for the Florida Virtual School says:

    The board of trustees shall aggressively seek avenues to generate revenue to support its future endeavors, and shall enter into agreements with distance learning providers. The board of trustees may acquire, enjoy, use and dispose of patents, copyrights and trademarks and any licenses and other rights or interests thereunder or therein. Ownership of such patents, copyrights, trademarks, licenses, and rights or interests thereunder or therein shall vest in the state, with the board of trustees having full right of use and full right to retain the revenues derived therefrom ….

    § 1002.37(2)(c) Fla. Stat. (2013).

    The Florida Supreme Court sees the problem, “The enabling statute for the Florida Virtual School and the statutes under which the DOS operates present a tension with regard to the scope of authority granted to the school.”

    And it resolves that tension in favor of Florida Virtual School. “When reconciling statutes that may appear to conflict, the rules of statutory construction provide that specific statute will control over a general statute and a more recently enacted statute will control over older statutes.” In addition, the Florida Virtual School, as a “body corporate,” has all the powers of any other corporation, specifically the power to bring a lawsuit. Under these principles, the Florida Virtual School is a proper party for an infringement action.

    So, with that, the Eleventh Circuit had its answer and the case was remanded to the district court.

    But K12 is not one to give up; it had new ammunition in the Florida state decision. K12 moved to dismiss Count 1 of the Complaint, one for trademark infringement under § 32 of the Lanham Act, on the theory that the registration is invalid because the registrant is, incorrectly, Florida VirtualSchool rather than the State of Florida. Alternatively, K12 moved that the count be dismissed based on the absence of a necessary party, the Secretary of the State of Florida, and it also moved to amend its counterclaim to add a new count for cancellation of the registration because the registration is not owned by the State of Florida.

    The district court was not amused. “Defendants’ arguments are an attempt to create an Gordian knot out of the Florida Supreme Court ruling.” The district court accuses K12 of “picking some decontextualized language within the Supreme Court opinion…. Although the Florida Supreme Court did not specifically address the ownership issue under the Federal Trademark Act, it is reasonable to infer from its opinion that FLVS is the owner of the marks for purposes of protecting its IP.”** The court therefore denied the motions to dismiss and the motion to amend.

    But here’s the thing – K12 is right and the court is utterly wrong. The Supreme Court of Florida said consistently and numerous times that, although Florida VirtualSchool has the authority to enforce the trademark, the State is still the trademark owner:

    • “Each statute addresses trademarks that are owned by the State”
    • “Specifically at issue is the field of operation for the school with respect to the trademarks it acquires on behalf of the State”
    • “We hold that the Florida Virtual School is authorized to file legal actions to protect the trademarks that it acquires on behalf of the State”
    • “The legislative grant to the board of trustees of ‘all the powers of a body corporate and such authority as is needed for the proper operation and improvement of the Florida Virtual School’ necessarily incorporates the ability to protect the trademarks that the school has acquired on behalf of the State”

    Clearly, in the Florida state court view, the State owns the trademarks and Florida VirtualSchool can enforce them. But that only speaks to the authority granted by state law; if that structure doesn’t comport with the requirements of federal law that’s just tough noogies. Just ask the Russian entity licensed to use the state-owned Stolichnaya brand.

    Under the Lanham Act, only the owner of the trademark may register it, 15 U.S.C. § 1051 (“The owner of a trademark used in commerce may request registration of its trademark”) and only a registrant may invoke § 32 as a basis for a claim. So the count for cancellation certainly states a claim, as does a motion to dismiss any count under § 32 of the Lanham Act.  Florida VirtualSchool, as a non-owner, would likely have standing to bring a trademark infringement claim under § 43(a) of the Lanham Act, a count which it also brought, but asking for joinder of the trademark owner itself is routinely granted.

    Perhaps there is a theory that Florida Virtual School is an instrumentality of the State of Florida and therefore the state is, in fact, the owner, analogous to a situation where the registration was erroneously granted to a division of a company rather than legal person. Or perhaps there is a theory that the State is an exclusive licensee with standing under Section 32, even though the State of Florida is the actual owner. But in general we keep rigid lines between legal persons, and there is nothing here that suggests we can just ignore the fact that Florida Virtual School is a “body corporate” separate from the State of Florida when that’s the very structure the Supreme Court of Florida relied on in deciding that Florida Virtual School had the authority to bring the infringement claim. If nothing else, it is a theory that requires more investigation before being so summarily dismissed.

    Florida Virtual School v. K12, Inc., No. SC13-1934 (Fla. Sep. 18, 2014).
    Florida Virtual School v. K12, Inc., No. 12-14271 (11th Cir. Nov. 17, 2014).
    Florida Virtual School v. K12, Inc., No. 6:11-cv-831-Orl-31KRS (M.D. Fla. May 4, 2015).

    * Bear with me on the use of both “Florida Virtual School” (with a space) and “Florida VirtualSchool” (no space). The enabling statute creates “Florida Virtual School,” but the entity does business as “Florida VirtualSchool.” I used what I thought was most appropriate in context.
    ** The court consistently uses “IP” when the only “IP” at issue is a “trademark.” Which perhaps is a clue how this case turned out so wrong.

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

    , , , , ,

  • The Year Is the Key

    I previously asked readers to “Name the Owner” of a copyrighted work. And the answer is: Urbont does not own the copyright* and the case is dismissed.

    The key is that the work was created in 1966, so whether the Iron Man Theme was a work for hire is decided under the Copyright Act of 1909. Under the 1909 Act, a work would be owned by the commissioning party if it was prepared at the “instance and expense” of the commissioning party.

    Whether the work was at the “instance” of Marvel depends on who induced the creation of the work. Urbont didn’t have any knowledge of the comic book characters and wouldn’t have created the theme song but for the potential use by Marvel, so it was prepared at Marvel’s instance.

    It was also done at Marvel’s expense. A work will be at the commissioning party’s expense when the creator was paid a fixed sum. Royalties cut against a work for hire, but do not vitiate a finding of work for hire if there was also a fixed sum paid. The fundamental question is whether the creator bears the “full assumption of the risk of the loss of the project” and here, where Urbont was paid for the production, he didn’t have the financial risk.

    Sealing the deal was the fact that the music was a derivative work of the comic book, which is likely to mean that a work is a work for hire.

    The presumption of Marvel’s ownership could only be overcome with a contemporaneous agreement stating Urbont was instead the copyright owner, but there wasn’t one. Urbont claimed that the 1995 settlement agreement with Marvel was conclusive evidence that Urbont the owner, but it wasn’t strong enough to overcome the presumption. While it referred to Urbont as the “owner,”

    First and foremost, a settlement is merely that: the resolution of a dispute between two parties. A settlement does not mean that the claim had merit or that it would have withstood scrutiny, and it is not a concession by a defendant that a claimant’s argument, legal or factual, has merit. Rather, pre-trial settlements are made for many reasons (one of them being to save money in the long run) and do not suggest liability on anyone’s part. Thus, the fact that Marvel entered into a licensing settlement with Urbont does not mean that Marvel has concluded or conceded that Urbont is the Composition’s owner, and it does not compel a finding that, contrary to our work-for-hire analysis, Urbont originally owned the Composition.

    Further, an after-the-fact agreement cannot retroactively alter the ownership that inhered at the work’s creation. So, despite the registration and the licensing fees paid to Urbont, Marvel was the owner of the Iron Man Theme at creation. Be careful what you choose to litigate.

    Urbont v. Sony Music Enter., No. 11 Civ. 4516(NRB) (S.D.N.Y. April 20, 2015).

    *You also get points for saying “Marvel,” which is what the court said, although that is not necessarily true. Since Marvel is not a party, the court’s statements can only be understood as a determination of ownership at the time of the work’s creation, not the current ownership.

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

    , , ,

  • Not What I Would Have Guessed …

    Plaintiff ZipSleeve, LLC had registered its ZIPSLEEVE trademark* but the registration lapsed for failure to file a declaration under Section 8 of the Trademark Act. ZipSleeve filed a new application, which hasn’t registered yet. ZipSleeve sued West Marine Inc. for trademark infringement under 15 U.S.C. § 1114, which is for infringement of a registered trademark. Some of the alleged infringement occurred before the registration lapsed. As the court notes,

    The question before the Court is therefore simple, but one on which direct authority is scant: Does the owner of a mark that was properly issued, but which has since been canceled, have a cause of action under § 1114 for infringement that occurred while the mark was valid?

    And the answer is … no, ZipSleeve did not state claim for infringement of a registered trademark, even for the period of time during which the mark was registered:

    A statutory cause of action “extends only to plaintiffs whose interests fall within the zone of interests protected by the law invoked.” Lexmark, 134 S. Ct. at 1388. The constructive notice to competitors and evidentiary presumptions afforded the registrant are among the most important rights a trademark registrant has under the Lanham Act. By contrast, the right to exclude others from use of the mark comes not from registration, but merely from priority of use of a protectable mark. And that right may be protected, in the absence of a registered trademark, using § 1125(a). The weight of authority thus clearly indicates that Congress sought to protect only the interests of plaintiffs with registered trademarks under § 1114. Plaintiffs with unregistered trademarks are protected by § 1125(a), but do not fall within the zone of interests protected by § 1114. Therefore, the owner of a mark that was valid when issued but which has since lapsed has no cause of action under § 1114—not even for infringement that occurred during the lifetime of the mark.

    ZipSleeve, LLC v. West Marine, Inc., No. 3:14-cv-01754-SI (D. Or. May 18, 2015).

    * The USPTO registration record lists the owner as Robert Niehaus with no record of an assignment. The new application to replace it also lists Robert Niehaus as the owner. I’m not sure why the court says that ZipSleeve, LLC was the owner. Mr. Niehaus is also not a party to the suit.

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

  • Name the Owner

    Below are the facts, and here’s the question—who owns the copyright? Answer in a later post.

    In 1966, songwriter and plaintiff Jack Urbont was aspiring. A friend introduced him to Stan Lee of Marvel Comics fame who was developing a television show called “Marvel Super Heroes.” Urbont wasn’t familiar with the Marvel superheroes, so Marvel gave Urbont comic books to use as source material. Marvel could reject the works if it wanted, but accepted theme songs for segments for Captain America, Hulk, Thor, and Sub-Mariner, the opening and closing songs and, the subject matter of the lawsuit, the Iron Man Theme. There was no written agreement.

    After Marvel accepted the Iron Man Theme, Urbont said he hadn’t been paid and he needed money to pay recording costs. Urbont was paid $3,000 and created the sound recording for the Iron Man Theme. Urbont recalled receiving some royalty payments.

    Urbont registered the copyright in 1966 and renewed it in 1994. He licensed the theme for use in the 2006 Iron Man movie and on other occasions. He entered into a settlement agreement with various Marvel entities to permit the rebroadcast of the original program; in the settlement agreement Urbont is identified as “Owner” and Marvel as the “Licensee.”

    Urbont alleges that hip-hop artist Ghostface Killah infringed the copyright in the Iron Man Theme on his album Supreme Clientele, on the Epic Records label, in the first track “Intro” and the last track “Iron’s Theme ‐ Conclusion.” Sony, the parent of record company Epic Records, claims that Urbont’s music was a work made for hire and owned by Marvel, and Urbont claims he owns the copyright. Who is right?

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

    , , ,

  • Check the Clock

    Mr. Hillyar was the the former director of Gems TV (UK). Gems TV (UK) was owned by Gem TV Holdings Ltd. Gems TV (UK) owned the ‘211 Patent and intended to assign it to Gem TV Holdings Ltd. but didn’t. Gem TV Holdings Ltd. then sold Gems TV (UK) in a stock purchase agreement to The Colourful Company Group Limited. The transaction closed but then Gems TV Holdings Ltd. discovered that they had overlooked the assignment of the ‘211 patent. Mr. Hillyar executed a subsequent assignment of the ‘211 Patent to Gem TV Holdings Ltd.

    This case revolves around whether or not the addendum Mr. Hillyer executed is valid. It is not. The Gems TV (UK) sale was completed by 7:13 a.m. the morning of June 18, 2010. Anthony Hillyer had previously executed a compromise agreement and resigned as a director of Gems TV (UK) effective at 6:45 a.m. that day. When Mr. Hillyer executed the addendum to assign the 211 Patent sometime after 8:00 a.m. on June 18, 2010, ownership of the 211 Patent (along with the rest of Gems TV (UK) had already been transferred to the Colourful Group, and Mr. Hillyer had resigned from his position as director of Gems TV (UK) Ltd. Mr. Hillyer clearly lacked the authority to transfer Gems TV (UK)’s intellectual property at the time he executed the addendum. The addendum is, therefore, invalid.

    Defenses that the patent was still assigned the same day, that Mr. Hillyar was unaware he didn’t have the authority, that the intent of the parties was that the patent would be transferred, and that (the successor to) Gem TV Holdings Ltd. should be estopped from claiming ownership all failed and (the successor to) Gem TV Holdings Ltd. did not have standing to bring a claim for patent infringement.

    America’s Collectibles Network, Inc. v. Genuine Gemstone Co., American Collectibles Network, Inc. v. Genuine Gemstone Co. (E.D. Tenn. April 23, 2015).

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

    ,

  • A Trademark Cause of Action Absent Confusion

    Sometimes it’s difficult to state a claim for a trademark ownership dispute. There is no cause of action per se for declaring or correcting ownership of a trademark.* Resolution of the ownership issue is almost always subsumed into the infringement claim, because the two warring parties are both trying to use the trademark and so there is confusion. Occasionally, though, that isn’t the case, which makes it a bit tougher to state a claim.

    Section 38 of the Lanham Act may give you the hook you need. It is another section of the Lanham Act that provides a basis for a civil action:

    Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence thereof.

    But plaintiff Joshua Fenwick learned it’s still not easy to state a claim. He and defendant Eddie Dukhman started a business manufacturing, marketing and selling an energy drink called PRO-NRG. Because Dukhman had a criminal background, he had his sister, Helen Khorosh, serve as his representative in the newly-formed company PRO-NRG, LLC. Fenwick alleges that Dekhman and the other defendants then set up a shadow company, Sante Pur Solutions, LLC, that excluded him and they transferred all of the assets, including the trademark, to it. (There are two trademark records for PRO-NRG, one for which the applicant was Khorosh, now surrendered, and the other by Sante Pur Solutions.) Among other allegations, Fenwick claimed that Dukhman’s wife sold a 30% interest in PRO-NRG, LLC on the show Shark Tank without authority:

    So what to claim? After Fenwick’s first complaint was dismissed without prejudice, his second stated six state law counts and three counts under the Lanham Act:

    • “Cancelation of PRO-NRG Trademark as Defendant is not the Owner of the Mark – 15 U.S.C. §1051(a)”
    • “Declaratory Judgment for Cancelation of Trademark Registration Procured by Fraud – 15 U.S.C. §1064” and
    • “Damages for False or Fraudulent Registration – 15 U.S.C. §1120”

    The defendants challenged Fenwick’s standing for the Lanham Act claims under Fed. R. Civ. P. 12(b)(1).

    First is the Section 38, 15 U.S.C. § 1120, claim for a false or fraudulent declaration or representation. But here’s the wrinkle: “To have standing under § 1120, it is not enough for the plaintiff merely to establish fraud in the registration of the trademark; the plaintiff must also show that it sustained some damage in consequence of the fraud.” Most of the harm Fenwick alleged was before the fraudulent registration, which isn’t actionable, and the complaint failed to allege any concrete injury post-registration:

    Plaintiff argues, however, that “just when PRO–NRG was poised to be launched to the market,” Defendants “committed their acts of treachery” by “fraudulently register[ing] the trademark, lock[ing] Mr. Fenwick out of taking any further part in the development of the PRO–NRG drink, and [ ] marketing the drink under the Sante Pur Solutions company instead of the PRO–NRG, LLC company.” Plaintiff also argues that, Defendants “have allegedly obtained contracts for the sale of PRO–NRG in thousands of stores,” resulting in “sales[ ] that would have accrued to the benefit of PRO–NRG, LLC, had it not been for the fraudulent registration and other fraudulent acts of [ ] Defendants”.

    While the precise bounds of post-registration damages necessary to confer standing under § 1120 are not defined, persuasive authority strongly suggests that Plaintiff’s alleged damages are insufficient.

    The case has a good summary of the § 38 cases, which ones survived and which didn’t. Here:

    Perhaps most significantly, … Plaintiff’s claims would exist wholly independent of Defendants’ allegedly false registration. Plaintiff’s § 1120 claim stems from the allegation that Defendants shut Fenwick out of PRO–NRG LLC; it is not the use of the PRO–NRG trademark, so much as Defendants’ exclusion of Fenwick, that forms the basis of Plaintiff’s Amended Complaint. Thus, any nebulous, post-registration damages asserted by Plaintiff are not “clearly articulated” and did not “directly” result from the fraudulent trademark registration—more accurately, it was the lockout of Fenwick that “directly” caused any such damages. In sum, the Amended Complaint amounts to an assertion that, although PRO–NRG LLC did not engage in any post-registration use of the PRO–NRG trademark, it was precluded from doing so because Fenwick was shut out of the business. Such an injury rightly sounds in the state law causes of action alleged by Plaintiff rather than a § 1120 action and, accordingly, the Court finds that Plaintiff lacks standing to assert a cause of action under 15 U.S.C. § 1120.

    As to the other Lanham Act claims,

    At the outset, it must be noted that the Court’s power to cancel trademarks derives solely from 15 U.S.C. § 1119, which reads in relevant part: “In any action involving a registered mark the court may determine the right to registration, order the cancelation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.” Although the Court is empowered to cancel trademarks under § 1119, this section alone cannot confer jurisdiction; there must be some independent basis upon which the Court may exercise the cancellation remedy.

    Section 1, 15 U.S.C. §1051, isn’t an independent basis for jurisdiction,

    Plaintiff cites no cases, and the Court is aware of none, in which a court cancelled a trademark solely on the basis of § 1051(a) where the registrant falsely asserted ownership of the mark. Indeed, unlike other sections of the Lanham Act, there is no mention of civil liability for violations of § 1051 nor any other indication that § 1051 was meant to create a cause of action. While fraudulent registration contravenes of the [sic] requirements of § 1051 and may therefore form the basis of another Lanham Act claim–such as a § 1064 claim–Plaintiff cannot predicate federal jurisdiction on § 1051 standing alone.

    Nor is § 14, 15 U.S.C. § 1064, an independent basis:

    it is beyond argument that § 1064 applies only to trademark cancellation proceedings in the Patent and Trademark Office …. Under a more generous reading of the Amended Complaint, Plaintiff asks the Court to cancel the PRO–NRG mark under § 1119–the proper statutory authorization for court cancellation of a trademark–for one of the enumerated reasons set forth in § 1064; namely, the alleged fraudulent registration of the mark. A petitioner seeking trademark cancellation pursuant to § 1064 and § 1119 must plead and prove facts showing a real interest in the proceeding in order to establish standing. Therefore, Plaintiff must show a real and rational basis for his belief that he would be damaged by the registration sought to be cancelled, stemming from an actual commercial or pecuniary interest. As thoroughly explained, supra, Plaintiff can make no such showing here.

    Because the Lanham Act claims were the only basis for federal jurisdiction, the court could not exercise supplemental jurisdiction over the state law claims and the case was dismissed with leave to amend.

    Fenwick  v. Dukhman, Civil Action No. 13-4359 (CCC) (D.N.J. March 20, 2015).

    *One can attack ownership per se in an opposition or cancellation proceeding at the Trademark Trial and Appeal Board, but that is a negative claim, i.e., that the applicant or registrant is not the owner so is not entitled to the registration. See Nahshin v. Product Source Int’l LLC, Cancellation No. 92051140 (TTAB June 21, 2013) (“Although the proceeding was brought on the ground of priority /likelihood of confusion, the actual issue in this matter is ownership of the mark”).

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

    , ,

  • Assent Versus Signature

    I asked whether the below “Submit” page, used when one posts a review on Rip-Off Report (owned by defendant Xcentric), transferred an exclusive license in the submitter’s copyright:

    Rip-Off Report submit page

    If you were to use the scrollbar on the right, you would find this grant:

    “By posting information or content to any public area of www.RipoffReport.com, you automatically grant, and you represent and warrant that you have the right to grant, to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute such information and content ….”

    Underneath the scroll area is a check box with this text:

    “By posting this report/rebuttal, I attest this report is valid. I am giving Rip–Off Report irrevocable rights to post it on the website. I acknowledge that once I post my report, it will not be removed, even at my request….”

    And the answer is … maybe?

    As background, attorney Richard Goren was unhappy with two reports about him that were posted on Rip-Off Report. He sued the complainer, Christian DuPont, and, in a default judgment, the court assigned the copyrights to Goren and appointed Goren as attorney-in-fact, which allowed Goren to execute the assignment documents. Goren then later assigned the copyrights to plaintiff Simple Justice. (More about the default judgment in a moment.) In the instant case, Simple Justice sued Xentric on several theories, relevant here are the counts for copyright ownership and infringement. If DuPont had granted an exclusive license* to Rip-Off Report, then the court couldn’t have later assigned the same rights to Goren.

    The fundamental struggle for the court was that the checkbox wasn’t clearly labeled as assent to the Terms of Service, the text in the box immediately above it. It didn’t say “by checking this box you agree to the Terms of Service above and that …”; rather, the check box could be interpreted as agreeing only to the text next to the box.

    So what to do? The court sets off on the hopeless task of trying to decide whether this is a “clickwrap” or “browsewrap” license. I have come to agree with Venkat Balasubramani and Eric Goldman’s view that this has become a meaningless distinction, and what we should do instead is just look at basic contract formation principles.

    But the court forges on. This wasn’t “clickwrap” because of the defect:

    Xcentric construes the terms and conditions as a clickwrap agreement, but the user never affirmatively indicates his agreement. The terms accompanying the checkbox do not state that “I agree to the terms and conditions” or other such language indicating express accord. By checking the box, the user agrees only to the terms accompanying the checkbox. This means that the terms and conditions, including the grant of an exclusive license, which is paramount to a copyright transfer, constitute a browsewrap agreement.

    So the court then looks at whether there was assent to this “browsewrap” agreement:

    [B]rowsewrap agreements do “not require the user to manifest assent to the terms and conditions expressly. A party instead gives his assent simply by using the website.” [Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1176 (9th Cir. 2014)]. Clickwrap agreements are generally upheld because they require affirmative action on the part of the user. Because no affirmative action is required by a website user to agree to the terms of a browsewrap contract other than his or her use of the website, the determination of the validity of a browsewrap contract depends on whether the user has actual or constructive notice of a website’s terms and conditions. If there is no evidence of actual notice, then the website owner must show that it “put[ ] a reasonably prudent user on inquiry notice of the terms of the contract.” Nguyen, 763 F.3d at 1177.

    (Some internal citations, brackets and quotation marks omitted).

    But here’s the problem. We’re not looking for assent to just any contract, but an assignment of a copyright. That requires a writing. Ngyuen was about arbitration, and whether there was assent to a contractual provision about arbitration is not the same question as whether there is a writing signed by the assignor of the copyright.

    But that wrinkle doesn’t slow down the court. Based on the design of the webpage “the Court concludes that a reasonably prudent user was on inquiry notice of the terms and conditions associated with the [Rip-Off Report], and, therefore, the transfer of copyright ownership was valid.”

    But how could that be right? How can the court find that (1) there was no signature, or signature equivalent, because the checkbox did not refer to the Terms of Service that conveyed the exclusive license and yet (2) there was an assignment? Yup, that’s just irreconcilable.

    As a backstop, the court also found that the checkbox text granted “an irrevocable right to Xcentric to post [DuPont’s] report on the website,” which, “if the browsewrap agreement were somehow invalid” was “at the very least, a non-exclusive license to publish the Reports.”

    So the conclusion:

    The Court concludes that DuPont transferred copyright ownership to Xcentric by means of an enforceable browsewrap agreement. Xcentric is thus entitled to summary judgment as to Count I (declaratory judgment as to copyright ownership) and Count II (copyright infringement). Moreover, even if the browsewrap agreement were considered invalid and DuPont retained ownership of the copyrights to the Reports, he nonetheless granted a non-exclusive license to Xcentric and, therefore, he waived his right to sue Xcentric for infringement where its use did not exceed the scope of that license. The latter scenario also requires summary judgment for Xcentric as to Count II.

    I don’t know whether this was a valid assignment or not because the court answered the wrong question. The right question was “is this checkbox a signature agreeing to the Terms of Service”? The court said not, but while looking at it through the wrong lens. The court talked a lot about how everyone would understand scroll bars and hyperlinks and layout in the context of assent, so if one was looking at it in terms of a signature, rather than assent, the outcome might have been different. Eric Goldman says “I’m confident that a super-majority of users understood that they were agreeing to the terms when they saw that scrollbox and proceeded to post,” and I agree. So I don’t think it would be a stretch to say that this could be a signature to an assignment.

    Or, alternatively, would the checkbox terms suffice for a copyright assignment? They might, there’s a lot of law around the language of assignment, but that wasn’t explored by the court.

    So, in conclusion—who knows. It was just the wrong question and therefore examined using the wrong law.

    And the bonus issue: The district court’s assignment of the copyright to Goren in a default judgment is unlawful under Section 201(e), which prohibits an act “to seize, expropriate, transfer, or exercise rights of ownership with respect to the copyright, or any of the exclusive rights under a copyright” by a governmental body, except in bankruptcy, provided that the owner of the copyright is the original individual author who has never transferred it. (Some history here.) The court’s transfer of the DuPont copyrights was therefore ineffective.

    Technology & Marketing Law Blog view of the case here.

    Small Justice LLC v. Xcentric Ventures LLC, No. 13-cv-11701 (D. Mass. March 27, 2015).

    • I use the same language that the grant clause uses, “exclusive license,” although the grant includes the right to “use, copy, perform, display and distribute” the content. Further, not in the opinion but on the current Rip-Off Report Terms of Service page, the grant continues “and to prepare derivative works of, or incorporate into other works, such information and content, and to grant and authorize sublicenses of the foregoing.” Although called a “license,” it doesn’t look like there are any rights that the submitter will have retained, so this is a full-blown assignment.

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

    , , , , , , , , , , , ,

  • STC.UNM v. Intel Stands

    I’ve written in the past about a patent ownership stand-off, where, because of a mix-up in assignments and a disinterested possible co-owner, the interested owner cannot enforce the patent (original decision here and en banc decision here). The Supreme Court has refused to review the decision, so Ethicon, Inc. v. United States Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998) remains good law.

    STC.UNM v. Intel, No. 14-717 (S. Ct. March 30, 2015) (cert. denied).

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

    , , , , , ,

  • Sometimes It’s That Easy

    Legal doctrine has developed a manufacturer-distributor paradigm, but that is too simplistic in today’s commercial world. What we have in ACRO Biosystems v. Acrobiosystems USA LLC, an opposition, is manufacturer versus branch office.

    The opposer is a Chinese manufacturer of biochemical reagents sold in the US under the mark ACROBIOSYSTEMS. The applicants are a US company and the individual who was the company’s incorporator. The opposer claims the US company is a division or branch, while the US company claims that it is the headquarters—actually, the applicants’ theory isn’t well-explained, probably because the evidence was so monumentally against them that it didn’t really support any relationship except the one the opposer claimed.

    The opposer, referred to in the opinion as Acro Beijing, was the first company to do business in the United States. After its first sales contract, the CEO, Mike Chen, contacted Kaifan Dai to establish a US division. According to Chen, the US entity, Acro USA, was to receive payments from the US customers and forward the payment to Acro Beijing, taking out about 10% as its operating costs. Chen’s desire was to be incorporator of the US entity, but Dai told Chen that the US company had to be under the name of a US citizen, permanent resident, or someone with a US work permit. Dai’s wife, Xuelian Zhao, had a work permit so she formed the US company. She also filed an application to register the ACROBIOSYSTEMS trademark in her name and the name of Acro USA, so we have a dispute over who owns the trademark.

    Putting the testimonial evidence aside, this is some of the documentary evidence about the relationship of the two companies:

    • A shareholder cooperation agreement signed by Zhao stating that Zhao had responsibility “for operation of the U.S. branch office (ACROBIOSTEMS [sic] USA LLC)” and she agreed to “complete all the legal formalities to ensure the full ownership by the Company [Acro Beijing] of the U.S. branch office”
    • An email from Dai saying “the U.S. branch will be the wholly owned subsidiary of the headquarter office [and] … [t]he ‘Acrobiosystems’ trademark registered by the U.S. Branch office is the company’s strategic assets”
    • An email from Dai saying “[a]ll of the U.S. branch company’s assets belong to the Beijing company”
    • An email from Dai entitled “US Branch Company report for discussion in the shareholder meeting” containing information regarding ” the US Branch Company” and the revenue it was transferring to Acro Beijing
    • An email from Dai saying that the “U.S. Branch Company’s accounting … including the costs, has always been consolidated with and under the unified controlled [sic] of the Beijing Company”

    It’s easy lifting from here:

    The foregoing evidence demonstrates that Applicant Acro USA was created by Kaifan Dai and Xuelian Zhao to act as a mere representative on behalf of Opposer Acro Biosystems, that Zhao’s function was to operate the U.S. entity on behalf of Opposer, and that Acro USA and Xuelian Zhao were Opposer’s representatives. The evidence further shows that all involved persons (i.e., Chen, Dai, and Zhao) treated Acro USA as a mere representative for Opposer, rather than treating Applicants as the owners of the mark in the United States. In view thereof, Opposer has demonstrated that there is no genuine dispute that it is the owner of the trademark ACROBIOSYSTEMS mark in the United States, and that Applicants acted as Opposer’s distributor. Cf. Global Maschinen GmbH v. Global Banking Systems, Inc., 227 USPQ 862, 866 (TTAB 1985) (“It is settled law that between a foreign manufacturer and its exclusive United States distributor, the foreign manufacturer is presumed to be the owner of the mark unless an agreement between them provides otherwise.”) (internal citations omitted).

    The applicants had some lame arguments that the Board rejected:

    Specifically, none of the documents provided by Applicants contradicts Opposer’s evidence which clearly shows that all individuals involved considered Acro USA to be Opposer’s representative. Applicants’ own statements in various emails corroborate Chen’s testimony and clearly demonstrate (i) that Dai and Zhao acted on behalf of Opposer in creating Acro USA and carrying out the business, and (ii) that the ACROBIOSYSTEMS mark belongs to Opposer. Applicants’ attempt to retract the previous statements of Dai and Zhao by stating that they were “opinion” does not raise a genuine dispute as to whether Applicants acted on behalf of Opposer.

    So, easily done. But I think it’s time to jettison the manufacturer-distributor paradigm. The doctrine creates a presumption in favor of the manufacturer,  Sengoku Works v. RMC Int’l, 96 F.3d 1217, 1220 (9th Cir. Cal. 1996) (“in the absence of an agreement between the parties, the manufacturer is presumed to own the trademark”); nevertheless, “a long-standing line of precedent holds that an exclusive distributor may acquire trademark rights superior to those of the manufacturer.” Id.  Trying to shoehorn these relationships with different contours into a “manufacturer-distributor” framework, which adds a presumption where perhaps none is justified (takes as an example the OEM manufacturing situation), simply muddies the waters. We should just look instead at the full scope of the relationship of the disputing parties and decide who the rightful owner is.

    HT to John Welch, author of my second favorite blog, for the case.

    ACRO Biosystems v. Acrobiosystems USA LLC, Opp. No. 91212675 (TTAB March 20, 2015)

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

    , , ,

  • Was It Licensed?

    Below is a portion of the “Submit” page when one posts a review on Rip-Off Report, owned by defendant Xcentric. (Click on the image for the full page.) If you were to use the scrollbar on the right, you would find this grant:

    “By posting information or content to any public area of www.RipoffReport.com, you automatically grant, and you represent and warrant that you have the right to grant, to Xcentric an irrevocable, perpetual, fully-paid, worldwide exclusive license to use, copy, perform, display and distribute such information and content ….”

    Underneath the scroll area is a check box with this text:

    “By posting this report/rebuttal, I attest this report is valid. I am giving Rip–Off Report irrevocable rights to post it on the website. I acknowledge that once I post my report, it will not be removed, even at my request….”

    Is this an effective grant of a copyright license? Why or why not?

    RipOff Report submit page

    Court’s conclusion to come.

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

    , , , , , , , ,

About Me

Learn more about me at my website, Chestek Legal

Recent Posts

Categories

Newsletter