Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Merck vs. Merck

    Lincoln VillageI used to live in the building seen above—well, maybe not that exact building, but one exactly like it in the same complex. It is Lincoln Village, military housing in Damstadt, Germany.

    Which doesn’t have much to do with anything, except that Merck KGaA is also in Darmstadt, Germany. When I was driving past the big “Merck” sign, I didn’t know that Merck KGaA is not the same “Merck” that we in the United States know, which is Merck & Co., Inc. The two have a common history; the U.S. company was created as a subsidiary of the German company in 1891. But the U.S. company was confiscated during World War I and the two companies have not been related since then. Merck & Co. uses the “Merck” mark in the United States and Canada and “MSD” in the rest of the world. Merck KGaA uses the mark “Merck” everywhere except the United States and Canada, and uses “EMD Group” in the United States and Canada. There are some co-existence agreements between the two companies and Merck KGaA uses geo-targeting tools to direct web users to the right pages.

    Both companies applied for the dot-merck top level domain name (“gTLD”) and both companies have filed Legal Rights Objections against the other. The Merck & Co. objections to the Merck KGaA applications were the first decided. All you need to know is the legal standard, and the result is clear:

    a DRSP panel of experts presiding over a legal rights objection will determine whether the potential use of the applied-for gTLD by the applicant takes unfair advantage of the distinctive character or the reputation of the objector’s registered or unregistered trademark or service mark (‘mark’) …, or unjustifiably impairs the distinctive character or the reputation of the objector’s mark …, or otherwise creates an impermissible likelihood of confusion between the applied-for gTLD and the objector’s mark ….

    You cannot reach a conclusion that a use is “unfair,” “unjustified” or “impermissible” when both have legitimate claims to the letter string. The Panel did the full analysis required of it, but the result really can be summed up in one paragraph:

    The question is whether a bona fide trademark owner that owns trademark rights in certain countries but does not have rights to a certain trademark in all countries of the world, should for that reason be prevented from obtaining a gTLD. In the view of the Panel, such a proposition does not make sense. If the opposite view would be accepted, it would be expected from any trademark owner interested in a gTLD to have trademark registrations in all countries of the world as otherwise another party could register one trademark in an “uncovered” country and thus prevent the first trademark owner from applying for and using its own gTLD.

    Whether there will be confusion is therefore for the parties to sort out on their own:

    Of course a rejection of the Objection does not preclude Objector from taking regular legal action should the use of the Disputed gTLD String by Applicant be infringing. It is, however, not for this Panel to anticipate on all the possible types of use Applicant could make of the Disputed gTLD.

    These two companies have coexisted for a hundred years, but you can’t help but wonder whether the time has come for one to bite the bullet and make the change. Both are huge companies, heavily invested in their names—it would probably be the most monumental renaming of any company ever done. But the amount of energy going into attentiveness about ever-vanishing geographic boundaries is also substantial and it’s never going to get better.

    Merck & Co., Inc. v. Merck KGaA, Case No. LRO2013-0069 (WIPO July 31, 2013) (“merck”).

    Merck & Co., Inc. v. Merck KGaA, Case No. LRO2013-0068 (WIPO July 31, 2013) (“emerck”).

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  • How the Copyright Act Changes Lives

    The Vanity Fair issue has been out for awhile now, but for anyone interested in Harper Lee, “To Kill a Mockingbird,” John Steinbeck, publishing, legal intrigue, contracts, copyright termination, or underhanded dealing, there is a lengthy investigative article in the August issue called “To Steal a Mockingbird.” It is the story behind a lawsuit filed by Harper Lee to recoup royalties paid to her agent after he convinced her to assign the copyright in her book to him.

    It is not only Harper Lee who claims to be victimized, but the Steinbeck heirs were involved in battling the same agent. As told in the Vanity Fair article, John Steinbeck’s sons were convinced by their stepmother, John Steinbeck’s third wife and widow, to give her powers of attorney in exchange for higher copyright revenues, apparently at the behest of the agent so that the agent could have complete control over the Steinbeck copyrights. Elaine died leaving her estate, including the revenue from the Steinbeck copyrights, to her own children and cutting out the Steinbeck blood heirs.

    Steinbeck’s son and granddaughter tried to terminate Elaine’s grant but were unsuccessful (blogged here), leaving the son, according to the article, “in a rented house, having lost the case and most of their money in the lawsuit.”

    The Court of Appeals decision in the Steinbeck case is a very technical analysis of a very technical copyright provision. But this story is a reminder of how, behind every court decision, no matter how sterile, there are complicated personal stories.

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  • It’s Hard to Be a Copyright Troll

    Link to IMDb
    subject matter of lawsuit
    I previously reported on a pending case, Contra Piracy v. Does 1-2919, where the court very quickly raised the issue of standing – sua sponte, because it’s still a John Doe case. The savvy court suspected something was up and put the plaintiff to its proof.

    Owning the bare right to sue isn’t enough for standing in a copyright infringement case; rather, one must be able to exercise, exclusively, one of the statutory rights of the author, such as the right to reproduce or distribute the work.

    In response to the court’s request for additional information on the plaintiff’s ownership interest, Contra Piracy provided the court with an Assignment Agreement, but the court wasn’t satisfied yet:

    It is apparent from Plaintiff’s brief, the attached declaration, and the assignment agreement,however, that the assignment is not the only contract between Plaintiff and Hannibal Inc. involving the copyrighted work. All three documents refer to a related member services agreement under which Plaintiff provides “intellectual property rights management to Hannibal Pictures, including counter-piracy services and enforcement of copyrights, of Hannibal Pictures’ intellectual property.” Plaintiff has not provided the Court with this member services agreement, contrary to the Court’s previous order.

    The plaintiff then provided the Contra Piracy Agreement. And, putting it all together, Contra Piracy didn’t have standing.

    It was a valiant effort by Contra Piracy because it had, in fact, been granted an exclusive distribution right:

    Contra Piracy grant language

    If you can’t read the image, it says “Assignor hereby grants to Contra Piracy the exclusive rights to copy and distribute the copyrighted Work or Works listed in Appendix 1 in the listed territories over internet-based peer-to-peer BitTorrent networks.”

    So you’d think this might be good enough – the plaintiff was enforcing its exclusive right to distribute on BitTorrent against those downloading using BitTorrent. But the court wasn’t fooled; on examination there were a number of reasons that the assignment wasn’t what it appeared to be:

    Plaintiff was assigned: (1) the right to enforce the copyright in the work; and (2) the right, which appears to be revocable (“revocable power of authorization”), to copy and distribute the work over peer-to-peer BitTorrent networks “in order to perform its tasks,” which tasks are exclusively enforcing the copyright to obtain income from out-of-court settlements to split with the copyright holder. The first, of course, does not confer standing. The second are exclusive rights in name only. In response to the Court’s further order requiring Plaintiff to file an additional declaration addressing the extent of commercial use of the P2P/BitTorrent protocol for distribution of copyrighted works, filed June 21, 2013, Plaintiff’s employee acknowledged that there is little to none and did not claim that Plaintiff engaged in any such commercial use. (Supp. Schneider Decl. ¶ 6 (stating that “it is exceedingly difficult to create a legitimate P2P/BitTorrent market in light of the overwhelming infringements utilizing the protocol” and that “the extent of legitimate commercial distribution via P2P/BitTorrent in a market sense is severely limited”). Plaintiff’s counsel further confirmed that this was the case at the hearing. Moreover, these purported rights appear to be revocable, as the Contra Piracy Agreement refers to a “revocable” power of authorization, which Plaintiff’s counsel could not explain at the hearing. Accordingly, the “exclusive rights” assigned to Plaintiff are illusory.

    ….

    [T]he Assignment Agreement and Contra Piracy Agreement are silent as to a number of things one would expect to see in an assignment of exclusive rights. The agreements say nothing about the duration of the assignment. Plaintiff’s counsel stated that he assumes that Hannibal Pictures could revoke the assignment if Hannibal Pictures withdrew is membership in Plaintiff. The agreements say nothing about whether the assignment could be sublicensed. Plaintiff’s counsel stated that he assumes Plaintiff could sublicense its rights. The agreements say nothing about royalties if Plaintiff were to exploit its rights to distribute or copy the work over a BitTorrent network. Plaintiff stated that he assumes any royalties would be split. The only split discussed in the Contra Piracy Agreement, however, is how the Plaintiff and its members will divide proceeds of settlements with alleged infringers. That the only monetary division discussed in the agreements involves settlement proceeds is further evidence that the purpose of the assignment was to give Plaintiff the ability to sue. Finally, the agreements are noticeably devoid of any provision for the disposition of any revenues that could be obtained from verdicts or court orders of fees or costs upon success in court, suggesting a business model of using the information obtained from early discovery into the identities of individual defendants to negotiate quick settlements under the threat of embarrassing and expensive litigation without actually litigating claims on their merits.

    III. Conclusion

    The stated purpose of the assignment, the lack of indicia that it was a legitimate assignment of exclusive rights, and the admittedly negligible value, if any, of the rights assigned (other than to obtain revenue through out-of-court settlements) convince the Court that in reality Plaintiff only holds the bare right to sue for copyright infringement. Thus, Plaintiff lacks standing under 29 U.S.C. § 501(b). The case is dismissed with prejudice.

    Contra Piracy v. Does 1-2919, No. C-13-01133 EDL (N.D. Cal. June 21, 2013) (Order on Plaintiff’s Brief for additional documents)

    Contra Piracy v. Does 1-2919, No. C-13-01133 EDL (N.D. Cal. July 23, 2013) (Order of Dismissal)

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  • What Every Patent License Must Have

    I was going to write about the case, but Dennis Crouch explains it so much better than I could.

    Kimble v. Marvel Enterprises Inc., No. 11-15605 (9th Cir. July 16, 2013)

  • Update: “What is an ‘E-Signature’?”

    I previously wrote about a case, Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., involving the assignment of copyrights by uploading photographs to a website. In it, the district court held that uploading a photograph was the equivalent of signing an agreement under the E-Sign Act. I was unhappy with the decision; it wasn’t clear that the uploader ever encountered the Terms of Use containing the copyright assignment language, and I didn’t believe that uploading a photograph met the definition of a signature – “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”

    The appeals court has now affirmed the trial court, albeit with facts that look a little different than they did before. Now, the court informs us that, in fact, “in order to submit photographs to the MRIS Database, the subscriber must click a button to assent to the TOU.n3” The footnote is telling, though: “fn3. The record is not clear as to the precise manner in which the TOU appears to subscribers.” I think that’s sloppy decisionmaking — how can there be a legal conclusion that a contract was formed if we don’t even know how, or if, one of the signatories to the contract saw it?

    But all is not yet lost for AHRN. This was an appeal of a preliminary injunction, so there will be more opportunity for some additional arguments:

    We make no comment (nor did the district court) as to whether the subscribers’ assent to MRIS’s TOU constitutes a valid agreement under generally applicable principles of contract law, or whether, as in Specht, 306 F.3d at 27, it might fail for lack of mutual assent. AHRN waived this argument by raising it for the first time in its reply brief.

    So the decision stands, at least for now. There is an extensive discussion of the E-Sign Act and its applicability to copyright assignments, if you’re interested.

    The court also makes passing reference to what I call the “Billy Bob defense,” a theory that a third party may not challenge the validity of an assignment if the parties to the agreement themselves do not dispute its validity. Even though plaintiff MRIS didn’t raise the defense, the court nevertheless did:

    Before delving into the E-Sign Act and the sufficiency of the transfer here, we note one initial consideration deriving from the particular relationship of these parties. Courts have held that, in situations where “the copyright [author] appears to have no dispute with its [assignee] on this matter, it would be anomalous to permit a third party infringer to invoke [Section 204(a)’s signed writing requirement] against the [assignee].” Put another way, Section 204(a) “was intended to resolve disputes between owners and alleged transferee[s], and was not intended to operate for the benefit of a third-party infringer when there is no dispute between the owner and transferee.” Although MRIS did not raise this argument, we nevertheless feel compelled to note the anomaly of allowing AHRN to fabricate for its own benefit a dispute between MRIS and its subscribers over copyright ownership in the photographs.

    (Internal citations omitted.) I am fairly vehemently opposed to this theory; it is the plaintiff’s burden to prove ownership, so I don’t understand why a plaintiff can’t be put to its proof.

    Finally, the court also had to sort out whether MRIS’s registrations for its database were adequate for standing to bring suit. Defendant AHRN claimed that the registrations didn’t cover the photographs, infringement of which was the only basis for the injunction. The court examined the problem thoroughly and disagreed, finding that the registrations were adequate. The area is a mess; I’ve written before about the disconnect between the Copyright Office’s requirements for registration and how the courts are misinterpreting the scope of the registrations in its decisional law on derivative works. Here we learn that there is the same problem with database registrations, although the Copyright Office has filed an amicus brief in the 9th Circuit that may help get things straightened out.

    Metropolitan Regional Info. Sys., Inc. v. American Home Realty Network, Inc., Nos. 12-2102, 12-2432 (4th Cir. July 17, 2013).

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  • A Patent Owner Who Doesn’t Own the Patent

    I’ve often written about the various categories of potential plaintiffs in patent infringement suits. Depending on what rights a licensee acquired, it may or may not have constitutional standing to bring a patent infringement lawsuit. A new case, CopyTele, Inc. v. E Ink Holdings, Inc., comes at it from a somewhat different angle — here, the patent owner is claiming that it didn’t grant an exclusive license and therefore may bring a lawsuit, not the usual case where it is a licensee claiming it obtained enough rights to sue. The court summarizes defendant E Ink’s argument this way:

    In essence, E Ink contends that CopyTele’s lawsuit is premature because (1) it previously assigned all substantial rights to the patents at issue to a third-party exclusive licensee, AU Optronics Corp. (“AUO”); (2) it has not yet secured a judgment (in a related case, CopyTele, Inc. v. AU Optronics Corp., No. C–13–0380 EMC) that the assignment has been rescinded; and (3) even upon rescission CopyTele will have standing only to sue prospectively and not retroactively.

    E Ink convinced the court on all three points. As a refresher on standing:

    [t]here are three general categories of plaintiffs encountered when analyzing the constitutional standing issue in patent infringement suits: those that can sue in their own name alone; those that can sue as long as the patent owner is joined in the suit; and those that cannot even participate as a party to an infringement suit.

    Often these three types of potential plaintiffs are called “owner” (or “assignee”), “exclusive licensee” and “non-exclusive licensee.” Courts create some confusion, though, because the words “exclusive licensee” are used for the second category, one who can sue as long as the patent owner is joined, as well as to describe a subset in the first category, where the transfer of rights is so complete is it effectively an assignment, also sometimes called a “virtual assignment” or “de facto ownership.”

    This case is about the latter situation: CopyTele claimed that it had not effectively assigned the patent. If instead AUO was the de facto owner, then CopyTele could not itself bring suit. See, e.g., Alfred E. Mann Foundation for Scientific Research v Cochlear Corp., No. 2009-1447 (Fed. Cir. May 14, 2010) (“In either case, the question is whether the license agreement transferred sufficient rights to the exclusive licensee to make the licensee the owner of the patents in question. If so, the licensee may sue but the licensor may not.”).

    The opinion has an extensive discussion of the license between CopyTele and AUO — I won’t go into it, but it’s a good example of how to write an agreement that accomplishes de facto ownership without full assignment. There were scarce rights that CopyTele retained, specifically, CopyTele was responsible for maintenance fees, CopyTele “retained a non-exclusive right to use the Licensed Patents and Licensed Products in a non-competitive manner” and AUO couldn’t assign the agreement without CopyTele’s prior written consent. But that wasn’t enough to avoid a conclusion that the patent was assigned.

    CopyTele didn’t even have a contractual right to terminate the agreement, which led to the second point. CopyTele argued that, even if there had been a transfer of ownership to AUO, AUO had breached the license (which was the subject matter of the related case) and therefore the license between it and AUO had been terminated, leaving CopyTele with the right to sue.

    But not so fast, said the court. CopyTele conceded that whether there was a material breach was a question of fact that had to be resolved before patent infringement could be addressed. CopyTele’s “suggestion that it can regain the right to enforce the patent simply by a unilateral declaration that the EPD Agreement is terminated is without any support.”

    Thus, the lawsuit against E Ink was premature. Joinder of AUO wouldn’t solve the problem; CopyTele has to have standing before it can ask another party to be joined, but it doesn’t. Case dismissed without prejudice.

    CopyTele, Inc. v. E Inc Holdings, Inc., No. C-13-0378 EMC (N.D. Calif. July 9, 2013).

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  • Does a Covenant Not to Sue Run With the Patent?

    There is some belief in the open source community that a patent license and a covenant not to sue have different legal effect. The theory is that a license runs with the patent but that a covenant not to sue may not — in other words, if a company that has covenanted not to sue assigns its patents to another company, or is acquired, the assignee will be free from the covenant not to sue and can bring patent infringement claims against open source software implementations. One draft of version 3 of the GNU General Public License offered a covenant not to sue but it was changed back to a license (p. 20, sec. 3.3.2) because of this concern.

    But a California district court recently examined whether this legal distinction exists and held that it does not. In Innovus Prime, LLC v. Panasonic Corp., the covenant not to sue was a 1982 agreement between non-party Philips Corporation and defendant Panasonic Corporation. The parties agreed that the patent-in-suit, the ‘350 Patent, was covered by the 1982 Agreement. Plaintiff Innovus Prime was the patent owner after three previous transactions: Philips assigned the patent to NXP B.V., “subject to all existing rights, commitments, licenses, non-assertion agreements and the like made by Assignor [Philips] and/or its affiliates under said Patent Rights and to any extensions of term and/or renewal thereof.” NXB B.V. assigned the rights to NXP Holding 1 B.V., which was renamed Trident Microsystems (Far East) LTD. Trident Microsystems assigned the patent to Innovus Prime. Innovus Prime sued Panasonic, which raised a license defense.

    The district court relied on TransCore, LP v. Electronic Transaction Consultants Corp., No. 2008-1430 (Fed. Cir. April 8, 2009), for the proposition that a license and a covenant not to sue have the same legal effect. It then applied the well-settled principle that an assignee of a patent takes the patent subject to prior licenses, whether or not it has notice:

    Patent owners cannot transfer an interest greater than what they possess, so assignees “take[ ] a patent subject to the legal encumbrances thereon.” Datatreasury Corp. v. Wells Fargo & Co., 522 F.3d 1368, 1372–72 (Fed.Cir.2008) (explaining that agreements involving the actual use of the patent “run with the patent” and are binding on subsequent owners, but holding that arbitration clauses in license agreements do not involve actual use and do not run with the patent).
    …

    This occurs whether or not an assignee had notice. A subsequent assignee “takes title to the patent subject to such licenses, of which he must inform himself as best he can at his own risk.”

    Innovus argued that an earlier Federal Circuit case, Hilgraeve Corp. v. Symantec Corp., No. 00-1373, 00-1374 (Fed. Cir. 2001), compelled a different conclusion. In Hilgraeve there was a covenant not to sue but defendant Symantec was not the direct grantee; rather, it acquired the covenant in a transaction. The Innovus court distinguished Hilgraeve:

    Unlike the situation in Hilgraeve, here, Panasonic is not attempting to convey a license to anyone. Instead, Panasonic is merely seeking not to be sued, the right which it possesses under the 1982 and 2007 Agreements. While it is true that Panasonic may not be able to grant a license to the ‘350 Patent to a third party, it is not attempting to do so. The question is whether Philips can convey the right to sue Panasonic, a right which it does not possess, to assignees.

    So the relevant inquiry is, not whether a grant is called a “covenant not to sue” or a “license” (both called “authorizations” in TransCore), but rather the scope of what was granted. In Innovus, the covenant allowed Panasonic to practice the patent in any way it desired for the life of the patent. Panasonic’s motion for summary judgment of noninfringement was therefore granted.

    The case is also notable for its explanation of the effect of recordation, or lack thereof:

    While this court understands the unfairness that may arise from an assignee not being on notice of a prior covenant not to sue or license, it is well settled that assignees take a patent subject to any prior licenses. And licenses are not required to be recorded any more than covenants not to sue. The assignee’s duty to inform himself of encumbrances on the patent rights exists regardless of the formal definition of the agreement as a covenant not to sue. As such, the fact that Innovus is a fourth generation assignee does not change the fact that Innovus did not acquire the right to sue Panasonic under the ‘350 Patent because neither Philips nor any later assignee could “convey what [it] does not own.”

    And the court had no sympathy with this particular set of facts, either:

    Moreover, the first assignment, from Philips to NXP B.V., specifically states that the Assignee, NXP B.V., took the patent

    subject to Assignor [Philips] retaining a royalty free, world wide, nonexclusive, irrevocable and unrestricted license … and further subject to all existing rights, commitments, licenses, non-assertion agreements and the like made by the Assignor … and/or its affiliates under said Patent Rights and to any extension of term and/or renewals thereof.

    Thus, NXP B.V. expressly took the patent subject not only to Philip’s continued license, but also subject to Panasonic’s non-assertion rights…. Because Philips never possessed the right to sue Panasonic, Philips could not convey that right to NXP B.V., NXP B.V. could not convey that right to NXP Holdings, and NXP Holdings could not convey that right to Innovus. All of these assignments are available as a matter of public record, including the first assignment from Philips to NXP B.V., which contains the express limitations on the rights transferred and should have put Innovus on notice of the nonassertion rights (although notice is not required, as explained supra).

    Innovus Prime, LLC v. Panasonic Corp., No. C-12-00660-RMW (N.D. Calif. July 2, 2013).

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  • When “Exclusive Licensee” Equals “Registrant”

    Heraeus Germany makes dental products and distributes them in the United States through a sister company, plaintiff Heraeus Kulzer LLC (Heraeus America). Defendant Omni Dental Supply imports gray market products it claims are made by Heraeus Germany but intended for distribution in other countries, primarily China. In order to stop Omni, Heraeus Germany made Heraeus America the exclusive importer of the dental products and granted “an exclusive right and license to use trademarks, trade names and other marks owned and/or used by Heraeus [Germany].”

    Heraeus America sued Omni under Section 32, et al., of the Lanham Act. By its terms Section 32 is limited to actions brought by the “registrant,” but some courts define the registrant to include exclusive licensees. The First Circuit, the controlling court for this case, is one. Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 160 (1st Cir.1977). The theory is that where the license is equivalent to an assignment, the exclusive licensee has standing. See Fin. Inv. Co. (Bermuda) Ltd. v. Geberit AG, 165 F.3d 526, 531-32 (7th Cir. 1998) (“a truly exclusive licensee, one who has the right even to exclude his licensor from using the mark … is equated with an assign[ee] since no right to use [the mark] is reserved to the licensor, and the licensee’s standing derives from his presumed status as an assignee.”); see also Calvin Klein Jeanswear Co. v. Tunnel Trading, 98 CIV. 5408 (THK), 2001 WL 1456577, at *4 (S.D.N.Y. Nov. 16, 2001) (quoting cases). My non-comprehensive review of the case law suggests that the focus on the ability to enforce trademark rights against the owner as the de facto definition of an exclusive license stems from Quabaug (“Quabaug admits that it does not have the power, under either the original 1964 agreement with Vibram or the 1974 amendment, to exclude importation of soles bearing the VIBRAM mark. However, an owner, assignee, or ” exclusive licensee” of a registered United States trademark would have such power. 15 U.S.C. § 1124; Bourjois Co. v. Katzel, 260 U.S. 689, 43 S.Ct. 244, 67 L.Ed. 464 (1923).”).

    In Heraeus, defendant Omni claimed that merely reciting in the agreement that Heraeus America was an “exclusive licensee” wasn’t good enough. Omni claimed that Heraeus America wasn’t an exclusive licensee because the agreement didn’t specifically give Heraeus America the right to exclude Heraeus Germany itself from selling product directly into the United States, or grant Heraeus America the power to bring infringement claims.

    But it’s a bit of a circular argument — we often use “exclusive” and “non-exclusive” in the grant of rights and expect that they have a commonly understood meaning. Indeed, I thought that referring to a license as “exclusive” meant that the licensor was itself excluded from using the mark. But the court approached it this way:

    It is true that merely terming a license agreement “exclusive” is “not conclusive as to its legal effect” if the actual rights granted under the agreement are inconsistent with the characterization. In the trademark context, an exclusive licensee is more often defined by what it is not, rather than what it is. It is clear that to earn the badge of exclusivity, a licensee must have the power to: (1) exclude importations and sales in its licensed territory by others, including the trademark owner; and (2) to enforce the licensed trademarks in court. See Quabaug Rubber, 567 F.2d at 159 (plaintiff was not an exclusive licensee where it lacked “the power to exclude importations and sales by [the trademark owner] and its foreign licensees in the United States.”). While nothing in the Distribution Agreement gives Heraeus America the explicit right to forbid Heraeus Germany from selling dental products in the United States, there is also no language in the Agreement that would prevent it from doing so. In light of the silence of the Agreement on the issue, the court looks to the conduct of the parties to the Agreement for guidance. In this regard, it is telling that there is no evidence whatsoever that Heraeus Germany or any of its foreign affiliates have ever attempted to circumvent Heraeus America by selling dental products directly in the United States. In other words, Heraeus Germany has always behaved consistently with the understanding that Heraeus America has the “exclusive right and license” to use its marks in the United States. Thus, Heraeus America is an exclusive licensee of the Heraeus marks.

    (Citations omitted.) So at least this court doesn’t agree with me that by definition an “exclusive” licensee has the right to exclude the licensor; instead it examined not only all the terms of the agreement but the behavior of the parties, too.

    But is this even the right question to ask? Shouldn’t it be “are you a registrant?” rather than “are you an exclusive licensee?”

    First off, I agree with McCarthy that the statute says “registrant” and should be interpreted to mean what it says:

    Author’s Comment: I believe that the statute and the majority of cases interpreting it creates a clear and bright line rule: only the registrant of record has standing to sue for the rights and remedies provided by Lanham Act § 32(1) for the owner of a registered mark. No amount of judicial interpretation or manipulation of words can turn an exclusive licensee into an assignee. A trademark assignment and license are two quite different transactions with widely different impacts. I believe that the minority view cases which allow an exclusive licensee to sue because it is “almost like” or “tantamount to” an assignee are not following the statute. If an exclusive licensee wishes to sue in federal court, it can do so only under Lanham Act § 43(a), unaided by the benefits of registration. Those benefits can only be invoked by the registrant.

    6 McCarthy on Trademarks and Unfair Competition § 32:3 (4th ed.) Nevertheless, even if we don’t strictly require that it be the registrant who brings suit, the legal question shouldn’t be “is the licensee exclusive,” but rather “is the plaintiff a de facto assignee?” In the trademark context that must include the right to exclude even the trademark owner, but really should include all of the rights of the owner, such as the right to license the mark or take actions that affect the goodwill of the mark. Examining whether Heraeus Germany imported through other distributors hardly answers the question.

    However, a lesson for license drafters: in the trademark context, don’t assume that “exclusive” has any meaning. You still need to spell out at least that it will be a breach of contract for the licensor to use the mark itself in the territory and that the licensee has the right to enforce the mark. Better yet, if you want to ensure that all the remedies to which the trademark owner is entitled under the Lanham Act are available, either fully assign the mark or have the true trademark owner file the lawsuit.

    Heraeus Kulzer LLC v. Omni Dental Supply, No. 12-11099-RGS (D. Mass. July 1, 2013).

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  • The Value of Recording

    A company assigned the same copyright in a film to two different companies. Who owns it?

    The film is Italian classic La Dolce Vita:
    LaDolceVitaPosterLarge

    The parties agree that a a company called Cinemat S.A. was the owner of the copyright, by assignment from original producer Riama Films S.p.A. The problem arises with the next link, with Cinemat subsequently conveying the copyright to two different companies, one in the plaintiff’s chain of title and one in the defendant’s chain of title. The court recites long chains of title for each party, but it all boiled down to which of the two original conveyances by Cinemat was the valid one.

    The first conveyance in time (big file warning), on January 7, 1962, was from Cinemat to a company called Astor International. One hitch, though: Cinemat didn’t own the copyright at the time it signed the agreement with Astor International. Cinemat then obtained the copyright on March 9, 1962. After that there were two more conveyances — the first, on July 25, 1962, was a single-page assignment from Cinemat to a company called Astor Pictures. The second, on July 26, 1962, was between the same parties and explained that on January 11, 1962, four days after the Cinemat-to-Astor International agreement, Astor International had assigned its rights to Astor Pictures, and that this assignment from Cinemat directly to Astor Pictures was in furtherance of that agreement. These are the transactions through which plaintiff Paramount Pictures claims ownership.

    Defendant International Media Film, Inc. (IMF) claims that it owns the copyright by virtue of an assignment on December 9, 1980 from Cinemat to a company called Hor A.G., 18 years after the Cinemat to Astor International/Pictures transactions.

    It’s an easy conclusion, easy enough for summary judgment — Paramount, with the earlier assignment, owns the copyright. IMF tried to claim that the subsequent assignment to Hor called into question the validity of the earlier assignment to Astor International/Pictures. The court disagreed:

    The purported Cinemat–Hor Transfer does not, in and of itself, call into question Plaintiffs’ ownership of the rights to the Film because it does not directly attack the authenticity or validity of any of the transfers in Plaintiffs’ chain of title. Rather, if Cinemat had already transferred the same rights to Astor Pictures in 1962, then the Cinemat–Hor Transfer eighteen years later is a nullity and therefore irrelevant to Plaintiffs’ Motion. Further, Defendant has cited to no case law, and the Court can find none, holding that evidence of a subsequent, conflicting transfer of rights calls into question an earlier transfer whose authenticity is established. Accordingly, the Court finds that evidence of the purported 1980 Cinemat–Hor Transfer is immaterial to the disposition of Plaintiffs’ Motion.

    IMF also claims that the timing of the original assignment from Cinemat to to Astor International, before Cinemat actually owned the copyright, meant that the assignment was invalid. Examining the agreement, however, Cinemat assigned no more than it owned at the time:

    The Cinemat–Astor International Agreement specifically provides that “[a]ll copyrights to the Film and registrations if and where existing thereof shall remain in the name of the Producers and/or the Seller” [i.e., Riama Films S.p.A.] until Astor International made all required payments under the contract. This language clearly contemplates that Riama may still retain some of the rights to the Film at the time the agreement was executed.

    And, even if the first assignment to Astor International was invalid, the subsequent assignment from Cinemat to Astor Pictures directly, in which Cinemat stated that it “had no further rights of any kind in and to the Film” in the territory, did the trick:

    Because Plaintiffs trace their chain of title through Astor Pictures, the Cinemat–Astor International Agreement is ultimately irrelevant, and thus Defendant’s arguments that it is internally inconsistent and that it purports to transfer rights that Cinemat did not own are likewise immaterial.

    Thus Paramount Pictures owns the copyright and IMF was a contributory infringer by its licensing of the films.

    Presumably the original assignments from Cinemat to Astor International/Pictures were not recorded, or else the court would have mentioned it. Presumably also, the assignment from Cinemat to Hor wasn’t recorded, or else IMF would have raised a bona fide purchaser in good faith defense. 17 U.S.C. § 205(d). Had either recorded, there wouldn’t have been a lawsuit.

    Paramount Pictures Corp. v. International Media Films, Inc., No. CV 11-09112 SJO (AJWx) (C.D. Calif. June 12, 2013).

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  • You Need to Ask Who Is Making the Product

    Nahshin v. Product Source International, LLC is a fairly routine manufacturer-distributor dispute with a twist — a middleman. It could have mucked things up a bit, but the Trademark Trial and Appeal Board handled it neatly.

    Israeli businessman and petitioner Leonid Nahshin adopted the mark NIC-OUT at least as early as January 1, 2002 outside the United States. The mark is for a cigarette filter. Two months later he entered into an agreement with non-party Nicholas Maslov to market and sell the product in the United States. Registrant-respondent Product Source International contracted with Maslov for the goods starting in 2003.

    Although the Board didn’t rely on the information for its decision, Nahshin filed an application to register NIC-OUT in 2003, but the application was refused (for reasons unrelated to this cancellation) and abandoned in 2004.

    Product Source filed the involved application on March 21, 2006. A few months later, Nahshin contacted Product Source and in August, 2007 Product Source started sourcing the product directly from Nahshin. Product Source’s application registered; a couple of years later Nahshin petitioned to cancel the registration.

    The Board deals with it in fairly simple fashion: it started with the proposition that Nahshin originally owned the mark:

    Petitioner has shown that he adopted the trademark NIC-OUT at least as early as January 1, 2002, when he entered into an agreement for the production of NIC-OUT cigarette filters. Two months later, petitioner entered into an agreement with Nicholas Maslov to market and sell petitioner’s NIC- OUT product in North America. Mr. Maslov promoted and distributed said product in the United States from 2002 through 2008.

    There is no evidence that petitioner ever agreed that Mr. Maslov would own the mark in the United States or that petitioner ever assigned his rights in the mark to Mr. Maslov. Accordingly, through the distribution of NIC-OUT filters in the United States by Mr. Maslov, petitioner became the owner of trademark rights in the mark NIC-OUT in the United States; Mr. Maslov did not.

    Although Product Source filed an application to register the mark, there was no evidence that Maslov authorized Product Source to do so or that any of the agreements between Maslov and Product Source transferred the mark between them or that Maslov had any rights to transfer. And as between Product Source and Nahshin, the mere distribution of a foreign manufacturer’s branded product does not give the distributor ownership interest and there was no evidence that Nahshin transferred any rights to Product Source. Nahshin therefore remains the owner of the mark. Laches and acquiescence defenses failed.

    I initially had some sympathy for Product Source — Product Source said that it didn’t know where Maslov was getting the product or knew of Nahshin before it filed its application. Its relationship with Maslov was also fairly casual, so I could see some ambiguity about who owned what and that Product Source could have a good faith belief that it owned the mark.

    But then I looked at the specimens, Nahshin’s (top), filed in January of 2003, shortly after Product Source started buying the goods from Maslov, and Product Source’s (bottom), filed three years later:

    Petitioner's specimen
    Petitioner’s specimen
    Registrant's specimen
    Registrant’s specimen

    Given the similarity of the specimens, there isn’t really any doubt that Product Source was simply reselling what it first bought from Maslov and later from Nahshin. Not mentioned in the case, Maslov had also tried, unsuccessfully, to register the NIC-OUT mark. Three applicants, all for the same trademark.

    There was no suggestion in the case of any wrongdoing on any attorney’s part, but the situation made me curious. As the attorney, what is your duty to inquire into the circumstances of the manufacture of the client’s goods? If a client comes to you and asks you to register a mark for specific goods and provides a specimen, do you ask who made the goods? Who spec’ed the goods? Whether your client was giving “the benefit of his reputation or of his name and business style” to goods that another entity manufactured? And if you later learned that the client is buying exactly the same goods but from a new source, having cut out a middleman, do you ask then? What do you do about the pending application?

    Nahshin v. Product Source International, LLC, Opp. No. 92051140 (TTAB June 21, 2013).

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