Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Billy-Bob Teeth Bites Again

    I recently wrote about the difference between standing in patent cases and copyright cases, and the always erudite Ron Coleman over at Likelihood of Confusion contributed on the topic. There is, in my mind, a flaw in copyright jurisprudence that essentially bars a defendant from challenging the chain of title for ownership of a copyright. And it strikes again.

    Engenium Solutions, Inc. v. Symphonic Technologies, Inc. is a software copyright case, so you know it’s complicated on many levels. The software in question is called “Scheduling Workbench” and is a customized scheduling and maintenance tool compatible with SAP software (SAP is not a party). Scheduling Workbench was developed by the plaintiff Engenium Solutions, but under a Developer’s License Agreement (“DLA”) with SAP. The DLA allotted copyright ownership for new software for the SAP platform in different ways, depending on whether the software was an “Add-on” (for which the developer would own the copyright), an “Enhancement” or a “Modification” (with the copyright in the latter two owned by SAP). In this case, SAP certified the Scheduling Workbench as an Add-on.

    Engenium then licensed the Scheduling Workbench to ConocoPhillips in a Master Software License, Maintenance and Service Agreement (“MLA”). The MLA had what might be conflicting provisions about the ownership of the copyright, saying both that ConocoPhillips had only a license to Scheduling Workbench but also, in boilerplate, that “All copyrights … developed or created by Licensor [i.e., Engenium] during the course of performing the work for Licensee [i.e., ConocoPhillips] shall belong exclusively to Licensee and shall, to the extent possible, be considered a work made for hire for Licensee ….”

    The defendants challenged Engenium’s copyright ownership in several ways: first, that the Scheduling Workbench software was not an Add-on but either a “Modification” or “Enhancement” and so the copyright was owned by SAP; second, that at least some parts of the Scheduling Workbench software were developed for ConocoPhillips and therefore ConocoPhillips owned the copyright by the terms of the MLA.

    So a very convoluted ownership problem, which the court handled this way:

    Plaintiff correctly points out that numerous courts, including this one, have held that alleged infringers may not avoid liability by arguing that a plaintiff does not own the copyright at issue due to defects in a copyright transfer agreement between the plaintiff and a non-party transferor. Billy-Bob Teeth, Inc. v. Novelty, Inc., 329 F.3d 586, 592-93 (7th Cir. 2005)….In this case, unlike the above precedents, Defendants argue that the DLA and the MLA are valid transfer agreements, and Engenium has successfully transferred ownership to SAP and ConocoPhillips under 17 U.S.C. § 204. However, the precedents cited by Plaintiff are equally applicable; where there is no dispute between contracting parties as to the ownership of the copyright, a defendant accused of infringement may not avoid liability by arguing that the contract actually worked a transfer of ownership. SAP itself agrees that Scheduling Workbench is owned by Engenium, as evidenced by the fact that SAP certified Scheduling Workbench as an add-on. Because SAP agrees that Engenium is the owner of the copyright at issue, Defendants ought not be permitted to avoid liability by arguing that SAP actually owns the copyright. Thus, even if Defendants could produce evidence that would support their contention that the capacity availability feature of Scheduling Workbench falls under the definition of an enhancement under the DLA, such an argument is not an appropriate defense to a copyright infringement suit.

    Okay, well I can see some economy in the use of judicial resources here by characterizing it as an improper defense, although I’d rather see it as simply that no reasonable factfinder could find that SAP owns the copyright. But then we get to the ConocoPhillips MLA:

    Defendants’ argument that Engenium transferred ownership of certain aspects of Scheduling Workbench to ConocoPhillips under the MLA fails for the same reasons. While it is not entirely clear from the MLA whether the changes made to Scheduling Workbench at ConocoPhillips’ request constitute “work product” owned by ConocoPhillips, or are merely “updates,” “versions,” or “releases” owned by Engenium, the Court need not resolve the matter. Defendants may not rely on an agreement transferring copyright ownership to avoid liability in an infringement suit.

    That’s it, baldly, “I don’t know who the heck owns what, but I’m saying you don’t even get to ask.” What?

    How did we get here? It started with Imperial Residential Design, Inc. v. Palms Development Group Inc., then was extended by Billy-Bob Teeth, Inc. v. Novelty, Inc., which, for no good reason, made the broad policy statement that

    [The defendant] simply does not having standing [to challenge ownership of the copyright] under § 204. The statute is in the nature of a statute of frauds and is designed to resolve disputes among copyright owners and transferees. As the court said in Imperial Residential Design, “the chief purpose of section 204(a), (like the Statute of Frauds), is to resolve disputes between copyright owners and transferees and to protect copyright holders from persons mistakenly or fraudulently claiming oral licenses or copyright ownership.”

    That may have been why there is a writing requirement in the statute, but that’s a significant amount of judicial activism to turn it into a basis for denying a defendant the right to challenge the threshold element of a plaintiff’s claim, ownership of the copyright.

    And look how far it’s gone. Both Billy-Bob Teeth and Imperial Residential Design were cases where there was an oral transfer later memorialized in writing, with the challenge being whether the oral agreement actually ever existed. It makes some sense to avoid that challenge; it is going down a bit of a rabbit hole to question whether there was an oral agreement when the parties to the agreement don’t challenge it and there ultimately was a writing confirming the assignment. But how we go from “you can’t challenge an undisputed oral agreement later memorialized in writing” to “you may not rely on an agreement transferring copyright ownership to avoid liability in an infringement suit” is, I repeat myself, crazy talk. In Engenium, we have no idea what ConocoPhillips thought about the situation and no reason to think that ConocoPhillips was in agreement with Engenium about the copyright ownership. The reasoning in Imperial Residential Design and Billy-Bob Teeth has no place here.

    So I’m going to go register me some copyrights, claim I won them in a poker game, and get busy ….

    Engenium Solutions, Inc. v. Symphonic Tech., Inc., No. H-10-4412 (S.D. Tex. Feb. 15, 2013).

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

    , , ,

  • Assignor Estoppel is Only a Shield

    Here’s a bit of an odd case — too much of a stretch for the court’s taste, but I suppose a hat tip for the try, and the plaintiff got out of it without being sanctioned.

    The case involves “assignor estoppel.” Assignor estoppel is an equitable doctrine that prevents an assignor of a patent from later claiming that the patent is invalid when sued for infringement of the patent. In Semiconductor Energy Laboratory Co. v. Nagata, Nagata was the assignor, having assigned his patent rights to plaintiff Semiconductor Energy (SEL). Things went swimmingly; SEL successfully asserted the patent and Nagata cooperated. Six years later SEL brought suit against Samsung in Wisconsin, but this time Nagata had became a fact witness for Samsung. He repudiated his signature on the assignments, Samsung alleged inequitable conduct, and the case settled. SEL claimed the case settled at a lower amount because of Nagata’s testimony.

    So SEL sued Nagata in federal court in California. There was one federal cause of action, for “Declaratory Judgment — Violation of Federal Patent Law,” plus state law claims for declaratory judgment for anticipatory breach of contract, slander of title, quiet title and unjust enrichment.

    The patent-based theory was an attempt to use assignor estoppel offensively, that is, SEL claimed that assignor estoppel barred Nagata from conduct that attacks the patent’s validity. But the Court of Appeals for the Federal Circuit didn’t see it the same way, taking its clue from the word “estoppel”:

    SEL relies on Diamond Scientific for the proposition that the doctrine of assignor estoppel is “not merely a defense,” but that it “embodies fundamental principles of federal patent law and policy” by imposing a “duty of fair dealing . . . on an inventor who assigns intellectual property rights that are protected by the Constitution.” … But SEL cites no precedent or statute establishing assignor estoppel as a federal cause of action. SEL thus effectively invites us to create a new federal cause of action recognizing a supposed violation of the assignor estoppel doctrine under the Declaratory Judgment Act….

    Despite SEL’s contentions, assignor estoppel is a form of estoppel, and with rare exception, estoppel is a shield; it is an affirmative defense, not a claim for relief on its own…. [W]e are not inclined to transform the shield into a sword. The relief requested by SEL is akin to seeking a declaratory judgment of patent validity, which is not a viable cause of action. As the district court fittingly noted, “it simply makes no sense to use a doctrine intended to estop a party from advancing a particular claim or defense in a legal case as a way to sue a non-party who has made no claim or defense in a legal case.”

    In the Federal Circuit’s opinion, “The appropriate remedy, if any, for SEL to foreclose Nagata’s relevant, factual testimony might have been to challenge his credibility in the crucible of cross-examination during the Wisconsin case, not to bring collateral litigation against him under a nonexistent independent cause of action.” The lower court also properly declined to exercise supplemental jurisdiction over the state law claims.

    Semiconductor Energy Lab. Co. v. Nagata, No. 2012-1245 (Fed. Cir. Feb. 11, 2013).
    Semiconductor Energy Lab. Co. v. Nagata, No. No. C 11-02793 CRB (N.D. Calif. Jan. 23, 2012) (district court opinion).
    Semiconductor Energy Lab. Co. v. Nagata, No. No. C 11-02793 CRB (N.D. Calif. Oct. 21, 2011) (First Amended Complaint).

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

    ,

  • Who, Exactly, is an “Author”?

    I confess that I haven’t paid enough attention to Aalmuhammed v. Lee, 202 F.3d 1227 (9th Cir. 2000) and its direction on the issue of “authorship” in a joint work. In Aalmuhammed, the Ninth Circuit observed that not everyone who contributes to a work is an author and set out, in the context of a contribution to a motion picture, how to determine whether someone was an author:

    First, an author “superintend[s]” the work by exercising control. This will likely be a person “who has actually formed the picture by putting the persons in position, and arranging the place where the people are to be – the man who is the effective cause of that,” or “the inventive or master mind” who “creates, or gives effect to the idea.” Second, putative coauthors make objective manifestations of a shared intent to be coauthors, as by denoting the authorship of The Pirates of Penzance as “Gilbert and Sullivan.” We say objective manifestations because, were the mutual intent to be determined by subjective intent, it could become an instrument of fraud, were one coauthor to hide from the other an intention to take sole credit for the work. Third, the audience appeal of the work turns on both contributions and “the share of each in its success cannot be appraised.” Control in many cases will be the most important factor.

    In Reinsdorf v. Skechers U.S.A., the court considered the question in the context of advertising material. Richard Reinsdorf took photos that were to be used in advertising for the shoe company Skechers. His photos were only raw images; Skechers took the images and altered them for the advertisements. You can see the types of changes made below, with the ad on the left and a similar raw photo on the right:

    (click on image for larger version)

    Reinsdorf invoiced Skechers for the photos. He later alleged that Skechers exceeded the temporal and geographic scope of the license that he granted.

    Skechers’ defended that the advertisements were a joint work of authorship and therefore, as a joint author, it could do what it liked with the photos. Reinsdorf sought to disavow that he was a joint author of the finished works.

    According to the statute and case law, in the Ninth Circuit a work of joint authorship is prepared by two or more authors who make independently copyrightable contributions and intend for those contributions to be merged into inseparable or interdependent parts of a unitary whole. 17 U.S.C. § 101; Ashton-Tate Corp. v. Ross, 916 F.2d 516, 521 (9th Cir. 1990). But this begs the question — when is one an “author”?

    Which is what takes us to Aalmuhammed and its three factors, as described by the Reinsdorf court: 1) an alleged author exercises control over a work, serves as the inventive or master mind, or creates or gives effect to an idea; 2) there exists an objective manifestation of a shared intent to be coauthors; and 3) the audience appeal turns on both contributions and the share of each in its success cannot be appraised.

    With respect to control, there can be joint control when both parties have creative control over separate and indispensable elements of the completed product. That was the case here; Reinsdorf had control over the raw photos and Skechers over the graphic design. This weighed in favor of joint authorship.

    With respect to audience appeal, there was no evidence that the success was attributable to one or the other, so this factor weighed in favor of joint authorship.

    Which leaves us with the objective manifestation of the parties’ intent on joint authorship. Here, the court distinguished the parties’ intent that their work be merged into a unified whole from the intent that they be joint authors:

    Aalmuhammed itself provides a useful illustration of the distinction. There, the plaintiff wrote certain passages and scenes that appeared in a movie. The court found that the parties all intended for the plaintiff’s contributions to be merged into independent parts of the movie as a whole. That intent, however, had no bearing on whether the parties intended the contributing plaintiff to be an “author” of the film. Applying the control, audience appeal, and intent factors described above, the Aalmuhammed court ultimately determined that, despite the parties’ intent to merge their independent contributions, the parties did not intend for the plaintiff to be a co-author of the movie and the plaintiff was not an author of the film.

    So although Skechers showed that Reinsdorf intended that his work become part of a unified whole, that wasn’t enough.  And what hurt Skechers the most? Paying Reinsdorf:

    Indeed, the parties behaved in ways uncharacteristic of joint authors. Perhaps most importantly, Reinsdorf charged Skechers thousands of dollars for his work. Not only did Reinsdorf charge for his time and effort, but also for “usage” of the photographs. Reinsdorf also attempted to limit Skechers’ use of its ads by including temporally and geographically restrictive language in his invoices to Skechers. Skechers, for its part, also sought to prevent Reinsdorf from making use of the finished images on his personal website, even during the pendency of this suit.A party intending to jointly produce a finished work generally would not require payment from a co-author and, conversely, would not likely agree to pay for a purported co-author’s contribution. More importantly, a co-author would not attempt to constrain an intended co-author’s use of a collaborative work. Other courts have come to similar conclusions under similar circumstances. In Tang v. Putruss, 521 F. Supp. 2d 600 (E.D. Mich. 2007), for example, a contract between a photographer and a purported coauthor required that the second party pay the photographer money before using the photographer’s photos. Id. at 607. The court found such a provision inconsistent with an intent to be joint authors. Id.

    The court in Robinson v. Buy-Rite Jewelry, Inc., No. 03 CIV 3619(DC), 2004 WL 1878781 (S.D.N.Y. Aug. 23, 2004), addressed circumstances similar to, but critically different from, those here. In Robinson, as here, a photographer was hired for a fashion shoot, and yielded all subsequent decision-making authority as to how the photos would be used. Id. at *3. Unlike here, however, the photographer agreed that the other contracting party could use the photographs without limitation. Id. Relying on this “critical” fact, the court concluded that the parties did intend to be joint authors. Id.

    Huh. I don’t think I buy that as a general rule, or even necessarily good evidence. There are many reasons why one joint author would pay another, even a fixed amount. Because one author wanted to be compensated at the beginning of a project and not wait for a royalty stream. Because, as in this case, the value of the contribution cannot be tied to revenue because the work isn’t directly revenue-producing. Because one doesn’t want to take any risk on future income.

    The court concluded that a factfinder could find that there was an absence of intent to be joint authors of the finished work and summary judgment was therefore denied.

    I also wonder about Skechers’ desire that Reinsdorf be a joint author, which means that Skechers’ has a duty of accounting to Reinsdorf. Reinsdorf did a survey purportedly designed to test whether the photographs influenced consumers’ decision to purchase a product and offered expert testimony to establish the amount of Skechers’ profits attributable to Skecher’s use of Reinsdorf’s photographs. But the court threw out the expert report: “Turner’s entire contribution to the dispute essentially amounts to ‘I have a lot of experience with brands and marketing, therefore I can divine that 50%-75% of this large successful, company’s profits come from Reinsdorf’s photographs.’ … Turner somehow settles upon an indirect profits figure between $161 million and $241.1 million without any specific data or discernible methodology ….’” A second, more moderate (only $33 million), expert report was also thrown out as untimely, and it suffered from methodological flaws too. Therefore Skechers’ motion for summary judgment on an indirect profit claims was granted and, since Reinsdorf hadn’t timely registered the copyright in the photos, Skechers motion on statutory damages and attorney’s fees was also granted.

    So Skechers lucked out on the joint authorship route here and its exposure is limited to Reinsdorf direct damages, i.e., the licensing fee for the photos. But still, in an advertising case, a joint authorship theory puts your product profits at risk. Bold move.

    Reinsdorf v. Skechers U.S.A., No. CV 10-07181 DDP (SSx) (C.D. Calif. Feb. 6, 2013).

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

    ,

  • Waiting Too Long

    Medical Products Laboratories, Inc. v. Premier Dental Products Co. had the makings of a good tale about joint ownership of a trademark, but alas, it was decided on a statute of limitations basis rather than anything more substantive. Maybe we’ll see something later in the state court.

    Medical Products was a contract manufacturer for Premier Dental. The two entered into an agreement that said:

    [a]ll current and future trademarks put into interstate commerce by Premier Dental Products Company covering merchandise made for their distribution by Medical Products Laboratories are jointly owned by Medical Products Laboratories and Premier Dental Products Company.

    Premier Dental, of course, registered the trademark ENAMEL PRO as the sole owner of the mark — twice, once in 2006 and again in 2008.  Medical Products filed suit in October, 2012, alleging a false and fraudulent registration under Section 38 of the Lanham Act and breach of contract.

    Because the Lanham Act does not have a statute of limitations, courts instead apply the statute of limitations for an analogous state law cause of action. In the Third Circuit this is two years for a Section 38 action, because it is analogous to a claim for fraud. The claim also accrues when an aggrieved party “learned or should have learned, through the exercise of due diligence, that they have a cause of action.” Premier therefore didn’t have much problem getting rid of the claim; the court found that, by operation of Section 22 of the Lanham Act, Medical Products was on constructive notice of the registrations in 2006 and 2008 so the claim was time-barred. A theory that the claim accrued again in 2012 when the Section 8 & 15 for the 2006 registration was filed didn’t fly.

    Medical Products also argued that the claim was timely because it was only seeking prospective injunctive relief.  But there was an insurmountable pleading problem here:

    This argument, however, suffers from one fatal flaw—Plaintiff cannot articulate a legal basis on which it can maintain an action for injunctive relief under § 38. The Lanham Act, 15 U.S.C. § 1116, sets forth the precise circumstances under which a court may award injunctive relief, as follows:

    The several courts vested with jurisdiction of civil actions arising under this chapter shall have power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office or to prevent a violation under subsection (a), (c), or (d) of section 1125 of this title.

    15 U.S.C. § 1116(a) (emphasis added). Plaintiff, however, is not the registrant of either of the Trademarks. Moreover, Plaintiff does not allege a claim of unfair competition—including false designations of origin, false descriptions, and dilution—under § 1125 of the Lanham Act. Finally, § 38—the basis for Plaintiff’s Lanham Act claims—expressly makes a party who fraudulently procures a trademark liable to “any person injured thereby for any damages sustained in consequence thereof.” 15 U.S.C. § 1120 (emphasis added). Nothing in that provision allows for a plaintiff to obtain injunctive relief. Because Plaintiff has no legal basis for recovery of the injunction it seeks, its mere request for such relief cannot end-run the applicable statute of limitations.

    The court dismissed the Lanham Act claims and declined to exercise supplemental jurisdiction over the state law breach of contract claim.

    I’m intrigued — what provoked the case? The Complaint doesn’t give any insight. Can Medical Products get a breach of contract award of specific performance granting it joint ownership of the mark? (A court has the power to rectify the register, so the registration itself isn’t a barrier.) Does Medical Products want to start distributing ENAMEL PRO? The same or a different product than Premier? What does that do to trademark ownership if the products are different? If there is no award of specific performance, what are Medical Products damages if it is barred from distributing the product because it would be an infringer? Such good fun!

    Medical Prods. Labs., Inc. v. Premier Dental Prods. Co., No. 12-6051 (E.D. Pa. Jan 31, 2013).

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

    , , , ,

  • Going to the Back-up Plan

    This is a blog about ownership of all types of intellectual property, but it is undoubtedly the ownership of trademarks that provides the most litigation fodder.  I think it is because no one thinks of the trademarks, or else they only become important in hindsight. Taylor v. Thomas is a typical example of what a court might have to deal with.

    Plaintiff Fontaine Taylor was the owner of a real estate brokerage firm called Coleman-Etter-Fontaine. The firm used a logo with red letters and a blue skyline silhouette:

    Taylor decided she didn’t want to run her own business but also didn’t want anyone else to own it. She therefore became a real estate agent for non-party Crye-Leike Realtors. In her agreement with Crye-Leike, Crye-Leike agreed that it would not use the marks without Taylor’s permission and that the Coleman-Etter-Fontaine name, service marks and goodwill would remain “Plaintiff’s property.” (This is how the court described it, based on the the Defendant’s Response to Statement of Undisputed Facts Supporting Plaintiff’s Motion for Partial Summary Judgment.) Taylor did, though, use the design herself on her website thefontaines.com:

    and later, after the infringement began, on her own yard signs:

    After the Coleman-Etter-Fontaine and Crye-Leike “merger” was announced, defendant Mark Thomas started using a sign that was similar to the Coleman-Etter-Fontaine sign:

    In his defense, he retorted that Taylor wasn’t the owner of the marks. As framed by the court, “there is no dispute as to whether the Service Mark was owned by Coleman-Etter-Fontaine prior to February or March of 2011. The dispute concerns if or when Plaintiff obtained ownership of the Service Mark from Coleman-Etter-Fontaine.”

    First, Taylor claimed that she owned the mark because she was the sole shareholder and owner of Coleman-Etter-Fontaine. She had McCarthy on her side, which states that:

    [i]f a corporation is using a mark, then a principle [sic] officer and shareholder is not the “owner.” It is presumed, however, that a real person who owns all the stock of a corporation controls the corporation so that use of the mark by the corporation inures to the benefit of the real person, who is presumed to be the “owner” of the mark.

    2 McCarthy on Trademarks and Unfair Competition § 16:36.

    But the court wasn’t buying it. It agreed with the defendant that construing trademark law to allow for individual ownership based on sole-shareholder status would conflict with Tennessee law governing corporations, where “even if one stockholder holds all of the stock in a corporation, the corporation and that single stockholder remain distinct legal entities.”

    Taylor had more luck though with the doctrine of implied assignment. “An assignment of a service mark need not be in writing to be valid. Where there is no written assignment, an assignment can be implied from conduct manifesting agreement.” The court found that Taylor’s conduct — retaining ownership in the Crye-Leike agreement, her continued use, and her exclusive control as the sole shareholder over the marks — was enough evidence to find there was an implied assignment of the mark from Coleman-Etter-Fontaine to Taylor.  She therefore owned the mark and her motion for partial summary judgment of ownership was granted.

    But here’s a can of worms that the court didn’t address. The Lanham Act has a writing requirement, as does Tennessee law: “Any mark and its registration hereunder shall be assignable with the good will of the business in which the mark is used, or with that part of the good will of the business connected with the use of and symbolized by the mark. Assignment shall be by instruments in writing duly ….”  Tennessee Code Annotated, Sections 47-25-507. (Here’s a post where the argument was raised about a similar provision under New Jersey law, but not decided.) Taylor later executed an assignment of the mark from the corporation to herself, although it was not nunc pro tunc, and it was dated after the infringement began. What do you think, how rigorous should we be with the writing requirement?

    Taylor v. Thomas, No. 2:12-cv-02309-JPM-cgc (W.D. Tenn. Jan. 22, 2013)

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

    , , ,

  • Standing is a Lot Easier for Copyrights

    I’m curious about the different legal standards that the courts apply in patent versus copyright cases when deciding whether a plaintiff who acquired the rights through transfer has standing. Patent law seems draconian, as exemplified by Abraxis Bioscience, Inc. v. Navinta, LLC.  In Abraxis (blogged here and here), standing for a patent infringement suit was foiled by a complex transfer that would have been perfectly fine under New York law, the choice of law for the transaction, but that wasn’t under the law of the Federal Circuit. Even an assignment to a corporate family member, perhaps carefully worded for tax purposes, can deprive a party of standing for patent infringement, like here and here. Often there are attempts to fix the problem with confirmatory assignments, but often the effort fails.

    Compare this to copyright cases. Twice in the past few weeks I’ve seen a statement like this, which I find somewhat remarkable: “When the parties to an assignment have no dispute over the transfer, third-party infringers lack standing to invoke Section 204’s writing requirement to avoid suit.” Malibu Media, LLC v. Does, No. 12-2078 (E.D. Pa. Jan. 3, 2013). In Malibu Media the assignor was an individual who created the company to which he later assigned his copyright, so it makes some sense not to sweat the details. But the court in Capital Concepts, Inc. d/b/a bCreative, Inc. v. Mountain Corp. said the same thing, in a situation where the assignor was an independent contractor.

    Why the difference? Here’s the statutory language:

    “Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing.” 35 U.S.C. § 261.

    “A patentee shall have remedy by civil action for infringement of his patent.” 35 U.S.C. § 281.

    “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.

    “The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it . . . .” 17 U.S.C. § 501.

    I don’t really see any support in the statutory language for the different treatment between patent and copyright cases. We have “patentee” and “owner”–equivalent terms–as the only ones who may bring suit. Transfers have to be in writing in both cases. In both cases, the burden is on the plaintiff to prove ownership–which is the point that I think the copyright cases play fast and loose with. I mean seriously, a defendant doesn’t have standing to ask that the plaintiff be put to its proof that it owns the rights it is asserting? Personally, I think that’s a bit of crazy talk.

    This appears to be the genesis of the reasoning on the copyright side:

    Under the pre-1978 copyright law, exclusive licenses could be granted orally or by conduct. [Nimmer], Sec. 10.03[B], at 10-37 (1980). Under the new Copyright Act, however, Eden’s claim of an informal grant of an exclusive license seemingly must fail in light of the statute of frauds provision of the new Act, which states that an exclusive license “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….” 17 U.S.C. Sec. 204(a) (Supp. IV 1980). However, since the purpose of the provision is to protect copyright holders from persons mistakenly or fraudulently claiming oral licenses, the “note or memorandum of the transfer” need not be made at the time when the license is initiated; the requirement is satisfied by the copyright owner’s later execution of a writing which confirms the agreement. See Dan-Dee Imports, Inc. v. Well-Made Toy Mfg. Corp., 524 F.Supp. 615, 618-19 (E.D.N.Y.1981); 3 M. Nimmer, supra, Sec. 10.03[A], at 10-34 (1982); cf. Khan v. Leo Feist, Inc., 165 F.2d 188, 191-92 (2d Cir.1947) (A. Hand, J.) (applying British law). In this case, in which the copyright holder appears to have no dispute with its licensee on this matter, it would be anomalous to permit a third party infringer to invoke this provision against the licensee.

    Eden Toys, Inc. v. Florelee Undergarment Co., Inc., 697 F.2d 27, 36 (2d Cir. 1982).  The case was then remanded for the district court to determine whether there had been a written license. Id. (“If Paddington granted Eden an informal exclusive license to sell Paddington Bear products in the market in which Florelee sold–adult clothing–and that informal license was later confirmed in a writing signed by Paddington, Eden may sue in its own name ….”).

    But the statement in dicta about “being anomalous” has now taken on a life of its own, preventing a defendant from even challenging ownership:

    [The defendant] … simply does not having standing under § 204. The statute is in the nature of a statute of frauds and is designed to resolve disputes among copyright owners and transferees. As the court said in Imperial Residential Design, “the chief purpose of section 204(a), (like the Statute of Frauds), is to resolve disputes between copyright owners and transferees and to protect copyright holders from persons mistakenly or fraudulently claiming oral licenses or copyright ownership.” The court went on to say that, where there is no dispute between the copyright owner and the transferee about the status of the copyright, “it would be unusual and unwarranted to permit a third-party infringer to invoke section 204(a) to avoid suit for copyright infringement.”

    Billy-Bob Teeth, Inc. v. Novelty, Inc., 329 F.3d 586, 592-93 (7th Cir., 2003), quoting Imperial Residential Design, Inc. v. Palms Dev. Group, Inc., 70 F.3d 96, 99 (11th Cir.1995).

    So somehow, through a bit of judicial activism, or impatience with the parties, the copyright jurisprudence has gone from “it’s ok to execute a document after the fact” (still a point with which the Federal Circuit disagrees in patent jurisprudence) to “a defendant doesn’t even have standing to challenge ownership.” That’s a little too far in my book.

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

    ,
    , , , , ,

  • It’s Not Really a “Work Made for Hire”

    One of the most misunderstood aspects of copyright law is work-made-for-hire.  The lay understanding is that a work created at the request of another in exchange for payment is a “work for hire.” That’s not true, as explained by the Supreme Court in 1989 in Community for Creative Non-Violence v. Reid, but nevertheless it must be one of the longest running misunderstandings about copyright law there is – well that, or the “poor man’s copyright.”

    Any lawyer will tell you that the agreements are commonly referred to as “work for hire agreements.” But when drafted properly, they say something to the effect of “To the extent a copyrightable work qualifies as a work made for hire, authorship vests in the hiring party. If the work does not qualify as a work made for hire, then independent contractor hereby assigns all right, title and interest to the hiring party …” It’s belt and suspenders; either the work is a work made for hire because it falls into one of the enumerated categories in Section 101 of the Copyright Act (a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas) or the copyright in the work is instead assigned to the hiring party by operation of the agreement. But you’re covered either way.

    I’ve always thought there was no harm to this approach. It’s easy; you don’t have to figure out ahead of time how exactly the hiring party has ownership but there is no doubt that it does. You also don’t have to explain to the creating party that, even though the magic “work for hire” words aren’t in there, it is the right document and they won’t have any ownership interest in the work. It’s easier just to use the words they know while making sure that the document is legally defensible.

    I still stand by the advice, but ran across a case where this type of agreement provoked a challenge. The hiring party won in the end, as it should have, but it still had to go through the exercise in court at no small cost.

    In Capital Concepts, Inc. d/b/a bCreative, Inc. v. The Mountain Corp., Mountain continued to use bCreative designs after its license agreement expired, so bCreative sued for infringement. Mountain claimed that bCreative didn’t own the copyright in the licensed works.

    bCreative had hired a independent contractor, Rob McAbee, to create the designs. After the designs were created (and well before the lawsuit was filed), McAbee signed a “Work for Hire Agreement” with this operative language:

    Any and all drawings, illustrations, characters, text, layout, designs, ideas, digital files, or any other works (collectively, the “Creative Works”) that I have created or worked on for either Capital Concepts, Inc., bCreative, Inc. or Offside, LLC (each individually, the “Hiring Party”) in the past, or unless mutually agreed to in writing by me and the appropriate Hiring Party, will create or work on in the future, are “Works Made For Hire” within the meaning of the United States Copyright Act….

    I agree that I have no ownership, rights, title, or interest in the Creative Works, nor will I challenge the Hiring Party’s ownership, rights, title or interest in the Creative Works and their right to register intellectual property rights, and use or license the Creative Works at their sole discretion. I agree to execute any documents attesting to this that may be necessary for registering copyright or trademark rights with the U.S. or other governments. I do not hold any copyright or trademark interest in the Creative Works, including any changes, derivations, or substantially similar artwork or designs related to the Creative Works.

    Note that the agreement is missing the “suspenders” assignment language. Mountain therefore claimed that because the works weren’t truly works made for hire, there was no transfer of ownership.

    But the court properly recognized that

    The question of whether a work is a “work made for hire” is a legal question that is determined by analyzing whether the requirements set forth in the definition of a “work made for hire” in the Copyright Act have been met…. [A] work is either a “work made for hire” or it is not, and the parties’ characterization of a work (or failure to characterize a work) as a “work made for hire” is not relevant to such determination.

    ….

    Accordingly, my analysis turns to whether Plaintiff acquired ownership of the Copyrighted Designs from McAbee under some other manner authorized by the Copyright Act. This is readily apparent. As discussed below, a transfer of copyright ownership requires only a writing signed by the owner of the rights conveyed. The McAbee Agreement is a written instrument transferring ownership of the Copyrighted Designs from McAbee to Plaintiff and, therefore, is sufficient to transfer ownership of the copyrights in the Copyrighted Designs to Plaintiff despite the misnomer in referring to and claiming ownership of McAbee’s works as “works made for hire.”

    Another problem in the case was that the misnomer carried through to the copyright registrations, which also stated that the works were works made for hire. This therefore also became fodder for litigation. A copyright registration will be invalidated (thus depriving the court of subject matter jurisdiction) if it was procured fraudulently, but the bCreative court had no problem finding that there was no fraudulent conduct: “there is no plausible argument that the mistake was knowingly made to mislead the Copyright Office and to confer a benefit or advantage on Plaintiff, because Plaintiff could obtain no benefit or advantage from the error.” The registrations were therefore valid.

    And one more problem for Mountain – it had clicked through an agreement that prohibited it from challenging the validity of any intellectual property rights bCreative owned, which the court found enforceable.

    The decision is most assuredly the right outcome, but my policy is to try to avoid collateral attacks to the substantive claim as much as possible. So there is a reminder here to make sure your “work for hire” agreements also have an express assignment provision, as well as a reminder that when you’re filing applications for copyright, don’t rely on what the agreement says but instead investigate the actual legal basis for ownership to make sure that it’s claimed properly.

    Capital Concepts, Inc. d/b/a bCreative, Inc. v. The Mountain Corp., No. 3:11-cv-00036 (W.D. Va. Dec. 30, 2012).

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

    , , ,

  • Why Can’t More Decisions Be This Short?

    Short and to the point from the Federal Circuit: a reversion of the assignment of a patent as a remedy for a breach of contract claim does not give the Court of Appeals for the Federal Circuit jurisdiction to hear the appeal. Appeal transferred to the Fourth Circuit. Patently-O gives you the details here.

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

    ,

  • What Is an “Ongoing and Existing” Business?

    Section 10 of the Lanham Act has what’s called an “anti-trafficking” provision, which prohibits the assignment of intent-to-use applications “except for an assignment to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing.” The provision was added by the Trademark Law Revision Act of 1988 when the United States began allowing intent-to-use applications. With this new type of application, there was a concern that the applications would become a commodity, so the law imposed limitations on their transfer.

    But what exactly does it mean? Courts have had three different interpretations:

    First, it might mean that the mark must actually be used before it can be assigned. This is the position taken in Ab Coaster Holdings, Inc. v. Greene, Nos. 2:10-CV-38, 2:10-CV-234 (S.D. Ohio Sept. 25, 2012) (“Bodytime Wellness, however, did not have ‘an ongoing and existing business’ related to the Ab Coaster mark in December 2006 at the time of the assignment because the mark was not in use”).

    Or it might mean that the application is validly assigned even if the mark is an extension of the applicant’s existing business, only in a planning phase, when the business was transferred – for example, the transfer of an application for non-metallic pipe couplings and joints, fence posts, and ski poles when the assignor was only in the ski pole business, as was the case in Exel Oyj v. D’Ascoli, Opp. No. 91160397 (TTAB Sept. 19, 2008).

    Or it might mean that the business transferred has to be the same kind described in the application, although the particular mark itself isn’t in use. This was the position, in dicta, in Railrunner N.A., Inc. v. New Mexico Dep’t of Transp., Opp. No. 91172851 (T.T.A.B. July 17, 2008).

    Creative Arts by Calloway, LLC v. Christopher Brooks gives us some more help in interpreting Section 10. Christopher Brooks is Cab Calloway’s grandson and performs as The Cab Calloway Orchestra. Creative Arts by Calloway is a business started by Cab Calloway’s widow, Zulme Calloway, and other family members. Zulme Calloway filed an intent-to-use application to register the mark CAB CALLOWAY for retail store services and entertainment services. She then transferred the application to Creative Arts by Calloway before filing a Statement of Use or Amendment to Allege Use.

    Brooks opposed the registration of the mark and successfully proved before the Trademark Trial and Appeal Board that he was the senior user of the mark CAB CALLOWAY. Creative Arts appealed to the Federal District Court of the Southern District of New York and Brooks raised the validity of the transfer in the trial court proceeding. The court ordered the parties to brief the matter for summary judgment.

    Creative Arts objected to the court’s framing of the question, characterizing it as a determination of whether there was goodwill attached to the mark CAB CALLOWAY, which there cannot be for a mark not yet in use. But the court clarified that it was not use of the mark per se that mattered, but rather whether there was a business to which the mark could pertain:

    Plaintiff seems to conceptualize goodwill as a concept independent of both a trademark and an “ongoing and existing” business, rather than synonymous with the part of an “ongoing and existing” business that a trademark symbolizes.

    ….

    As goodwill is inseparable from an “ongoing and existing” business utilizing the trademark in question, the critical inquiry regarding the validity of Mrs. Calloway’s assignment of the ITU application to Plaintiff is – as I stated in my December 9, 2011 order – whether “Zulme Calloway’s ‘business activities’ were organized as an ongoing and existing business to which the ‘Cab Calloway’ mark pertained.”

    It then reviewed Mrs. Calloway’s business activities and decided they weren’t enough — collecting royalties and approving use of her husband’s name in return for payment did not rise to the level of a business, particularly given testimony in an earlier suit between the parties that Mrs. Calloway took no steps to “market, merchandise, advertise, promote [or] sell the products bearing Cab Calloway’s name, likeness, voice or caricature.” And reciting that the goodwill is transferred in the assignment agreement does not make it so.

    Unfortunately, though, because there was no business, the court didn’t have to investigate the relationship between the proposed mark in the intent-to-use application and the transferred business, so we’re still left wondering what the correct interpretation of Section 10 is.

    HT to John Welch for the case.

    Creative Arts by Calloway, LLC v. Brooks, No. 09-CV-10488 (CS) (S.D.N.Y. Dec. 27, 2012).
    Brooks v. Creative Arts by Calloway, LLC, Opp. No. 91160266 (T.T.A.B. Oct. 30, 2009).

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

    , , ,

  • Mind Your Licenses

    Mind your licenses – if you want the mark to remain valid, it behooves you to comply with the terms of the license.

    Non-party Ansell Incorporated, later called Ansell Healthcare Products (Ansell), owned the mark CONDOM SENSE for prophylactics, claiming first use in 1988. In 1992, it filed an intent-to-use application for the mark CONDOM SENSE for retail store services. Around the same time, it learned that a store was calling itself Condom Sense, so it threatened the store with an infringement suit and then granted a license to plaintiff Condom Sense, Inc. (CSI – link fairly safe for work) allowing the store to use the mark. Thereafter Ansell filed a Statement of Use based on CSI’s use of the mark and the registration issued.

    It was a five year license, expiring in 1999 unless CSI gave written notice of its intent to renew and was not in default. CSI could use the mark in only two locations within the Dallas metropolitan area, could not assign the agreement, and could not sublicense the mark.

    CSI missed its first royalty payment and essentially thereafter ignored the fact that it didn’t actually own the mark.* In 1997 it sold its store to defendant Mike Edwards and as part of the transaction licensed the CONDOM SENSE mark to Edwards. CSI also licensed other stores to use the CONDOM SENSE mark. Edwards also started opening more stores, in competition with CSI, claiming that his license agreement with CSI allowed him to do so.

    By the third quarter of 1996 Ansell gave up on any royalties from CSI and CSI never renewed the license. In 2001 Ansell filed a Declaration of Continued Use in order to maintain the trademark registration, even though Ansell was not itself using the mark for retail store services and CSI had been the only licensee.

    In 2003 CSI finally sued Edwards and the Edwards licensees. CSI’s lawyer informed Ansell of the suit, which was the first notice to Ansell that CSI was licensing the CONDOM SENSE mark. Ansell ended up assigning the mark to CSI for $4,000 — the trademark administrator for Ansell said it was a “no brainer” because Ansell was not using the mark; it was “either sell it or let it go.” In 2005, after CSI acquired the registration, it non-suited the 2003 lawsuit (no reason given by the court), then two years later filed a petition for a temporary retaining order and an injunction against Edwards.

    So who owns the mark?

    It is a thorough state appeals court opinion and I’ll only cover parts of it. The appeals court agreed with the the district court’s conclusion that Ansell had abandoned the trademark. The question turned on whether the CSI license had expired or not:

    It bears noting that the question of whether the license agreement expired is crucial to the determination of whether Ansell abandoned the mark before the February 2005 assignment. That is because the parties agree that Ansell’s rights in the mark can be maintained through the use by a licensee and that Ansell relied on its licensee’s use to support its registration of the mark for retail store services. The parties also agree CSI was the only entity to which Ansell granted a license to use the mark and that appellants have used the mark continuously since the first Condom Sense retail location opened in the early 1990s. So, if the license agreement remained in force, Ansell did not abandon the mark. But if the license agreement expired as the trial court found, then Ansell’s use of the mark ceased.

    The court found that the license agreement had expired by its terms; there was no notice of renewal and CSI had been in default on payments.

    The court correctly went further, though, since a trademark license can be oral or implied. CSI claimed that various acts extended the license; it continued to buy products from Ansell and claimed to have an oral extension. There was also a handwritten note, presumably written by someone at Ansell, to contact CSI about the Declaration of Continued Use, which CSI claimed was evidence of its license. But Ansell’s behavior wasn’t that of a licensor; the trademark administrators’ testimony was that the CSI was in default, that Ansell wouldn’t have extended the license orally, and the more recent administrator wasn’t even aware there had been a license until contacted by CSI about the litigation. The evidence supported the trial court’s conclusion that there was no license and therefore the mark was abandoned through non-use.

    So if Ansell abandoned the mark, who owns it, and as of when? If we assume that CSI could thereafter acquire the trademark based on its own use, when would that have happened? The opinion offers no help, since the court didn’t decide when Ansell had abandoned the mark, only that it was abandoned. CSI has state registrations that it obtained in 2005, after the suit was filed. It almost lost these, at least it did in the trial court, but the appeals court reversed on technicality. No mention of common law rights.

    Then we move on to lesson number 2 from the case. Even assuming CSI owned trademark rights to CONDOM SENSE independent from those flowing from Ansell, CSI’s loose licensing practices gave the defendants an unclean hands defense. CSI had licensed a trademark that it had no right to license, since at the time of CSI’s license grant to Edwards Ansell still owned the mark:

    When Kahn [owner of CSI] sold the 3609 Greenville location to Edwards, he had already entered into the license agreement with Ansell. That agreement did not permit Kahn or CSI to assign or sub-license the mark. Acting on his own, Kahn sold another party, Edwards, the rights CSI acquired in the license agreement. But unless a licensor explicitly grants its licensee the right to sub-license the licensed mark, any putative sub-license is invalid as a matter of law….

    Then, based on the rights he bought from Kahn, Edwards sold the right to use the name to the Smiths. Both Edwards and the Smiths have expanded on those rights. Thus, the original sale and each subsequent sale were all based on something that nobody had a right to do in the first place. The trial court specifically found the license agreement did not provide CSI with the ability to grant sublicenses for the use of the Condom Sense name or mark and that Ansell never gave CSI permission to assign its rights as licensee under the license agreement.

    So CSI struck out twice because of its failure to comply with the terms of its original license. It’s acquisition of the Ansell federal registration was worthless because its own breach of the license — noncompliance with the royalty provisions and failure to renewal — caused an abandonment of the mark before the assignment. CSI’s noncompliance with the prohibition against sublicensing meant that its own attempt to license was unenforceable. Abandoning the Ansell license may have seemed like a good idea in the short run, but it turns out not to have been.

    Condom Sense, Inc. v. Alshalabi, No. 05-10-01024-CV (Tex. App. Dec. 21, 2012)

    * The court doesn’t say, but since CSI was using the mark before it entered into the Ansell license, and only licensed up after being threatened, it was no doubt a reluctant licensee. In my experience, these types of licenses are difficult because the unwilling licensee doesn’t really accept the role of licensee and instead still thinks of itself as independent of the licensor, just with some pesky document to get the other party out of its hair. So it doesn’t surprise me that CSI acted as the trademark owner; in its mind it was.

    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