Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • You Don’t Really Need a Writing

    I recently reported on a case where the plaintiff successfully claimed that a trademark hadn’t been assigned, despite the fact that virtually all of the other assets of the company were assigned. Jomaps, LLC v. D-Mand Better Products, LLC is the opposite case.

    The principle is that the assignment of a business in its entirety generally includes an assignment of the trademark, even if not expressly listed as an asset. This makes a lot of sense; think of all the small businesses — restaurants, boutiques, plumbers, cleaning companies — where no one really realizes that they have a trademark asset. They sell the business, no trademark is mentioned, but generally the intent is to sell the name, too.

    In Jomaps, an unrelated company, Jomaps, Inc., sold its assets, including the M-1 mark for mildewcide products, to Orr Enterprises, LLC. Orr Enterprises then changed its name to Jomaps LLC.

    The owner of the new Jomaps, Wayne Orr, defaulted on his payments to Jomaps, Inc. and so defendant D-Mand rescued Jomaps by buying out the company. Whether the trademark was transferred is the question; Orr claims that the trademark was “carved out” of the transaction and instead he only granted temporary permission, revokable without notice, to D-Mand to use the mark. Interestingly, it doesn’t appear that there is any overarching transactional document for the acquisition of the business.

    I won’t list all of the evidence that D-Mand produced about the transaction, but it was extensive. Cash, receivables, employees, and insurance policies were transferred to D-Mand. The formula for the mildewcide, a trade secret, was transferred. Orr himself worked for D-Mand for two years before he filed the suit and he even signed an application for financing for D-Mand that included the trademark as a secured asset.

    The court summarized the case:

    D–Mand has produced copious records to show the transfer of all of the assets from Jomaps to it. It contends without dispute that it possesses the trade secret formula for the M–1 mildewcide at issue, and no trade secret claim is in the case. It has shown that Jomaps was left as a shell with nothing and no operations, manufacturing nothing, selling nothing, and doing nothing. Moreover, the record indicates that Orr and his counsel were representing to third parties that Jomaps was defunct.

    It makes little sense to have transferred everything in the Jomaps company to D–Mand, including the goodwill, payables and other obligations, without having conveyed the trademark. The evidence shows that Jomaps went out of business for some time and other than filing a 2012 registration, is not operating now.

    All that Orr could come up with was — no small thing — the statutory requirement that “assignments shall be by instruments in writing duly executed.” Lanham Act § 10, 15 U.S.C. § 1060. The court readily disposed of the argument, though:

    [T]he “writing” requirement of the Trademark Act has been on the books since at least 1905. Since then, many cases, including a case decided by the old Fifth Circuit which is very similar to the instant case, have held that even without a formal writing, the transfer of all of the assets of a company to another, including the goodwill, means that the trademark in question has been transferred as well. Holly Hill Citrus Growers Ass’n v. Holly Hill Fruit Products, Inc., 75 F.2d 13, 14–15 (5th Cir.1935) [and others]. This Court understands the wisdom in these cases because sometimes a transfer of assets is simply not neatly bundled up with copious documentation prepared by lawyers and scriveners. But if the transfer really took place, there is no sense in invalidating the transfer of the trademark and shutting down the business of an obvious transferor [sic, transferee].

    (Brackets mine). Motion for preliminary injunction denied.

    As an aside, I don’t see anything in the decision explaining why Jomaps LLC has standing for a Lanham Act claim. Jomaps alleges that Count 1 of its Amended Complaint is for “Trademark Infringement.” But a Lanaham Act infringement claim, whether under § 32 or § 43(a), require proving likelihood of confusion. The decision says that Jomaps can’t even make a competitive product, so it’s not clear to me how there can be two products that might be confused. 

    Jomaps, LLC v. D-Mand Better Prods., LLC, No. 1:12-cv-01376-TWT (N.D. Ga. July 23, 2012).

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  • Questionable Decision on Assigning an ITU

    I recently wrote about a case which held that, while there was an assignment of an invention, a continuation-in-part application was not assigned because it had new matter. I’m not sure if the outcome was right; at least I suspect that many drafters of assignment language haven’t thought about it that way.

    The same decision also interpreted a section of the Lanham Act that general prohibits assignment of an intent-to-use application, an interpretation that I’m also not sure is consistent with the general understanding of this particular part of the statute. Let’s start with the law:

    Section l0(a)(l) of the Lanham Act prohibits the assignment of intent-to-use trademark applications prior to the filing of a statement of use, unless a statutory exception is met:

    (a) (1) A registered mark or a mark for which an application to register has been filed 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. Notwithstanding the preceding sentence, no application to register a mark under section 1(b) [15 USCS § 1051(b)] shall be assignable prior to … the filing of the verified statement of use under section 1(d) [15 USCS § 1051(d)], 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.

    (Brackets in original.)

    In the case, Bodytime Wellness LLC filed an intent-to-use application for the mark AB COASTER for an exercise machine, then assigned the application to Tristar Products, Inc. before a statement of use was filed.  A declaration by the now-owner of the trademark says that Bodytime was interested in distribution, but not manufacturing. Bodytime therefore transferred “all of its interest in the exercise device,” including the trademark and patent applications, to Tristar in exchange for a distribution license. Tristar then manufactured and marketed the device, with Bodytime personnel “actively contributing to the sale and continued development of the equipment bearing the AB COASTER mark.” The declaration continues:

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

    12. Bodytime Wellness was, at the time of the assignment, engaged in the ongoing business of distributing wellness products (such as massagers) and was actively engaged in the ongoing business of developing the Ab Coaster abdominal exercise including analysis of various marketing strategies, creating sample devices, filing patent applications, etc.

    13. The assignment documents executed on December 11, 2006 [presumably the patent and trademark assignments] convey all of Bodytime Wellness’ (and the inventors’) right, title and interest to the development of the Ab Coaster exercise product, including intellectual property associated therewith.

    I couldn’t find any transactional documents in the record except for the patent and trademark assignments.

    Based on this record, the court found that the assignment from Bodytime to Tristar did not fit into the exception for assignment of an intent-to-use application in Section 10 of the Lanham Act, i.e., that it was not “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.”

    I have no quibble with the conclusion; the plaintiff tried to cobble together an assignment of an entire business when the only things that appears to have been assigned were a patent application and an intent-to-use trademark application.  Personally I think the plaintiff introduced enough evidence to withstand summary judgment, but I don’t disagree that this is a reasonable conclusion based on the facts.

    But I do quibble with the court’s statement of the law. The court quoted a non-precedential TTAB decision, Railrunner N.A., Inc. v. New Mexico Dept. of Transportation (blogged here by John Welch), for the proposition that a product must already exist before the application can be assigned:

    prior to the filing of an allegation of use, see Trademark Act §§ l(c)-(d), an intent-to-use (“ITU”) applicant may not transfer its application to another, unless it transfers with it at least that part of applicant’s business to which the mark pertains. And as the last clause of the quoted subsection [the exception] emphasizes, even that transfer is only permissible if the applicant actually has such a business, i.e., if the applicant is already providing the goods or services recited in the application.

    (Brackets in original; emphasis added.)

    John Welch disagreed with the last part of the TTAB’s statement, as do I. There is no requirement in the statute that the particular product be available, only that the business to which the mark pertains have been acquired. For example, if one acquires an entire $100 billion pharmaceutical business, including drugs in development for which ITU applications have been filed but that are not yet sold, does that mean that the intent-to-use applications can’t be assigned? I don’t think so; that would mean that the applications could never become registered. The assigning owner wouldn’t be in a position to file a statement of use, since, having sold the business, it couldn’t begin use of the mark. This outcome is not what was intended with Section 10; Section 10 was meant to prevent trafficking in marks, not legitimate business transactions involving nascent product lines that happen to have pending intent-to-use applications.

    But then the Ab Coaster court went even further, requiring that there be goodwill in the mark before it can be assigned and concluding, as one can only conclude, that there’s no goodwill in a mark that isn’t used yet. In other words, according to the Ab Coaster court, an intent-to-use application can’t be assigned unless the mark is in use.

    The Ab Coaster court’s conclusion essentially eviscerates the statutory exception in Section 10. Note that Section 10 allows the assignment of an intent-to-use application after an amendment to allege use/declaration of use is filed whether or not the business is assigned (“A … mark for which an application to register has been filed shall be assignable with the good will of the business in which the mark is used…. Notwithstanding the preceding sentence, no application to register a mark under section 1051(b) of this title shall be assignable prior to the filing of an amendment [to allege use] under section 1051(c) of this title to bring the application into conformity with section 1051(a) of this title or the filing of the verified statement of use under section 1051(d) of this title…”, thus implicitly allowing assignment after the document alleging use has been filed). Therefore if a mark is in use, one simply has to file the amendment to allege use/statement of use before assigning it, an act that any trademark lawyer will advise that you do in order to avoid the very situation in this case. It is therefore exactly for those cases where one cannot allege use that the exception allowing the assignment of the application as part of an ongoing and existing business was intended.

    Ab Coaster went too far, and further than necessary on the facts of the case, to find that the application was invalidly assigned. If it was relying on non-precedential administrative proceedings for its law, then it should have also considered Restifo v. Power Beverages, LLC, Opp. No. 91181671 (TTAB Sept. 21, 2011), which held that an assignment of an intent-to-use application by a company that only ever intended to license the mark to manufacturers was an assignment of the entire business.  I suspect the court wanted to avoid having to reach a question of fact, i.e., whether there was a business assigned or just a patent application and trademark application, so it could dispose of the case on summary judgement. It is indeed a messy factual question, but it’s one that should be reached.

    Ab Coaster Holdings, Inc. v. Greene, Nos. 2:10-CV-38, 2:10-CV-234 (S.D. Ohio Sept. 25, 2012).

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  • Who Owns the Shop Right?

    The decision in Ultimax Cement Manufacturing Corp. v. CTS Cement Manufacturing Corp. begins “After a four-week trial in this decade-old patent infringement case, the jury was unable to reach a verdict.” Imagine how deflated the parties and their lawyers were. But the court was able to sort things out on the parties’ renewed motions for judgment as a matter of law, including one on shop right.

    The patent-in-suit was for rapid-hardening, high-strength cement. The owner of defendant CTS Cement, Edward Rice, had been the mentor of the owner of plaintiff Ultimax Cement, Hassan Kunbargi, when Kunbargi was a graduate student at UCLA. Kunbargi then worked for Rice starting in 1985, and by 1987 was working for CTS Cement. He worked on rapid-hardening, high-strength cement. While working for Rice and CTS, Kunbargi participated in a burn experiment known as “Burn One,” or the “Heartland Burn,” which resulted in the production of, in the court’s words, “a novel form of rapid-hardening, high-strength cement.” Kunbargi later was granted U.S. Patent No. 4,957,556 titled “Very Early Setting High Strength Early Cement.” The patent was assigned to plaintiff Ultimax Cement, who sued CTS Cement for patent infringement.

    First, to define a shop right:

    A “shop right” is generally accepted as being a right that is created at common law, when the circumstances demand it, under principles of equity and fairness, entitling an employer to use without charge an invention patented by one or more of its employees without liability for infringement. Guided by these equitable principles, the Federal Circuit has held that “an employer may obtain a shop right in employee inventions where it has contributed to the development of the invention.”

    The plaintiff argued that “shop right requires acquiescence by the employee in the employer’s use of the invention.” If that were true, though, it “would enable employees to prevent employers from acquiring shop rights simply by refusing to consent to the employers’ use of inventions created with the employers’ resources” — an employee’s acquiescence is therefore not required.

    Kunbargi had admitted all the elements needed to prove a shop right. When asked by defense counsel whether “develop[ing] new hydraulic cements … was one of your jobs with Mr. Rice,” Kunbargi responded, “Yes.”  As to whether all the elements of the the patented invention was created while he worked for the defendant, Kunbargi testified:

    Q. [Defense Counsel] All the elements in Claim 9 were at hand at Burn 1, weren’t they?
    A. [Kunbargi] Yes.

    …

    Q: [Defense Counsel] … when was the first time that you observed ultra high-strength early setting cement having a compressive strength on the order of 3000 PSI within one hour?
    A: [Kunbargi] I think when I apply my formula to the production in the Heartland 1988, when I make that demonstration to Ed Rice.
    Q: That was the first time you’d observed that; okay?
    A: If I remember correct, yes. Yes.

    Kunbargi also testified that Rice provided the financing and resources necessary to conduct Burn One  in 1988.

    The only question seemed to be who could claim the shop right. Shop rights are personal and cannot be assigned or transferred. It wasn’t clear whether Kunbargi worked for Rice, CTS Cement, or other companies owned by Rice. However, the Ninth Circuit has held (as has the Supreme Court) that a shop right will pass to a successor business that acquires an entire business of the shop right holder:

    The Court specifically held that attempts to invalidate shop rights based on the “formalities of modern business organization” were “unsuitable to the equitable origins of the shop right concept.” [California Eastern Laboratories v. Gould, 896 F.2d 400, 402 (9th Cir.1990).] Plaintiffs’ argument that CTS could not have held a shop right in the ‘556 patent because the shop right was held by Rice himself or entities owned or controlled by Rice elevates the “formalities of modern business organization” over the “equitable origins of the shop right concept.”

    Thus:

    The innovations in cement technology that Plaintiffs claim to have pioneered would not have been possible without the capital and resources that Defendants provided. When all the evidence is viewed in the light most favorable to Plaintiffs, and all inferences and credibility determinations are drawn in Plaintiffs’ favor, the only reasonable conclusion the evidence permits is that Rice and CTS held a shop right in the ‘556 patent.

    Ultimax Cement Mfg. Corp. v. CTS Cement Mfg. Corp., No. SACV 02-578 AG (ANx) (C.D. Cal. April 20, 2012).

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  • Another Band Name Ownership Decision

    Ok, I’m very confused by the decision in the TTAB case O.T.H. Enterprises, Inc. v. Vasquez. What’s confusing is that the Board discusses, in two separate parts of the decision, ownership of the mark and priority. I don’t really get that – if the case is about who owns the mark, what other mark is there to compare it to for purposes of priority?

    The decision alludes a number of times to a lack of clarity in the briefing, so I suspect the Board was ensuring that it was responsive to all theories raised. But I’ll consider them just two different theories of ownership, one based on assessing who controls the mark and the other a chain of title analysis. Here goes.

    The opinion is on a petition to cancel the mark for a band’s name, GRUPO PEGASSO, registered in 2005 for sound recordings in Class 9 and and live performances in Class 41. The decision starts with the cast of characters, which I’ll distill down:

    Vasquez: Registrant and claims to have started the band in 1979.
    Reyna: Non-party; member of the band from 1981-85, then left the band and performed and recorded as Grupo Pegasso and Pega Pega de Emilio Reyna. Also registered GRUPO PEGASSO in 1995 but the registration was cancelled in 2002 for failure to file a Section 8 affidavit.
    Benavides: Non-party; sound engineer and manager for the band from 1981 until his death in 1989 and principal of the recording company Discos Remo.

    The Board first considered who owned the band name GRUPO PEGASSO. Relying on McCarthy, it applied the following test for ownership of the name of a performing group:

    (1) whether the group name is personal to the members; (2) if the name is not personal to the members, for what quality or characteristic is the group known; and (3) who controls that quality?

    Here, there was apparently no argument that the name was not personal to the members, so the Board looked at the qualities and characteristics for which the group was known and who controlled them. O.T.H. claimed that Benavides, as the manager and its predecessor-in-interest, controlled the band from 1985 until his death in 1989. However, the only admissible evidence that O.T.H. had was Benavides’ filing of an assumed business name. But a business name isn’t evidence of trademark use because it is not evidence of a person’s right to exclude others from using a mark, nor does it provide evidence of control over the quality of the music group. A further flaw in the theory was that the band put out five albums between 1979 and 1985, making it “difficult for us to accept” O.T.H.’s allegations of ownership without addressing the period from 1979-1985 and how Benevides would have succeeded to ownership in 1985.

    O.T.H. argued alternatively that Reyna owned the mark from 1981 to the present, or 1989 to the present, but the only admissible evidence was a partial file wrapper for his registration. But there was no evidence of Reyna’s control over “the GRUPO PEGASSO mark” (I think the Board means the goods or service with which the mark is used), and therefore no evidence that Reyna was owner of the mark.

    On the other hand, Vasquez testified that he started the band in 1979 and was the only member who was in the band during its entire existence. He testified that he named the band after a local rotary club and designed the logo. Another former band member testified that Vasquez acted as director and guided the band by instructing them how to play certain arrangements. The witness’s testimony corroborated a statement on the back of an album stating that “[Vasquez], director, arrangement, guitarist of the group, he always adds that special flavor to the melodies that they perform and a great deal of that is what gives the Grupo Pegasso so much success.” (I’m not sure why the album back isn’t hearsay, but whatever). Vasquez also owned Mexican trademark registrations, his son testified to the father’s control of the band, and Vasquez informed a Music Worker’s Union in Mexico of new band members so that Grupo Pegasso could “keep working” and “comply with its pending contracts.”

    Thus, Vasquez is the owner of the GRUPO PEGASSO mark,* and both parties conceded that there was likelihood of confusion. I would have thought that was the end of the decision – but wait, for some reason the Board goes on to talk about “priority.” I think it’s because Vasquez and Reyna both continued to perform, apparently for many years, as independent “Grupo Pegasso’s”: Vasquez as “[Grupo] Pegasso del Pollo Estevan” and Reyna as “Grupo Pegasso de Emilio Reyna” – but the Board didn’t really explain, and it also noted that the addition of “del Pollo Estevan” only added matter to the mark, it didn’t change the mark.

    So we forge on. O.T.H. didn’t have a registration and therefore had to prove common law rights in the mark. It claimed to have acquired rights from Discos Remo, the company that produced the Grupo Pegasso albums which, you’ll recall, was owned by Benevides. Benenvides’ widow and a business partner assigned some rights to O.T.H., but the assignment had a couple of problems. First, there was no evidence about how Benevides’ widow and the business partner came to have the right to dispose of Discos Remo’s assets. Second, the assignment was of:

    Note no mention of any trademark or band name, or any evidence of the entire sale of a business. A later “confirmatory assignment” for the same transaction was more explicit about assigning ownership of the copyrights, but again no mention of a trademark.

    Finally, O.T.H. alternatively claimed to have obtained trademark rights from Reyna (who you will recall had a cancelled registration for the mark) by assignment:

    The problem with this transaction is that Reyna couldn’t have established common law rights in the name before Vasquez did because Reyna didn’t join Vasquez’s band until after its first album and performances in the U.S. (There were some other reasons given by the Board, but the Boards seem to be holding against O.T.H. that it made arguments in the alternative, so I won’t go into them.)

    So O.T.H. didn’t get the trademark by assignment either. A claim that the mark was abandoned failed on lack of proof of cessation of use (litigation tip – if you are claiming abandonment, don’t let your own witness testify that he is still currently selling albums), and a claim that the registration was procured through fraud failed on all elements. The petition to cancel the Vasquez registration was therefore denied.

    O.T.H. Enterprises, Inc. v. Vasquez, Cancellation No. 92050569 (TTAB Sep. 28, 2012).

    *This conclusion strikes me as what is meant by “a name being personal to the members.” That is, McCarthy distinguishes the two scenarios as “whether the service mark or name identifies and distinguishes that particular performer combination or just style and quality….” 2 McCarthy on Trademarks and Unfair Competition § 16:45 (4th ed.). The distinction is between something like the Rolling Stones, where the band wouldn’t be the Rolling Stones without particular members, and a producer-created concept group like Menudo, where the members frequently changed because they no longer fit the concept (too adult, in the case of Menudo). In this case, it seems to me that the band name is personal to one of the members, Vasquez. But if nothing else, this case demonstrates that the doctrinal framework for band names isn’t particularly helpful.

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  • Assigning the “Goodwill”

    There are several meanings to the word “goodwill,” depending on the context. This ambiguity was the basis for Axiom Worldwide, Inc. v. HTRD Group Hong Kong Ltd.

    The plaintiff Axiom Worldwide, Inc. (Axiom Inc.) registered trademarks, obtained authorizations from the Food and Drug Administration, and “created its own intellectual property” (those are the court’s words, it’s not clear what exactly that might be). On January 3, 2006, it transferred assets – exactly what is the subject of the dispute – to Axiom Worldwide, LLC (Axiom LLC).  Below is an excerpt from the bill of sale:

    If you can’t read the image, it says:

         WHEREAS, it was the intention and consistent action of Axiom Worldwide, Inc. and Axiom Worldwide, L.L.C., their officers, directors, managers, stockholder and members, that the prospective business operations of Axiom Worldwide, Inc., be transferred over to and assumed by Axiom Worldwide, L.L.C., including specified business assets associated therewith, effective on January 3, 2006; and

         WHEREAS, Axiom Worldwide, Inc., and Axiom Worldwide, L.L.C., now wish to confirm and ratify the transfer of business operations and specified operating assets including goodwill effective as of January 3, 2006.

         NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, Axiom Worldwide, Inc., a Florida corporation (the “Assignor”), hereby conveys, grants, bargains, sells, transfers, assigns and delivers unto Axiom Worldwide, L.L.C., a Florida limited liability company (the “Assignee”), its successors and assigns forever, all of the Assignor’s right, title and interest in and to all of the Assignor’s raw materials inventory, finished goods inventory, computer equipment, leasehold improvements, machinery, equipment, furniture, fixtures and goodwill (the “Assigned Assets”).

    According to the defendant, Axiom LLC thereafter ran the business, including using the trademarks. In March 2010, Axiom LLC filed an assignment for the benefit of its creditors and ceased doing business. Progress Bank ended up with the assets of Axiom LLC and on July 1, 2010 it sold the assets to defendant HTRD.

    HTRD began using the marks. Axiom Inc. also used the marks, in competition with HTRD.

    HTRD claimed to be the owner of the marks based on Axiom Inc.’s transfer of the “goodwill” to Axiom LLC. Axiom Inc. claimed that the assignment to Axiom LLC was only of specified assets, i.e., the raw materials inventory, finished goods inventory, etc. Axiom Inc. maintained that the remaining assets, including the intellectual property, were to be transferred to a third party but the deal fell through and therefore it ultimately retained ownership. Axiom Inc. claimed to have continued to use the marks by licensing them to Axiom LLC and foreign distributors, although it later terminated Axiom LLC’s license. Thus, according to Axiom Inc., Axiom LLC had no trademarks that Progress, and thereafter HTRD, could have acquired.

    The court agreed with HTRD that “[w]here the entire stock of a business is purchased and the business continued under its original name, it must be presumed that the purchaser acquired the goodwill of the business together with the commercial symbols of that goodwill, the business’ trademarks and trade names,” even if the trademarks are not specifically identified as assets. However, a trademark may also be retained by the owner, even “[w]here the owner has sold its equipment, inventory and other assets, discharged its work force and announced it has discontinued manufacturing its products.” Further, if the transfer is short of the entire business and its assets, such that the transferor can continue operating within the same line of business, the trademarks do not pass inherently with transferred goodwill.

    On these facts, where Axiom retained some assets and continued to use the mark itself, the court found that HTRD was not likely to succeed on the merits of its claim of ownership of the marks.  Therefore HTRD was unable to obtain a preliminary injunction to enjoin Axiom Inc. from using the marks.

    So what was the “goodwill” that was assigned? I expect they meant a broader type of goodwill than just that which can be attributed to a trademark – things like the value of already-existing business operations and established channels of trade. It was a bit of a long shot for HTRD, but understandable given that the bill of sale expressed the intent for Axiom Inc. to cease business operations.

    HTRD paid $400,000 for all the assets as-is, although it’s hard to tell how much the remaining assets were worth and whether that was a good deal even without the trademarks.  A gamble for HTRD that didn’t pay off.

    Axiom Worldwide, In. v. HTRD Group Hong Kong Ltd., No. 8:11-cv-1468-T-33TBM (M.D. Fla. July 18, 2012) (Report and Recommendation).

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  • Copyright Transfer by “Operation of Law”

    A copyright can be transferred by written document or by operation of law. The First Circuit recently discussed the latter form of transfer, albeit with a neat sidestep of the question.

    The plaintiff Society of the Holy Transfiguration Monastery (the Monastery) is a religious order in Massachusetts founded in the 1960’s. The Monastery created translations of ancient Greek religious texts, which are the works in dispute. In 1965 it became spiritually affiliated with the Russian Orthodox Church Outside of Russia (ROCOR). This affiliation meant that the Monastery agreed with the ROCOR faith and enjoyed ROCOR’s blessing. The spiritual affiliation is created by accepting an antimension, a cloth signed by a bishop that is kept on an alter table.

    In the 1970’s, defendant Archbishop Gregory obtained ROCOR’s permission to leave the Monastery and move to Colorado, where he formed his own monastery dedicated to painting icons. In 1986, the Monastery ended its spiritual affiliation with ROCOR, returning the antimension. In 2005, Archbishop Gregory created a website on which he published the Monastery’s translations, which is the publication that is the subject of the suit.*

    Archbishop Gregory claimed that the copyrights in the translations were transferred by the operation of law to ROCOR. The “operation of law” to which Gregory referred was ROCOR’s Monastic Statutes for Monasteries (the “Monastic Statutes”) and the Regulations of ROCOR. The Monastic Statutes state:

    The articles of incorporation of the monastery, convent or community must make it clear that it will always be in the jurisdiction of the Synod of Bishops of [ROCOR] and that, in case of its closing or liquidation, its possessions will be handled over to the diocese subject to the Synod of Bishops of [ROCOR] or directly to the Synod of Bishops.

    (Bracket in original.) While a court may not “tread[] on religious doctrine, church governance and ecclesiastical laws,” here the court could reach a conclusion without interpreting religious law.

    The court had several problems with Archbishop Gregory’s theory. First, the Monastery’s records–its articles of incorporation, by-laws and the certifications of registration for the translations–did not show that it was under ROCOR’s jurisdiction. There was no sign that the Monastery intended to be bound by ROCOR’s statutory law or to relinquish title in its property.

    Second, the Monastic Statutes specifically referred to “closing or liquidation.” The defendant regarded the termination of the spiritual affiliation as akin to a corporate dissolution, merger, bankruptcy or foreclosure, but the court had none of it. The Monastery never ceased to exist, so it could not have “handed over” its possessions to ROCOR.

    Third, the ROCOR Statutes require that a monastery incorporate, but there was no indication that the Monastery had incorporated to satisfy that requirement. Rather, it was already incorporated before it affiliated with ROCOR and had only accepted the antimension to signify its association with ROCOR. This also demonstrated that the copyrights were not transferred:

    We are far from being authorities as to the weight the giving of an antimension to another religious body might hold under church law and offer no ruminations on the matter. But a review of the evidence reveals no other act or document confirming that the Monastery reincorporated itself under ROCOR law. The giving of a consecrated cloth does not, under civil law, ring of the type of alteration in corporate structure that transfer in authority over the Monastery’s possessions may properly be deemed to have occurred.

    Therefore the Monastery was the copyright owner of the translations.

    The defendant also challenged ownership of copyright based on publication without notice, lack of originality, and merger, asserted that the works were not substantially similar, and brought affirmative defenses that he was not the direct infringer, he had a safe harbor under the DMCA, the use was a fair use, and the Monastery was misusing it’s copyright, all of which failed.  Seventy-five pages later, the court ended:

    III. Conclusion

    Our pilgrimage through the complexities of copyright law concluded, we keep our words here few–for the foregoing reasons, we affirm the decision of the district court.

    Society of the Holy Transfiguration Monastery, Inc. v. Gregory, No. 11-1262 (1st Cir. Aug. 2, 2012).

    *The Monastery sued the Archbishop in 2006 and the parties settled, but the Archbishop did not comply with the terms of the settlement agreement.  This is the second suit brought by the Monastery, for copyright infringement and breach of the settlement agreement.

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  • “Co-owned” Means Owned by the Same Entity

    Short and sweet:

    The parties agree with binding Federal Circuit precedent that holds that if the ownership of a disclaimed patent is separated from the prior patent, the disclaimed patent is not enforceable. Further, the parties do not dispute that, according to the condition set forth in the Terminal Disclaimer, the ‘176 Patent is enforceable only so long as it is commonly owned with the ‘789 Patent. Rather, Defendants argue that because the ‘789 Patent is owned by a party other than Plaintiff, Online News Link, LLC, the ‘176 Patent is not enforceable. Plaintiff counters that because Acacia owns both Plaintiff and Online News Link, the two patents are commonly owned by Acacia and Patent ‘176 is still enforceable according to the terms of the Terminal Disclaimer.

    Plaintiff’s argument that both the ‘176 Patent, owned by Plaintiff Email Link, and the ‘789 Patent, owned by Online New Link, are owned by Acacia by virtue of its 100% ownership of Email Link and Online News Link goes against a “basic tenet of American corporate law.. that the corporation and its shareholders are distinct entities…. A corporate parent which owns the shares of a subsidiary does not, for that reason alone, own or have legal title to the assets of the subsidiary.” Specifically in the patent context, the Federal Circuit has applied this basic principle of American corporate law to hold that once a parent company assigned a patent to its subsidiary, the parent no longer had rights in the patent, even though it controlled the subsidiary. For this reason, Email Link, not Acacia, is the owner of the ‘176 Patent. Because the ‘176 Patent and the ‘789 are not owned by the same entity as required by the Terminal Disclaimer, we hold that the ‘176 Patent is unenforceable as a matter of law.

    …  Because we hold that the ‘176 Patent is unenforceable as a matter of law, we must also deny Plaintiff’s Motion for Leave to File an Amended Complaint for reason of futility.

    Internal citations omitted.

    Email Link Corp. v. Treasure Island LLC, No. 2:11–cv–01433–ECR–GWF (D. Nev. Sept. 25, 2012).

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  • Assignment of a Part of a Continuation-in-Part?

    Plaintiff AB Coaster Holdings Inc. claimed to be the owner of patents that were subject to terminal disclaimers.  Some of the patents were expressly assigned and some were not.  Here are the pairings:

    ‘633 (assigned) and ‘079 (not expressly assigned)
    ‘445 (not expressly assigned) and ‘263 (assigned)
    ‘079 (not expressly assigned) and ‘263 (assigned)

    The defendant argued that since none of the pairs were fully transferred, and therefore the patents not co-owned, they were unenforceable. 

    The ‘633 patent was the parent and the other three above-listed patents, as well as another, the ‘134 patent, were all continuations-in-part of the ‘633.  Here is the patent assignment language used for the ‘633:

    If you can’t read the image, it says:

    Assignors hereby sell, assign, and transfer to Assignee, the entire right, title, and interest in and to said Invention, and said Patent Application for said Invention in the United States and throughout the world, including the exclusive right to file any provisional, non-provisional, divisional, continuation, continuation-in-part, reissue, foreign, or other application based on the Invention directly in the name of Assignee and to claim any priority rights to which such applications are entitled under international conventions, treaties, or otherwise.

     The continuations-in-part were all filed after the assignment of the parent.

    The defendants challenged the plaintiff’s ownership of the child patents. The plaintiff claimed that the above language was an effective assignment of the child patents, but the defendants argued that the language–assigning “all right, title and interest to said Invention“–only assigned the original invention disclosed in the parent application and that any newly-added materials in the continuations-in-part would not have been assigned by the agreement.

    The court found both arguments to be viable, so the court looked to extrinsic evidence to determine the intent of the parties. The defendant further pointed out that two continuations-in-part from the same parent, the ‘263 and the ‘134, were expressly assigned. If the above assignment of the ‘633 transferred ownership of all continuation-in-part applications, then the inventors would not have owned the ‘263 and ‘134 patents at the time they purportedly assigned them; rather, they would have already been owned by the plaintiff and the assignments were unnecessary. Thus the different treatment of the continuations-in-part indicated that the ‘633 assignment did not transfer any new inventive portion of a continuation-in-part.

    But the defendant’s argument was made in a reply brief so the plaintiff had no opportunity to rebut it.  The court therefore denied the motion and will consider evidence at an upcoming oral argument.

    Hmmmm.  I don’t know what to think of the argument. A winner or not? Was it sloppy assignment practice?  If a continuation-in-part is subject to a terminal disclaimer, is there any new invention in it? Can you assign only a part of a patent that reflects an “invention,” not identified by claims?

    AB Coaster Holdings, Inc. v. Greene, Nos. 2:10-CV-38, 2:10-CV-234 (S.D. Ohio Sept. 25, 2012).

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  • The Piano Mark Was Apparently Not Abandoned

    I previously told the story of what I characterized as a zombie piano trademark for SOHMER.  The long version is here and the short version is that an owner of the mark, Burgett, Inc., had a period of non-use during which time it allowed the registrations to lapse; upon discovering the lapse another piano manufacturer, Persis International Inc., filed an intent to use application for the mark and began using it; Burgett also filed a new application for the mark; Burgett later assigned its new registration to a successor; Persis sued Burgett for trademark infringement; Burgett counterclaimed Persis for trademark infringement; the successor assigned the Burgett registration to Persis; whereupon Persis expressly abandoned the application with the language shown below, which allowed its own application to mature into a registration. Got all that?

    Which still leaves the infringement case between Burgett and Persis. The parties cross-moved for summary judgment on infringement for the period of overlapping use. You would think that Persis would have pretty clear sailing at this point, but not quite. What’s missing is any admission by Burgett that it abandoned the mark. The successor apparently thought so because it assigned the registration to Persis, and Persis clearly thought so from the statement in its express abandonment, but Burgett hasn’t conceded the point yet. In fact, Burgett successfully convinced the court that, while there was a cessation of use of the mark, it engaged in efforts to license the mark (indeed, one of the potential licensees was Persis) and therefore still intended to resume use of the mark.  Therefore, Burgett’s SOHMER mark was not abandoned and Persis’s infringement claim failed.

    Burgett’s claim against Persis didn’t fare any better, though.  Burgett’s assigment to the successor said:

    Burgett, Inc. hereby transfers all rights to causes of action and remedies related thereto including the right to sue for past, present or future infringement, misappropriation or violation of any rights relating to the SOHMER trademarks; seek injunctive or declaratory relief, and to protect any and all other rights and interest arising out of the SOHMER trademarks.

    Burgett clearly gave up the right to sue for past infringement and so only was its counterclaim dismissed, Burgett was sanctioned under Rule 11 for bringing the claim.

    Persis Int’l, Inc. v. Burgett, Inc., No. 09 C 2751 (N.D. Ill. Sept. 18, 2012).

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  • Lack of Control as a Shield

    You are undoubtedly familiar with the concept that the lack of control over the quality of the goods and services with which a mark is used can mean that the trademark is abandoned (recursive link alert) by the trademark owner.  But in East West, LLC v. Rahman, the lack of control was instead used to ratify the ownership of the trademark, not destroy it.

    Defendant Caribbean Crescent, Inc. sold assets, including the trade name and mark CARIBBEAN CRESCENT, to plaintiff East West. After the transaction the defendant continued to use, or resumed the use of, the mark, triggering the lawsuit.

    East West claimed that the mark was fully assigned in the transaction, but Caribbean Crescent claimed that it only licensed the mark to East West. The court agreed with East West, based on the lack of control:

    [T]he facts of the instant case do not demonstrate the existence that [sic] a licensing arrangement between the parties. After an assignment, the parties may license-back the mark to enable the assignor- licensee to continue to conduct the same business or provide the same services under the mark. In order to be a valid license, the licensor must adequately control the quality of the goods and services provided by the licensee under the mark. In the instant case, it appears that no such arrangement existed. There has not been evidence put forth that either party exerted control over the quality of the products manufactured and distributed by the other, or that parties even made any overt attempts to do so. Consequently, this Court finds Defendants’ assertion that the transfer of business assets resulted in a license on the trade name to Plaintiff to be lacking a factual basis and without merit.

    East West, LLC v. Rahman, Civ. No. 1:11cv1380 (JCC/TCB) (E.D. Va. Sep. 13, 2012).

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