Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Why Trademark Lawyers Should Work M&A

    It’s common in many industries for a company to be named after its partners. The names both individually and as part of the firm name develop goodwill, which makes it a challenge when an individual departs – how do you divvy it up? Not how it was done in Basile Baumann Prost Cole & Assocs., Inc. v. BBP & Assocs. LLC.

    Basile Baumann Prost Cole & Associates, Inc. was an economics and real estate consulting firm. It was originally established in 1990 as Basile Baumann Prost & Associates, Inc. The firm used the acronym “BBPA” and had the domain name “bbpa.com” for its website. Basile and Prost mostly did work for state and local governments and Baumann mostly did Navy work. In 2006 Baumann sold his share of the company to Cole, the name was changed to add “Cole,” and the company started using “BBPC”:

    However, it continued to have its website at “bbpa.com.”

    Cole continued to do the Navy work. About three years later, Basile and Prost decided they didn’t want to work with Cole anymore and they entered into a Stock Redemption Agreement to cash out. In the Stock Redemption Agreement, Basile and Prost got to keep

    If you can’t read it, it says “[a]ll goodwill created on all past contracts and clients by Basile and Prost [within the last four years] to include but not be limited to any and all use of job qualifications and materials and job references for Basile and Prost’s contracts and clients.” The corporation retained all assets not assigned, which included the “Basile Baumann Prost Cole & Associates” name.

    There was also an addendum on “goodwill” that describing how the parties could use the other’s “goodwill” in certain fields, e.g., Cole could use Basile’s and Prost’s goodwill for military contracts:

    Before moving on to the decision, can we talk about how awful this concept is? What on earth does “goodwill” mean here? It appears that the parties were trying to define how they could refer to work done during the relationship.  Undoubtedly how the two companies distinguish their businesses while still taking credit for their previous work is going to be the trickiest area for the two companies to navigate in the future. But leaving this difficult task to the undefined and ambiguous term “goodwill” – a term that those of us who work with it every day are still challenged to define – almost guaranteed a lawsuit.

    Basile and Prost’s new business was “BBP & Associates” (note that there weren’t two “B’s” working for the business, just Basile) and used the below logo:

    BBP & Associates then claimed in various ways, extensively documented in the opinion, that it was a successor to Basile Baumann Prost Cole & Associates, including rewriting testimonials given to the original company to put in the BBP & Associates’ name and listing awards given to the original company. Not unexpectedly this caused confusion for Cole’s business, including checks sent to the wrong place (never a good thing for a trademark infringement defendant). Basile Baumann Prost Cole & Associates complained; BBP & Associates changed its logo:

    Ultimately Basile Baumann Prost Cole & Associates sued BBP & Associates for trademark infringement, cybersquatting, false advertising and related state law claims. Both parties filed motions for summary judgment and indeed what “goodwill” means was one of the sticking points.

    BBP & Associates defended against the charge by claiming that Basile Baumann Prost Cole & Associates transferred “most or all of the goodwill associated with [marks such a ‘BBP’ and “BBP LLC’]” under the Stock Redemption Agreement. Basile Baumann Prost Cole & Associates claimed that it transferred only the personal goodwill of Basile and Prost but had retained the corporate goodwill. Here’s the court’s primer on “goodwill”:

    Goodwill is “the total of all the imponderable qualities that attract customers to [a] business.” “There may be business or professional goodwill, or both combined in one enterprise.” Professional, or personal goodwill, “is good will that is based on the personal attributes of the individual such as personal skill, training, or reputation.” In Maryland, the concept of personal goodwill most often arises in cases involving the distribution of property in divorce, or covenants not to compete.

    “If … consumer satisfaction and preference is labeled ‘good will,’ then a trademark is the symbol by which the world can identify that good will.” “A sale of a business and of its good will carries with it the sale of the trademark used in connection with the business, although not expressly mentioned in the instrument of sale.”


    [Footnotes and citations omitted.]

    The court agreed with Basile Baumann Prost Cole & Associates that the Stock Redemption Agreement was not a sale of a business that impliedly transferred the trademarks to Basile and Prost:

    The Stock Redemption Agreement is unambiguous in at least one respect: it was not a sale of the Corporation’s entire business and goodwill. Although Basile and Prost acquired certain assets—including 83 jobs, 138 leads and proposals, and the “goodwill [they] created on [certain] past contracts and clients”—the Corporation retained all other assets, including the company name and location, two-thirds of the staff, and 70 percent of the Corporation’s contracts by revenue. Thus, the agreement was not a “sale of a business and … its good will” that impliedly transferred the Corporation’s trademarks.


    Basile and Prost also argued that Basile Baumann Prost Cole & Associates had abandoned the mark “BBPA” but they did not meet their burden of proof for summary judgment. They also failed to prove, on summary judgment, that there was no likelihood of confusion. But it wasn’t so one-sided that Basile Baumann Prost Cole & Associates proved that there was confusion, and summary judgment in its favor was denied also.

    This is what happens when you don’t have trademark lawyers working M&A.

    Basile Baumann Prost Cole & Assocs., Inc. v. BBP & Assocs. LLC, Civ. No. WDQ-11-2478 (D. Md. June 19, 2012).

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  • 1.65% of 33% Ownership

    Marques Class 46 Blog reports on a decision out of Poland that I struggle with conceptually.  There were three joint owners of the trademark SILMENT.  One of the joint owners assigned 1.65% of his 33% ownership to his son.

    This is where I’m struggling.  What does an approximate 1/2% ownership interest in a trademark actually mean? What rights or benefits accrue to a 1/2% owner? What role in the business did the son play, if any? I would understand if there was a royalty-bearing licenses for the mark and the father was providing income for the son, but in that situation an assignment of a portion of the income stream, rather than the actual ownership of the mark, would suit the purpose better. Perhaps the father wanted to give the son a portion of his interest in the company and was stymied, but again I’m not sure what giving him a small percentage of the ownership of the trademark accomplishes.

    The Polish Patent Office recorded the assignment and one of the other two owners objected.  We learn two things: first, in the case of joint ownership all the joint owners have to consent to the assignment, although its not clear in the reporter’s summary whether the decision was based on law or the terms of the joint ownership agreement.

    Second, we learn that the role of the Polish Patent Office is to reflect the legal status, but it does not have authority to determine ownership.  Questions about interpretation must be referred to a civil court.

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  • Why You Need an Ownership Clause in Your Employee Agreements

    An old case popped out on Westlaw for some reason, but it is an interesting one, about ownership of trade secrets created by an employee. So I thought it was worth writing about.

    Plaintiff Premier Displays & Exhibits and defendant EWI Worldwide are both in the business of design and fabrication of displays and exhibits for museums, theme parks and other businesses. Co-defendant David Cogwell was employed by Premier and apparently his wife was employed by EWI.

    EWI, but not Premier, was invited to bid on a Disney project, transforming a winery-themed exhibit at Disney’s California Adventure theme park into a workspace to be used by the Disney Imagineers.  EWI created CAD drawings of its proposal for the redesigned space, but wanted hand-drawn renderings to use in the bid. Cogswell’s wife asked Cogswell to make the drawings “for the fun of it,” which he did. He created two, a preliminary sketch and a final sketch. (Here’s the declaration that has the sketches, although the original CAD drawings are redacted.)

    Final drawing (click for larger image)

    In addition to claims against Cogswell, Premier brought a claim for misappropriation of trade secrets against EWI.

    First, on the question of whether there was a trade secret at all, for the most part the hand-drawn drawings were highly similar to EWI’s CAD drawings but they included some new details, like adding artwork to the walls, handles to the doors, chairs at the workstations, hoop bands on the workstation barrel-like enclosures, figures standing in the background, boxes on the floor, tools and papers at the workstations, and a full barrel of blueprints. The court decided that this last element, the full barrel of blueprints, was not a common design element like the rest and therefore was protectable as a trade secret. (Yeah, I know, a barrel of drawings in a design shop. Hardly original. But go with it, because it allows us to get to the more interesting stuff.)

    But how would Premier come to own this trade secret?  Premier had four theories: that it owned the Cogswell sketches under either California Labor Code section 2860, the terms of the Premier Employee Orientation Handbook,  an unwritten company policy, or the corporate opportunity doctrine. Goose egg on all four.

    With respect to the California statute, an employer owns “everything which an employee acquires by virtue of his employment ….”  In California, “acquired” is not construed to be the same as “created” and does not apply to employee-created works.

    The employee handbook didn’t have the magic bullet that Premier needed either. These are the portions of the handbook relied on:

    •  You may engage in work outside your regular work at the Company, provided this work does not detract from your job performance, is not harmful to the Company’s best interests, and does not present a current or potential future conflict of interest with your employment here.
    •  One of the Company’s greatest assets is ‘know-how.’ It is this specialized knowledge and experience which helps Premier Displays and Exhibits to successfully compete in the market place and thus provide security and growth for our Company. To help preserve this competitive advantage, you should be careful about what you say to those not employed by the Company. Information on the Company’s production methods, production rates, and new product ideas would be very helpful to any competitor and not in our best interests. Remember that loose and idle talk can harm the Company and our future success.
    •  Employees who may work for Company competitors or subcontractors must notify management in advance in order to prevent possible conflicts of interest.
    •  Everything on this property with the exception of employee’s personal property and client’s property, is Company property and must be maintained according to Company rules and regulations . . . and must be safeguarded against . . . loss. . . . No Company property may be removed from the premises without prior approval of a Manager.

    Note what’s missing here — any statement describing when work performed by an employee is owned by Premier.  The court found that, while Cogwell may have breached the terms of his employment agreement (for which he got fired), nothing in the handbook gave Premier a contractual right to claim ownership of the work.

    Premier claimed that it had orally expressed to employees that Premier would own work product created by employees for any third parties in the same line of work as Premier, no matter when the work was done. This theory wasn’t disclosed in discovery but only in an affidavit filed with Premier’s opposition to EWI’s motion for summary judgment, so the court disregarded the affidavit as a sham.

    Finally, under the corporate opportunity doctrine, an officer of director may not “seize for himself to the detriment of his company business opportunities in the company’s line of activities which the company has an interest and prior claim to obtain.” But neither Cogswell nor Premier had the opportunity to bid on the Disney project — the only opportunity Cogswell had was to create sketches and, at best, all that Premier could gain was to recover any payment Cogswell received for drawing the sketches, not ownership of the sketches themselves.

    Therefore Premier did not own any trade secret in the drawings and EWI’s motion for summary judgment was granted.

    Premier Displays & Exhibits v. Cogswell, No. SACV 09-354 JVS (Anx) (C.D. Cal. Dec. 23, 2009).
    Premier Displays & Exhibits v. Cogswell, No. SACV 09-354 JVS (Anx) (C.D. Cal. Mar. 3, 2010) (denying request for reconsideration).
    Premier Displays & Exhibits v. Cogswell, No. SACV 09-354 JVS (Anx) (C.D. Cal. April 24, 2009) (amended complaint).

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  • Two Companies Making Pianos, One Mark

    Digging into an interesting decision about the duty to defend an insurance claim turns out to be a long tale about a zombie mark, with strategic moves in prosecution, before the TTAB, and in federal court.  It’s still going, but as far as I can tell all that should be left to decide is damages.  The facts below are taken from a number of different documents, all linked at the bottom. And by the way, the newcomer wins.

    The mark is SOHMER for pianos.  The oldest registration is from 1912 with a first use date of 1872.  The mark was assigned to Mason & Hamlin Co. and purchased in a Chapter 11 sale by a predecessor to Burgett, Inc. in 1996, along with some other marks for pianos.

    According to the district court complaint by plaintiff Persis International, Inc., Burgett never used the marks between 1996 and 2003.  In 2000, Edward Richards, the sole shareholder of Persis, approached Burgett about purchasing a different piano trademark.  Burgett instead offered the SOHMER trademark.  Richards investigated and learned that the mark was not in use and registrations not renewed. He told Burgett that he thought the mark was abandoned.

    Richards then filed his own intent-to-use application for the SOHMER mark (the ‘248 application, later assigned to Persis) on February 15, 2001 and eight days later Burgett also filed an intent-to-use application for the mark (the ‘968 application). The duel begins.

    The prosecution histories for the applications tell part of the story.  As one would expect, the Burgett application was stayed pending final disposition of the first-filed Richards application. But note that SOHMER is a surname; both applications were refused registration on that basis.  Richards filed an Amendment to Allege Use claiming first use in interstate commerce at least as early as June, 2001 and amended his application to one for registration on the Supplemental Register.

    Richards specimen

    In 2002, Burgett licensed the use of the SOHMER mark to Samick Music Corp. and Samick started making pianos in 2003. On July 1, 2003, Burgett filed an Allegation of Use, claiming a first use date of April 1, 1872, with this specimen:

    Burgett specimen

    In 2004, Burgett filed an affidavit in its trademark application claiming acquired distinctiveness based on five years of continuous use, which was accepted by the examining attorney. Sharply, Burgett noted that Richard’s amendment to the Supplemental Register made Richard’s priority date June, 2001 (its date of first use), which was after Burgett’s filing date (and priority date) of February 23, 2001. The Burgett application was therefore allowed. Which, of course, Persis opposed.

    Also in 2004, Persis sent cease and desist letters to Samick and Burgett, claiming senior rights to the trademark. In 2009, Burgett assigned its trademark application to Samick, Samick sued Persis for trademark infringement, and Persis countersued Samick and Burgett.

    The next thing we know is that Samick and Persis settled, Samick assigned the ‘968 application to Persis, and Persis expressly abandoned it shortly thereafter.  Unfortunately, I couldn’t find any of the good stuff about what happened (like the settlement agreement), and can only assume that Samick saw the reasonableness of Persis’s position.  But here’s the abandonment, certainly an unusual thing to see in a trademark application:

    By now, in 2010, Persis had used the SOHMER mark for more than five years, so it filed an affidavit to that effect and withdrew its amendment to the Supplemental Register, which was accepted. The ‘248 application registered on September 7, 2010 on the Principal Register. But the federal court litigation is ongoing, with more parties and countersuits than I care to figure out.
     
    And back to where I started. Burgett’s insurer claimed that it did not have a duty to defend a trademark infringement lawsuit, since trademark infringement fell into an exclusion in the policy.  After several theories, though, the one for product disparagement stuck:

    Persis alleges that Plaintiff [Burgett] made false representations that harmed Persis “by implying to the marketplace that Burgett had the superior right to use the SOHMER trademark,” and thus, by implication, represented that Persis did not have the rights to the SOHMER trademark. Persis further alleges that Plaintiff’s “willfull statements to Samick and others regarding [Plaintiff’s] use of the SOHMER trademark, created a likelihood of confusion or of misunderstanding as to the source, sponsorship or approval of [Plaintiff’s] and/or Persis goods, as well as … confusion of or misunderstanding as to affiliation, connection or association of [Plaintiff] and Persis.”

    At the time of the alleged misrepresentations, Persis contends that Plaintiff “was fully aware that Persis was using the SOHMER trademark in commerce.” The Court concludes that these allegations, taken as a whole, create potential liability and thus, potential coverage for disparagement of Persis’ product—the alleged ownership of the SOHMER trademark.

    More from Rebecca Tushnet on the duty to defend.

    Persis International, Inc. v. Burgett, Inc., Opp. No. 91162715 (TTAB May 16, 2007).
    Persis International, Inc. v. Burgett, Inc., No. 09 C 7451 (N.D. Ill. Sept. 19, 2011).
    Burgett, Inc. v. American Zurich Ins. Co., No. 2:11-cv-01554-MCD-JFM (Nov. 23, 2011).
    ‘248 file wrapper here.
    ‘968 file wrapper here.

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  • Another Dirty Co-Existence Agreement

    I just read a post by my friend Neil Wilkof entitled The Dirty Little (Or Not So Little) Secret Of Trade Mark Law.  In it, he talks about co-existence agreements and too often their tolerance of confusion rather than avoidance of it.

    And then I ran across a fairly uninteresting and poorly decided case that involved a coexistence agreement. But the agreement had something I’ve never seen before in one – a term shorter than both parties’ use of their respective marks:

    And what a term – 25 years.  The agreement was dated for 1984 but according to the complaint it was effective on January 18, 1985, meaning that it expired on January 18, 2010.

    It all started over 75 years ago when two brothers each opened confectionary stores some distance apart in Wisconsin using their surname “Beerntsen.”  The businesses were passed down from father to son to son in both cases.  In 1984 there was a dispute and the two families entered into the concurrent use agreement with the 25 year term.  The agreement set geographic limits for both parties.

    Fast forward to 2003 when the defendant family sold its business to Schadrie Chocolates, which changed its name to Beerntsen Confectionary.  The plaintiff became unhappy and filed a trademark infringement lawsuit.  This is one allegation in the complaint:

    If you can’t read it, it says “The Concurrent Use Agreement expired on January 18, 2010, yet Beerntsen Confectionary, Inc. continues to advertise and market its products using the Beerntsen name in Wisconsin and other states and continues to use ‘Beerntsen’s’ and ‘Beerntsen Candies’ trademarks as its own trademarks.”

    So wow, what interesting stuff.  First, we have a plaintiff who is treating the agreement as a license rather than a co-existence or concurrent use agreement, alleging that somehow the defendant’s right to use the mark expired with the agreement.  Second, assuming that the agreement is not a license but, as Neil points out, an agreement to make certain there is no likelihood of confusion, what is the effect and purpose of a term of 25 years?

    As to effect, assuming there has been no breach of the agreement, I think you come out of it with a pretty solid defense.  There is either no confusion (after all, both parties agree that there hasn’t been any confusion for 25 years and presumably continued consistent behavior would have the same result) or the defendant has an equitable defense based on the harm to to it that would be caused by having to cease use after 25 (or in this case, 75) years.

    So what was the purpose of the term?  I can’t really fathom one for such a long period.  A short period, maybe, like five years, as a trial period to see whether the agreed-upon restraints might make sense and avoid a likelihood of confusion.  But 25 years?  I haven’t a clue.

    Sad to say, though, we don’t find out what the effect of the agreement is.  The court held that the plaintiff’s BEERNTSEN mark didn’t have secondary meaning because the defendant was using BEERNTSEN too, and that there was no likelihood of confusion.  I leave it to you to read the reasoning if you care to, but be prepared for a completely wrongheaded analysis. The breach of contract claim was dismissed for lack of supplemental jurisdiction.

    Beerntsen v. Beerntsen’s Confectionary, Inc., No. 11-C-151 (E.D. Wisc. May 24, 2012).  Complaint here.

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  • You Really Need It Signed

    If you snoozed through biz org class in law school thinking that you weren’t going to be a transactional lawyer, perhaps you better go back and brush up on the law of agency. That’s what snagged Universal Music Group and its related company, UMG Recordings. That, and the pressure to get the deal done.

    Artists Fabolous and Swizz Beatz used plaintiff Luar Music Corp.’s copyrighted work “Dale Don Dale” in a remix that was created as a work made for hire for UMG Recordings. Gustavo Lopez of UMG Recordings sent the remix to Luar’s president, Raul Lopez, telling Raul to “listen and call me.” Gustavo testified that “upon hearing the remix, Mr. [Raul] Lopez expressly gave me his consent to use and distribute the record.”

    In house counsel for UMG Recordings, Jeffery Koenig, sent a draft contract to Gustavo and Raul.  Koenig then sent a revised version to Luar’s attorney, Patricia MacMurray.  Koenig asked MacMurray to have Luar’s authorized signatory execute five copies of the agreement.  MacMurray responded that she had sent it for “Luar’s signature,” then on a follow-up responded that she had sent the documents to Raul to sign but he was out of the office.  Koenig responded with an email saying:

    Until we receive the signed paperwork, for the avoidance of doubt, this e-mail shall confirm that Luar Music approved of Universal’s re-mix of “Dale Don Dale” and granted Universal the right to exploit this re-mix in the manner described in the re-mixer agreement (and that Universal is proceeding in reliance herein).

    MacMurray responded “OK.”  The contract was never signed but UMG Recordings nevertheless went ahead with distributing the remix as “Reggaeton Latino.”

    An exclusive license must be in writing and signed by the copyright owner or the copyright owner’s “duly authorized agent.” 17 U.S.C. § 204(a). Defendant Universal claimed that it had an exclusive license, based on the draft contract and the email. But MacMurray wasn’t a “duly authorized agent”:

    There is no evidence in the record that indicates that MacMurray was ever vested, orally or otherwise, with the authority to grant licenses for copyrighted material owned by Plaintiff. Rather, according to Raul’s unsworn statement made under penalty of perjury, Raul who did not sign the Re–Mixer Agreement, the Revised Re–Mixer Agreement or any other relevant document, was Plaintiff’s only authorized signatory.

    Defendants argue that Plaintiff is estopped from denying that MacMurray was duly authorized to grant licenses because MacMurray held herself out as Plaintiff’s agent. However, the record belies this contention. The Court finds that there is no indication that MacMurray held herself out as Plaintiff’s authorized agent. To the contrary, the emails exchanged between Koenig and MacMurray show that Koenig was well aware that MacMurray was not Plaintiff’s duly authorized agent. Koenig emailed MacMurray the Revised Re–Mixer Agreement and asked MacMurray to have “an authorized signatory of Luar Music sign in the appropriate indicated space.” Further supporting this conclusion is MacMurray’s response as she told Koenig that she sent the documents “over for Luar’s signature.” A few days later, Koenig asked Macmurray if she “received the signed documents from Raul.” MacMurray responded that Raul has been out of the office and has not been able to sign the Revised Re–Mixer Agreement. This email exchange demonstrates that neither Koenig nor MacMurray considered MacMurray to be Plaintiff’s duly authorized agent. Nevertheless, despite not having Raul’s signature, Defendants chose to release Reggaeton Latino. Thus, the record indicates that Koenig knew that Raul was the only person capable of granting an exclusive license and as a result Plaintiff is not estopped from denying that MacMurray was its duly authorized agent.

    All is not lost yet; the court found that there was a question of fact on whether the plaintiff had granted a nonexclusive license, which can be given orally or implied through conduct.

    So you in house lawyers, how many times, in the pressure to get a deal done, have you thought “oh, the email is good enough,” or “maybe they aren’t an agent, but at least they’re an apparent agent”?

    There was another distribution in Mexico, so there’s also some stuff in the decision about extraterritorial application of the Copyright Act.


    Luar Music Corp., v. Universal Music Group, Inc., Civ. No. 09-2263(DRD) (D.P.R May 22, 2012).

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  • Don’t Get Greedy

    Tahir Mahmood believed that he was a co-inventor of a RIM patent.  He hadn’t worked for RIM, but it was undisputed that in 1995 he provided information to RIM about his own PageMail technology.

    In 1998 RIM filed a patent application for the patent that in 2001 ultimately matured into U.S. Patent No. 6,219,694. In 2004, Mahmood told RIM that he thought he was a co-inventor of the patent and RIM undertook an investigation.  This is the court’s description of what RIM did:

    RIM’s investigation included analysis of a variety of materials including, inter alia, lab notebooks of individuals associated with the ‘694 patent, interviews with relevant people within RIM and review of the source code associated with the ‘694 patent. In a series of correspondence exchanged between RIM and plaintiff, RIM repeatedly requested that plaintiff provide it with any information that he had with regard to the merits of his claim of inventorship. On more than one occasion, plaintiff stated that such information would be forthcoming but it never was. In a single fax, plaintiff outlined several general areas that he believed demonstrated that he was an inventor of the ‘694 patent. [RIM investigator] Pathiyal testified credibly that this fax did not provide RIM with any factual basis upon which to make a determination that plaintiff had any role in the invention of the ‘694 patent. While plaintiff had repeatedly told RIM that he had additional information, none was forthcoming and RIM had to proceed based on the information available to it at the time.

    Mahmood claimed that he wasn’t aware RIM owned the Blackberry brand until 2004, but the court didn’t buy it – there was a screen capture of a 2001 webpage of a company Mahmood owned in which Mahmood touted RIM’s use of his technology with its Blackberry device.*

    After RIM’s investigation, it decided that Mahmood wasn’t an inventor and Pathiyal testified that RIM committed itself to the technical direction described in the ‘694 patent.

    In 2008 Mahmood found evidence supporting his claim of inventorship in his brother’s garage, including the source code for his invention. He hired counsel in late 2009 and counsel contacted RIM in July, 2010. Mahmood filed suit against RIM for correction of inventorship and related state law claims on August 1, 2011.
    In a decision on a motion for summary judgment on January 24, 2012, the court found that Mahommod had unreasonably delayed in bringing his claim but that RIM hadn’t shown economic prejudice.
    That’s when Mahmood got greedy.  On February 3, 2012 he filed another lawsuit, this time for a declaration of co-inventorship of five applications and patents that were based on continuing applications from the ‘624 patent: U.S. Patent No. 7,386,588, U.S. Patent No. 6,463,464, U.S. Patent No. 6,389,457, U.S. Patent Application Publication No. 2008/0052365, and U.S. Patent Application Publication No. 2008/0052409.
    Whereupon the court allowed RIM to file a new motion for summary judgment on laches. The new suit was stayed pending the outcome of this case.
    And RIM was more successful on its second shot. The ‘624 patent is the ultimate parent in a family of over 120 patents worldwide with over 4,000 claims. RIM testified credibly that in 2004, had Mahmood substantiated his claim, RIM would have had a number of options:

    [I]it could have provided a financial settlement, it could have designed around the patent, it could have obtained a license to the patent, it could have entered into some sort of business relationship with plaintiff, and/or it could have considered whether plaintiff should have been included as an inventor on the ‘694 patent.

    Pathiyal provided support for these alternatives. For instance, in terms of design around, Pathiyal testified that this was a realistic option in 2001 or 2004. There was, in fact, more than one way to achieve certain of the features of the ‘694 patent. Pathiyal explained that the ‘694 patent has claims relating to a single mailbox and Microsoft has itself invented a technology that has a single mailbox that is not on the same “technological path” as the ‘694 patent. Moreover, Pathiyal presented a number of patents that listed non-RIM employees as inventors with RIM employees to support his assertion that RIM would have considered, as one option, listing plaintiff as a co-inventor if merited.

    The court found that RIM had been economically prejudiced by the delay and that there was a nexus between the delay and its actions. “Equity does not condone, and this Court will not allow, a plaintiff to make unsupported allegations of ownership, disappear for years while a company builds a successful business strategy around the very invention in which he asserts an interest, and then allow him to bring an untimely lawsuit.”  The case was dismissed on the basis of laches.
    *This image is from an affidavit provided by the Internet Archive to authenticate the Wayback Machine document. It’s a good read for an explanation of the timestamping and what part of a page is archived by the Wayback Machine (trademark lawyers take particular note of the second point – images, like logos, that are displayed may not be from the date shown).
    Mahmood v. Research in Motion Ltd., No. 11 Civ 5345(KBF) (S.D.N.Y. Jan. 24, 2012)
    Mahmood v. Research in Motion Ltd., No. 11 Civ 5345(KBF) (S.D.N.Y. May 16, 2012)

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  • Way Too Many Co-owners

    International Importers v. International Spirits & Wines, LLC is, at bottom, a manufacturer-distributor dispute. It’s also a lesson in how not to handle trademark ownership.

    Fernbrew Pty. Ltd. Corp., an Australian company, is the owner of trademark registrations for WALLABY CREEK for wine in Australia, New Zealand, the EU, and Canada, but the U.S. trademark application was filed by A.V. Imports, Inc. A.V. Imports was the first distributor of WALLABY CREEK wine in the United States. This is the transactional history for the registration:

    – May 4, 2004: Maple Leaf Distillers, Inc. assigns a 25% interest to Fernbrew Pty Ltd. The assignment says:

    If you can’t read the text, it says “Further to our discussions, Maple Leaf Distillers Inc. hereby confirm that we understand the Wallaby Creek trademark is … owned by Fernbrew Pty. Limited Corporation of Australia (50%) and A.V. Imports of the United States (50%).

    “Following the agreement with New World Brands Inc. to distribute the product in the United States and our discussed agreement is in place, it is understood and agreed that trademark will be shared in the United States as follows:

    “Fernbrew Pty. Limited Corporation 25%
    “Maple Leaf Distillers Inc. 25%
    “New World Brands Inc. 50%”

    Note that this assignment was recorded by litigation counsel for Fernbrew after suit was filed. Thus, International Importers might not have been aware of Fernbrew’s claim of partial ownership at the time it filed the complaint.

    – February 8, 2005: A.V. Imports, Inc. assigned the entire interest to Maple Leaf Distillers Inc.

    – March 9, 2005: Maple Leaf Distillers Inc. assigns a 50% interest to New World Brands, Inc. According to Rex D’Aquino, a director of Fernbrew, these two 2005 assignments were in furtherance of the 2004 letter and a distribution agreement of the same date.

    – May 16, 2008: New World Brands Inc. assigns its entire interest to plaintiff International Importers, Inc. Fernbrew had appointed International Importers as the importer (p. 6) in 2005, so presumably this assignment was made because of the change of relationship, albeit well after the change.

    The dates are a bit out of order and the 2004 letter assignment (if it can be given such a formal status) is ambiguous, but it looks like it goes this way: Fernbrew and A.V. Imports were each half owners of the trademark but A.V. Imports was the only record owner of the registration. A.V. Imports then assigns the entire interest to Maple Leaf Distillers upon the instructions of, or at least with the knowledge of, Fernbrew. Shortly thereafter the assignment of the 50% interest to New World Brands is formally recorded, but not the 25% interest of Fernbrew that is acknowledged in the same letter. In 2008 Fernbrew engages a new distributor, plaintiff International Importers, and New World Brands assigns its 50% interest to it. So after all the assignments, International Importers has 50%, Maple Leaf has 25%, and Fernbrew has 25%.

    But there’s more. There was a condition on the 2004 assignment:

    It says “In the event that any one of the companies mentioned above becomes insolvent or unable to fulfill our agreement (ie. sales and marketing of the products), the trademark will revert to Fernbrew Pty Limited Corporation ownership.” And Maple Leaf Distillers did become insolvent, so the defendants claimed that Fernbrew was now 50% owner of the mark. Plaintiff International Importers disagrees, claiming that Maple Leaf Distillers’ 25% interest didn’t revert to Fernbrew under Canadian bankruptcy law and instead was owned by the purchaser of Maple Leaf Distillers’ assets out of bankruptcy, Angostura Canada, Inc.

    With that as background (phew!), International Importers sued International Spirits & Wines, LLC and “D’Aquino Group of Companies,” a non-existent legal entity, for infringement of the mark WALLABY CREEK based on the defendants’ importation and sale of the wine. Most notably, Fernbrew is one of the “D’Aquino Group of Companies.” So at the end of the day we have what is a common situation – the former distributor of a product claiming ownership of the trademark and bringing a trademark infringement claim against the manufacturer and the new distributor. But because of the joint ownership of the mark, what happens next is far from typical.

    Rather than sorting out the ownership under the usual manufacturer-distributor framework (alert – recursive link), the defendants challenged International Importers’ standing under Fed. R. Civ. P. 12(b)(1), on the theory that all co-owners must be joined, and under Fed. R. Civ. P. 12(b)(7) for failure to join a necessary and indispensable party under Rule 19, namely, the other owners of the trademark.

    So does one owner have standing without joining the other owners? The magistrate deferred, but the district court in adopting the report and recommendation did not:

    International Spirits and D’Aquino Group cast the absence of the trademark co-owners as a standing issue. According to International Spirits and D’Aquino Group, in patent cases, failure to bring suit alongside a co-inventor of a patent raises prudential-standing concerns. By analogy, the argument continues, the same principle applies in trademark cases. I disagree.

    To be sure, in patent cases, for prudential reasons, a co-inventor of a patent must sue with all her co-inventors or else she lacks standing to sue for infringement. International Spirits and D’Aquino Group have not linked the concerns found in patent law to concerns found in trademark law. Any prudential concerns, moreover, are allayed by Rule 12(b)(7), which allows dismissal for failure to join a party under Rule 19. And, in fact, where an owner of a trademark is not involved in a case, courts have dismissed under Rule 19, not the prudential-standing doctrine. Accordingly, I reject the standing argument.


    But the defendants were much more successful with the failure to join an indispensable party. Here’s the standard:

    A party is “required” if “in [the] person’s absence, the court cannot accord complete relief among existing parties.” FED. R. CIV. P. 19(a)(1)(A). A party is also “required” if the party has an interest in the action and resolution of the action may either “as a practical matter impair or impede the person’s ability to protect the interest” or “leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations.” FED. R. CIV. P. 19(a)(1)(B).


    International Importers’ first effort to dodge Rule 19 was a claim to be the sole owner, despite the recorded documents. It claimed that Fernbrew and Angostura, the other potential co-owners, abandoned the mark because they didn’t use it. Relying on one 2006 district court case from New York, Mears v. Montgomery, No. 02 Civ. 0407 (MHD), 2006 WL 1084347 (S.D. N.Y. Apr. 24, 2006), the magistrate held, however, that one owner’s use would be imputed to the other co-owners. Quoting Mears:

    The purpose of the “use” requirement is to “maintain the public’s identification of the mark with the proprietor. Therefore, as long as [the challenging co-owner] was actively using the name … , there was no danger of improper identification of the owner of the Mark by the public, and [the challenged co-owner] had no reason to take additional steps to use or protect the Mark.


    Having decided that there were co-owners, the court didn’t go on to decide whether Maple Leaf Distillers still had its 25% interest or whether Fernbrew or Angostura succeeded to it. It didn’t matter; all that mattered was that International Importers was not the sole owner.

    The magistrate then held that any co-owners were necessary and indispensable parties under the above standard: if absent the co-owners would be deprived of the opportunity to protect their interest in the validity of the trademark registration so thus had an interest in the action, and the defendants would be at risk of multiple obligations since any judgment would only be binding on International Importers, not any other co-owners.

    Even if the co-owners couldn’t be joined the court might proceed if the co-owners’ interests would be adequately protected in their absence. The court, in admirable understatement, didn’t think they would be: “The ease with which the plaintiff seeks to divest its co-owner(s) of their interests in the mark suggests to the undersigned that the co-owner(s)’ interests would not be adequately protected in the instant case.” It therefore gave International Importers leave to amend the complaint to add the other co-owners – Fernbrew and/or Angostura – as plaintiffs. “D’Aquino Group of Companies” was dismissed for failure to properly serve it (which you can’t do when it doesn’t exist).

    International Importers was then unable to join the co-owners as plaintiffs. In what I suppose it thought might be a colorable end run, International Importers added Fernbrew as a party defendant, but didn’t amend the complaint to state that there were other co-owners of the trademark. The court was not amused and granted the defendants motion to dismiss, albeit with leave to replead.

    So Fernbrew found itself in a world of hurt because of a misguided decision, made long ago, to allow for joint ownership of its U.S. trademark. I don’t know to what end the parties thought that a joint ownership of the trademark was an appropriate arrangement. The 2004 assignment uses an odd turn of a phrase, to “share” a trademark. According to Rex D’Aquino, the trademark was assigned by A.V. Imports to reflect Fernbrew’s “equitable interest” in the registration and “how the rights in the Registration were to be apportioned as of the time that New World Brands, Inc. was appointed as the U.S. distributor for our ‘WALLABY CREEK’ wine.” But rather than devising a legal relationship that more accurately reflected the various roles and stakes of the parties, such as granting a security interest in the mark, the parties divvied up the ownership of the mark itself. Perhaps under Australian law the arrangement would have worked out fine, but under U.S. law, by allowing the distributor to have a claim of legal ownership, Fernbrew finds itself in a position where another company can start labeling goon “Wallaby Creek.”

    As clever as the defense ploy was, I’m not sure where it goes now and how Fernbrew can regain ownership of its trademark. It looks like a stand-off, at least one based on a trademark infringement cause of action. There are at least two co-owners, neither of which can bring a trademark infringement case against the other. Breach of contract? Interference with contractual relations? Often a lot of money goes a long way ….

    Thanks to counsel for the defense Joe Lewis for sending me this fascinating case.

    International Importers, Inc. v. Int’l Spirits & Wines, LLC, Civ. No. 10-61856-CIV-Jordan/O’Sullivan (July 26, 2011) (Report and Recommendation).
     International Importers, Inc. v. Int’l Spirits & Wines, LLC, Civ. No. 10-61856-CIV-Jordan/O’Sullivan (Sep. 26, 2011) (Order Adopting Report and Recommendation).
    International Importers, Inc. v. Int’l Spirits & Wines, LLC, Civ. No. 10-61856-CIV-Jordan/O’Sullivan (May 9, 2012) (Order Granting Motion to Dismiss).

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  • Salba United

    I previously blogged about a case, Salba Corp. v. Ralston, where there were two different owners of SALBA-formative marks.  Salba Corp. owned the trademark SALBA (a varietal of chia seed) and the Ralstons then assigned their SALBASMART and SALBA BALANCE marks to Salba Corp. with a license back and a reversion if Salba Corp. breached certain terms of the assignment, which naturally Salba Corp. did.  As a result, the Ralstons regained ownership of their SALBASMART and SALBA BALANCE marks.

    Now Salba Corp. and the Ralstons have teamed up, suing another company using the SALBA mark.  I say “mark” instead of “word” because the website is using SALBA® (that is, with the circled “R” symbol).

    The case caught my attention for two reasons: first, I expected that, as between Salba Corp. and the Ralstons, there would ultimately be a single entity that could claim rights to all the SALBA-formative marks because the existing registrations – SALBA, SALBASMART and SALBA BALANCE –  are too close to co-exist without confusion.  Instead, they now have a cooperative relationship, described this way in the complaint: “Plaintiff Salba Corp. is in the business of licensing the distribution of seed and food products that are sold under the SALBA trademark. Plaintiff SSNP [Salba Smart Natural Products, owned by the Ralstons] has the sole license to distribute and sell the SALBA seed and food products containing the SALBA seed under the ‘SALBA’ trademark throughout the United States.”  It’s a fairly unusual situation where the various trademarks in a family of marks would be owned by different entities in the chain of distribution, but apparently it’s how they worked it out.  I wonder what happens if there’s another falling out.

    Second is the egregiousness of the infringement by the defendant, which makes me wonder whether it’s an infringement at all. Salba Corp. formerly had licensees who lost their licenses as a consequence of the reversion back to the Ralstons in the original suit. I wonder if this is one of them.

    Salba Corp. N.A. v. X Factor Holdings, LLC, Civ. No. 1:12-cv-01306-REB (complaint filed May 18, 2012).

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  • Trademark Troll Extraordinaire

    We occasionally hear about trademark trolling, but Premier Pool Management Corp. v. Lusk takes it to a whole new level.
    Plaintiff Premier Pool Management Corp. (“PPMC”) offers swimming pool and spa construction services through licensees doing business as Premier Pool & Spas.  It first used the PREMIER POOL & SPAS mark in 1989 and was using it in interstate commerce at least by 2001. PPMC filed an application to register its trademark, but was refused registration because of a pre-existing registration for the mark Premier Pools Construction, Inc. owned by a company of that name (“PPCI”). PPCI’s registration claimed a first use date of 1993. PPMC tried to negotiate a consent to the registration of its application with PPCI, but was unsuccessful and abandoned its application. PPCI later filed another application, which matured to registration, and let the older one lapse (it looks like a chain of title problem).
    In August or September 2011, PPMC hired defendants Dean and Jason Lusk, d/b/a SmartPro for SEO, to assist with search engine optimization (SEO).
    At about the same time, PPCI contacted PPMC asking whether PPMC was still interested in the registration, offering to sell it. The reason given by the president of PPCI was that he wanted to wind down the business, was only doing a couple of pools a year, and only worked in central Florida. PPMC agreed to pay $5,000 for the registration and PPCI asked PPMC to draw up the paperwork, which PPMC did. PPMC then received a call from a lawyer for PPCI, claiming that there was a bidding war for the registration and asking PPMC to up its bid. PPMC declined, based on its belief that the two companies already had a deal for the registration. PPMC also told the lawyer that the registration was invalid because the mark had not been used in interstate commerce.
    So who was on the other side of this bidding war? None other than the Lusks. In the course of their work for PPMC, they discovered the PPCI registration. They were aware of PPMC’s previous efforts to purchase the registration and figured that, with the registration, they could “turn the lights out” on, yes, their client, PPMC. A partner in crime named Hamilton Leonard proceeded to buy the registration from PPCI for something around $140,000 and had it assigned to Dean Lusk.
    Dean Lusk and Hamilton then went to PPMC in furtherance of their scheme. They offered PPMC three options: (1) SmartPro would enforce the trademark against the PPMC licensees and demand $7,000 to $10,000 per year from them; (2) SmartPro would assign the registration to PPMC in exchange for PPMC’s enforcement of the trademark against unlicensed “Premier Pools” (as you can imagine, there were more than a few) and $6,000 to $10,000 per month; or (3) pay an “astronomical sum” to buy the trademark. PPMC declined the extortion offer.
    Since it was unsuccessful with PPMC, Lusk proceeded to send a cease and desist letter (see Exhibit A) to Rackspace, PPMC’s hosting provider. PPMC tried to appease Rackspace, but ultimately PPMC had to find a new hosting provider. PPMC also found the Lusks advertising on YouTube for “Premier Pools & Spas,” PPMC’s mark. And so PPMC sued the Lusks for trademark infringement and for cancellation of the PPCI registration.
    The Lusks defaulted, so the outcome is predictable. PPMC had standing because of the Lusks’ offering of pool services on YouTube under the same mark. The complaint stated a claim under Section 43(a) of the Lanham Act and therefore also for unfair business practices under California Business & Professional Code Section 17200. The PPCI registration is to be cancelled because PPCI had not used the mark in interstate commerce. Finally, there was intentional interference with contractual relations because of the shenanigans with Rackspace.
    Certainly the most shocking part of this story is the outright perfidy of the Lusks,* but apparently the best that could be made of that was the interference with contract claim. PPMC lucked out, in a way, because PPCI wasn’t a party to the suit. PPCI may have been able to show that it had used the mark in interstate commerce, which would mean that the Lusks newly-discovered propensity for pool construction could tack to PPCI’s prior use. Indeed PPMC had an earlier first use date, but PPMC’s rights would be limited geographically under Section 33(b)(5) of the Lanham Act.** Luckily also for PPMC, the Lusks admitted that they knew about PPMC’s efforts to buy the registration from PPCI, so at least the Lusks didn’t have a bona fide purchaser in good faith defense. But you can see where, with a better registration, the scheme would have worked, with a measly interference with contract claim for leverage.
    *There are two sides to every story and since it was a default, the Lusks side of the story wasn’t told. But they apparently didn’t have one good enough to make it worthwhile to respond.
    **Quiz for advanced trademark practitioners – what is the relevant constructive use date for the PPCI mark under Section 33(b)(5)?
    Premier Pool Management Corp. v. Lusk, No. CIV S-11-2896 GEB CKD (E.D. Calif. May 4, 2012).  Premier Pool declarations here and here.
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