The BODY UP decision at the Trademark Trial and Appeal Board has been appealed to the District Court for the District of Columbia.
Body Up Dist. Ct. Complaint
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BODY UP Going to the District Court
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North Carolina IP Section Annual Meeting
I am pleased to be speaking at the 2012 North Carolina Bar Association Intellectual Property Law Section Annual Meeting on March 23, 2012. My session is titled “Who Owns the Intellectual Property?” I’ll be covering developing law surrounding the ownership of patent, copyright and trademark rights (what else?).
Details here. Hope to see you there.
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No Do-Overs
Scanner Technologies Corp., the defendant in the declaratory judgment action, was the owner of 13 patents in the same family. There were multiple suits between it and declaratory judgment plaintiff ICOS Vision Systems, Inc. over “ball grid inspection devices,” which inspect the electrical connections between a microchip and circuit board.In 2008, ICOS filed a declaratory judgment action against Scanner Technologies for noninfringement and invalidity of eight patents in the family. To try to escape the suit, Scanner Technologies gave a covenant not to sue on the patents. It didn’t work though; the court didn’t dismiss the declaratory judgment action because the CNS didn’t cover future product; therefore ICOS was still in apprehension of suit on improvements to its existing products. That suit is still pending and now consolidated with the present dispute about the last patent in the family, the ‘237 Patent.
The ‘237 Patent issued after Scanner Technologies gave the CNS, so ICOS filed another declaratory judgment suit. The ‘237 Patent is broader than the eight patents in the CNS, thus practicing the eight other patents would still infringe the ‘237 Patent unless the infringement was excused by a license. ICOS tried to get Scanner Technologies to agree to give it a CNS for the ‘237 Patent, but, not only was it unsuccessful, Scanner Technologies revoked the earlier CNS, stating in an email:Nevertheless if we are unable to achieve a satisfactory resolution, Scanner is reserving all its rights permitted by law on the entire portfolio. To that effect, Scanner has revoked the CNS agreements previously executed as per the attached revocations. Since Transcore, the authority upon which you are relying makes it clear that a CNS is a license, in the absence of a related settlement agreement as per Trancore with terms to the contrary, the CNS is a revocable license. Since Scanner was unable to defeat ICOS and NVIDIA’s claim of jurisidiction [sic], there is no benefit to Scanner to continue the license and thus has revoked them as per the attached revocations.ICOS thereafter filed a motion for summary judgment claiming a licensee estoppel defense.The court described four ways that an implied license can arise: by acquiescence, by conduct, by equitable estoppel, or by legal estoppel. It was the last, legal estoppel, that the court considered.The court agreed with Scanner Technologies that a legal estoppel defense arises only where there has been consideration for the license granted. The court also agreed that there was no consideration given for the covenant not to sue. But promissory estoppel can serve as a substitute for consideration, which is what happened here:In reliance on the CNS, ICOS has expand its sales worldwide and has indemnified its customers against future suit. NVIDIA, in turn, has relied on the CNS for assurance that as ICOS’s customer, it is entitled to continue using ICOS’s ball grid array inspection devices that existed as of March 10, 2009 without risk that Scanner will bring suit against NVIDIA for infringement of the CNS Patents. Scanner presents no facts that show a genuine issue of material fact as to whether ICOS and its customers relied on the CNS. Accordingly, ICOS has demonstrated promissory estoppel and satisfies the element of consideration for the CNS. ICOS has therefore established that the CNS constitutes a valid license.So the CNS was valid but there was one more hurdle: the ‘237 Patent wasn’t part of the CNS. However, Scanner Technologies had threatened ICOS with the ‘237 Patent and enforcing the ‘237 Patent would derogate ICOS’s right to practice the claims of the patents included in the CNS because the ‘237 Patent was broader. ICOS therefore must have the benefit of its bargain and be allowed to fully practice the eight patents in the CNS. To the extent it required a license to the ‘237 Patent to do so, ICOS has an implied license.Further, because the ‘237 Patent was a continuation patent and, by definition, a continuation patent cannot claim a new invention not already supported in the earlier patents, the license to the eight patents in the CNS was also an implied license to the ‘237 Patent. The case was dismissed.ICOS Vision Sys. Corp. v. Scanner Tech. Corp., No. 10 Civ. 0604 (PAC) (S.D.N.Y. Feb. 15, 2012).ICOS Vision Sys. Corp. v. Scanner Tech. Corp., No. 08 Civ. 8102 (DC) (S.D.N.Y. March 29, 2010).
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When the Law Fails
Sometimes I find great dissonance between the application of trademark law and the marketplace realities. The parties line all their legal ducks up in a nice straight row, but there’s just such an inconsistency between what the legal outcome is and what consumers’ understanding of the situation might be.
E & J Gallo v. Proximo Spirits, Inc. is that kind of case. Plaintiff Gallo contracted with Tequila Supremo, a tequila supplier in Mexico, to produce a tequila that would be sold under the brand name “Familia Camarena.” Tequila Supremo filed three trademark applications that contained the word “Camarena” in them, CAMARENA, FAMILIA CAMARENA and FAMILIA CAMARENA 1761. Gallo, however, filed trademark applications for the shape of the bottle that would be used for the tequila:
The ownership rights were defined in an agreement between Gallo and Tequila Supremo; Tequila Supremo was to own the CAMARENA name (it was the name of the owners of the company) and Gallo was to own the bottle design and packaging. Gallo is licensed to use the CAMARENA trademark and Tequila Supremo is licensed to use the Gallo bottle. (It’s not clear where Tequila Supremo would use it. Gallo is the exclusive distributor of FAMILIA CAMARENA tequila in the United States, so presumably no one else could be using the bottle design in the United States, at least for FAMILIA CAMARENA tequila. Query whether Tequila Supremo may use the bottle for other types of alcohol in the United States, a highly relevant question to distinctiveness.)Both Gallo and Proximo Spirits moved for summary judgment on a counterclaim that the Gallo and Tequila Supremo trademark applications and registrations were void for fraud. The theory is this: because Gallo is merely a distributor of the tequila and Tequila Supremo insures the quality of the tequila, Gallo cannot be the owner the bottle marks. The theory against Tequila Supremo is – well, since defendant Proximo Spirits repeatedly said that Tequila Supremo controlled the quality of the tequila there wasn’t a theory, so the court denied the counterclaim as to Tequila Supremo.
Proximo Spirits argued that the fraud was based on a false statement in the declaration, which was that Gallo was the sole source of the tequila, manufactures the tequila, or controls the quality. But there are no statements like that in the application, rather one only avers that it is the owner of the applied-for mark. As a consequence,
Accordingly, Counterclaimants fail to carry their heavy burden to establish that Gallo expressly misrepresented in its applications that it was the sole source of Camarena Tequila. ….
Counterclaimants’ “sole source” theory appears to be based on outdated trademark law. Although a trademark originally indicated the source of the related product, trademark law has shifted to recognize various valid premises upon which a person or entity may own a trademark, including the control of a product’s quality:
The historical conception of trade-mark as a strict emblem or source of the product to which it attaches has largely been abandoned. The burgeoning business of franchising has made trade-mark licensing a widespread commercial practice and has resulted in the development of a new rationale for trade-marks as representations for product quality.
Siegel v. Chicken Delight, Inc., 448 F.2d 43, 48–49 (9th Cir.1971). Because of this changing rationale and growth in the practice of trademark licensing and franchising, a trademark is not necessarily an indicator of source. Indeed, a trademark may denote source, control of quality, and good will, among other things. Moreover, it is not uncommon to see marks of more than one company appearing on or denominating a single product or service. The marks of different companies may appear on a single product where they serve separate functions such as “manufacturer/distributor” or “licensor/licensee.” Accordingly, and contrary to Counterclaimants’ arguments, a trademark does not necessarily designate the source of the goods or services with which it is associated.
Viewed under this legal perspective, Counterclaimants’ “sole source” misrepresentation theory fails legally and factually.
The court also assessed defendant’s theory that Gallo was not the owner of the mark because it was only a distributor and therefore didn’t control the quality of the tequila goods. Gallo successfully deflected the theory on the basis that distributors may, indeed, own trademarks, that the agreement with Tequila Supremo allowed it to own the trademark in the bottle shape, and that it also participated in quality control by inspecting the tequila.
This is all an utterly correct statement of law, but completely misses the point. There are lots of ways that two trademarks can be used on the same goods. There can be a house brand used with a product brand, like a well-recognized Apple logo with the “iPod” word mark:
The court characterized the relationship between Gallo and Tequila Supremo as “co-branding,” but that’s wrong. In a co-branding relationship, the different owners’ use of their respective marks represents different types of relationship with the goods or services. When we see Edy’s Nestlé Butterfinger ice cream we know that Edy’s makes the ice cream and the Butterfinger is a component of the ice cream. When we see “Mercedes Benz Fashion Week,” we don’t think that Mercedes Benz has gone into the fashion or the trade show business, but rather that it paid to a lot of money to have high exposure for its brand so it could ultimately sell more cars.
Where this case went off the rails is that the court didn’t examine whether the use of the marks was consistent with what a consumer might think about the message conveyed by that use. As consumers, we think that the label on the bottle and the bottle itself are from the same source, that is, that both trademarks, the label and the bottle, are conveying the same relationship-type information. So something is fundamentally wrong if you can say that two trademarks providing the same information – in this case “I am the source” – can be owned by two different entities.
As proof, imagine the label and bottle shape are disconnected. In that case, because a product packaging or configuration mark is very weak, we will soon assume that the bottle shape is not an indicator of source. Imagine if the Coke bottle was licensed for use for a coffee drink by a different company – how long would it take before we don’t think of it as standing for “Coke” anymore? If Gallo had established the bottle as its trademark by its exclusive use across a number of its products, so we had learned that the bottle shape means “Gallo” regardless of the liquid inside – the house mark/product mark relationship – the outcome might be different. But that’s wasn’t this case.
I think the defendant had the correct view of what consumers would think, i.e., no consumer would think that the shape of the bottle and the name of the brand on the label are indicators of different source. But the defendant could find no hook in the law that supported that theory. I’m hoping for an appeal.
E & J Gallo v. Proximo Spirits, Inc., No. CV-F-10-411 LJO JLT (E.D. Cal. Jan. 30, 2012).
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Inventing a Chemical Compound
Plaintiff Olusegun Falana was hired to work on synthesizing chemical compounds for use in liquid crystal display screens. The compounds had to perform over a range of temperatures. Falana developed a protocol for synthesizing compounds and, using the protocol, synthesized “Compound 7.” Compound 7 had a much improved temperature range, but it still wasn’t adequate. Falana then left the project and his boss synthesized “Compound 9” using Falana’s protocol, which had all the characteristics they were looking for. A patent was filed that described the synthesizing protocol in the specification, however the patent didn’t claim the protocol, it only claimed compounds. Falana was not named as an inventor, so he filed suit for correction of inventorship.The Federal Circuit relied on the principle that conception of an invention for a chemical compound requires knowledge of both the specific chemical structure of the compound and an operative method of making it, and concluded:
Accordingly, this court holds that a putative inventor who envisioned the structure of a novel genus of chemical compounds and contributes the method of making that genus contributes to the conception of that genus. This holding does not mean that such an inventor necessarily has a right to claim inventorship of all species within that genus which are discovered in the future. Once the method of making the novel genus of compounds becomes public knowledge, it is then assimilated into the storehouse of knowledge that comprises ordinary skill in the art. Additionally, joint inventorship arises only “when collaboration or concerted effort occurs—that is, when the inventors have some open line of communication during or in temporal proximity to their inventive efforts.” Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1359 (Fed. Cir. 2004). The Patent and Trademark Office must issue a certificate of correction correcting inventorship.
Falana v. Kent State Univ., No. 2011-1198 (Fed. Cir. Jan. 23, 2012) (nonprecedential).
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Sketchy Standing Decision
The only good thing about the latest Federal Circuit standing decision is that it’s nonprecedential. This is the sequence of events, taken from both the majority’s and dissent’s statement of them:In 2002, The Dow Chemical Company (“Dow”) assigned patents to a holding company, Dow Global Technologies, Inc. (“DGTI”). The dissent described the assignment as of “essentially [Dow’s] entire patent portfolio” as part of a tax strategy. This was the grant:2.01 Transfer of Patent Rights and Technology. Effective on the Transfer date, [Dow] hereby conveys, transfers, assigns and delivers to DGTI, and DGTI hereby accepts from [Dow] as an additional contribution to DGTI’s capital, all of [Dow’s] right and title to and interest in the Patent Rights, Technology and Work Processes, which rights are owned or controlled by [Dow] on the Transfer Date or thereafter. The language defining “Patent Rights” is the crux of the problem:
1.07 “Patent Rights” means any and all patents and applications for patents of any kind, filed with and/or granted by a governmental body of the United States or any other country … which are owned solely or controlled by [Dow] on the Transfer Date or thereafter, that [Dow] is able to assign to DGTI without the consent of or accounting to a Third Patty or Affiliated Company, without diminishing the royalties paid or payable by or otherwise materially affecting the obligations of such Third Party or Affiliated Company with respect to such Patent Rights, and without resulting in a loss of rights. The parties shall provide a schedule of Patent Rights as Schedule A to this Agreement, within ninety (90) days of the Effective Date, and shall provide subsequent supplements thereto from time to time during the Term. The agreement also said this about the schedules to the agreement:
9.07 Schedules. Each of the schedules referenced within this Agreement, prospectively including any updates or amendments thereto, is deemed incorporated herein by reference. While care shall be taken in the provision of the schedules, it is recognized that inadvertent errors may occur. Accordingly, inclusion of an item on one or more schedules shall not give rise to rights or an implication that DGTI has rights greater than those expressly provided for in this Agreement. Likewise, omission of an item from one or more schedules shall not give rise to an implication that DGTI has rights less than those otherwise provided for in this Agreement. Upon their mutual recognition of an error in one or more schedules, the parties will amend the erroneous item(s) on the affected schedule(s). In 2005, Dow sued defendant Nova Chemicals Corp. for patent infringement.
Five months after discovery closed Dow first produced a Schedule A that said “this Schedule includes all Patent Rights of [Dow] … excluding Excluded Patent Rights set forth in Schedule ‘D’” and a Schedule D that indeed listed the patents-in-suit, although the patents had been added to Schedule D years after suit was filed and right before it was produced. Dow also produced a “Quitclaim Deed,” dated four days before it was produced, assigning “all of DGTI’s right, title, and interest to the Patents[-in-suit], if any.”
Defendant Nova pressed for further disclosure. Dow then produced a 2002 version of Exhibit D that did not list the patents-in-suit and a Schedule A dated September 15, 2005 that, unlike the broad language in the earlier-produced Schedule A, listed a number of patents by number but not the patents-in-suit.
To recap, the definition of assigned patents had three exclusions: (1) the transfer would require “the consent of or accounting to a Third Party or Affiliated Company”; (2) the transfer would “diminish[ ] the royalties paid or payable by or otherwise materially affecting the obligations of such Third Party or Affiliated Company with respect to such Patent Rights”; or (3) the transfer would result in “a loss of rights.”
Everyone agreed that the first two exclusions didn’t apply, leaving the question whether transferring the patents-in-suit would have resulted in a “loss of rights.” Nova argued that the language was intended only for those patents in litigation pending at the time of transfer, designed so that there would be no loss of standing in those cases. At the time the assignment was being drafted, Dow’s Managing Patent Counsel sent a question by email:
“Did transfer of all patents into this new company have any provisions on how to handle pending litigations under Dow patents…. It is a question of who had standing and who is the real party in interest in these litigations.”
The response was:
“Thank you for the feedback. I’ve addressed this issue in the contribution agreement by excluding patents that can’t be transferred to DGTI without a loss of rights (previously, it excluded patents that can’t be transferred to DGTI without a loss of patent protection). As an overall safety net, there is a schedule of excluded intangible assets, just in case there may be other instances in which we determine that there would be some disadvantage in transferring the assets to DGTI.”
Dow’s argument was that, in addition to patents in pending litigation, the language was meant to preserve the ability to recoup lost profits in future litigation.
(I don’t follow Dow’s theory. Does it mean that Dow somehow was prescient in knowing that these patents would be litigated in the future and therefore didn’t assign them? Or that the patents flow back and forth without any further action by Dow or DGTI as litigation comes and goes? Was it the Schrödinger’s cat of assignments, any given patent was both assigned and not assigned depending on whether it was a tax situation or a patent infringement situation?)
But the majority punted on the language. It held that, while it didn’t know what the “loss of rights” language was supposed to mean, it didn’t matter because Schedule A was the definitive list of what was assigned, the patents-in-suit weren’t on it, ergo, they weren’t assigned and Dow had standing to bring suit.
The dissent disagreed with the majority’s conclusion about Schedule A’s role:
Section 1.07 defines the transferred Patent Rights as “any and all patents” owned by Dow that Dow can assign without implicating one of three exceptions, none of which reference Schedule A. Nowhere in the Contribution Agreement is the transfer predicated or dependent upon whether patents are listed on Schedule A. Indeed, Section 9.07 makes clear that the contents of the schedules are not controlling. Moreover, Section 2.01 provides that Dow “hereby” transfers the patents, which strongly indicates an immediately effective transfer, while Schedule A was not even required to be completed until after the Contribution Agreement was executed. To find that no patents were transferred unless and until listed on the Schedule A ignores Section 9.07, nullifies the transfer set forth in Section 2.01, renders superfluous the detailed and specific definition of Patent Rights in Section 1.07, and rearranges the fundamental purpose of the tax and business scheme intended under the agreement as a whole. Such a reading would cause most of the Contribution Agreement to be “meaningless or illusory.” The reference to Schedule A in the Contribution Agreement shows that the parties desired to make and maintain a listing of the patents that were transferred to DGTI as a matter of convenience, not as a prerequisite to a valid transfer.
The dissent also didn’t buy Dow’s argument that somehow these patents fit into the “loss of rights” exclusion, reciting all the extrinsic evidence (which, under Delaware law, should have been considered because the language was ambiguous) that the intention was only to exclude those patents in litigation at the time of the assignment. As well as the language of the agreement and the emails described above, the dissent also described all the ways that the company treated the patents as assigned for tax purposes.
I agree with the dissent; I don’t see how you would draft an agreement intending to assign only scheduled properties but also have an extensive, but apparently non-binding, description of what should be on the list – you don’t need both. But I will be taking a closer look at the language of grant clauses and schedules in the future after having read this case.
Perhaps the whole thing was just a matter of bad timing. The district court sat on the motion on standing for nine months and heard it the day after the jury returned a verdict for Dow on the infringement trial. Maybe the majority just didn’t have the stomach for a do-over with the right party-in-interest.
Dow Chem. Co. v. Nova Chems. Corp. (Canada), No. 2010–1526 (Fed. Cir. Jan. 24, 2012) (nonprecedential).
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The Yankees Still Own Their Logo
Last April there was an interesting complaint filed (blogged here) by a woman who claimed that her uncle, Kenneth Timur, now deceased, had designed the New York Yankees logo in 1936 but hadn’t been compensated for it. The plaintiff’s proof of authorship was the fact that her uncle, when he revised the logo in 1952, put “1P08
9” instead of “1908” on the top of the logo, thus:
As you might have guessed, the complaint was kicked six ways to Sunday. First, there was no diversity jurisdiction and no federal subject matter jurisdiction because the complaint alleged infringement of a common law copyright, which is a claim under state law, not federal.
But the court, after formally dismissing the case on jurisdictional grounds, had just gotten started:
Moreover, if the Court were to have jurisdiction over this matter, it would find that Plaintiff’s First Amended Complaint utterly fails to state a claim upon which relief may be granted. All of Plaintiff’s non-copyright claims have been barred by the applicable statutes of limitation for over half a century. Plaintiff’s argument that equitable estoppel applies to toll the statutes of limitation because the Yankees somehow concealed the Logo’s provenance from the Logo’s own creator is laughable. Ouch. But the court didn’t stop there, also finding that section 301 of the Copyright Act of 1976 expressly preempts any common law copyright claim. Next up, in 1936 there was only a common law copyright for unpublished works (published works would have fallen under the Copyright Act of 1909), but a theory that the work was unpublished was inconsistent with the statements in the complaint that the Yankees commissioned the logo, Timur transferred the logo to the Yankees, and the Yankees published the logo as part of the Yankees uniform.The court didn’t even stop there, opining on the outcome of the plaintiff’s claim for infringement of a published work that wasn’t made. Any infringement claim fails here too; if the work had been published under the Copyright Act of 1909, even if registered and renewed (it wasn’t), the copyright would have expired in 1992.
All that in nine pages in Courier New, double-spaced (okay, a one-sentence carryover and signature on the tenth page). About six solid bases for dismissal but hope springs eternal; the plaintiff has appealed.
Buday v. New York Yankees Partnership, No. 1:11-cv-02628-DAB (S.D.N.Y. Oct. 20, 2011).
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Defining Terms (Especially the “Agreement”)
Sometimes you read a decision and don’t know what the arguments really are until you read the dissent. Abbott Point of Care, Inc. v. Epocal, Inc. is one of those cases. Out of the Federal Circuit, it’s a question about whether a former employee’s duty to assign inventions survived various changes in the relationship and various agreements between the inventor and his employer.Dr. Imants Lauks, the inventor and founder of defendant Epocal, Inc., had been employed by Integrated Ionics, a predecessor to the plaintiff Abbott Point of Care, Inc. There were ultimately three agreements in play. First, in 1984 Lauks executed an agreement that covered confidentiality, non-competition, non-solicitation, disclosure and assignment provisions. There didn’t appear to be any dispute that, had Lauks invented something while this agreement was operative, Integrated Ionics would own it.
Integrated Ionics became i-STAT and in 1994 Lauks executed an employment agreement with i-STAT that covered employment duties, compensation, benefits, termination and severance payment. In 1999 Lauks resigned from i-STAT and instead entered into an eighteen-month consulting relationship that expired on March 1, 2001. The consulting agreement defined Lauks consulting services and also said, in a section entitled “Continuation of Employee Confidentiality, Non-Solicitation and Non-Competition Covenants” that:
The existing agreement between Lauks and [i-STAT] regarding confidentiality, non-solicitation and non-competition (the ‘Existing Confidentiality Agreement’) shall remain in place as if Lauks remained employed by [i-STAT], except that the covenants regarding non-competition shall run 18 months after the execution of the Consulting Agreement. Lauks filed the applications on the patents-in-suit on June 4 and 8, 2001, three months after his consulting relationship ended, and assigned the resulting patents to Epocal. Abbott acquired i-STAT and now claims that the 1984 agreement, including the assignment provision, was operative until March, 2001. It claims that Lauks conceived of the inventions before then and therefore Abbott owns the patents.The appeals court held that the 1999 Consulting Agreement didn’t continue the assignment provision of the 1984 agreement, but only the confidentiality, non-solicitation and non-competition provisions. The court considered the above language unambiguous.The dissent saw it differently. The dissent informs us that the 1984 agreement was untitled, but that the 1992 employment agreement referred to the 1984 agreement in its entirety as “The Confidentiality and Non-Competition Agreement,” and that Lauks and Epocal also referred to it (although it’s not clear where) as the “certain letter agreement . . . concerning employee confidentiality and non-competition.” These instances of using a shorthand reference to the entire agreement makes it less clear what the use of the term “Existing Confidentiality Agreement” in the 1999 Consulting Agreement means – whether it was to the “confidentiality, non-solicitation and non-competition” provisions of the agreement only or the agreement as a whole.
There is more, though. The 1999 Consulting Agreement also recognized that
[t]he Consulting Agreement does not extend to work on new products, whether or not based on [i-STAT’s] core technology and whether or not for point-of-care blood analysis applications. These provisions would be inconsistent with a duty on Lauk’s part to assign inventions on all his work. The dissent doesn’t address this, but then it also only disagreed about granting the motion to dismiss rather than remanding for additional factfinding.
Lawyers are generally anal about defining terms, and this case demonstrates why it’s good practice. Had the dissent carried the day and the contract been interpreted differently, Lauks might have lost his entire business because of ambiguity about whether he succeeded in retaining his invention for his new company.
Abbott Point of Care, Inc. v. Epocal, Inc., No. 2011-1024 (Fed. Cir. Jan. 13, 2012).
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The Danger of Terms of Art
Sherman & Associates, Inc. v. Oxford Instruments, PLC discusses the fairly commonplace question of whether plaintiff Sherman & Associates, who was only a patent licensee, has standing to sue. The answer hinged on interpretation of the contract between it and the patent owner, ASM America, Inc. Sherman & Associates was originally the owner of the patent-in-suit, but it had transferred title to ASM several years earlier. In exchange, Sherman & Associates received a “non-assignable, nontransferable worldwide exclusive right to grant sublicenses under the Sherman Patents in fields of use other than the field of Microelectronic Applications” from ASM. The question was whether this right to sublicense also included the right to sue for infringement.The first notable part of the case was the position of patent owner ASM – it was named by Sherman & Associates as a defendant in the Amended Complaint, with this statement: “ASM has an interest in the outcome of this litigation, and is a proper party to this action as a plaintiff, defendant, defendant patent owner, or involuntary plaintiff, whichever designation is deemed appropriate by this Court.” Sherman & Associates had named ASM in its Certificate of Interested Entities when it filed suit and two months later filed the Amended Complaint adding ASM, so there was presumably some communication about the issue. And presumably any communication with ASM didn’t turn out well because, not only did Sherman & Associates name ASM as a defendant, ASM was the one who filed the Motion to Dismiss under FRCP 12(b)(1), not the accused infringer Oxford Instruments.But the eyebrow-raising part of the decision is the court’s interpretation of this language, fairly standard in any licensing agreement:Sherman agrees to cooperate and assist ASM in any litigation involving the Sherman Patents on reasonable terms and conditions to be agreed upon. Sherman also agrees to assist ASM in patent prosecution relating to the Sherman Patents at no cost to ASM. ASM will pay all prosecution costs and will reimburse Sherman for any out of pocket costs. What did the court do with this?[T]he contract says nothing about Sherman’s right to litigate. The only language in the contract about litigation anticipates that ASM will be litigating, and does not limit such litigation to the field of microelectronics. See Bunsow Decl. Ex. A ¶ 1(g) (“Sherman also agrees to assist ASM in patent prosecution relating to the Sherman Patents at no cost to ASM.”). Sherman argues that the paragraph about litigation contains no reciprocal language because he is the inventor of the patent and would not need any assistance from ASM in prosecuting a patent. That is plausible, but it is no more plausible than ASM’s suggestion that the parties did not intend for Sherman to do any litigating. What!? The court thinks that the language about “prosecuting” patents is further elaboration on the preceding sentence about litigating patents?
It’s easy to understand how this happens. When I talk about “prosecuting” patents to anyone but a patent lawyer, I follow up with an explanation of what that means. Apparently no one helped the judge out with that part of it here. Nevertheless, the court otherwise had adequate reason to find that Sherman & Associate’s didn’t have the right to sue and dismissed the case.Sherman & Associates, Inc. v. Oxford Instruments, PLC, No. C 11-8827 CRB (N.D. Cal. Jan. 10, 2012).
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Assignment or License?
I last wrote about the licensing rights of a joint copyright owner as discussed in Corbello v. DeVito. The same case also had two agreements that the court needed to construe before deciding who owned what rights in the copyright.Plaintiff Corbello is the widow and heir of Rex Woodard, who wrote an authorized biography about Tommy DeVito, a member of the Four Seasons musical group. It was never published. Corbello alleges that DeVito provided the book to the producers of the Broadway musical Jersey Boys and the show is a derivative work of the book. Corbello brought a number of claims against DeVito and various entities related to the production, including for copyright infringement and an equitable accounting.
Woodard had entered into a brief letter agreement with DeVito over the rights to the book:December 1, 1988 Mr. Tommy DeVito
[street address]
Las Vegas, Nevada [zip code]Dear Tommy:
I am making progress on the taped interviews we did. You suggested that I prepare a written memorandum of our arrangement for future reference. I will do so by this letter.
I agreed to write your authorized biography based on the recorded interviews you gave me, plus any other relevant information which would benefit the book. You and I will be shown as co-authors, with you receiving first billing. I will do all of the actual writing, but you will have absolute and exclusive control over the final text of this book.
We have further agreed that we will share equally in any profits arising from this book, whether they be in the form of royalties, advances, adaptations fees, or whatever. This agreement will be binding upon our heirs, both as to obligations and benefits, in the event one or both of us should die.
If this letter accurately sets forth our agreement as you understand it, sign the enclosed photocopy where indicated and return it to me in the enclosed self-addressed, stamped envelope. Keep this original letter in your own file.
Thank you for asking me to work with you on this project. I look forward to working with you over the next several months.
Sincerely,
[signed] Rex Woodard
Rex Woodard
RW/ml
EnclosuresAPPROVED:
[signed] Tommy DeVito
TOMMY DEVITO
The first question was whether DeVito was a joint copyright owner of the book or Corbello, as Woodard’s heir, owned the copyright in its entirety. The agreement between Woodard and DeVito doesn’t say; it says that Woodard and DeVito would share equally in any profits but that doesn’t necessarily mean that DeVito was a copyright owner. “If the Work were Woodard’s alone under the law of copyright, the Letter Agreement would still constitute an assignment of 50% of Woodard’s rights to receive profits from the Work, i.e., a partial assignment of royalties, but it would not appear to constitute a partial transfer of copyright.” Nevertheless, Corbello had admitted that DeVito was closely involved in editing the book, so the court found that DeVito was a co-author since he contributed non-de minimis creative edits. Corbello therefore wasn’t the sole owner of the work but only a joint owner, which meant that DeVito had the rights of an owner to grant a license for the production of Jersey Boys.
But what kind of license in the book did DeVito give? DeVito had granted extensive rights to his co-band members Frankie Valli and Robert Gaudio to exploit undefined “Materials,” thus:
In consideration of the foregoing payments, you grant to us the exclusive right to use and incorporate the Materials in one or more theatrical productions, and any and all ancillary and subsidiary exploitations thereof including, without limitation, cast albums, motion picture and televised versions, merchandise and/or other works…. You hereby consent to any such use and agree that the Works may be exploited throughout the world in all media now existing and later devised, and you further acknowledge that you shall not receive any compensation for the use of the Materials or in connection with any of the Works other than the compensation expressly set forth herein. The rights granted by you to us hereunder shall continue in perpetuity if the rights in the Play have merged with each other pursuant to the production contract between us and the initial commercial producer. ….
The rights granted to us herein are irrevocable and not subject to rescission or injunction under any circumstances.
A transfer of copyright ownership doesn’t have to say “transfer” or “assign,” but simply must indicate an intent to effect an outright transfer of the copyright. The court found that the above language in the Valli-Gaudio agreement was expansive enough to demonstrate an intent to assign the copyright, with one not-so-minor problem – the agreement didn’t describe what the “Materials” consisted of. Valli and Gaudio testified that at the time they entered into the agreement they didn’t know the book manuscript existed and, indeed, had never seen it until their depositions in 2011. Hence,
the Valli/Gaudio License was not a transfer of copyright from DeVito to Valli and Gaudio, because although the instrument purported to give exclusive rights in the Materials irrevocably and perpetually, it did not sufficiently identify the Work to transfer DeVito’s 50% ownership of copyright in the Work to Valli and Gaudio. At best, the instrument is ambiguous with respect to intent to transfer copyright, and the parol evidence indicates that there was no intent to transfer copyright, particularly as Valli and Gaudio appear not to have known specifically about the Work itself at the time they entered into the Valli/Gaudio License with DeVito. The court therefore found that it was DeVito, not Valli and Gaudio, who owed Corbello a duty of accounting for her ratable share of the profits realized for the use of the book. That’s not as easy as it might sound, though; DeVito had provided a number of “Materials” and so there remains a question of fact about what percentage of DeVito’s royalties under the license is attributable to the book and what percentage is attributable to other works or assistance DeVito provided under the license.
There’s even more to this decision if you’re interested: some juicy details about DeVito’s claim that he alone authored the book and some elucidation on supplemental registration – who can make it and how it’s indexed with respect to the original registration.
Corbello v. DeVito, Civ. No. 2:08-cv-00867 (D. Nev. Oct. 27, 2011).
The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.
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