Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • It Seemed Like a Good Idea at the Time

    Popeye vs. Popeyes: the owner of Popeyes “quick service” restaurants, AFC Enterprises, Inc., has filed a Complaint for Declaratory Judgment asking the court to declare that it, not the Hearst Corporation, owner of the Popeye cartoon character, is the owner of the trademark POPEYES for restaurant services.

    The dispute exists because AFC Enterprises originally licensed some rights – exactly what rights are, of course, what is in dispute – from Hearst in March 1976, about four years after the restaurant was founded. There were many agreements after that (it takes almost two pages in the recitals in the last amendment to list all the agreements), but all licenses are due to expire December 31, 2012.  The complaint says that the restaurant has ceased all use of the characters domestically, is requiring that the few remaining international franchises that still use them to cease by December 31, 2012, and will let the license expire. From a 2002 amendment it appears that AFC Enterprises is paying around $900,000 annually to Hearst regardless of whether it exercises the rights Hearst granted.

    Interestingly, the parties put this in the 2002 amendment:

    (click for larger image)

    Which, if you can’t see the graphic, reads in part “The parties acknowledge that they disagree about the nature of their relationship as evidenced in correspondence between the parties during 2001. Neither party intends by entering into this January 1, 2002 Amendment to agree, either expressly or implicitly, with the other party’s position and both parties acknowledge the right of the other to have and hold positions previously asserted.”
    Fast forward to 2011, and AFC Enterprises now files for declaratory judgment. The allegation of imminent harm, required for a declaratory judgment, mentions only the 2001 letter and some vague discussions and meetings (no dates given):

    Notwithstanding the plain language and clear intent of the Agreement, through discussions and meetings between representatives of AFC and representatives of Hearst, an actual controversy exists over the meaning and application of the Agreement. In correspondence dated September 5, 2001, Hearst’s President at the time, T.R. Shepard III forwarded to Jon L. Luther, POPEYES® President at the time, a memorandum prepared by Hearst’s counsel, Baker & Hostetler. In the memorandum, Hearst’s counsel claimed that Hearst could claim rights to the POPEYES® trademarks in connection with prepared foods and restaurant and franchise services. The memorandum also stated that, “if the agreements were terminated or canceled, at the minimum AFC would not be able to make any use of the POPEYES® marks outside of restaurant services… and it is also likely that a court will prohibit AFC from making any use of the POPEYES® mark.”

    I don’t think a letter in 2001 gets you to imminent harm, although I see the argument. And although the license still has 13 more months, and I can understand you’d want to get something like this straightened out well ahead of time – does the scale of the harm factor into ripeness for declaratory judgment? At any rate, I expect we’ll see a motion to dismiss for lack of jurisdiction.

    From the snippets in the agreements I saw, it looks like AFC Enterprises has a good argument. It’s somewhat surprising that ownership of the trademark wasn’t stated clearly enough to avoid the dispute from the beginning, though. But in 1976 Popeye was still a hot character and the restaurant a nascent business, perhaps only successful now because of the original association.  Maybe there was a licensing agreement only because of a threat by Hearst (although the founder said the restaurant was named after detective Popeye Doyle in “The French Connection”), so leaving it unsaid perhaps wasn’t an oversight but the best that could be accomplished under the circumstances.  Maybe AFC Enterprises always knew it had this battle to fight sooner or later.

    AFC Enterprises, Inc. v. The Hearst Corp., No. 1:11-cv-04150-WSD (N.D. Ga. Nov. 30, 2011).

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  • The Power of Joint Authorship

    There are many copyright cases where joint ownership of copyright is raised as a defense. Since a joint owner of a copyright is not an infringer but, at most, has a duty of accounting to the other joint owners, it’s one way to avoid infringement.  Often it’s a last-ditch defensive maneuver, claiming that the commissioning of a work, coming up with the idea, or some minor amount of editorial work amounts to joint authorship.

    In BSN Medical, Inc. v. Parker Medical Associates LLC we have a defendant with more foresight.  Defendant Bruce Parker created co-defendant Parker Medical Associates LLC (PMA).  While there, he created a product called “Ortho-Glass” for making splints.  PMA sold the splinting business to Smith & Nephew Casting, Inc. but retained a business making athletic equipment. Parker worked at Smith & Nephew until 2000, then in 2001 Smith & Nephew sold the business to plaintiff BSN Medical. Parker and PMA then re-entered the market for splint materials and were sued by BSN Medical largely for misappropriation of trade secret, but also unfair competition, false advertising (Rebecca Tushnet’s summary of that claim is here), and various other state law claims. And there’s a nugget of a copyright infringement case.

    A Smith & Nephew product manager, Tom Darcey, led the creation of a training booklet showing how to make splints. A person named Ken Hawkins and graphic designer Nancy Roth all worked on the manual. Roth’s contributions were all the graphics, the layout of the work, and creating illustrations.  Roth later became an employee of Smith & Nephew, but wasn’t at the time the manual was created. Smith & Nephew and BSN Medical also created the “OG Pocket Chart” based on the splinting manual.  When PMA re-entered the splinting market, it created its own “PMA Pocket Chart” that BSN Medical claims was copied from the OG Pocket Chart.

    Even if it was, that was only half the battle. PMA had used Nancy Roth to create the PMA Pocket Chart and the court held that she was a joint author of the original splint manual (only the split manual had a registered copyright, so the copyright infringement allegation was infringement of the manual). Noting that a joint work requires (1) an intent to form a single work and (2) contribution of independently copyrightable material from each collaborator in the work, the court held that Roth met those requirements:

    The court is satisfied that Darcey, Roth, and Hawkins all intended that their contributions be merged into inseparable or interdependent parts of a unitary whole. That is, they intended for their work to be merged to create the Splinting Manual. The court further finds that defendants have produced evidence of intent of co-authorship such that the court may conclude as a matter of law that Roth was a joint author of the Splinting Manual. Roth’s contributions included all graphics, the layout of the work, and illustrations. Roth has further attested that her contributions to the layout of the work included making final decisions on its overall layout, including the placement of images, graphics, and text and how the overall work would be visually appealing to the end user. Roth has further attested that she did not sign any agreement transferring her rights in the Splinting Manual to Smith & Nephew or any other company. These facts all tend towards a finding that Roth was a joint author of the Splinting Manual. Although it is true that Roth was not given any billing or individual credit in the Splinting Manual itself, this fact does not preclude a finding by the court that Roth was a joint author of the Splinting Manual for the purpose of copyright protection. Courts have stated that “billing” or “credit” is some evidence of intent to create a joint work, but billing or credit is not required in order to find that a work is a “joint work.”

    In response to the motion for summary judgment, plaintiff has offered no evidence that the other collaborators on the Splinting Manual did not intend Roth to be a joint author, or any other evidence that would tend to show that Roth was not considered to be a joint author of the Splinting Manual.
    Because Roth was a joint author, she could grant a license to PMA, which in this case was a non-exclusive, implied license. I’d love to know whether hiring Nancy Roth to create the PMA Pocket Chart was a strategic choice in order to avoid copyright infringement or just a fortunate turn of events.

    BSN Medical, Inc. v. Parker Medical Assoc. LLC, Civ. No. 3:09cv15 (W.D.N.C. Nov. 10, 2011).

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  • Litigation Strategy

    Here’s a TTAB case that I think presents an interesting procedural question.  The situation:

    Bello Fitness Ltda, petitioner, is a Brazilian clothing manufacturer.  It owns the BODY UP mark in Brazil and had a relationship with non-party Body Up, LLC to distribute the BODY UP clothing in the U.S.

    Fernando Homem da Costa Filho was an officer and 49% shareholder of Bello Fitness and a 20% owner of Body Up, LLC.  He testified that Body Up was created to be Bello Fitness’s distributor in the U.S. and that his part ownership of Body Up was to “insure Bello Fitness Ltda interest in the ‘BODY UP’ trademark was protected.”

    The distribution agreement provided that

     If you can’t see the image, it says:
    Supplier … hereby grant[s] DISTRIBUTOR an exclusive and irrevocable license to register for and use the trademark “Body UP” throughout the Territory. Notwithstanding anything contained in this Agreement to the contrary, in the event of termination of this Agreement, all ownership rights in and to the trademark “Body Up” and all corresponding logos shall remain with as [sic] shall be assigned to DISTRIBUTOR with nothing further necessary or required.
    The agreement also had a provision for arbitration, where “any controversy or claim arising out of or relating to this Agreement” would be arbitrated.

    Registrant Body Up Fitness, LLC acquired the distribution agreement when Gilda Almeida, the manager of both Body Up and respondent Body Up Fitness, signed a bill of sale transferring Body Up’s assets to Body Up Fitness. Mr. Filho testified that Bello Fitness never agreed to the assignment. Body Up Fitness subsequently filed an application to register the BODY UP mark, which was granted. While Body Up had distributed the Bello Fitness clothing, Body Up Fitness did not. Bello Fitness ultimately filed a petition to cancel the registration when it learned that other companies were using the BODY UP mark.

    Body Up Fitness argued that, based on the distribution agreement, it is the rightful owner of the BODY UP mark. Maybe it is, maybe it isn’t,* but the kicker is the arbitration clause. According to the Trademark Trial and Appeal Board:

    The dispute arises over whether Body Up, LLC acquired ownership rights in the mark BODY UP based on this agreement and subsequently whether respondent acquired such rights in the sale of Body Up, LLC’s assets. What is clear in the agreement is that such disputes must be submitted for arbitration[.]

    The Board therefore would not consider the effect of the distribution agreement on the issue of ownership. Instead, it looked at the evidence of priority of use, found Bello Fitness had first use in the United States through an individual named Marcia Garcia and original distributor Body Up, and cancelled Body Up Fitness’ trademark registration.

    Here’s the question. Once the issue was raised by Bello Fitness, should Body Up Fitness have invoked an arbitration and asked that the cancellation be stayed? While it may not do any better in arbitration, Body Up Fitness’ position without the agreement looks like a pretty lost cause.

    Body Up Fitness has requested reconsideration of the decision. I don’t think there’s much chance that the TTAB will reverse, but I also think the case is a long way from over.  At this point, I think the only question is whether it goes to the district court or the Federal Circuit.

    Bello Fitness Ltda v. Body Up Fitness, LLC, Cancellation No. 92049838 (T.T.A.B. Oct. 28, 2011).

    *In a footnote the TTAB notes obtusely that “paragraph 6 of the distribution agreement grants the distributor ‘an exclusive and irrevocable license to register for and use the trademark.’ However, only the owner of the mark may file an application to register the mark.”

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  • 11th Circuit Affirms Email Exchange as Contract

    You may recall a dispute between an individual named Rafael Vergara Hermosilla and Coca-Cola about the ownership of Spanish lyrics Vergara wrote that Coca-Cola used in its World Cup advertising.  First, Vergara filed a motion for a preliminary injunction and Coca-Cola was ordered to provide credit to Vergara. The 11th Circuit affirmed. However, on summary judgment after a full review of the facts, the trial court determined that an email exchange between the parties was a fully formed assignment of the copyright from Vergara to Coca-Cola.

    The Court of Appeals for the 11th Circuit has now affirmed this holding also:

    The district court did not err by granting summary judgment in favor of Coca-Cola because the record establishes without dispute that Vergara assigned his copyright interest to Universal…. Vergara stated in his email on March 4, 2009, that his “only demand” to assign his copyright interest was that he receive credit as the adapter and producer. Puig [A representative for Coca-Cola] “unconditionally accepted” that condition in his email on March 5, 2009, in which he told Vergara to “count on the credits on the track.” Puig’s acceptance on behalf of Universal was effective to create a contract with Vergara because it “match[ed] the terms of [his] offer.”  The two emails were “so connected with each other that they may be fairly said to constitute a complete contract.”

    That Vergara and Universal intended to execute a “subsequent formal, written contract, does not denote that they did not intend to be bound immediately by their written negotiations.” Their emails do not contain any language from which “conflicting legal inferences could be drawn regarding the expressed intent of the parties so as to alter the legal effect of the undisputed facts of an offer by Vergara, acceptance, and communication of that acceptance” by Puig.

    To add insult to injury for Vergara, the district court has awarded Coca-Cola partial attorneys’ fees and costs to the tune of $578,146.99. Vergara had argued that “the issue of whether an email constitutes a signed writing for purposes of the Copyright Act was not previously addressed by the Eleventh Circuit or its District Courts” and therefore his claim was well-founded.  Summarizing the law, the magistrate disagreed and held that the argument was objectively unreasonable:

    Taking all this into account (Eleventh Circuit precedent linking the § 204(a) to state statutes of frauds, Vergara’s own assertion that state law governs the interpretation of copyright contracts, the ruling in this District that signed emails satisfies the Florida statute of frauds, a Florida statute specifically stating that electronic signatures have the same force as written signatures, a Florida case stating that a memorandum may take almost any possible form in order to satisfy the statute of frauds, and the text of the Electronic Signatures in Global and National Commerce Act) Vergara’s entitlement defense crumbles. It is neither objective nor reasonable for Vergara to have believed, despite the fact that a case on this extremely specific issue had not appeared before a court in this District, that any court in this District would rule any other way than that his email assignment
    of copyright interest was valid. Vergara in no way “took a reasonable stand on an unsettled principle of law.”

    At least Vergara can take some comfort that the amount of fees and costs was knocked down from $1.7M, with this colorful analogy:

    [“R]easonable” fee applications . . . are designed to provide adequate compensation that is reasonable to bill to one’s adversary irrespective of the skill, reputation or experience of counsel. In other words, one can drive from point A to point B in a Ferrari, a BMW, or a Ford Fusion. Which car one chooses is ordinarily a matter of personal style coupled with financial freedom. The successful personal injury or criminal defense lawyer may choose the Ferrari. The average corporate defense lawyer will wisely choose the BMW. But a successful attorney fee applicant can only choose the Ford Fusion.

    Vergara has also appealed the order granting attorneys’ fees.

    Vergara Hermosilla v. The Coca-Cola Co., No. 11-11317 (11th Cir. Nov. 3, 2011).

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  • “Hustler is Larry Flynt, You Know”

    The Flynt family, of HUSTLER fame, has been embroiled for years in several lawsuits over the ownership of the business and use of the HUSTLER mark. As you might expect for a business based on pornography, the corporate form was ever-changinga “morass” as described by the court—as the family tried to limit its liability, and corporate formalities were not always strictly observed.

    An earlier decision in the lawsuit held that brothers Larry and Jimmy did not have a partnership and instead Larry was the sole owner of the Hustler business. The instant decision is one that addresses a likelihood of confusion claim for Jimmy’s use of the HUSTLER mark for a store in Cincinnati.

    There was “no dispute” that Larry and corporations that he controlled owned the registered trademark HUSTLER, originally for the magazine and later for many other goods and services.  Jimmy wasn’t helped by his testimony in an earlier divorce proceeding (in an effort to avoid paying more alimony) that “Hustler is Larry Flynt, you know.” But Jimmy had opened the first store that used the HUSTLER mark, Hustler News and Gifts in Cincinnati, and was president of Hustler Entertainment, Inc. (“HEI”), the operating company for west coast “Hustler Hollywood” stores. Hustler News & Gifts originally paid no license for the use of the mark, but a “Hustler Hollywood” store in Monroe, Ohio had a license agreement and was paying licensing fees to HEI. In 2004 the successor to Hustler News & Gifts, Hustler Cincinnati, started paying licensing fees, although only an unsigned copy of a license agreement was produced.

    In 2007 the family had a falling out—Jimmy was no longer president of HEI and Larry fired Jimmy’s sons from the business. Jimmy stopped paying licensing fees but nevertheless claimed a right to use the HUSTLER mark for the Hustler Cincinnati store, arguing that as senior user he was the owner of the HUSTLER mark for stores, or that at most the mark was nakedly licensed to him. Larry retorted that licensee estoppel precluded Jimmy’s naked license defense.

    Jimmy was entirely unsuccessful. The most notable precept to take from the case is that implied license is not only a defensive weapon, where it is most commonly used, but an offensive one as well. Jimmy’s use was not on his own behalf, but as licensee to Larry:

    Larry and Jimmy indisputably entered into an implied licensing arrangement by their conduct. Jimmy may have initially used the “Hustler” mark for [Hustler News and Gifts] and Hustler Cincinnati with Larry’s implicit permission and for free. But, whatever their original arrangement, it changed by mutual consent and without protest when Jimmy acquiesced with Larry’s wishes, and restructured the relationship between Hustler Cincinnati and [parent company] LFP. Thereafter, Hustler Cincinnati paid licensing fees for years to LFP, uninterrupted and without protest, until family dynamics soured their relationship and Jimmy refused to pay.

    The unsigned licensing agreement and the parties’ objective conduct demonstrate that Hustler Cincinnati operated just like the Monroe store arrangement. The proceeds from these highly successful southern Ohio stores flowed back to LFP largely in the form of licensing fees.

    Jimmy argued that the licenses to the Hustler Cincinnati store was “naked” for lack of quality control. The court expediently disposed of the claim in two ways. First, it noted that in some cases a licensor’s close relationship to the licensee is enough to ensure quality. Here, the court found that Larry’s daughter’s, Jimmy’s, and Jimmy’s sons’ involvement in the store operations, combined with the lack of any allegation that quality had slipped, were sufficient control on Larry’s part. Second,

    the purpose of the control requirement is the protection of the public because where a licensor does not maintain control of his licensees in their use of the license, the public may be damaged by products that, despite their trademark, do not have the normal quality of such goods. Neither party suggests the quality of the Hustler goods was changed in any way when they were sold at the Hustler Cincinnati location as opposed to the other Hustler retail stores around the country.

    There was therefore no naked license.

    Further, though, Jimmy couldn’t raise a naked license defense at all under the doctrine of licensee estoppel. Jimmy’s license, even though implied, was an acknowledgement that Larry owned the mark and therefore Jimmy did not. As a result Jimmy is precluded from now making a contrary argument. Jimmy tried to claim that licensee estoppel only applies to “written, clear and signed licensing agreements.” Not so, says the court:

    By entering into the license agreement, the licensee recognizes the licensor’s ownership of the mark and by-implication, covenants not to challenge the licensor’s rights. This implied covenant also estops the licensee from claiming that the licensor abandoned his rights by failing to exercise adequate quality control during the terms of the license. 

    And further, a licensee claiming that its own license is a naked license essentially seeks to benefit from its own misfeasance. By asserting a naked licensing defense, the licensee contends that the licensed trademark or trade name has lost its significance as a source of origin because the licensor has failed to police the licensee’s operations. Thus, by relying on its own ability to offer inferior or nonuniform goods and services under the trademark or trade name, the licensee seeks to free itself of the constraints imposed by the licensor’s ownership of the trademark or trade name. Not surprisingly, the Restatement (Third) of Unfair Competition observes that the case for applying licensee estoppel is strongest in such a case.

    [Italics in original.] Jimmy will be enjoined from using the HUSTLER mark for stores.

    L.F.P.IP., Inc. v. Hustler Cincinnati, Inc., Civ. No. 1:09cv0913 (WOB) (S.D. Ohio Oct. 20, 2011).

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  • How Damaging To Your Case is a Cancelled Trademark Registration?

    I ran across a point about enforceability of a trademark that I don’t recall seeing before, which is that a trademark for which the registration was procured by fraud is unenforceable. The point is made in Firehouse Restaurant Group, Inc. v. Scurmont LLC, a case in which a jury held, and the court affirmed, that the plaintiff’s trademark was procured by fraud. The fraud was that the plaintiff, as part of its application, swore that “to the best of its knowledge and belief no other person, firm, corporation or association has the right to use the mark in commerce, either in the identical form thereof or in such near resemblance thereto as to be likely, when used on or in commerce with the goods/services of such other person, to cause confusion, or to cause mistake, or to deceive,” when, in fact, the plaintiff had been unsuccessful in procuring a co-existence agreement with a more senior “Firehouse Grill & Pub” before filing its trademark application. The defendant in the case, going by “Calli Baker’s Firehouse Bar & Grill,” was not this senior user, but was instead junior to the plaintiff.

    The statement in Firehouse is that “[f]raud in the procurement of a trademark registration is also a defense to a claim of trademark infringement.” The court cited a footnote in Lone Star Steakhouse & Saloon, Inc. v. Alpha of VA, Inc., 43 F.3d 922, 931, n.12 (4th Cir. 1995) in support of its statement. Lone Star says “the Lanham Act provides that trademarks procured by fraud are unenforceable,” citing to 15 U.S.C. §§ 1052 and 1064. What? Neither of those sections says that. Section 1052 mentions a number of bases for refusing registration, but fraud isn’t one of them. Section 1064 gets closer; it provides that a trademark registration may be cancelled if the registration was obtained fraudulently.  But since in the United States trademark rights are based on use, not registration, cancelling a registration shouldn’t mean that the trademark owner has no trademark rights at all; instead it should only mean the trademark owner doesn’t have any of the benefits that a federal registration provides. Nevertheless, the Lone Star court, in dicta, made the leap that a trademark registration procured by fraud means that the common law trademark is also unenforceable.

    I don’t have any problem with the Firehouse court finding that fraudulent procurement of a registration is a complete defense to trademark infringement. But what about the next defendant?  Can Firehouse Subs bring suit for likelihood of confusion against new defendants based on its common law rights?  If not, is there any point in time where the trademark rights are free of the prior wrongdoing?

    Firehouse Restaurant Group, Inc. v. Scurmont LLC, Civil Action No. 4:09-cv-00618-RBH (D.S.C. Oct. 17, 2011).

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  • Standing for Correction of Inventorship

    A brief primer on when an employer has standing to bring a claim under Section 256 of the Patent Act, asking that a non-party employee be added as an inventor: you’ll have to show that you will have rights to the patent you would not otherwise have, or, more specifically, that the employee had a duty to assign the patent to you.  If you gain nothing by the correction then you have no standing.

    Or perhaps another way to skin the cat is to have the employee assign any interest it may have in the patent to you, as Informatics states was done in its Amended Complaint (para. 78).

    Update: It works.   Informatics Applications Group, Inc. v. Shkolnikov, No. 1:11cv726 (JCC/JFA) (Dec. 27, 2011 E.D. Va.).

    Informatics Applications Group, Inc. v. Shkolnikov, No. 1:11cv726 (JCC/JFA) (Oct. 11, 2011 E.D. Va.).

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  • Championship Cabbage Chucking

    There is only one World Championship Cabbage Chuck (flash and sound warning). It’s hosted by St. Denis Parish in Shiocton, Wisconsin:

    The question, as one might expect on this blog, is who owns the trademark? The first narrator of the video is registrant Diana Van Straten, who obtained a registration on the Supplemental Register for WORLD CHAMPIONSHIP CABBAGE CHUCK for “charitable fund raising by means of an entertainment event where competitors throw cabbages.” The other claimant is St. Denis Parish, which filed a petition to cancel Ms. Van Straten’s registration.

    Registrant’s specimen
    In its petition, St. Denis Parish pleaded fraud on the PTO, that there was likelihood of confusion, and nonuse on the part of Van Straten. The TTAB interpreted this last claim as a claim of lack of ownership on the basis of nonuse, which was the theory upon which it decided the case.
    Van Straten thought up the idea of a cabbage-throwing contest as a fundraiser for her church, but that’s about all the evidence she could muster to back up her claim of ownership. Rather, the evidence showed that the parish:

    adopted the mark WORLD CHAMPIONSHIP CABBAGE CHUCK for its annual charitable fund raiser in 2006. Petitioner has been using the mark continuously since then, and has held annual fundraisers in 2006, 2007, 2008, 2009, and 2010 using the mark. There is no question that petitioner is the party responsible for all aspects of the annual WORLD CHAMPIONSHIP CABBAGE CHUCK, held in Shiocton, Wisconsin from 2006 continuously through 2010. Petitioner’s witnesses testified, with exhibits, that although numerous volunteers (such as respondent, on several occasions) participated, petitioner was the party responsible for paying for costs associated with each such event. All of the advertisements tout respondent, “St. Denis Parish,” as the host of the event. Ms. Tews [the parish business manager] has also sent out, on behalf of petitioner, letters thanking people for their participation, after each event, and begun preparations for the following year.
    So Van Straten wasn’t the owner of the mark used for the church-sponsored event. She had also never put on a different cabbage tossing event and her specimen of use was for the parish’s cabbage chucking contest, not any separate event she had sponsored.  Thus, since Van Straten had never rendered the services described in her application, under In re Wella, A.G., 858 F.2d 725, 8 U.S.P.Q.2d (BNA) 1365, 1368 (Fed. Cir. 1988), she was not the owner of the mark. Registration cancelled.
    For those of you who haven’t been able to concentrate on the post because the little voice inside your head has been saying “but it’s cabbage CHUNKING,” you have my sympathy. It’s been hell trying to type “chuck” instead of “chunk” each time. But there is an explanation:

    In the midst of these meetings, actually, I made a mistake, and I called it cabbage chuckin. And I did that a couple of times, and members of the committee were correcting me, it’s not chuckin, it’s chunkin. Somebody said, well, why don’t we call it chucking, because we are throwing, chucking cabbages. That’s how I remember it evolving into cabbage chucking.
    HT to John Welch for the case.

    St. Denis Parish v. Diana Von Straten, Cancellation No. 92051378 (TTAB Sept. 28, 2011).

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  • An Assignment that Works Like a License

    You’ll recall that there was a dispute over the ownership of the name of the famous Central Park restaurant “Tavern on the Green.”  The restaurant owner owned two registrations for “Tavern on the Green” marks, one for restaurant services (the “Restaurant Mark” and “Restaurant Registration”) and one for oils and dressings (the “Oil and Dressing Mark” and “Oil and Dressing Registration”).  The restaurant owner later lost the lease on the premises and filed for bankruptcy. 

    After the City of New York successfully won a judgment that it owned the restaurant name, the City and the trustee for the estate entered into a stipulated settlement agreement. The Restaurant Registration would be owned by the City, but a concurrent user could use the Restaurant Mark outside of New York, New Jersey, Connecticut and certain parts of Pennsylvania so long as the concurrent user added a geographic identifier to “Tavern on the Green,” e.g., “Tavern on the Green – Los Angeles.”  However, the bankrupt estate would continue to own, and therefore could convey to a buyer, the Oil and Dressing Registration. Also, the buyer from bankruptcy could use and register “Tavern on the Green” for products related to restaurant services like food and tableware. It’s a lot more complicated than that, but that description suffices for my present purposes.

    Note that the agreement is a Concurrent User Agreement, not a license. According to the Agreement, the Trustee is selling to the Concurrent User the right to use and register the “Concurrent User’s Marks.”

    Although it is a full assignment of marks, the agreement puts limitations on how the buyer can use the marks that are very similar to what one would see in a traditional trademark license.  For the restaurant services, the concurrent user

    shall use the Concurrent User’s Marks and Current logo solely to operate . . . full service restaurants, featuring host/hostess and table service, high-quality made-to-order food and distinctive décor; buffet service also maybe offered.  For the avoidance of doubt, fast food, drive-through and cafeteria style eating establishments are specifically prohibited . . . .
    With respect to products, there are provisions for the specification of goods and the City’s approval of them.

    The termination provision contemplates a number of noncompliance issues that will be a breach, like the failure to use a disclaimer, the sale of illegal or prohibited services or goods, sales into prohibited territory, and the failure to keep an acceptable level of quality.  In the case of uncured breach,

    the City may provide written notice to Concurrent User immediately terminating this Agreement and/or the City’s consent to use the Concurrent User’s Mark or Product Mark with regard to the particular goods or services that are the subject of such breach and/or the City may take such other enforcement actions as it deems appropriate to protect its interests, including but not limited to, filing an action for trademark infringement and/or a petition to cancel the registrations for such marks, and in such event and for purposes of such action, the Concurrent User agrees that a likelihood of consumer confusion shall be presumed to exist and Concurrent User irrevocably waives and agrees not to interpose any legal or equitable defense that does not go to the merits of the action, including incontestability of the registration, statute of limitations, waiver, laches, delay or estoppel.
    Presumably a license to the “Tavern on the Green” mark was not as saleable as an assignment of a concurrently used trademark.  But has the City managed to accomplish the same thing with the conditions it placed on the use and the remedies available to it?

    I think so and applaud the drafter. The City may not be able to cancel registrations, but that doesn’t make a difference in the long run. For example, if the concurrent user’s registrations are permitted by the terms of the agreement, then the City can’t claim that the concurrent user doesn’t own them.  If these registrations are incontestable, they can’t be cancelled as likely to be confused.  Since the City has the burden of proof on these legal issues, the concurrent user doesn’t need to raise any defense.  So the concurrent user may be able to keep its registrations, but a registration is not a grant of an affirmative right to use the mark.  And when challenged for its use of the mark, the concurrent user is stuck – it has agreed that likelihood of confusion is presumed to exist and it may not raise any affirmative defenses.  Twenty years from now, the concurrent user won’t be able to claim that the twenty years of concurrent use weigh against likelihood of confusion because it has conceded confusion, and can’t raise affirmative defenses that the City waited to long or that the agreement provides an equitable estoppel.  I can’t find any way that the concurrent user can avoid a finding that there is likelihood of confusion and the almost certain injunction that goes with it.  Does anyone see any way around it?

    More coverage of the story here and here.

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  • An Embarassment of Ownership Issues

    Opposed mark

    TTAB decision Restifo v. Power Beverages, LLC has, count ’em, seven different trademark ownership theories discussed in it. My kind of case.

    In 2006 opposer Restifo and trademark applicant Kidd first discussed a business arrangement for making YING YANG VODKA.  Kidd described his method of doing  business this way:

    [a]s an alcohol beverage, YING YANG VODKA would only be produced and [d]istributed by entities with appropriate license and expertese (sic) to obtain [a]ppropriate approvals, manufactured and established (sic) a distribution network. Hence, akbargloble (sic) or [I] myself do not directly sell this (YING YANG VODKA) or any alcohol products.

    In January, 2007 Kidd filed an intent-to-use application for YING YANG VODKA in his own name and in February, 2007 Kidd’s company, Akbar Globle Entertainment, entered into an “Endorsement Agreement” with a third party company called Ying Yang Tours, LLC.  And so we start with ownership issue #1, albeit easily dispensed with: “While the agreement raises questions about whether [Ying Yang Tours] may have an ownership interest in the YING YANG VOKDA mark, [Ying Yang Tours] is not a party herein and the issue is not before us in this case.”

    On March 17, 2007 Akbar Globle entered into an “Exclusive Sublicensee Agreement” with Restifo’s company Data Commodities. Ownership issue #2: who are the real parties in interest here, Kidd or Akbar Globle, or Restifo or Data Commodities?  The question was resolved thusly:

    The evidence further establishes that both Messrs. Restifo and Kidd conducted business matters interchangeably in their individual capacities and through their respective companies, Data Commodities and Akbar Globle. The record shows that the individuals are the sole owners of their respective companies and that they controlled the corporate entities in their relevant business dealings. This degree of ownership and control overcomes any presumption that any rights acquired in the mark would inure to the corporate entities rather than the individuals. As explained by Judge Nies in a concurring opinion in In re Wella A.G., “the one entity which controls the nature and quality of the goods sold under the mark is the owner,” (emphasis in original). Here, the corporations were essentially the alter egos of the individuals. Accordingly, we construe all relevant activities taken by the companies as having been done at the behest and on behalf of the individuals.

    In the sublicense agreement, Akbar Globle granted Data Commodities an “exclusive, continuous, irrevocable and non-cancellable sublicense to utilize, sub-license, sell, commercialize and otherwise exploit” the YING YANG VODKA trademark.  The agreement said that the mark was currently owned by Akbar Globle but that

    [Akbar Globle] also agrees to assign to [Data Commodities] fifty percent (50%) ownership in [the YING YANG VODKA trademark] owned by [Akbar Globle]…

    In June, 2007 Data Commodities solicited a distillery to produce YING YANG VODKA and Data Commodities sold two cases, the only sale of goods using the mark.  Four months later, Kidd wrote to Restifo “to notify you that . . . our contract dated March 19, 2007 . . . is now null and void.” Kidd then entered into an agreement with third party Richard W. Hills for the production of vodka, the two created co-defendant Power Beverages, LLC, and Kidd assigned his intent-to-use trademark application to Power Beverages.

    Restifo had pleaded ownership of the mark but didn’t try the issue of priority/likelihood of confusion. Instead, he tried only ownership issue #3, a claim that Kidd’s assignment of the intent-to-use application to Power Beverages was void under Section 10 of the Lanham Act. The parties conflated ownership issue #4, whether Restifo had his own ownership interest in the mark, with standing.  But the two aren’t the same; standing only requires a sufficient interest in the proceeding, not that the opposer have superior rights altogether. Thus it was unnecessary to decide ownership issue #4. Nevertheless, the Board commented in a footnote that Restifo’s claim of ownership of the mark wouldn’t have succeeded anyway. Restifo claimed that he had prior use of the mark as a result of his sale of the two cases of vodka, but the sale was well after Kidd’s application had been filed so under § 7(c) of the Lanham Act Kidd had priority.

    With the factual and procedural background out of the way, the Board finally reached the merits of the case and ownership issue #3, the assignment of the intent-to-use application.  This is actually ownership theories #3a, #3b, #3c and #3d.  First, Restifo claimed that because Kidd hadn’t sold any vodka before they entered into the sublicense agreement, Kidd had no mark that could have been licensed. Restifo therefore was not a licensee, so his use of the mark for the two cases of vodka didn’t inure to Kidd’s benefit.  Not so, said the Board.  For reasons #3a1, #3a2  and #3a3 Restifo is correct that Kidd couldn’t have assigned the mark if it didn’t exist: 

    [#3a1] To the extent that the agreement may be construed as a promise to assign an ownership interest sometime in the future, i.e., upon acquiring rights after use in commerce, there would still need to be a second actual assignment of ownership.  There is no evidence of record that any interest in the ownership of the mark was subsequently assigned to opposer once any ownership rights were acquired by Mr. Kidd through use of the mark in commerce.

    [#3a2] Mr. Kidd’s filing of the intent-to-use application prior to entering into the agreement accorded him a constructive use (filing) date under Section 7(c), but not any ownership rights in the trademark. The constructive use priority date only becomes perfected upon actual use of the mark and is “contingent” upon successful registration of the mark. Put simply, Mr. Kidd was conferred a right of priority by filing the application; he did not have an ownership interest in the trademark. [#3a3] Moreover, and so as to be entirely clear, neither party has argued that the proposed assignment of ownership pertained to the intent-to-use application. The agreement, itself, does not identify the application whatsoever and we do not construe the purported assignment of ownership as involving ownership of the application.

    On ownership theory #3b, though, Restifo’s claim that the license was invalid so his use of the mark couldn’t have inured to Kidd’s benefit, Restifo was mistaken. One may license future use of an applied-for mark not previously used in commerce; in fact, the license agreement here contemplated that it was for the future use of the mark. Ownership issue #3c was a naked license theory, that Kidd hadn’t controlled the quality of the two cases of vodka Restifo produced and thus Restifo’s use didn’t inure to Kidd’s benefit but instead was for his own benefit. But

    there are two problems [#3c1 and #3c2] with opposer’s attack on the licensing agreement. First and foremost, a licensee is estopped from attacking a license (vis-à-vis the licensor) on grounds such as the licensor’s failure to exercise the necessary control. Second, even if opposer was not estopped from attacking the licensing agreement, it would be premature to invalidate the agreement based on Mr. Kidd’s failure to adequately control the quality or nature of the goods. The agreement was signed in March 2007 and Mr. Restifo received a termination letter from Mr. Kidd in October 2007. During those six months, opposer was the exclusive licensee and only one or two small shipments of YING YANG VODKA were sold. Despite the lack of any written provision regarding Mr. Kidd’s exercise of control over the quality of the goods or evidence that he actually asserted any quality control, there is likewise no evidence that quality control was an issue during that short time. Accordingly, we cannot conclude that preventing public deception based on varying quality standards of the vodka was ever such a viable or real concern that it invalidates the licensing provisions of the agreement.

    And we finally reach ownership issue #3d, whether Kidd’s assignment to Power Beverages was contrary to § 10 of the Lanham Act, which disallows assignment of an intent-to-use application “except for an assignment to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing.”

    Restifo had the burden of proof and failed to meet it. Zombie mark owners take note; as described above Kidd’s business was conceived and operated as a non-manufacturing, licensing business. The Board found Kidd had assigned the business in its entirety, along with the application, to Power Beverages:

    After the relationship with opposer terminated, Mr. Kidd “brought in” a third party and, with Mr. Hills, sought to have the YING YANG VODKA branded vodka produced. Moreover, by the terms of the December 3, 2008 agreement [between Kidd and Hills] (as incorporated into the December 12, 2008 Operating Agreement), Mr. Kidd assigned all rights he had acquired from Ying Yang Tours to Power Beverages ‘upon formation’ of [Power Beverages]. Finally, a review of the December 3 and 12, 2008 agreements reveals that Mr. Kidd relinquished any separate personal interest he had in the ongoing business; his remaining interest in the business thereafter was as a Member of Power Beverages, LLC. . . . Here, we are able to discern that Mr. Kidd assigned all interest in the application and the ongoing business to Power Beverages.

    And so the opposition was dismissed. Here’s the list:

    #1: third party with superior rights
    #2: corporate veil
    #3a: assignment of (non-existent) trademark
    #3b: licensing of future rights
    #3c: naked license
    #3d: assignment of ongoing business under Section 10
    #4: priority

    Hat tip to the Board for distilling a very confusing record down to a concise 24-page discussion of only the necessary claims (my summary hardly seems shorter).  And thanks to John Welch at The TTABlog for the case.

    Finally, for those of you who have hung in there this far, there is bonus ownership issue #5: Restifo’s trademark license was “irrevocable and non-cancellable.”  If he makes vodka under the mark and is sued by Power Beverages, does he have a license defense?

    Restifo v. Power Beverages, LLC, Opp. No. 91181671 (TTAB Sept. 21, 2011).

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