Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Calling John Welch …

    A fairly mundane trademark opinion, Warden v. Falk, raised a trademark ownership question I hadn’t thought of. What is the legal effect of a consent to use and register the name of a living individual when the name is already a trademark?

    Plaintiff Bob Warden was a QVC television personality selling cookbooks and endorsing others’ cookware products. Defendant Pamela Falk, “with whom Warden was previously involved in both business and romantic relationships with,” wanted to register the BOB WARDEN trademark in the name of co-defendant Dynamic Housewares, Inc. (DHI). Warden and Falk were advised by counsel that “If the application is to be filed in the name of [DHI] based on an oral license agreement from Bob to [DHI], we can go ahead and file the application now. However, if Bob decides to assign his name to [DHI], we should have an assignment agreement executed prior to filing the application.” No assignment was ever executed and Warden instead consented to the use and registration of his name as a trademark. The trademark was registered, Warden and Falk apparently had a falling out, Warden sued Falk, and finally he revoked his consent to the registration and any license he granted to DHI. (Calling John Welch … Can you withdraw consent to the registration of a name as a trademark after it’s registered?)

    The court shot down an argument that the mark was assigned to DHI, in part on the theory that the consent to register would have been unnecessary if the mark had been assigned:

    Granting consent to use a trademark instead of transferring ownership in a mark is also inconsistent with an assignment of rights and title. Moreover, DHI’s acceptance of the right to use Warden’s name is a tacit acknowledgement that DHI did not own the trademark at the time Warden signed such consent. See A & L Labs., Inc. v. Bou-Matic LLC, 429 F.3d 775 (8th Cir. 2005) (explaining that “if [the licensee] had owned the trademarks, it would not have needed [the trademark owner’s] permission to use them); Hot Stuff Foods, LLC v. Mean Gene’s Enters., Inc., 468 F. Supp. 2d 1078, 1095 (D.S.D. 2006) (explaining the existence of a party’s license to use a trademark indicates the party does not own the licensed mark).

    The court takes it a little too far here. Trademark practitioners know that under Section 2(c) the mark could not have been registered without Warden’s consent. The statutory consent required, though, is for registration of a name, not a trademark — the two aren’t the same.

    However, Falk admitted during her testimony on a motion for preliminary injunction that DHI was only a licensee, so the goose was cooked at that point. The court held that the application for the BOB WARDEN mark was void ab initio because DHI never owned the trademark.

    But the case presents an interesting conundrum. Bob Warden had already-existing trademark rights in his name for cookbooks and endorsing cookware before he granted consent to register his name for the same use. If one has trademark rights in one’s name, consents to the registration of the name as a trademark for the same goods and services, and trademark ownership is a necessary predicate to registration, doesn’t that admit to some kind of ownership interest in the registering entity? Indeed, DHI and Falk also argued that the consent was an assignment, but the court didn’t buy it:

    Although an assignment in writing is not necessary to transfer common law rights in a trademark, an act which a party asserts is an implied agreement to transfer trademark rights will be construed as an assignment only if the conduct manifests agreement to transfer the rights. There is no strong evidence of intent to create an assignment here, only evidence that Warden refused DHI’s request for an assignment of his rights to his name. Moreover, the plain language of the consent form does not purport to transfer ownership rights, title or the trademark’s goodwill to DHI; it is merely a consent to DHI’s “use and registration as a trademark” of the Bob Warden name.

    But if there hadn’t been the admission that DHI only had a license, might this have gone differently?  It seems to me that this case might be a closer call than the court made it look.

    Warren v. Falk, No. 11-2796 (E.D. Pa. Sept. 21, 2011).

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  • Not Just Ownership, Authorship

    Plaintiff Chris Sevier, owner of Severe Records, LLC, collaborated with artist Shanna Crooks on two songs,“Better” and “Watching Me Leave,” the extent of the collaboration on the songs and the sound recordings TBD.  Both of them distributed the sound recordings.  Next was the expected falling out, and Shanna Crooks’ new management company accused Sevier of infringing the copyright with his distribution of the works.  He filed a complaint for copyright infringement and declaratory judgment on ownership of the copyrights.  The district court dismissed all counts; infringement on the basis that there was no unauthorized distribution by Crooks and the declaratory judgment on ownership of the copyright on the basis that it was a state law claim.

    The Court of Appeals for the Sixth Circuit affirmed on the copyright infringement claim but reversed on the declaratory judgment claim.  Crooks’ management company, Muzik Mafia, LLC, had been regularly sending cease and desist letters demanding that Sevier stop distributing the music.  Implicit in that activity was the claim that Sevier had no copyright ownership interest.

    But whether he was an owner doesn’t completely answer the question of whether there was federal subject matter jurisdiction.  To succinctly summarize:

    Not all claims of co-ownership will arise under the Copyright Act…. For example, at times, whether there is co-ownership may be determined by the terms of a contract governed by state law or through other ownership interests governed by state law and thus not require application of the Copyright Act.  However, a question of authorship, rather than ownership, does arise under the Copyright Act. In other cases, such as where co-ownership results from purported statutory co-authorship, the question of co-ownership is governed by the Copyright Act.

    Here, the question was to what extent Sevier and Crooks were co-authors of the various copyrights.  Since authorship is uniquely a matter of federal law, the declaratory judgment action was reversed and remanded.

    Severe Records, LLC v. Rich, No. 09-6175 (6th Cir. Sep. 23, 2011).

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  • Check the Chain of Title, Please

    Folks, really.  Check the assignment documents before you file the lawsuit, don’t assume the face of the patent is correct:
     At some point soon after PBS Inc. filed its motion to amend, it was discovered that PBS Ltd., not PBS Inc., is the assignee and owner of the ‘651 and ‘039 patents. PBS Inc. is listed as the assignee on the face of the ‘651 and ‘039 patents, but all of the underlying assignment documents on file with the USPTO designate PBS Ltd. as the assignee. PBS Inc. asserts that the designation of PBS Inc., instead of PBS Ltd., as assignee on the face of the ‘651 and ‘039 patents was the result of a clerical error.
    There’s really no excuse for failing to check the chain of title on any asset before bringing a lawsuit. Is the chain of title documented at every step for ALL former owners, particularly inventors? Have all necessary fees been paid?  Do the assignment documents have the proper language, e.g., did the trademark assignment include the goodwill, did the patent assignment properly assign future inventions?  You may be able to fix all this before the suit is filed, but if you don’t it will surely be challenged.

    Luckily for the plaintiff here, substitution is allowed under Fed. R. Civ. P. 17(a)(3).  “Courts should grant leave to substitute if ‘(1) the defect in the named plaintiffs plausibly resulted from mistake (“mistake” prong), and (2) correcting this defect would not unfairly prejudice defendants by changing the particulars of the claims against them (“prejudice” prong).’”

    The “mistake” prong was met:

    Here, PBS Inc. asserts that when filing this suit, its attorney was under the mistaken belief that PBS Inc. was the owner of the ‘651 and ‘039 patents based on the face of each patent, which listed PBS Inc., not PBS Ltd., as the assignee. Park B. Smith, chairman of PBS Inc. and PBS Ltd., likewise avows that he mistakenly believed that PBS Inc. was the owner from the time that the complaint was filed until May 2010, when he was advised otherwise by his attorney. While PBS Inc.’s failure to look beyond the face of the patents and investigate the underlying assignment documents before filing suit evinces a lack of diligence, there is no indication that they acted in bad faith and absent such evidence, PBS Inc. meets the mistake prong.

    “Prejudice” prong was too, so the suit continued.  But imagine if it didn’t – five years of litigation down the drain.

    Park B. Smith, Inc. v. CHF Indus. Inc., No. 06 Civ. 869 (LMM) (S.D.N.Y. July 12, 2011).

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  • The STOLICHNAYA Case Ends Again

    In 2004 plaintiff Federal Treasury Enterprise Sojuzplodoimport (FTE) challenged defendant Spirit International B.V.’s (“SPI”) claim of ownership of the various STOLICHNAYA trademarks. In 2006 the district court dismissed almost all claims on a motion to dismiss, holding that the incontestable status of SPI’s registration meant that FTE couldn’t challenge ownership. In 2010 the Court of Appeals for the Second Circuit reversed, holding that it is only after a valid assignment that one succeeds to the rights of the assignor, including incontestability.  The appeals court instructed the district court to examine the validity of the assignment to SPI.  It didn’t (at least not in this decision), instead dismissing the case based on FTE’s lack of standing.

    FTE seemed fairly well-positioned; in 2002 the Russian Federation issued a decree that FTE had the right to use and dispose of (without the right to assign) the STOLICHNAYA trademark in Russia: 

    FTE also provided another decree from the Russian Federation dated January 6, 2005, stating that FTE was to “represent the interests of the Russian Federation in the courts on matters of recovery and protection of the rights of the Russian Federation to the trademarks for alcoholic products abroad” and “realize registration of the rights of the Russian Federation to the mentioned trademarks abroad.”


    FTE asserted that this grant from the Russian government was adequate to give it standing to assert a trademark infringement claim under Section 32 of the Lanham Act.

    The court disagreed.  Only a registrant or its “legal representative” may bring a claim under § 32.  FTE argued it was the Russian Federation’s legal representative, but the court interpreted “legal representative” narrowly:

    Absent explicit guidance from the Second Circuit, this Court adopts the narrow requirement. That is, a party qualifies as a legal representative under Section 32(1) of the Lanham Act if the party has the authority to appear on behalf of the registrant/owner with respect to the registrant/owner’s legal interests and the registrant/owner is unable or incapable of representing itself and enforcing its own rights. Plaintiff FTE has not provided a persuasive argument to depart from what this Court considers to be the plain and ordinary meaning of the term “legal representative.”

    FTE also argued that the Russian Federation had assigned the trademarks to it, but this also did not convince the court.  FTE’s complaint repeatedly said that the Russian Federation owned the trademark, FTE had no assignment in writing, and it didn’t have exclusive enough rights to be considered an owner, so it was not an assignee.  The court therefore dismissed the case.

    I am utterly confused by this decision. First, I don’t understand why the court entertained a § 32 argument any further than “FTE isn’t a registrant.” I couldn’t find any application or registration owned by FTE or Russia, so I’m not sure why, even assuming FTE was the Russian Federation’s agent or assignee, either would have had standing as “registrant” under § 32.

    Second, why is there no argument under § 43(a)?  As explained in this post, one doesn’t have to be a trademark owner to bring a claim under § 43(a), just “likely to be damaged.”  But there was no § 43(a) count.  Perhaps it was because FTE isn’t actually selling anything in the U.S., so FTE had no claim that SPI’s use was likely to cause confusion with FTE’s (non-existent) use.

    Finally, is this a Lanham Act case at all? There’s no mention of how SPI came to own the trademark registrations for STOLICHNAYA in the decision, but the Third Amended Complaint tells quite a story about what the plaintiff claims is the theft of the mark in Russia and efforts to recapture it.  Is this really a claim for fraud, to void a contract, or for enforcement of a Russian or Dutch judgment, rather than for trademark infringement?

    Federal Treasury Enter. Sojuzplodoimport v. Spirits Int’l B.V.    , No. 04 CV 08510 (GBD) (S.D.N.Y. Sept. 1, 2011).

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  • Does a “Beneficial” Patent Owner Have Standing?

    Often there is the concept of “beneficial owner” in intellectual property-related transactional documents.  My limited experience is that the concept is useful for tax purposes, i.e., one can have legal title in one company and “beneficial” ownership in another in order to create a favorable tax position.

    This presents some interpretive problems in the United States, though, because the statutory law for patents and trademarks does not encompass any concept of beneficial ownership. Copyright does; under section 501 of the Copyright Act, “The legal or beneficial owner of an exclusive right under a copyright is entitled . . . to institute an action for any infringement of that particular right committed while he or she is the owner of it.”  But we’re a bit little lost in patent and trademark cases when the concept comes up.  Does a beneficial owner have standing to bring an infringement claim?

    Pfizer Inc. v. Teva Pharmaceuticals USA, Inc. examines the question for patents. The inventors of the patent-in-suit were employed by Pfizer Limited, but Pfizer Limited had a “Patent Filing Agreement” with Pfizer, Inc.:

    LIMITED Property patent applications will be filed by PFIZER [INC.] in the USA…. In filing such applications, PFIZER [INC.] will act as agent for LIMITED, so that such applications and any patents issued thereon shall be held by PFIZER [INC.] in trust for LIMITED, as the beneficial owner thereof.
    Pfizer, Inc. was therefore listed as the assignee of the patent-in-suit but Pfizer Limited was the “beneficial owner.”

    Both Limited and Inc. sued for patent infringement. Teva challenged both parties’ standing to assert the patent.

    Patent law provides that there are three categories of patent right owners, “those that can sue in their own name alone; those that can sue as long as the patent owner is joined in the suit; and those that cannot even participate as a party to an infringement suit.” Where does a “beneficial owner” fit in?

    “Beneficial owner” is not defined in the Patent Filing Agreement, and it specifically provides that it is to be interpreted under the laws of England. The court has undertaken a review of English law and found that “beneficial owner” is often used to describe an entity that gathers the benefits of an asset, business, or agreement without necessarily holding legal title. From the court’s research, it appears that the term “beneficial owner” has similar meanings in both English and American law. This is not surprising given that “beneficial owner” in both countries sounds in equity, which evolved from mutual roots in the common law. Black’s Law Dictionary, noting the term’s origins in the Eighteenth Century, defines “beneficial owner” as “[o]ne recognized in equity as the owner of something because use and title belong to that person, even though legal title may belong to someone else…. Also termed equitable owner…. A person or entity who is entitled to enjoy the rights in a patent, trademark, or copyright even though legal title is vested in someone else.” Further, “[t]he beneficial owner has standing to sue for infringement.” Thus, it appears that, under the general definition of “beneficial owner,” such an entity has most to all of the traditional property rights of the owner, except for actual legal title to the property.

    The terms of the Patent Filing Agreement do not contradict this meaning of the rights of a beneficial owner. Under that agreement, Pfizer, Inc. holds the patents in trust for Pfizer, Ltd., while Pfizer, Ltd. has the right to grant licenses and enforce the patent. Therefore, this court concludes that Pfizer, Ltd. has sufficient proprietary rights in the patent to confer standing to sue in its name alone. However, even if the court were to conclude otherwise, Pfizer, Ltd. certainly has sufficient proprietary rights to sue for infringement in concert with the owner of the patent, as it has done here with Pfizer, Inc.

    Pfizer, Inc. v. Teva Pharm. USA, Inc., Civ. No. 2:10cv128 (E.D. Va. Aug. 12, 2011).

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  • WYHA (Would You Have Abandoned)?*

    ZAO Gruppa Predpriyatij Ost v. Vosk International Co. is a very long decision with very little meat.  Sixty-eight pages, of which the first 34 are evidentiary rulings suitable for the final exam for any evidence course.

    Applicant Vosk International Co. had an agreement with opposer and manufacturer ZAO Ost Aqua to import ZAO Ost Aqua’s non-alcoholic beverages.  Shortly after the original agreement was executed, Vosk applied for the registration of three marks (here, here and here), which ZAO Ost Aqua and its parent company opposed.

    The Board approached it as any ordinary likelihood of confusion case, cleanly done because the opposer had the luxury of being able to prove prior use by its earlier distribution through another company. (Often in the manufacturer-distributor situation the manufacturer’s only use is through the distributor, a much stickier situation.) Although there were some differences between the marks as originally used by ZAO and those filed by Vosk (one example below):

    Opposer’s drawing (application later abandoned)

    Applicant’s drawing
    nevertheless likelihood of confusion was pretty clear and the opposition was sustained.

    So although it was decided as an ordinary likelihood of confusion case, as if the two parties were legal strangers, the Board did touch on manufacturer-distributor law.  A review of the legal standard:

     The law is clear on the question of ownership as between a foreign manufacturer and a domestic distributor or importer:

    [T]he question of ownership of a trademark as between the manufacturer of a product to which the mark is applied and the exclusive distributor of that product, or as between a foreign manufacturer and the exclusive United States importer and distributor, is a matter of agreement between them, and in the absence of any such agreement, there is the legal presumption that the manufacturer is the owner of the mark. Without such expressed or implied acknowledgement or transfer by the foreign manufacturer of rights in the trademark to the exclusive U.S. distributor, such distributor does not acquire ownership of a mark of a foreign manufacturer any more than a wholesaler can acquire ownership of the mark of a manufacturer, merely through sale and distribution of goods bearing the manufacturer’s trademark.

    Audioson Vertriebs-GmbH v. Kirksaeter Audiosonics, Inc., 196 USPQ 453, 456-7 (TTAB 1977) (citations omitted).
    To try to escape this rule, Vosk claimed that it wasn’t a distributor but merely a purchaser of the goods. Apparently no case has expressly applied this same rule in the reseller context, but the effort still didn’t get Vosk anywhere:

    Under the rule in Audioson, applicant’s purchase of the goods gives it no right to register the marks, and the presumption of ownership remains with the manufacturer. Although Audioson speaks primarily of the rights of manufacturers vis-à-vis those of “distributors,” it is quite clear that the principle enunciated is not limited to manufacturer relationships with formal distributors – that would make no sense given the reasoning of the presumption, which is grounded in treaty and need to protect foreign manufacturers against the registration of their marks in other countries.

    There was also a collateral attack on the legality of ZAO’s prior use of the mark, claiming that the use was illegal because one shipment through ZAO’s original distributor used coloring that was not approved by the FDA and had been seized. The case runs down the illegality defense, a good reference next time you’re thinking of asserting it.

    I’m not sure why this case was so clearly hard-fought — looks like a slam-dunk to me, no matter how you look at it.

    ZAO Gruppa Predpriyatij Ost and ZAO Ost Aqua v. Vost Int’l Co., Opp. Nos. 91168423, 91169098 and 91169446 (TTAB Aug. 9, 2011).

    *Hat tip to John Welch at the TTABlog for the case and for stealing (and changing!) his “WYH*” tags. 

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  • Trick Question

    A debtor-in-possession had a contract it wanted to assign. The contract included a trademark license, but it was somewhat unusual in structure. For starters, it was a trademark sublicense, not a direct license, for the mark “Jag Jeans”:

    There is no registered trademark for “Jag Jeans,” although there are several for “Jag” owned by Jag Licensing LLC. Not that it mattered; trademark owner Jag Licensing wasn’t a player in the suit and the actual mark was academic. The original trademark license agreement is here, though, if you’re interested.

    Western Glove Works (WGW), a Canadian partnership, was the sublicensor and Seymour J. Blue, LLC (SJB) was the sublicensee. The agreement in dispute described two different sets of rights and responsibilities, a first set for 2002 and a second set for 2003 and subsequent years. In 2002, SJB was granted a non-exclusive license to

    sell womens’ jeanswear bearing the Trademark (“Trademarked Apparel”) in the United States commencing on the date of this Agreement and ending on December 31, 2002.
    December 31, 2002 was only two weeks after the effective date of the agreement. SJB  was to pay WGW a 12.5% royalty on net sales. At the end of 2002, WGW was to purchase all of the Trademarked Apparel inventory at cost and assume all outstanding orders and contracts.

    In 2003,

    [WGW] shall sell, for its own account, the Trademarked Apparel and in connection therewith SJB shall provide the following (the “SJB Services”): (1) the right to use product designs and specifications developed by SJB for this purpose; (2) sourcing services; (3) marketing and sales services (for U.S.A. customers only); (4) merchandising services; and (5) customer service (for U.S.A. customers only.

    SJB was to get 30% of of WGW’s net sales for its services.

    A January 1, 2003 amendment extended the 2002 terms of the agreement until June, 2003 and the 2003 terms would kick in on July 1, 2003 instead of January 1, 2003. A September, 2003 second amendment changed some financial terms.  SJB assigned the contract to successor Simply Blue Apparel, Inc. with WGW’s consent, and an April, 2007 letter of intent extended the original agreement, as amended, until June 30, 2011 and provided for two additional five-year extension terms.

    In 2009, Hartmarx Corp. (at some point the name was changed to XMH Corp. 1) and 50 of its subsidiaries and affiliates, including Simply Blue, declared bankruptcy under Chapter 11. The bankruptcy court allowed the WGW-SJB agreement to be sold, along with many other assets. The district court affirmed and WGW appealed to the Seventh Circuit.

    Neither the court nor the parties arguing the matter could explain exactly why the contract was written this way, but it made all the difference. First, the court noted that, while the WGW-SJB license didn’t have a “no assignments” clause, the default rule is that a trademark license may not be assigned.

    But it turns out that the contract wasn’t a trademark license, at least not in 2009.  The trademark license was in 2002, extended to June 2003, but ended then. WGW argued that the contract for “SJB Services” beginning in 2003 was a continuation of the trademark license but the court didn’t buy it:

    We don’t agree that those provisions constituted any sort of trademark license. The contract is explicit that after the expiration of the sublicense to Blue to sell Jag Jeans and pay a license fee to Western the rights in the trademark revert to Western; all the trademarked apparel held by Blue has to be returned to Western; Jag Jeans would henceforth be priced and sold by Western; and the license fee would be replaced by a fee for specific services rendered by Blue. The services were extensive, but Western retained control over “all other aspects of the production and sale of the Trademarked Apparel,” and these were, as our quotations from the contract should have made clear, also extensive.

    . . . .

    But if the service agreement is really a trademark license, why did the contract distinguish between a trademark license and a service agreement and make the former expire in 2003? Western has been unable to answer that question. Maybe a contract regarding a trademark could be a trademark license for some purposes but not others, but this is not argued and we are reluctant to go down that dark path. There is no good reason for courts to wrestle with classification issues in contract cases when it is easy for the contracting parties to resolve the issues themselves. If Western wanted to prevent Blue from assigning the service contract to another firm without Western’s permission, all it had to do was get Blue to agree to designate the contract as a trademark sublicense, thus triggering the default rule that we have discussed and endorsed. That would have headed off a legal dispute that courts are in a poor position to resolve. It would have been more effective than a clause forbidding assignment because it would have survived bankruptcy; anyway there was no such clause either.

    It is a curious agreement. Whenever I see inexplicable things like this I always blame the tax department.

    In re XMH Corp., Nos. 10-2596, 10-2597, 10-2598, 10-2599 (7th Cir. July 26, 2011).

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  • The Fight for Bratz – With a New Plaintiff

    Just when you thought the Bratz story was over, it gets better. You know, the fight over the pouty-lipped dolls, where the designer, Carter Bryant, who was employed by Mattel off and on, claimed to have designed them while the relationship was off and then took the design to MGA Entertainment. Mattel sued MGA, won in a huge way, then lost in a huge way. I won’t even try to summarize it all because it’s way too confusing.

    But now we have a new fight over Bratz.  Seems that designer Carter Bryant testified during the Mattel v. MGA Entertainment case that the Bratz doll design was inspired by a (disturbing) advertisement for Steve Madden shoes in Seventeen magazine, below:

    I’ve extracted two of Carter Bryant’s drawings from the exhibits with the Complaint:

    The full exhibit is here. I think it’s easy to see that Carter Bryant’s designs were quite close to the Seventeen magazine ad. Close enough that the photographer, Bernard Belair, has now sued both Mattel and MGA Entertainment (a wise choice, given the flip-flop decision in the district court) for copyright infringement.

    This is what the dolls looked like after transformation from original design to commercial product:

    What a fascinating question. Compare the proportions and pose of photo on the left of the Seventeen ad with the second Bryant sketch – they look quite similar to me.  But do Carter Bryant’s drawings infringe the photograph? And do the dolls?

    Mattel has filed a motion to dismiss the Complaint against it on the basis that the copyright claim is time barred (it’s been ten years since the dolls were first designed) and the unjust enrichment claim is preempted by copyright. They seem like good arguments to me, but MGA won’t have such an easy out. This could be interesting.

    Belair v MGA Entertainment, Inc.    , No. 09-CIV-8870 (SAS) (S.D.N.Y.)

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  • What Does a Patent “Cover”?

    What does “cover” mean in a patent assignment clause?

    Plaintiff Openwave Systems, Inc. developed software for network computing but decided to sell off the client-side part of the business, keeping the server-side.  It sold the business to Purple Labs S.A., predecessor to defendant Myriad France S.A.S.  Some patents were assigned in the transaction, but the transactional documents (an Intellectual Property License Agreement (IPLA) in particular) also provided for transfer of patents afterwards if they were “Missing Assigned Patents.” “Missing Assigned Patents” were defined as:

    Patents owned by Openwave immediately prior to the execution of the APA (or patents issuing on patent applications owned by Openwave immediately prior to the execution of the APA) that (a) contain claims that, immediately prior to the execution of the APA, cover products or services in the “Business” (as defined in the APA) but do not cover products or services in the Openwave Field of Use; and (b) were not assigned to Purple Labs as “Seller IP” pursuant to the APA.

    Two years later Myriad sold its patents to Google and informed Openwave that it thought there were 35 Missing Assigned Patents.  This called into question the meaning of the word “cover.”  Here are the parties proposed definitions:

    Openwave (wishing to avoid transfer):

    Option 1: One of the client software products Purple Labs acquired from Openwave infringed the patent
    Option 2: That the invention described in the patent was implemented in one of the client software products Purple Labs acquired from Openwave

    Myriad (wanting the transfer):

    Generally describing client-side products and services, or serving to protect client-side products and services from competition

    What’s your vote?

    I thought that “cover” would be readily construed to mean that the product would infringe the patent – and I was wrong. The court held that:

    First, “cover” cannot mean infringement. The sophisticated parties to the IPLA were familiar with the term infringement and the concept of an infringement analysis. They invoked infringement elsewhere in their contracts but chose not to do so when defining Missing Assigned Patents.[*] Moreover, the bone-crushing burden of claim construction and a double infringement analysis for each patent claim is too impractical, grossly so, to have been a mutual business intent. The term “cover” as used in the definition of Missing Assigned Patents is not reasonably susceptible to any meaning that requires a conventional infringement analysis. No extrinsic evidence will be admitted to prove such an interpretation.

    I don’t buy it. What else could “cover” mean when it comes to a patent?  The only thing that’s relevant is whether a patent is infringed. If the patent isn’t potentially infringed, then the patent doesn’t interfere with the business and no assignment or license is necessary. Infringement is surely what the Supreme Court means when it talks about patents “covering” products. TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23, 30, 121 S. Ct. 1255, 1260 (2001) (“Although the precise claims of the Sarkisian patents cover sign stands with springs ‘spaced apart’ “); Markman v. Westview Inst., Inc., 517 U.S. 370, 374, 116 S. Ct. 1384, 1388 (1996) (“Victory in an infringement suit requires a finding that the patent claim ‘covers the alleged infringer’s product or process’ “); General Motors Corp. v. Devex Corp., 461 U.S. 648, 650, 103 S. Ct. 2058, 2060 (1983) (“Claim 4 of the Patent covers . . . .”); Parker v. Flook, 437 U.S. 584, 586, 98 S. Ct. 2522, 2524  (1978) (“The patent claims cover . . . .”); U.S. v. Glaxo Group Ltd., 410 U.S. 52, 54, 93 S.Ct. 861, 863 (973) (“This patent covers . . . .”), Merrill v. Yeomans, 94 U.S. 568, 572 (1877) (“If the patentee is … entitled to a patent for the product …, and has failed, as we think he has, to obtain it, the law affords him a remedy, by a surrender and reissue. When this is done, the world will have fair notice of what he claims, of what his patent covers, and must govern themselves accordingly.”).

    I also don’t buy that they couldn’t mean “infringe” because it would be a “bone-crushing burden” to figure out – that’s just some backfill on the weak theory that “cover” doesn’t mean “infringe.”

    But tsk, tsk on Openwave for using such an inartful term in the document. Although I have some sympathy, it’s not a clearly defined term of art and begs for argument about the meaning.

    Openwave’s option 2 was also knocked out because the agreement contemplated patents that were relevant to future products Purple Labs might develop.  Myriad didn’t win either, though; instead, the proper construction will be decided at trial.

    Openwave Sys. Inc. v. Myriad France S.A.S., No. C 10-02805 WHA (N.D. Cal. June 29, 2011).

    *This is a bit of a stretch in my book. The court cites to two other mentions of “infringement” in the transactional documents.  One was in the seller’s reps and warranties in the Asset Purchase Agreement that “no Person has infringed, misappropriated, or otherwise violated, and no Person is currently infringing, misappropriating or otherwise violating, any Seller IP.” (Sec. 2(f)).  The other was in the disclaimer of warranties in the IPLA, “Except for the express representations and warranties set forth in the APA, each party expressly disclaims any and all representations and warranties, express or implied, including any warranty of noninfringement, merchantability or fitness for a particular purpose.”  (Sec. 5. ALL CAPS omitted.  You’re welcome.) I don’t think that the parties “chose” not to use the word “infringement” in the more individualized portions of the documents simply because it also appeared in the more formulaic boilerplate.

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  • The Mongols Have Their Colors Back (For Real)

    The whole Mongols trademark seizure case is a little confusing, so this story is put together from a few different decisions in two different cases.  Two marks, the MONGOLS word mark for “association services, namely, promoting the interests of persons interested in the recreation of riding motorcycles” and the “Image Mark“

    for “jackets and t-shirts” were registered in January 2005 and April, 2006 to the unincorporated association Mongols Nation, on applications signed by then-President Ruben Cavazos.  On March 26, 2008 Cavazos created Shotgun Productions, LLC, which was solely in his control, and assigned the marks to it. He claimed the Mongols leadership was aware of the assignment, but the subsequent president said the assignment was without the knowledge or authorization of the Mongols Nation.  Thus, on October 14, 2008, Mongols Nation filed a “corrective assignment” of the marks back to it.

    A few days earlier, on October 9, 2008, the government had indicted Ruben Cavazos and 78 other members of the Mongols Nation. Mongols Nation was not indicted. On October 22, 2008 (after the assignment of the marks back to Mongols Nation) the government obtained an ex parte order restraining that sale or transfer of the Mongols trademarks. The government’s proposed order was that the defendants “and those persons in active concert or participation with them” be enjoined from wearing or displaying the Mongols trademarks, but that was stricken by the court before it issued the order. Nevertheless, the defendants themselves were ordered to surrender all their articles with Mongols trademarks.

    Mongols Nation then incorporated Mongols Nation Motorcycle Club, Inc. and on January 21, 2009, in disobedience of the restraining order, the trademarks were assigned to the corporation.

    Then the second suit starts, a civil one. Ramon Rivera was an unindicted member of the Mongols. He witnessed other unindicted members having their apparel seized, so on March 10, 2009 he filed a civil action seeking a permanent injunction restraining the government from seizing his.  In July 31, 2009, a preliminary injunction was granted in his favor, finding that the government’s seizure of articles bearing the marks was improper.

    On June 15, 2010 in the criminal action the court entered a Preliminary Order of Forfeiture of the trademarks. On July 20, 2010, the Mongols Nation Motorcycle Club, Inc., as a third party affected by the forfeiture, filed an ancillary proceeding asking the court to vacate the preliminary order.

    On January 1, 2011, in the civil matter the court granted summary judgment in Rivera’s favor. The court held that seizing the items would be a violation of Rivera’s First Amendment rights without adequate justification by the government.

    Which brings us to the present decision, where in the criminal matter the court vacates its preliminary order forfeiting the Mongols trademarks. While the decision in the civil matter did not collaterally estop the government from seeking the forfeiture, nevertheless the forfeiture was improper.  Recall that the Mongols Nation was never indicted. The government’s theory was that Cavazos, in transferring the marks to his wholly-owned company Shotgun Productions, was the actual owner of the marks and therefore they were subject to forfeiture.  That was a no-go, however:

    The assignment of the marks to Shotgun Productions, an entity under Cavazos’ sole control was invalid. Any right or interest in a trademark must be “appurtenant to an established business or trade in connection with which the mark is employed.” The stated purpose of Shotgun was “promotional and licensing services.” Clearly, Shotgun never used the mark to indicate membership in an organization substantially similar to that of Mongols Nation.

    I’m not sure why this is “clearly” so without more information on what activities Shotgun Productions might have engaged in – and even then, the Image Mark was registered for jackets and t-shirts, surely items that can be licensed goods for promotional purposes.  Nevertheless, it is a stretch on the facts to think that Cavazos, rather than the club, owned the trademarks. Thus, “the court regrettably must conclude that . . . property belonging only to the unindicted enterprise is not forfeitable.”  The Mongols have their colors back.


    U.S. v. Cavazos    , No. CR 08-1201 (C.D. Calif. Oct. 21, 2008) (Order Restraining Sale of Trademark).
    Rivera v. United States, No. 2:09-cv-2435 FMC-VBKx (C.D. Calif. Aug. 3, 2009) (Order Granting Preliminary Injunction).
    U.S. v. Cavazos, No. CR 08-1201-1 ODW (C.D. Calif. June 15, 2010) (Preliminary Order of Forfeiture).
    Rivera v. United States, No. CV 09-2435 DOC (JCx) (C.D. Calif. Jan. 4, 2011) (Order Granting Summary Judgment).
    U.S. v. Cavazos, No. CR08-01201 ODW (C.D. Calif. June 28, 2011) (Final Order Vacating Preliminary Order of Forfeiture).

    Prior posts here and here.

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