Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • There Has to Be Confusion

    Plaintiff DeliverMed transferred its marks for pharmaceutical delivery – “DeliverMed,” “Right at Home” and this logo

    to defendant Medicate Pharmacy as part of a joint business venture.  The venture failed, but Medicate Pharmacy continued to use the marks to promote its own business, enclosing a card bearing the marks with every prescription and using the logo on its web page.

    DeliverMed sued under § 43(a) of the Lanham Act.

    But the Lanham Act claim was a no-go, dismissed under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction.  Citing to International Armor & Limousine Co. v. Moloney Coachbuilders, Inc., 272 F.3d 912 (7th Cir. 2001), the court held that it had no jurisdiction:

    The Lanham Act claim DeliverMed pleads in its original complaint is really a contract dispute over the existence and meaning of a joint venture agreement. This dispute over the use of the marks cannot be principally distinguished from the dispute in International Armor. If the joint venture agreement existed and transferred DeliverMed’s marks to Medicate, Medicate owns the marks. If the agreement did not exist or did not transfer the marks, DeliverMed owns them, and Medicate’s use of those marks violates the Lanham Act. The existence and effect of a joint venture agreement is a matter of contract, not trademark, law. In this way, the case at bar is just like International Armor and, as with International Armor, presents no Lanham Act question.
    Medicate Pharmacy’s potential defense under the Copyright Act (a claim that one of the defendants owned the copyright in the house and pestle logo) did not create federal jurisdiction, as we know from Holmes Group v. Vornado Air Circulation Sys., Inc., 535 U.S. 826 (2002).  DeliverMed was, though, allowed to amend its Complaint to add a declaratory judgment claim for copyright non-infringement, keeping federal jurisdiction alive.

    DeliverMedHoldings, LLC v. Schaltenbrand, Nos. 10-cv-684-JPG-DGW, 10-cv-685-JPG-DGW (N.D. Ill. May 27, 2011).

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  • Moral Rights versus Economic Rights

    Fahmy v. Jay-Z is a cautionary story about music sampling.  Not the usual one, about to what extent sampling may be a fair use or may require a license, but rather what kind of rights sampling implicates.

    Fahmy was the successor in interest to the copyright in the composition and music recording of an Egyptian piece called “Khosara, Khosara.”  The allegation was that Jay-Z infringed the copyright by sampling it in his piece “Big Pimpin’.”  Fahmy alleged that, under Egyptian law, the right to creative derivative works is a moral right, not an economic right, that moral rights are inalienable, and therefore the license upon which Jay-Z relied could not include the right to sample.

    Contrary to Fahmy’s expert’s opinion that the financial right includes only the right to perform, reproduce and distribute without alteration, Jay-Z’s expert opined that financial rights under Egyptian law include the right to make adaptations and translations.  On summary judgment the court sided with Jay-Z, holding that a transferable adaptation right exists independently of inalienable moral rights under Egyptian law.

    Next was the question whether the license allowed Jay-Z to make a derivative work, including both whether the license encompassed the musical composition copyright or only the sound recording copyright and whether the license included the right to make derivative works. There were a number of documents in the chain of title for the 1957 work, so unsurprisingly that winds up as a question for the jury.

    Fahmy v. Jay-Z, No. CV 07-5715 (C.D. Cal. May 2, 2011).

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  • Rejected Trademark License

    Photo by doortoriver

    Borders Group had contracted with Seattle’s Best, an acquisition/ subsidiary of Starbucks, for in-store coffee shops.  In February, 2011 Borders filed for bankruptcy under Chapter 11 and filed a motion to reject the Seattle’s Best license, claiming it will save $10 million a year operating the stores independently. Seattle’s Best objected, asking the court to require that Borders follow the debranding process described in the license Borders was rejecting and keep paying royalties until the debranding was completed.

    The court allows rejection of the license but not until the stores are debranded, paying royalties pro-rated on a location-by-location basis, with the task to be completed by July 31, 2011.

    News coverage here.

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  • Think of the Trademark Too

    “Lingo v Lingo,” so you know where this is going.  In this case brother versus sister, arguing over ownership of the trademark for “Lingo’s Market” in Rehoboth Beach, Delaware. The opinion isn’t terribly clear on the facts, so I’ve put the story together from the pleadings and the decision.

    Lingo’s Market was opened in Rehoboth Beach, Delaware 112 years ago by the parties’ grandfather.  It was run by the parties’ father until 1981, when he died. Plaintiff Archie Lingo then took over the business.

    In 1998, he incorporated “Archie’s Market, Inc.” and was its sole stockholder and officer. He, or Archie’s Market, Inc., leased the building from his mother Eleanor. He also federally registered the trademark in his own name.

    His mom Eleanor worked at the store, for the most part for no pay, except when Archie was divorcing his wife. During that time he and his mom both testified that his mom owned the store and she received the income from the store.  They lied so that Archie’s ex-wife wouldn’t get as much alimony.

    When Archie’s dad died, he made no provision in his will for the ownership of the market or the name of the store. His will had a residuary clause that created a trust for the benefit of Eleanor which, upon her death, terminated with the corpus to be distributed to Archie and his sister, defendant Dinah, per stirpes. Eleanor died in November of 2009 and also did not devise the market or trademark in the will. It did have this juicy bit, though:

    FOURTH. I make no provisions in this will for my son Archie, except the same amount of love that he showed me after he started living with his French girlfriend, because he has been well provided for. This is because, Archie, you came to me and said “mother, let me show you how to save money by incorporating Lingo’s Market.” You incorporated it as “Archie Lingo’s Market.” I trusted you my son, but you used me for [your] own money grubbing ways. I thought your wife Bunny was a piece of work, after living in our house rent free for years with her demands. But your French girlfriend is a real sick person. I work over 100 days a year in the market, 12 hours a day without a break, and my son does not pay me or offer any help. My son makes me wait for the rent check until the end of the year so he can get the interest and only pays half the rent. You only care about your French girlfriend, you treat your mother, your sister and your daughter the same, without any care.

    The chancery court ordered a partition sale of the property and Dinah bought it.  She apparently kicked Archie out to take over operation of the store herself. According to the complaint, Archie took down his sign but it was stolen, and then the store sported a new sign under Dinah’s ownership:

    (click for larger image)

    If your eyes are better than mine, you can see “The Original” is in the top left corner of the new sign and “Dinah H. Lingo, Sole Proprietor” in the bottom right. (She created an LLC, “The Original’s Lingo Market, LLC” presumably to run the business.  So is “sole proprietor” false advertising?)

    The court realized “this case turns on who actually owns the mark.” It concluded Archie did:

    The evidence of record, while not compelling, supports the court’s conclusion that plaintiffs have carried their burden to prove, by a preponderance of the evidence, that Archie owns the statutory and common law rights to the “Lingo’s Market” trademark. There is no mention of the Lingo’s Market trademark in the will or estate documents of either William or Eleanor Lingo. Furthermore, Eleanor indicates in her will that Archie had claimed ownership of Lingo’s Market when he incorporated the business under “Archie’s Market, Inc.” Archie’s registration of the “Lingo’s Market” trademark on the principal register of the USPTO further supports his claim to ownership as it is “prima facie evidence of the mark’s validity, the registrant’s ownership of the mark, and [his] exclusive right to use the mark in commerce.”

    While Archie said during his divorce that he didn’t own the trademark, that was a lie – “while the court does not condone Archie’s actions, his story is consistent with the record.”  The leases were consistent with Archie’s ownership of the trademark too, since they referred only to the real estate being leased, not the trademark.

    The court then marched through likelihood of confusion, albeit it in a confusing way. It treated Dinah’s new use, “The Original Archie’s Market,” as a separate mark and evaluated whether there was likelihood of confusion (surprise, surprise, there was).  But confused with what?  Archie doesn’t have a market anymore. There is no cause of action for determining ownership in the Lanham Act, so where was the subject matter jurisdiction? The complaint alleged that Archie plans on opening another market, which I suppose was enough. Rather than cooking up a Lanham Act claim though, I would prefer to have seen the chancery court decide who owned the trademark. But perhaps no one thought to point out to the chancery court that the market and the trademark were two separate assets, and later Archie was clever enough to get a second, and successful, bite at the apple.

    Lingo v. Lingo, No. 10-624-SLR (D. Del. May 19, 2011).  First Amended Complaint here, Answer here.

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  • Unlicensed, Confusing Trademarks

    Can two restaurants use the same mark and confuse consumers when one is the unambiguous owner and the other not a licensee?  Yes, when a bankruptcy court makes it so.

    The Siano family first opened “Vincent’s Clam Bar” in 1904 at 119 Mott Street in Little Italy, New York (the “Mott Street restaurant”). They then sold the restaurant and the mark to Andrew DeLillo. DeLillo opened more restaurants, including at the location involved in the suit at Carle Place, Long Island. In 1983 defendant/appellee Quadami, Inc. bought the Carle Place restaurant from DeLillo. In 1985, the Mott Street location filed for Chapter 11 bankruptcy and plaintiffs/appellants Vincent’s of Mott Street, Inc. and Vincent Generoso bought the restaurant. The trademark wasn’t part of the assets acquired though; instead trademark rights were governed by a stipulation with the following provisions, as described by the court of appeals:

    First, Appellants agreed that they “shall use and operate [the Mott Street Restaurant] under the names VINCENT’S CLAM BAR, VINCENT’S CLAM BAR OF MOTT AND HESTER STREETS, and/or MOTT AND HESTER RESTAURANT” (collectively “Vincent’s Marks”). Second, Appellants agreed not to represent that they are affiliated or connected with any “other business” known by either the Vincent’s Marks or “facsimiles thereof.” Finally, Appellants agreed and acknowledged that Andrew DeLillo was the sole owner of the Vincent’s Marks and that he retained the sole and exclusive right to use the marks.
    As these things go, the Mott Street restaurant changed the name, first calling it “The Original Vincent’s Clam Bar” and a few years later dropped the reference to a clam bar and identifying the restaurant as “The Original Vincent’s Established 1904.”  In 1992 Quadami acquired from DeLillo, subject to the stipulation:

    all rights, title, interests and claims in the “Vincent’s Clam Bar” and “Vincent’s Clam Bar of Mott and Hester Streets” names and “any all [sic] variations thereto and derivatives thereof,” including “all trademarks, names, service marks” and the good will associated with the names.

    Quadami then also started using “The Original Vincent’s Established 1904” at the Carle Place restaurant and filed applications to register “The Original Vincent’s Established 1904” and a logo form of “Vincent’s Clam Bar“:

    Generoso and Mott Street Inc. opposed the Quadami applications and Generoso filed his own applications for “The Original Vincent’s Established 1904” and “Vincent’s Since 1904.” The opposition was sustained and Generoso’s marks registered. Undoubtedly buoyed by the TTAB decision, Mott Street, Inc. and Generoso of the Mott Street restaurant sued Quadami of the Carle Place restaurant for trademark infringement.

    Bad move.

    Though federal registration of a mark is prima facie evidence of ownership, that evidence is rebuttable. See 15 U.S.C. § 1115(a). In particular, as is the case here, parties may allocate rights in a trademark through private agreement. Times Mirror Magazines, Inc. v. Field & Stream Licenses Co., 294 F.3d 383, 395 (2d Cir. 2002). Provided the agreement does not violate public policy–and in this case there is no contention that it does–courts will give effect to agreements governing ownership and use of the mark without recourse to trademark law. See id. at 395-96. Thus, principles of contract interpretation govern the present dispute.

    By its plain language, the Stipulation requires Appellants to use one of the three Vincent’s Marks and precludes Appellants from claiming affiliation with other restaurants using either any of the three Vincent’s Marks or “facsimiles thereof.”

    It found that the restaurant name with the changes, adding “Original” and “1904” and dropping “Clam Bar,” were still “facsimiles” of the original DeLillo marks and therefore still governed by the stipulation. Thus Mott Street, Inc. and Vincent Generoso had no independent rights in the new denominations and could not enjoin Quadami from using them also, although the court was careful to circumscribe the scope of its decision: “In holding that Appellants have no claim against Appellee for infringement, we should not be taken to imply that Appellee has any claim against Appellants, a question not before us.” The Generoso registrations were also cancelled.

    The court several times characterized the Mott Street restaurant has having “unlicensed” right to use the marks. The TTAB decision not to allow registration of the Quadami applications characterized the stipulation this way: “it is neither a license, a franchise nor an ownership right.” The dissent in the Board opinion read it the same way the Court of Appeals did, an “unlicensed” right to use the mark. The district court characterized it as consent to use agreement, but that’s not quite right either – a consent to use agreement is an agreement recognizing that concurrent usage does not create confusion, whereas here there was evidence of confusion. Also under a consent to use, both parties can have trademark ownership rights, which was not the outcome here.

    But bankruptcy courts often aren’t particularly good at understanding trademark rights and how to circumscribe them, or have greater equitable concerns they are trying to resolve.  In this case, the bankruptcy court left three courts scratching their heads.

    Vincent’s of Mott Street, Inc. v. Quadami, Inc., No. 10-3154-cv, (2d Cir. May 23, 2011).
    Vincent’s of Mott Street, Inc. v. Quadami, Inc., No. 1:05-cv-04358-SLT -JO (E.D.N.Y. Sept. 28, 2009).
    Vincent’s of Mott Street, Inc. v. Quadami, Inc., Opp. No. 97,805 (TTAB Sept. 30, 2002).

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  • Invention Assignment and Shop Right

    I don’t follow patent law as attentively as I do copyright and trademark, but I don’t recall seeing too many shop right cases.  Maybe this is ordinary stuff, but it was new to me.

    First though is the dispute over who owned the invention, the employee or the employer. Normally it’s pretty well defined in an invention assignment agreement of some kind, but this case is a mess of facts. I’m surprised that defendant General Electric Company bothered to file a motion for summary judgment, and not at all surprised that it lost.

    Former employee-plaintiff Henryk Oleksy started his invention while employed by Preferred Machine and Tool Products Corporation (“Old Preferred”).  A sub-subsidiary of GE named New Preferred (not the real name, but you get it) acquired the assets of Old Preferred on January 5, 1998. There were further corporate changes within GE after that that aren’t particularly relevant to the patent ownership issue.

    Oleksy continued to to work on his invention while now employed by New Preferred. Upon the acquisition in January, 1998, he, like all former employees of Old Preferred, was asked to sign a “Patent, Proprietary Information and Waiver Agreement” (Waiver Agreement) that served to assign all employee inventions to GE, including a requirement that they execute all necessary documents. Oleksy didn’t sign the agreement and gave it to his attorney because of his pending invention.

    At some point – could have been while the company was Old Preferred or New Preferred – Oleksy offered his invention to his employer.  On April 23, 1998, the president of New Preferred wrote a memorandum to Olesky saying “I am advising that you are free to take your manufacturing conceptual ideas to whomever would be most beneficial to you. We are not currently in a position to make the necessary changes to accommodate your process.” Oleksy also later had conversations with the company’s new president, Jewett, about implementing Oleksy’s process at the plant, but Jewett also said he wasn’t interested. Oleksy’s attorney wrote to Jewett looking to memorialize the verbal agreement, saying that in the conversation Jewett had confirmed the prior president’s statement that Oleksy would own the patent rights but also added that GE wanted to retain a shop right.  The lawyer asked Jewett to confirm the agreement by signing a copy of the letter and returning it, but Jewett never did.

    Oleksy’s lawyer then contacted Robert Lampe, one of GE’s patent counsel, to confirm GE’s release of the invention. According to the Oleksy’s lawyer, Lampe tried to retract the original president’s memorandum. Lampe said they could come to an agreement, but they never did. Oleksy then signed the Waiver Agreement in December, 1998 and filed a provisional patent application in January, 1999.  There was more back and forth with Lampe and another lawyer at GE who suggested GE would license the patent, but apparently by then Oleksy wasn’t interested.  In November, 2000 Oleksy was asked to sign another invention assignment agreement, unsuccessfully tried to amend it to retain rights in his invention, and ultimately was fired because he wouldn’t sign it. The patent issued in 2002, in 2006 Olesky sued GE for patent infringement, and GE counterclaimed for breach of the Waiver Agreement and also claimed noninfringement because it had a shop right to the invention.

    Wow. What a mess. So who owns the invention? I think it’s pretty clear no one wins this one on summary judgment, but Olesky got a boost from the court: “In the instant case, the undisputed facts not only do not demonstrate that defendant is entitled to judgment on its counterclaim for breach of contract, but they suggest just the opposite.”  Oleksy disclosed the invention and GE consistently said it wasn’t interested and also didn’t ask Oleksy to sign any assignment forms.  The court said “At no time from the point when plaintiff developed the process until after plaintiff had been terminated did defendant ever claim ownership rights in the process or patent.”

    I think the court bent over a little backwards for Olesky. GE may not have affirmatively said it owned the patent, but it surely didn’t act like Oleksy did. I also think GE had some good legal arguments that the court didn’t buy. The assignment was to GE, so could New Preferred waive GE’s rights?  Retention of patents rights by employees was not contemplated in the Waiver Agreement (at least not that the court mentioned), so did the president’s memorandum language serve to amend the Waiver Agreement? Nevertheless, clearly no summary judgment here for GE.

    The court then considered the shop right defense. A shop right is a common law right that allows an employer to practice an invention patented by an employee. It is an equitable defense, considering the circumstances surrounding the development of the patented invention and the inventor’s activities.

    But, nothing for GE here. It was clear that Olesky conceived, developed and perfected his invention on company time using company materials, which normally would justify a shop right.  But there was also evidence that GE expressed time and time again it had no interest in the invention, so no shop right. And the kicker?

    [S]hop rights are equitable in nature and creatures of common law. They attach where the employment relationship does not involve any specific contractual provisions providing for the assignment of intellectual property. “Where those rights are allocated by contract, the common law doctrine is superceded.”

    In the instant case, defendant argues that plaintiff’s employment relationship with New Preferred was specifically conditioned on his agreement to assign intellectual property rights. “Where an employment relationship specifically anticipates the development and assignment of intellectual property and sets conditions for assignment, the equitable remedy of shop rights is inapplicable.” Accordingly, to the extent that the Waiver Agreement applies to plaintiff’s invention, the shop right doctrine does not.
    (internal citations omitted). So if there’s an invention assignment agreement, no shop right, even if the employer doesn’t retain rights to the employee invention.  Good thing to know.

    Oleksy v. General Elec. Co., No. 06 C 1245 (N.D. Ill. May 23, 2011).

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  • UPDATE: Who Owns Thunderbolt? I Thought Apple and I Was Wrong

    Apple and Intel appear to have dueled over ownership of the Thunderbolt trademark for “dual protocol I/O [input/output] technology,” i.e., some combination of port, connector, cable and underlying technology (not to be confused with this Thunderbolt – application here – which Apple is set to oppose). Reportedly, Intel had technology by the name of “Intel Light Peak” and was approached in 2009 by Apple to modify it, with the result being the current Thunderbolt technology.

    Apple filed applications for the Thunderbolt trademark, filing the first application in Jamaica on November 9, 2010.  It then filed Canadian and U.S. applications on February 24, 2011 and May 6, 2011 respectively, claiming priority to the Jamaican application.  Apple also filed an application for an International Registration, claiming the U.S. as the base application and asking for extension of protection to China, Liberia and Syria.  In fact, it has filed more than a few applications:

    (click to enlarge image)

    Meanwhile, on February 24, 2011 (the same day as Apple’s Canadian filing) Intel announced the availability of its Thunderbolt technology, including at the bottom of the page a statement that “Thunderbolt and the Thunderbolt logo” are Intel trademarks:

    (click to enlarge image)

    It also lists the Thunderbolt on its Trademark page as one of its trademarks, but Intel does not appear to have filed its own applications.

    On Wednesday, May 18 electronista tumbled to the Apple trademark applications (interestingly, Patently Apple found the Canadian application back in March, but there didn’t seem to be much uptake on the story at the time).  Bright Side of News contacted Intel about the situation and Dave Salvator, Senior Communications Manager at Intel, had this to say:

    As part of our collaboration with Apple, they did some of the initial trademark filings.  Intel has full rights to the Thunderbolt trademark now and into the future. The Thunderbolt name will be used going forward on all platforms, irrespective of operating system.

     
    Bright Side of News, AppleInsider and MacStories characterize this as a statement that “Apple did the original trademark work but will be transferring it back to Intel,” but I’m not so generous in my reading. It really doesn’t say so; I read it as a license, like Apple has done with “Firewire.”

    But mostly what this story shows is that even the most sophisticated parties with presumably well-thought out agreements can still flub it (or else couldn’t agree).  It appears that in a joint development situation, presumably covered by a formal agreement, no one thought about who would own the trademark name for the new technology.  The land was up for grabs and Apple was the first to the high ground, filing its first application off the radar in Jamaica well before any public announcement.

    But it looks like there may be more to come on the story. Sony is reportedly going to also have a Thunderbolt port, although using a USB connector instead of the Mini DisplayPort used by Apple. Which adds more confusion about what “Thunderbolt” actually is, including, in my mind, whether it is a trademark or simply the generic name of a technology like “USB,” “Ethernet,” or “S-video.”

    UPDATE:  Intel is now saying:

    Apple filed for the original trademark and is now transferring that trademark to Intel. At the same time, Apple will continue to have unrestricted use of the technology. 3rd party implementations such as Sony’s desire to use USB Connector instead of DisplayPort and the eventual change of technology branding (Sony’s IEEE1394 a.k.a. Firewire implementation was named i.LINK) will have to be ironed out as the time passes by.

    News reporting here, here, here, here, here, here, here, here and here.

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  • Ho Hum Naked Licensing Case

    I came away from reading Eva’s Bridal Ltd. v. Halanick Enterprises, Inc. pretty much nonplussed. It’s a naked licensing decision out of the 7th Circuit, and I generally can get fairly riled up about naked licensing cases. But this case is so lacking in any facts that I just can’t say it was wrong – could be right, could be wrong, I just don’t know.

    Eva Sweis started a bridal shop named “Eva’s Bridal.” Eva allowed her children to open shops with the same name. The business ultimately “passed to Said and Nancy Ghusein (née Sweis),” which I assume from the names are Eva’s daughter and son-in-law. The Ghuseins “continued the pattern of licensing the name to relatives.” (No mention of how this licensing was done or to whom: implied? Express? Who knows.) One shop was opened by Said and Nancy and then sold to Nayef Ghusein, a person we must assume by the name is also a family member. (Cousin? Son? Uncle? Nephew?) Nayef had a royalty-bearing license to use the mark, paying $10 for the store and $75,000 per year for the license. The license expired in 2002 and Nayef never paid anything more but continued to use the mark. In 2007 Said and Eva’s Bridal Ltd. sued Nayef for trademark infringement. (My idea of fun at the family Fourth of July picnic after that.)

    The defendant raised a naked licensing defense. These are the only relevant facts mentioned in the decision:

    The written agreement did not require Nayef and Halanick to operate the Orland Park store in any particular way and did not give the licensor any power of supervision over how the business was conducted. Nancy conceded during her deposition that she and her husband Said never tried to control any aspect of how defendants’ shop operated or how the mark was used.

    A clear naked license.

    So what’s the problem – it looks pretty naked, right? But go back to what an abandonment is, a loss of significance as a mark. I’m willing to buy the theory that this definition of abandonment could mean that a mark was first understood by consumers as indicating the same source or origin as the original but has subsequently strayed far enough away that it no longer does and now represents to consumers that it has a different (its own) origin or source. (I don’t really agree with that – an abandonment is a loss of rights against the world, so I think it should mean the mark has lost all trademark significance altogether, not just with respect to one licensee. But I’m willing to go with it here.)

    But is that what was going on here? The court made passing reference to the concept that the stores using the same trademark should have similarities:

    A person who visited Eva’s Bridal of Oak Lawn and then Eva’s Bridal of Orland Park might not have found a common ambiance or means of doing business.

    Might? Well, did they or not? The court seems to acknowledge it should matter to a naked licensing defense, but there were no facts mentioned at all. Did they co-market? Were the two stores in geographic locales that might lead a consumer to think they were related? Did they use the same logotype for the signage? Did they work in concert as one business? Could one store get a dress sent over from another store? Those are signals understood by a consumer as indicating they were a chain of stores, one source. If instead consumers never had reason to believe they were related – store employees said to customers they weren’t related, they had different trade dress, they were far apart geographically – then I could agree the original Eva’s Bridal had abandoned the mark with respect to the defendant store. But there’s just no clue in the decision.

    Nevertheless, the court found there was a naked license through rote application of a rule that is not anchored in what a trademark is or what the doctrine is meant to protect:

    Trademark law requires that “decisionmaking authority over quality remains with the owner of the mark.” Restatement § 33comment c.[*] How much authority is enough can’t be answered generally; the nature of the business, and customers’ expectations, both matter. Ours is the extreme case: plaintiffs had, and exercised, no authority over the appearance and operations of defendants’ business, or even over what inventory to carry or avoid. That is the paradigm of a naked license.

    [emphasis in original] This decision, as in most naked licensing decisions, makes no finding about whether the trademark has actually lost significance as a mark as required by the law. Rather, it simply metes out punishment to a “bad” trademark owner who doesn’t follow some set of ambiguous rules for “control” that may – or may not – have any effect on the significance of the mark.

    And what about the other stores? Under traditional naked licensing doctrine the original Eva’s Bridal has no rights anymore, but is that the legal outcome in this case? Should it be? Might it not be that the other family members running those other “Eva’s Bridal” are all behaving properly and there still is a unitary brand significance for the other stores? Could it be that the Nayef outlier store is causing great confusion for the other stores? (What made them finally sue Nayef anyway?) More questions left over from the rote application of a rule without thought about its greater implications.

    So what’s the naked licensing takeaway here? This case doesn’t actually give me much heartburn because I think it has so little future relevance. As I said, maybe it’s right, maybe there was an abandonment as to this particular store, it’s just that the court didn’t elaborate, which you get to do when you’re an appeals court. The rebuttal to the naked license defense was that Said had no reason to doubt Nayef and that Nayef sold the same brands of dresses that Said had sold when he started the store – pretty feeble. The court characterized it as the “extreme case” and I expect in most situations a lawyer can muster up stronger facts than were elicited here.

    There was a laches defense that neither the district court nor the appeals court considered, jumping straight to naked licensing. Laches would have been a much less mischievous defense.

    Extra credit – as pointed out by the reader who sent me the case, where was the licensee estoppel defense?

    Anyway, at least it’s a short decision. My post is probably longer.

    Eva’s Bridal Ltd. v. Halanick Enter., Inc., No. 10-2863 (7th Cir. May 10, 2011) (Easterbrook, C.J.).

    * Surprisingly, the decision cites the Restatement of Unfair Competition also exclusively as authority. How about some binding law here?

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  • When Do You Have an Exclusive Copyright License?

    I’ve been hanging on to a decision from the Seventh Circuit since January, but it’s still worth some exposure because it explains one way to determine whether a copyright license is exclusive.

    A claim for copyright infringement may only be brought by the “legal or beneficial owner of an exclusive right under a copyright.” 17 U.S.C. § 501(b). To have standing a licensee doesn’t have to own all rights in a copyright, just some portion of them, but it must own that portion exclusively.

    HyperQuest, Inc. v. N’Site Solutions, Inc. is about the licensing of software called “eDoc,” used for collision claims management. Defendant N’Site had a non-exclusive license from the original owner of the software to use it internally. The original owner then sold the software, including the copyright, to Safelite Group Inc. Safelite then licensed the eDoc software to HyperQuest so that HyperQuest could commercialize it. HyperQuest thought N’Site was exceeding the scope of its license and sued N’Site. The district court kicked the suit, finding that HyperQuest was not an exclusive licensee and therefore did not have standing.

    The three rights implicated were the right of reproduction, the right to prepare derivative works, and the right to distribute. But how much exclusivity is enough? 

    [E]ach of the three rights it has identified can themselves be subdivided into smaller bundles of rights. Although one would reach the point of absurdity going too far down that line, it does not follow that any subdivision is too much. To the contrary, HyperQuest is correct to observe that subdivision is possible.
    The appeals court backed into the analysis by looking at the others who had rights – N’Site and Safeflite.  First, N’Site’s pre-existing license was for internal use only, without any right of reproduction, distribution, or the right to create derivative works. This license therefore did not disprove HyperQuest’s claim of an exclusive license in those fields.

    Next, the court looks at the rights retained by the licensor, Safelite.  Below is the text of the license:

    [2(a).] Safelite grants to HQ [HyperQuest] a perpetual (subject to termination only as provided in Section 4), worldwide, exclusive (except as set forth in Section 2(b)) license (i) to use the eDoc Software, in source code form, to support the development and commercialization of HQ Services, and (ii) to develop, modify and enhance the eDoc Software as HQ in its sole discretion determines; provided, that such modifications and enhancements are solely related to the development and commercialization of HQ Services. . . .

    [2(b).] Except as otherwise provided in this Section 2(b), HQ’s license to the eDoc Software is exclusive in the Territory. . . . Safelite shall have the right to use the eDoc Software and may license the eDoc Software to third parties solely for purposes of testing or development. . . .

    Notwithstanding the foregoing, HQ acknowledges the eDoc Software is licensed (“License”) to N’SITE Solutions, Inc. (“N’SITE”). HQ further acknowledges Safelite and N’SITE are presently negotiating the terms of a revised license (“Revised License”) regarding N’SITE’s use of the eDoc Software. . . . [I]n the event the Revised License is modified to include terms substantially different than the Revised License provided to HQ, Safelite will advise and include HQ in the determination of the final terms of the Revised License.

    While the license to N’Site itself didn’t destroy exclusivity, Safelite’s right to renegotiate it was. HyperQuest had no say in the rights that N’Site might ultimately end up with, but only the right to be “advise[d] and include[d].” “The fact that hindsight reveals that Safelite did not exercise its right to confer greater rights on N’Site does not matter. We must determine the scope of HyperQuest’s rights as of the time it received them. The agreement demonstrates that HyperQuest did not receive the degree of exclusivity in the realms of reproduction and distribution that it may have wanted.”

    An argument that one licensee has a claim against another simply if there is no overlap of rights licensed (like in patent law) didn’t fly:

    HyperQuest argues that as long as it has the right to exclude a third-party defendant from using the copyrighted software, then it holds the right to sue for infringement. But the right to exclude, standing alone, is not enough. Suppose that Amy, a copyright owner, licenses her copyright to Bill and promises Bill that she will not also give a license to Charlie. Under HyperQuest’s theory, if Charlie now uses the copyright without authorization, Bill would be entitled to sue for infringement. But this seems contrary to the intent of the Copyright Act; Amy’s promise of exclusivity extended only to Charlie–she gave Bill no right of exclusivity vis-à-vis Dave, Ellie, or Francesca. It therefore seems that Bill might have a contract action against Amy, but no more, if Amy is content to tolerate Charlie’s infringement. HyperQuest resists this conclusion with a number of citations to patent cases, but they are not helpful in this regard, because patent licensees who do not have sole authority over the patent are permitted to sue only if they join the patent owner.
    The district court’s decision that HyperQuest did not have standing was affirmed.
    HyperQuest, Inc. v. N’Site Solutions, Inc., Nos. 08-2257, 08-3979, 08-4176 (7th Cir. Jan. 19, 2011).

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  • Meet the Bloggers VIILXCIIIV9

    Or whatever number it is.  (Marty, when do we switch to real numbers??)

    It’s that time again, the never-to-be-missed Meet the Bloggers event at “#INTASF” for those of you who tweet, “The Annual Meeting” for those of you who are proper hobnobbers, and “in-tah” for you crass Americans who don’t know enough to say “eye-en-tee-ey.”  Also known as “Blogfest” by one stalwart, which, even though it’s a better name, somehow fails to catch on.

    The details:
    TUESDAY May 17, 8 to 10 pm
    The loft at SWIG BAR
    561 Geary Street, SF

    And you too can join in the sponsorship fun!  To quote Marty:

    Everyone who is a IP law blogger (and we are using an expansive definition of the term so as to include Twitterers, folks who contribute to their law firm’s blogs, people who wear IP-related sandwich boards, people who hear IP-related voices in their heads), should send me a link of their choosing prior to Blogfest, and a one sentence summary of their worldview. On BlogFest day, we (will all) publish the links in what will become the de facto authoritative IP law blog directory. AND at BlogFest, we introduce each of you to the others (and you can say a few words and then pass the mike (or megaphone)).

    Hope to see you there! More folks talking about it here, here, here and here.

    Who is this scary looking duo?  Come to MTBVII and find out.  I’m betting they’ll be there.

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