Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Nothing Much New in Bratz

    There was a recent summary judgment decision in the Mattel v. MGA Entertainment case (otherwise known as Barbie vs. Bratz), but nothing much notable on the ownership front.  As it last stood, the Court of Appeals remanded the issue of ownership of the “Bratz” and “Jade” trademarks to the district court. Whether the names should be owned by Mattel or MGA turned on interpretation of the designer’s employment agreement with Mattel, specifically whether a trademark could be an “idea” as the term was used in the agreement. The court of appeals found the contract ambiguous and told the district court to consider extrinsic evidence. On summary judgment, the district court, surprise, surprise, could find for neither party on summary judgment.

    On copyright, Mattel owns the copyright in the designer’s original work but MGA is partially home-free on infringement; the jury will decide infringement on only the first generation dolls and a couple others.  The rest are not infringing.

    There’s a heck of a trade secret dispute going on too, but I couldn’t bring myself to plow through that part of the 117-page decision. Happy reading.

    The Telegraph reports that jury selection has already begun and the trial to start January 18.

    Mattel, Inc. v. MGA Entertainment, Inc., No. CV 04-9049 DOC (C.D. Calif. Dec. 27, 2010).

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    ,
    , ,

  • An Ugly Trademark Ownership Decision

    I’m only blogging about this case because I grew up within walking distance of the venue for the antique show with the disputed name, the Valley Forge Military Academy.  The magistrate’s reasoning wasn’t so hot, but the district court managed to get it cleaned up.

    Bottom line is that the plaintiffs, the Gemmers, volunteered for several years to run the Main Line Antiques Show (held on the grounds of the military academy) for defendant Surrey Services for Seniors. The Gemmers then got the not-so-bright idea that they would still run the show but find a new benefactor. They didn’t exactly tell that to Surrey, though; they just said they weren’t going to run it the next year. Surrey went ahead with planning the show without the Gemmers and the Gemmers planned on running a show of the same name too. Dueling trademark applications filed; lawsuit ensued.

    It really was a slam-dunk for Surrey. The magistrate in excruciated detail related how Surrey had signed all contracts relating to the show, had paid all costs, and had sent out the marketing materials under its name.  The Gemmers argued they were the first to use the mark because Mrs. Gemmer sent out letters soliciting dealers for the first show, but the magistrate decided this wasn’t enough to establish first use in commerce, which is what Surrey Services later did.  Since Surrey Services had first use in commerce, it was owner of the mark.

    I’m not fond of using this as the basis for the decision, since it was merely a matter of happenstance that Mrs. Gemmer’s use was one that wasn’t a “use in commerce.” She could have done more acts that would have been considered a “use in commerce,” but she still shouldn’t have owned the mark. Luckily for Surrey the district court cleaned the matter up on its review:

    Based on this significant factual record, the Report properly concludes that the Gemmer’s actions were performed in the capacity of volunteers for Surrey. As volunteers, the Gemmer’s use of the MLAS mark would be more appropriately attributed to Surrey rather than vice versa.
    The Gemmers argument that section 5 of the Lanham Act creates ownership rights in marks was also rejected. This is not a case where there is a licensor-licensee relationship, or two separate entities using the mark, so the section has no applicability.

    Unfortunately, between the magistrate’s fairly poor grasp of trademark law and the district court’s quick fix, it’s an ugly decision.  Ugly enough to appeal.

    Gemmer v. Surrey Services for Seniors, Inc., No. 10-610 (Sep. 7, 2010) (Report and Recommendation)
    Gemmer v. Surrey Services for Seniors, Inc., No. 10-610 (Dec. 13, 2010) (Order)

    Creative Commons License The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    ,

  • LunaTrex Out of the Race

    A year ago, the LunaTrex team of the Google Lunar X Prize had fallen apart, as reported here. The problem manifest itself when the warring members each tried to claim ownership of the LunaTrex name.  The X Foundation, sponsor of the contest, suspended the team until it received clear evidence of ownership of the LunaTrex name and a clear statement of who was authorized to speak for the team.

    It looks like that hasn’t happened.  Registration of teams closed on December 31, 2010 and LunaTrex is not on the list of entrants.  Meanwhile, the court just dismissed Cafasso’s claim for a breach of contract (there was, at most, an agreement to agree) and the remaining claims are on life support – the plaintiff must show cause by February 1, 2011 why summary judgment should not be granted to the defendants on all remaining claims, including the trademark ownership claim.

    Peter Bitar, one of the defendants, had re-entered the contest with a new team, LUNARecon.  It claims to have been a reconstitution of the LunaTrex team.  But alas, it has withdrawn from the contest too.


    Lunatrex, LLC v. Cafasso, No. 1:09-cv-1272-DFH-DML (S.D. Ind. Jan. 4, 2011).

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    , ,

  • Google Is the Senior User of ANDROID Mark

    Google has successfully defeated an infringement claim over its use of the ANDROID trademark.  So I thought I’d take a look at the bases, which include rarer claims of tacking and abandonment, along with a first use date kicker.
    Plaintiff Specht had a trademark registration for ANDROID DATA but went out of business. He assigned the mark to another company he owned, Android’s Dungeon, which was moribund. When Specht learned that Google had announced the ANDROID mobile phone operating system, he used the mark some more and then sued Google for trademark infringement. Google won on summary judgment based on the following findings of fact and law:
    Tacking: Specht’s use of ANDROID’S DUNGEON cannot tack to his former use of ANDROID DATA. Specht “materially altered the mark, which does not provide tacking rights,” when he:

    dropped the disclaimed word (‘data’), made the dominant portion of the mark possessive, and added the word ‘dungeon’ to the dominant portion. . . .  ‘Data,’ as used by Plaintiffs in ANDROID DATA, presumably suggests the definition of ‘information in numerical form that can be digitally transmitted or processed.’ ‘Android,’ considering the robot logo that Plaintiffs use with the mark, suggests a meaning of ‘mobile robot usu[ally] with a human form. The word ‘dungeon,’ however, has an entirely different meaning: ‘a dark usu[ally] underground prison or vault.’  Plaintiffs have altered their original mark–which created a computer services or products impression–and created a mark with allusions to robotic prisons, futuristic vaults, or a number of other meanings about which the Court will not speculate.

    (Perhaps a comic book store in “The Simpsons.” – ed.)
    Google’s first use: The court found that Google had first use on November 5, 2007, the date of Google’s press release announcing the Android operating system. I find this somewhat interesting, since the first distribution of software under the Android mark (in the form of a development kit) was not until November 12, 2007, and the first product with the Android operating system was not until October 22, 2008. I would have thought the November 5, 2007 use was a use analogous to trademark use (still sufficient to secure rights), with actual use November 12.
    Specht’s abandonment of ANDROID DATA: The mark was used continuously from 1998 to 2002. On the first prong of the abandonment analysis, discontinued use, the period of non-use began when Specht ceased operations at the end of 2002 and started using ANDROID’S DUNGEON instead–no matter the continuing use of the domain name androiddata.com or the information at the web site, because it did not provide a means for ordering software or offer information about Specht’s services. (NB that, according to the court, this is the only decision to address whether a “ghost site” remaining after a company has gone out of business will be use of a trademark in commerce.) There was no use for three years, thus a rebuttable presumption that the trademark was abandoned. On the second prong of abandonment, intent not to resume use, Specht’s only evidence that he did not intend not to resume use (phew) was his own statement in the Statement of Material Facts that 

    With his new day job intact, Specht’s interest in selling Android Data’s assets significantly lessened. By May 2004, he decided to keep the assets with every intention of further developing the Android Data Software Suite and returning the Android Data business to profitability at the earliest opportunity.

    That “purely subjective intention in the abandoner’s mind to re-engage in a former enterprise at some indefinite future time” wasn’t enough to defeat the presumption of abandonment. The mark ANDROID DATA was abandoned.
    Summary judgment granted in favor of Google declaring that it is the senior user of ANDROID, for cancellation of the Specht registration, and that Google does not infringe the Specht mark.
    Hat tip to counsel on both sides; it’s clear the arguments were well-formed and well-supported.
    Specht v Google, Inc., No. 09 C 2572 (N.D. Ill. Dec. 17, 2010). 
    , , ,

  • Standing for Patent Infringement Just Got a Lot Easier

    Mindspeed was the owner of seven patents and plaintiff WiAV Solutions LLC was a licensee, claiming to be exclusive. Prior to WiAV becoming a licensee, various predecessors-in-interest had granted the following licenses to third parties:

    Entity Potential Licensees Patents
    Rockwell Science Center Rockwell International and Affiliates All
    Conexant
    Subsidiaries Spin-offs Joint Development Partners 
    (limited to Conexant Products)
    		 All
    Mindspeed
    Subsidiaries Spin-offs Joint Development Partners 
    (limited to Mindspeed Products) 
    		 All
    Skyworks
    Qualcomm 
    (but promised not to grant new licenses)
    		 All
    Qualcomm Affiliates All
    Sipro
    Anyone 
    (limited to Mindspeed Products in the field of WLAN)
    		 ‘573 and ‘493 patents
    WiAV sued a number of defendants for patent infringement. Not surprisingly, the defendants claimed that WiAV lacked constitutional standing, since it was not the exclusive licensee of the patents.
    It is without dispute that one can be an exclusive licensee despite the license being subject to pre-existing non-exclusive licenses. What was disputed was whether those licensees’ right to grant sublicenses meant that the WiAV’s license wasn’t really exclusive, and therefore WiAV without standing to bring the infringement claim. The court said not necessarily:
    This court has explained that a party has the right to sue for infringement of the patent “if that party has a legally protected interest in the patent created by the Patent Act, so that it can be said to suffer legal injury from [the] act of infringement.” Such a party is commonly referred to as an “exclusive licensee.”

    . . . . 
    Depending on the scope of its exclusionary rights, an exclusive licensee may have standing to sue some parties and not others. For example, an exclusive licensee lacks standing to sue a party for infringement if that party holds a preexisting license under the patent to engage in the allegedly infringing activity. Similarly, an exclusive licensee lacks standing to sue a party who has the ability to obtain such a license from another party with the right to grant it. In both of these scenarios, the exclusive licensee does not have an exclusionary right with respect to the alleged infringer and thus is not injured by that alleged infringer. Thus, the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury.
    This court therefore holds that an exclusive licensee does not lack constitutional standing to assert its rights under the licensed patent merely because its license is subject not only to rights in existence at the time of the license but also to future licenses that may be granted only to parties other than the accused. If the accused neither possesses nor can obtain such a license, the exclusive licensee’s exclusionary rights with respect to that accused party are violated by any acts of infringement that such party is alleged to have committed, and the injury predicate to constitutional standing is met.

    (emphasis added).

    The court claimed to distinguish Mars, Inc. v. Coin Acceptors, Inc., but I’m not really buying it. In Mars, a sister subsidiary licensee in the UK was what destroyed exclusivity for the US subsidiary. The Mars court held that the US subsidiary was not an implied exclusive licensee because, by virtue of the license to the UK entity, the licensor had not manifested exclusivity to the US entity. But this is what we know about the terms of the license to the UK subsidiary, which I suggest is even more restrictive than the six third-party licenses granted in the WiAV case:

    MEI-UK will continue to have a non-exclusive right to exploit, in the conduct of its business, the Covered Intellectual Property in any country of the world in exchange for a royalty payable to Incorporated….

    Thus, prior to 1996, MEI-UK had a license: the right to practice the patents-in-suit “in any country of the world” (including the United States), in exchange for a royalty payment. MEI cannot have been Mars’s exclusive United States licensee, when the terms of the 1996 Agreements make clear that Mars had allowed MEI-UK to practice the patents in the United States. The deposition testimony of Mars’s Corporate Tax Director confirmed MEI-UK’s rights under its license from Mars. See J.A. 4130 (“Q. Were there instances where MEI-U.K. could make a product such as a coin changer and import that product into the United States for delivery to MEI, Inc.? A. That could happen, sure.”).

    Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1368 (Fed. Cir. 2008). Note that this license is limited to “exploiting” and apparently without right to sublicense. Perhaps the distinction is that the US subsidiary’s claim in Mars was of an implied license, a situation where one is rightfully skeptical of the terms.

    So I think this is a significant change in the law of standing, but one I’m in favor of. It was overly technical to put licenses in buckets of “exclusive” or “nonexclusive” when, actually, the world isn’t so simple. Complex corporate structures nowadays require intracompany licenses, which will generally be nonexclusive so other sister companies may also practice a patent.  The license terms may also be expansive, in contemplation of a variety of ways that a subsidiary might need to exploit the patent rights and out of reasonable caution over relying on implied rights, such as exhaustion. But those licenses do not necessarily mean that the corporate family as a whole will tolerate infringement.  This test is simple and fundamental – whether the accused could otherwise obtain the rights elsewhere.  Combined with the prudential considerations that ensure that a defendant will not be subject to more than one suit for infringement of the same patent, the court has struck the appropriate balance of all interests.

    As an aside – WiAV named patent owner Mindspeed as “defendant patent owner” to satisfy prudential standing. Can anyone fill me in on why Mindspeed would be one the defendant’s side of the caption? Is this a clever way to solve the prudential standing problem when one has an unwilling patent owner?

    WiAV Solutions LLC v. Motorola, Inc., No. 2010-1266 (Fed. Cir. Dec. 22, 2010).

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    , , , ,

  • Another Restaurant Name Dispute

    Specimen

    One of the most common scenarios where trademark ownership disputes arise is between the owner of the building and the operator of the business in the building.  There was the newsworthy “Tavern on the Green” case, where the City of New York successfully retained ownership of the name for the landmark building in Central Park, and the continuing internecine dispute over “Joyce Theater.”  The common thread in these disputes is that there are documents defining the relationship, but they do not elaborate on trademark ownership.  The court has to do some tea leaf reading to figure out what the intent of the parties was with respect to the trademark ownership.

    In Nothing Heavy, Inc. v. Levinson, though, the court has a little more than just tea leaves.  The defendant’s predecessor had originally opened a diner under the name “Empire Diner” and operated it for about 30 years.  In 1976, plaintiff Nothing Heavy then leased the property and made substantial improvements to the restaurant.  In 2002 it filed a trademark application to register “Empire Diner,” but the lessor caught on.  The lessor then negotiated a deal where Nothing Heavy would abandon the application in exchange for the lessor’s consent to an outdoor sidewalk cafe license:

    (Note that I’m not sure much was obtained on the trademark front; the application was about to be finally refused under § 2(d) for likelihood of confusion with EMPIRE, KOSHER EMPIRE RESTAURANT, EMPIRE KOSHER CHICKEN RESTAURANT and EMPIRE BREWING COMPANY.)

    But that wasn’t the end of it.  In 2007, Nothing Heavy began negotiating with third parties to expand the use of THE EMPIRE DINER trademark and trade dress.  A potential licensee, Michael Feucht, filed a Madrid application for THE EMPIRE DINER and extended it to the United States.  Nothing Heavy then asserted to the lessor that it owned the trademark, the lessor opposed the Feucht trademark application, and asserted its own ownership claim to the restaurant name.  Ultimately Nothing Heavy lost the lease to the restaurant, vacated the building, and sued for a declaratory judgment that it owns the name of the restaurant.

    There’s not much meat at the moment for this case.  The decision is on a motion to dismiss by the lessor, claiming that the 2003 amendment precludes the trademark ownership claim altogether.  The court, I think rightly, rejects the theory:

    Reading the contract language in the light most favorable to Plaintiff, the agreement unambiguously requires Plaintiff to forgo trademark registration-nothing else. Plaintiff’s covenant means that Plaintiff relinquished its right to become a registrant, which confers certain benefits to trademark owners, but is not the only avenue for acquiring trademark rights. See 15 U.S.C. § 1127 (“trademark”). Based solely on the contract language, the covenant cannot be reasonably construed to bear on any common law trademark rights claimed to have been already acquired by Plaintiff. Nor can it be construed as an admission that Plaintiff lacks trademark rights. The 2003 Amendment is thus not dispositive. There are simply insufficient facts at the moment to conclude that Defendants are, as a matter of law, the owners of THE EMPIRE DINER trademark.

    The pleadings and decision reference an opinion of counsel obtained by Nothing Heavy that it is the owner of the trademark, but I couldn’t find a copy through the docket.  That’s an opinion I’d be interested in reading.  Wonder what it did with this: “The traditional view in New York [is] that the goodwill and rights to the name of a public building run with the building.” City of New York v. Tavern on the Green, L.P., 09 Civ. 9254 (MGC) (S.D.N.Y. March 10, 2010) (citing cases).

    Nothing Heavy Inc. v. Levinson, No. 10-cv-03466 (GBD) (S.D.N.Y. Dec. 6, 2010).

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    , ,

  • Why Does a Subsidiary Need a License Agreement?

    Bankruptcy. Not sure it would have made a difference in the outcome here, but it might have helped.

    Ham’s Inc., a wholly-owned subsidiary of Chelda, Inc., operated restaurants under the “Ham’s” brand:

    Ham’s Inc. filed for bankruptcy and RCR Marketing, LLC bought all of Ham’s “right, title and interest in the assets, property and rights, tangible and intangible (including without limitation, equipment, inventory, supplies, goodwill, trademarks, licenses, and other intellectual property), of [the Ham’s Inc.] bankruptcy estate.”  It bought the assets without any warranties of title, merchantability or fitness.

    Problem was, Ham’s didn’t own the trademark, Chelda did.  Meanwhile, the Bank of North Carolina was a secured creditor of Chelda, holding a perfected security interest in, inter alia, the trademark. The Bank of North Carolina and Chelda filed complaints claiming that RCR Marketing had no right to use the mark and asking that RCR Marketing be enjoined.  RCR Marketing retorted that that it bought the marks and other property at auction, so Chelda and the bank no longer had an ownership interest.

    (Any bankruptcy practitioners out there?  The U.S. trademark register lists Chelda, Inc. as the record owner of the trademark. How is it that RCR Marketing could think that it owned the mark?  The only clue I could find in the case was a statement that “RCR contends that confusion exists regarding the separation of Ham’s Inc. and Chelda as operational businesses, which in turn has created a question of whether the companies operated as one entity, or, if separate, which company had title to the assets in question, including the Trademarks.”)

    Not surprisingly, the court found that, by virtue of the registration, Chelda had prima facie evidence of its ownership of the mark and had therefore shown a likelihood of success on the merits that it owned the trademark.  But not all was won for Chelda; it wanted RCR Marketing to cease using the marks too, but was unsuccessful. The court was unsympathetic:

    Evidence suggests that Chelda has never used the Trademarks in commerce itself, but rather only benefitted from the use by another, namely use by Ham’s Inc. under a purported license agreement. Furthermore, Chelda is not currently using the Trademarks itself and has not provided the Court with another entity which would definitively become the immediate user of the Trademarks at this time. As such, although the Court takes into account that Chelda seeks to maintain control over the use of the Trademarks, the Court finds that immediate and continued use of the Trademarks cannot be accomplished by Chelda, itself, at this time. Therefore, prohibiting all use of the Trademarks in commerce by RCR would neither protect the purported ownership interest claimed by Chelda nor protect the goodwill of the Trademarks in the eyes of the consuming public. As such, the Court will not grant the preliminary injunctive relief sought by the Bank to the extent that such relief would entirely prohibit RCR from using the Trademarks in commerce. Instead, the Court will allow RCR to continue use of the Trademarks in commerce . . . .

    Chelda was granted the right to exercise quality control over RCR Marketing’s use of the mark, “in the manner it claims to have done as purported licensor during Ham’s Inc.’s use of the Trademarks.”  A percentage of sales was also to be held in escrow.

    Would a formal license agreement between Chelda and Ham’s Inc. have put Chelda in a better position?  Perhaps. The court is clear that there are underlying questions of trademark ownership and abandonment based on the absence of a formal licensing agreement (e.g., “As of the October 18, 2010 hearing, no evidence of any specific license agreement between Ham’s Inc. and Chelda has been produced. As such, the Court does not resolve any questions of ownership nor make any determinations based on abandonment arguments that have been or may be raised by the parties . . . .”), issues that would be much harder for RCR Marketing to raise if there was a formal agreement in place. 

    Further, by not having formal quality control program in place, Chelda is somewhat hamstrung in its ability to exercise quality control (“the Court will allow Chelda to monitor use of the Trademarks in the manner it claims to have done as purported licensor during Ham’s Inc.’s use of the Trademarks. As such, Chelda shall have the authority to monitor operations of the Ham’s restaurants and the trademark use therein for purposes of maintaining the consistency of the goods and services sold in conjunction with use of the Trademarks. Such monitoring authority shall include access to individual Ham’s restaurants for purposes of inspecting the quality of goods and services rendered therein. . . . Chelda shall not have the authority to substantially interfere with RCR’s general management of the individual Ham’s restaurants.”)

    Finally, the license would have been part of the bankrupt estate, making RCR Marketing’s argument that it thought it acquired the mark because “confusion exists regarding the separation of Ham’s Inc. and Chelda” much more difficult. I’m not a bankruptcy lawyer, but I believe that the trustee would also then have had to go through the process of formally deciding whether to reject or assume the license under Bankruptcy Code § 365.

    It’s easy to let the formalities between corporate family members slide.  But you never know when you’re not going to be on such friendly terms anymore.

    Bank of North Carolina v. RCR Marketing, LLC, No. 1:10cv663 (M.D.N.C. Dec. 3, 2010).

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    , ,

  • Unremarkable Manufacturer-Distributor Dispute

    Wincam America, Inc., a distributor for CD Lab AG Multimedia Systems, filed applications to register the WINCAM and WINCAM AMERICA trademarks in the U.S.  CD Lab, the foreign owner of the WINCAM mark, was unhappy.  Wincam America set out the possible scenarios: (1) withdraw the applications, (2) CD Lab register the marks and Wincam America change its name, or (3) Wincam America gets to keep the trademarks in the U.S.  CD Lab opted for allowing Wincam America to complete the registration, after which Wincam America unequivocally agreed to assign them to CD Lab.  Wincam America didn’t.  CD Lab wins summary judgment on breach of contract but summary judgment for trademark infringement denied; infringement was at trade show where Wincam America was using the mark with the permission of and for the benefit of CD Lab.

    Wincam America, Inc. v. CD Lab AG Multimedia Systems, No. 3:09-CV-103-S (W.D. Ky. Nov. 24, 2010).

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    ,

  • “Dad, Who Owns the Mark?”

    Arredondo v. Arredondo is a classic family dispute over trademark ownership. Here, two brothers, Carlos and Caesar, were successful real estate developers–so successful that they established the Arredondo Properties Limited Partnership (APLP) to invest in projects and gather and distribute income to the Arredondo family for the next 200 years. APLP had no employees and never played any role in the daily operation of its investments. Ultimately, APLP was jointly owned in 50% share by two trusts, one for the benefit of Carlos’ grandchildren and one for Caesar’s. Carlos and Caesar were the trustees for their respective trusts. For the most part, Carlos and Caesar operated all their businesses through a company called Arredondo & Co., LLC (“A & Co.”).

    This dispute in particular is about a self-storage business that Carlos and Caesar started, originally called “Westy’s” and then changed to “Westy.”  A number of facilities were opened in Connecticut and New York, the first in Port Chester, New York. The various pieces of real estate were owned by APLP or by the brothers personally. The facilities were ostensibly operated by Westy’s Connecticut, Inc. and Westy’s New York, Inc., although these entities had no employees and instead contracted with A & Co. for the actual operation. The opinion details how Carlos and Caesar were fairly lackadaisical about keeping the roles of the various companies and trusts separate. In 1991, counsel filed trademark applications for WESTY’S and a Westie dog logo in the name of Westy’s Connecticut and the marks were registered.

    In 1999 Carlos decided to get out of the business and sell to Caesar his interests in A & Co., Westy’s Connecticut and Westy’s New York.  Carlos agreed to transfer “all rights and claims to any assets,” including “trademark rights and vehicles” to Caesar.  A trademark assignment to A & Co. was recorded with the PTO. The description in the case is somewhat confusing, but it appears that APLP then asked A & Co. not to open new facilities for it.  A & Co. agreed, but continued to open new facilities that were not owned by APLP.

    In 2002 A & Co. filed new applications for the WESTY, WESTY’S and dog logo marks, since the original registrations had been cancelled under Section 8. One of Carlos’ children questioned her father about it, mentioning the concept of “first use.”  Carlos spoke with a lawyer, then contacted Caesar to say that APLP was the first user of the marks and therefore owner of them, offering to license-back the marks.*  Caesar disputed the claim, stating that A & Co. was the first user and owner.  Carlos then opposed the new applications and filed the lawsuit.

    The court recognized the root of the problem:

    Generally, trademark rights are acquired and maintained through priority of use . . . . [But t]his is not the typical situation in which one company, completely separate from a competitor, first uses a specific mark in commerce. Here, a number of different entities and individuals contributed, in some way, to the creation of the Westy facility at Port Chester. Because of the number of different entities that were involved in the conception, funding, purchase, construction, advertising, management, and day-to-day operation and control of the Port Chester facility, no one single entity can conclusively be determined to be the “first user” of the Westy marks.

    The court held that the marks are owned by whoever controlled them.  Because it was a small family enterprise where two identifiable individuals made all the decisions, the easy answer might have been “Carlos and Caesar.” But the court dug a little deeper and gave the business forms their due:

    [T]he relationship between Carlos and Caesar and their various corporate forms and limited liability companies is complex and sometimes inconsistent. Throughout the trial and the history of the Westy self-storage facility development, “Caesar and Carlos,” “C & C,” and A & Co. were often used by the brothers and other witnesses interchangeably. In a legal sense, of course, these entities are not interchangeable. The lack of clarity or confusion at times over whether the brothers were acting through their corporate forms, particularly A & Co., stems largely from the lack of consistent involvement of legal counsel. Neither Carlos nor Caesar has legal training, and the brothers involved lawyers in their business dealings only on an episodic and infrequent basis, and then only for very specific tasks. Therefore, their lack of complete adherence to the corporate form is understandable.

    Caesar and Carlos, however, were particularly diligent in creating and utilizing various corporate entities to limit their own personal liability in connection with the Westy facilities. . . . Therefore, the Court finds that when the brothers acted in connection with the management, creation, and development of the Westy facilities and the Westy concept, as well as the management and control of the trademark, they intended to and did act through the protection of their corporate working arm–A & Co.

    Although the relationship of the brothers to A & Co. is complex, and the history of the trademark licensing opaque, what is crystal clear is that APLP did not exercise control over the trademarks at any time. APLP was a completely passive vehicle whose only actions were to fund and benefit from investments. APLP had only one meeting per year, had no employees, and never made any of the key decisions regarding the trademark or the daily management of the Westy facility. Therefore, APLP did not exercise any control over the trademarks or the quality of the Westy services and is not the owner of the Westy trademarks.

    In a footnote the court also dismissed the possibility that Westy’s Connecticut owned the marks: “Although the brothers initially registered the trademarks in WCI, WCI is not the owner of the trademarks. The registrations for the trademarks in WCI I or II have lapsed, and WCI I ceased to exist for a number of years while the trademarks were still being used. More importantly, WCI never had any employees and did not control the development of the trademark, the use of the trademark in commerce, or the quality of the goods or services that the trademark represented. These actions were all conducted by A & Co. Thus, WCI is not the owner of the marks in question.”

    A & Co. owns the marks, case dismissed.  Notice of appeal filed.

    Arredondo v. Arredondo, No. 3:02-cv-2200 CFD (D. Conn. Nov. 30, 2010).

    *The decision not say specifically, but I assume that Carlos’ children saw the Westy business growing and perhaps were not too happy to be excluded.  One solution would be to own the trademarks and earn royalty income for their use.

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    ,

  • The Writing on the Wall

    Sometimes you should just know when to quit.  Not that clients always go along with it, or that you have a choice, but some cases are just losers.  The Daniel Group v. Service Performance Group, Inc. is one of those.

    The facts are simple – senior common law user (defendant Service Performance Group, Inc.) and junior registrant (The Daniel Group).  The mark: SERVICEPERFORMANCE. Legal arguments trying to negate the fact of the defendant’s seniority failed. 

    First up, that the plaintiff owns the mark by virtue of its federal registration. That is, of course, just flatly wrong under U.S. law.  The registration claims a first use date of January 20, 2005 and the registrant backpedaled to a 2002 date.  No matter; defendant had affidavits from 51 individuals proving its use from at least 1997 to the present so it was senior user.

    Second up, that change of corporate form caused the trademark rights to evaporate.  That was also a no-go.  As is typical of small business, there were a number of changes in entity form.  The mark was first used by a husband and wife team, the Guyles.  They incorporated their business in Illinois.  The couple moved to North Carolina and the Illinois corporation was administratively dissolved in 2005.  The couple then operated “as a d/b/a” (a proprietorship), continuing to use the mark, and incorporated in North Carolina. After getting the cease and desist letter from the plaintiff in late 2009, they assigned any trademark rights that the Illinois company might have had in the trademark to the North Carolina corporation.

    Under Illinois law, a corporation has five years to wind up its affairs.  The Guyles got the assignment in under the wire, so it was effective.  Even if they hadn’t, also under Illinois law any assets would have passed to the shareholders, the Guyles.  In either case, they owned the trademark and could assign it to the North Carolina corporation.

    Third up, abandonment.  The defendant produced affidavits showing continuity of the business and continuous use of the same mark during the entire period from 1995 to 2010.  Dissolution of the Illinois business entity was not the same as cessation of use of the mark.  Citing Callman on Unfair Competition, Trademarks and Monopolies § 20:19, citing a TTAB case, Brewski Beer Co. v Brewski Bros. Inc., 47 U.S.P.Q. (BNA) 1281 (TTAB 1998), there was no abandonment:

    The relevant authority holds that defendant’s change of corporate status–from a proprietorship, to an Illinois corporation, to a proprietorship, to a North Carolina corporation–does not affect defendant’s validly held and continuously used trademark.

    Since confusion was conceded, the only issue was priority.  Defendant’s motion for summary judgment on federal and state law infringement claims granted.

    This looks to me like a case the plaintiff should have been smart enough to get out of before it got this far.  It undoubtedly obtained a registration for its mark without having any knowledge of the defendant’s senior use, then had that horrible “uh-oh” moment when, after accusing another of infringement, it realized that the accused is actually the senior user.  Assuming you don’t want to change the mark (which might actually be the best move), smart money then is to either just shut up and hope that they don’t sue you for infringement until you have a good equitable argument or negotiate a co-existence agreement. Instead now, the defendant has a judicial determination that it is the senior user AND a pending  counterclaim for trademark infringement against the plaintiff.  Perhaps no harm – it appears The Daniel Group has modified its web pages to eliminate use of the mark – so maybe it was all a question of buying time. But I’m curious to know why it got this far.  It sure is an expensive way to buy time.

    The Daniel Group v. Service Performance Group, Inc., No. 5:10-CV-82-FL (E.D.N.C. Nov. 10, 2010).

    Creative Commons License
    The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

    , ,

About Me

Learn more about me at my website, Chestek Legal

Recent Posts

Categories

Newsletter