Property, intangible

a blog about ownership of intellectual property rights and its licensing

  • Contract Interpretation Quiz

    Interpret this contract, reproduced below in full:

    In consideration of the sum of One Dollar ($1.00) and other good, valuable, and adequate consideration, the receipt and sufficiency of which is acknowledged, the undersigned does hereby sell, assign, transfer, and set over to Bridgeport Music, Inc., its respective successors and assigns, fifty percent (50%) of his interest now owned or subsequently procured in the universe-wide copyright in and to the following musical composition(s) set forth in Exhibit A attached hereto, and all of the universe-wide right, title, and interest of the undersigned, vested or contingent, therein and thereto, including all claims for infringement of the copyrights whether now or hereafter existing, for the maximum terms of copyright, including any extensions and/or renewals thereto, throughout the universe.[*]

    The assignor sues for copyright infringement. Does the assignor have standing, or did it assign all claims for copyright infringement to the assignee?

    According to the Eastern District of Texas, the assignor didn’t have standing. According to the Fifth Circuit, it did.

    The appeals court said that the assignment had two clauses, the clear assignment of half interest in the copyright and the second clause assigning “all of the universe-wide right, title, and interest of the undersigned, vested or contingent, therein and thereto, including all claims for infringement.” The district court concluded that the plain language of this second clause assigned all interest in copyright infringement claims, but the appeals court decided that the lower court’s interpretation “ignores the language of the clause as a whole and renders the contract contradictory.”

    If the second clause is read to mean that [the assignor] assigned all of its rights to pursue copyright infringement claims related to the compositions, then it would also necessarily mean that [the assignor] had assigned all of its interest in the compositions, given that the second clause also stated that [the assignor] assigned ‘all of [its] interest’ in the compositions. This result would contradict the clear language of the first clause, which states that [the assignor] assigned only 50% of its interest in the musical compositions.

    The court explained that “The proper reading of the two clauses is that the second clause operates as a clarification of the 50% interest assigned in the first clause. Thus, the second clause clarifies that the 50% share is a full share, rather than an income, participation, royalty, or some other limited share in the copyright.”

    Ambiguous is an understatement for the contract, but it does seem the intent was that the second clause was meant to explain exactly what kinds of interests were assigned in half, i.e., all of them. Therefore, the plaintiff had standing. The assignee was also to be joined, so all parties in interest were represented in the suit.

    * See here for discussion of assignments “throughout the universe.”

    In re Isbell Records, Inc., No. 09-40343, 2009 WL 3386546 (5th Cir. Oct. 22, 2009).

    © 2009 Pamela Chestek

  • Memorylink Gets to Fight Another Day

    Last February, plaintiff Memorylink was on the losing side of a motion to dismiss almost all counts of a complaint against Motorola, a company with which it had a joint development agreement. During their relationship, Motorola filed a patent application that had both Motorola and Memorylink inventors listed, then filed a second application with just Motorola inventors listed.

    Count I of the complaint was for correction of inventorship on the first patent. The court originally held that Memorylink had “pleaded itself out of court” because the documents showed that Motorola contributed to the project, but, as explained in my previous post, the court didn’t analyze whether the patent itself was the product of joint inventorship. So Memorylink filed a motion for reconsideration.

    The court reversed the dismissal of the claim on patent inventorship, as well as some other claims. Memorylink successfully convinced the court that none of the documents the court originally relied on to decide inventorship actually showed that Motorola was an inventor on the patent itself. The court reversed and Memorylink’s count for correction of inventorship is alive.

    Memorylink Corp. v. Motorola, Inc., No. 08 C 3301, 2009 WL 3366974 (N.D. Ill. Oct. 15, 2009).

    © 2009 Pamela Chestek

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  • It’s Alive! Or On Life Support, at Least

    Candy company Mars has a convoluted ownership saga for some patents related to currency acceptors in vending machines. In a classic case of the left hand not being introduced to the right, Mars, Inc. had assigned patents to another member of the corporate family, Mars Electronic International, Inc. (MEI),* during ongoing patent litigation. This created unending problems for Mars when it tried to enforce the patents and collect damages for the infringement. The first case, Mars, Inc. v. Coin Acceptors, Inc., is blogged here and the second, Mars, Inc. v. JCM American Corp., blogged here.

    In Mars v. JCM, MEI moved under Fed. R. Civ. P. 25(c) that it be substituted for Mars in the suit. The court initially joined MEI, but later held that the Mars didn’t have standing when suit was filed because MEI, not Mars, owned the patents at that point in time. Therefore, MEI had no shoes to step into and the case was dismissed.

    MEI, Inc. v JCM American Corp. is the do-over. MEI, Inc. filed a suit against JCM in its own name. JCM tried to duck the suit again, claiming this time that MEI’s claim was a compulsory one in the first lawsuit, so it shouldn’t be allowed now.

    Score one for MEI (finally). JCM had never claimed against MEI in the first suit, so MEI was under no duty to bring any counterclaim. Under Fed. R. Civ. P. 13(a)(1), “A pleading must state as a counterclaim any claim that — at the time of its service — the pleader has against an opposing party’s claim if the claim (A) arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim[.]” In the original suit, JCM never counterclaimed against any independent cause of action that MEI had, only against Mars’ claims. Therefore, MEI wasn’t obliged to counterclaim.

    MEI could not have brought its independent counterclaims in the original suit even if it wanted to. A party joined under Rule 25 cannot assert its own substantive rights, only those of the original party. Therefore, even if JCM had counterclaimed against MEI, MEI would not have been allowed to file a substantive counterclaim.

    But, the case is stayed pending appeal of the original Mars case. Claim construction is one issue on appeal, so the court isn’t going to waste its time on this case until it knows the Federal Circuit is done tinkering with the claim construction of the patents in suit.

    MEI, Inc. v. JCM American Corp., No. 09-351 (RBK/JS), 2009 WL 3335866 (D.N.J. Oct. 15, 2009).

    *The assignment history of the patents looks even more complicated. The first suit discussed an assignment of the patents to “Mars Electronic International, Inc.,” but the plaintiff in the instant case is “MEI, Inc.” The assignment history is not particularly helpful.

    © 2009 Pamela Chestek

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  • Logo Designer Loses Again After No Show

    A few days ago, the court in the Middle District of Florida held that the company that designed the logo for the “Beef O’Brady” restaurant did not own the logo for promotional goods, as blogged here.

    A few days later, the court also adopted the magistrate’s report and recommendation and granted a preliminary injunction against the T-shirt company’s continued sale of the promotional goods. On likelihood of confusion, the magistrate said:

    Moreover, FSC’s rights to the protected marks are not restricted to food and beverage service and seemingly extend to other areas, such as apparel and merchandise to promote its food and beverage franchises. “The protection afforded a trademark owner is not limited to the goods on which he is using the mark, but, rather extends to any goods on which the use of the offending mark is likely to cause confusion.”
    . . . .

    Particularly in the absence of any contrary showing, the plaintiff has demonstrated a likelihood of success on the merits. This conclusion is supported by decisions holding generally that when franchisees or licensees are terminated and continue using the previously authorized trademarks, they are guilty of trademark infringement.

    The case also provides a few more details – the logo designer filed for bankruptcy during the proceedings and apparently has been a no-show since then. It didn’t oppose the motion for preliminary injunction or oppose the magistrate’s report. It also wasn’t exactly an upstanding citizen, continuing to sell shirts after the agreement was terminated but asked the buyers not to tell the restaurant. Likelihood of confusion isn’t so hard under those circumstances.

    FSC Franchise Co. v. Express Corporate Apparel, LLC    , No. 8:09-cv-454-T-23TGW, 2009 WL 3334138 (M.D. Fla. Oct. 2, 2009).

    © 2009 Pamela Chestek

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  • Standing or Not? Answer

    Here is the answer to yesterday’s post:

    The court held that Balsam was the owner of the patent and therefore had standing to bring suit. Although San Marco was the owner of the patent in 2005, the court found that the 2006 agreement evidenced intent that Balsam immediately possess title to the patent and hold it until San Marco had satisfied certain conditions. San Marco did not satisfy them, so the patent remained with Balsam. San Marco’s claim that it had “100% ownership interest” in the patent was consistent with the parties intent; if San Marco found a buyer it could have satisfied the conditions for ownership of the patent, therefore having full ownership to transfer to the buyer.

    So the 2006 agreement transferred ownership of the patent from San Marco back to Balsam and was simultaneously a conditional purchase of the patent by San Marco back from Balsam. Although assignments have to be in writing, the court found that the 2006 document satisfied the writing requirement.

    Folger’s argument, that the 2006 agreement was void ab initio because it was a mutual mistake between the parties, was sensible, but wrong. At most the agreement was voidable by an adversely affected party, either San Marco or Balsam, but neither had asked to have the agreement set aside. Balsam therefore had standing as September 30, 2006, including for the suit against Folgers filed in 2009.

    Balsam Coffee Solutions Inc. v. Folgers Coffee Co., No. 6:09-CV-89, 2009 WL 3297292 (E.D. Tex. Oct. 14, 2009).

    © 2009 Pamela Chestek

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  • Standing or Not? Answer Tomorrow

    Here are the facts, you decide who owns the patent. Court’s decision this time tomorrow.

    The original owner of the patent was Balsam Coffee Solutions, Inc. On June 9, 2005, Balsam assigned the patent to San Marco Roasters, Inc. The two inventors on the patent were co-owners of both companies. More than a year later, on September 30, 2006, Balsam and San Marco executed an agreement that said:

    1. [San Marco] intends to purchase U.S. patent number[] 6,861,086 . . . and agrees to pay [Balsam] based on the terms set out on invoice number 001604 dated September 30, 2006.

    2. If it appears [San Marco] will have problems paying for the above noted items and at [Balsam’s] sole discretion, this agreement may be terminated and the rights and ownership shall remain with [Balsam] upon giving notice and returning any payments made to them in regards to the above noted invoice.

    3. Ownership and all rights in respect of the above noted patent[] . . . shall remain with [Balsam] until paid in full.

    San Marco then tried for a couple of years to sell the patent, representing that it had “100% ownership interest in” the patent. On August 27, 2008, Balsam decided that San Marco was incapable of performing under the terms of the 2006 agreement and terminated it.

    On February 27, 2009, Balsam filed a patent infringement suit against Folgers Coffee. Folgers filed a motion to dismiss, claiming that there was no subject matter jurisdiction because Balsam was not the owner of the patent. On August 3, 2009, San Marco assigned the patent to Balsam as “belt-and-suspenders,” then filed a second suit.

    Did Balsam own the patent at the time of the original suit? Answer this time tomorrow.

    © 2009 Pamela Chestek

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  • Logo Designer Loses (And Should Have)

    In FSC Franchise Co. v. Express Corporate Apparel, LLC, a printing company designed the logo for a restaurant and manufactured and sold promotional goods for the restaurant. The parties had a falling out, the restaurant sued for infringement, and the logo designer counterclaimed for infringement too.

    Express Corporate Apparel made the branded apparel for plaintiff’s restaurant “Beef O’Brady’s.”

    In 1996, on a handshake, co-defendant Richard Donahue (presumably an employee or principal of Express Corporate Apparel) designed the branding for the restaurant and was the exclusive supplier of apparel for it. Beef O’Brady’s didn’t get any royalties from the sales; instead it simply stocked the Express Corporate goods in its souvenir shop.

    In 2008, the two companies finally entered into a “Supplier Trademark License Agreement.” The grant clause stated:

    Express Corporate also agreed:

    The term and termination of the contract were thus:
    FSC Franchise sent a letter to Express Corporate in November terminating the license as of December 31, 2008 and demanded that Express Corporate stop making the merchandise. Express Corporate didn’t, so FSC Franchise sued.

    Express Corporate counterclaimed for trademark infringement, claiming that it was the owner of the mark for apparel, although it did acknowledge that Beef O’Brady’s was the owner for restaurant services. (Although not mentioned in the opinion, after the suit was filed Express Corporate also filed a trademark application for the mark for apparel.) But it was an easy call for the court on ownership. It didn’t need to resort to discussions of the relatedness of restaurant services and apparel, or the concept of promotional goods, to decide:

    Express Corporate admits that the marks are identical but argues that the plaintiff’s “registered trademark rights begin and end with the food and beverage service business and do not extend to clothing and apparel items. Instead, these trademarks as applied to clothing and apparel items have been lucidly the domain of [Express Corporate].” (Doc. 21 at 3) Common sense belies this argument, which contradicts the express terms of the parties’ “Supplier Trademark License Agreement .”
    . . . .
    “A licensee’s prior claims of any independent rights to a trademark are lost, or merged into the license, when he accepts his position as licensee, thereby acknowledging the licensor owns the marks and that his rights are derived from the licensor and enure to the benefit of the licensor.” [Citations.] Upon signing the license, Express Corporate’s prior independent use of the Beef O’Brady’s marks merged into the license, and Express Corporate acknowledged the plaintiff’s ownership of the marks.

    Express Corporate Apparel advertises on it’s website that it does “Logo Development!” One wonders how Corporate Apparel’s business will fare once it becomes known that it claims to own the trademarks it designs.

    FSC Franchise Co. v. Express Corporate Apparel, LLC, No. 8:09-cv-454-T-23TGW, 2009 WL 3200656 (M.D. Fla. Oct. 2, 2009).
    Complaint here.
    Answer and Counterclaim here.

    © 2009 Pamela Chestek

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  • Pushing a Deal

    Movie deals are made at the Sundance Film Festival, and they’re made fast. Weinstein Company v. Smokewood Entertainment Group gives us some of the flavor.

    The film was “Push,” now renamed “Precious.” (One blog suggests that it was done to avoid confusion with a cheesy sci-fi film of the same name.) Push won the Grand Jury Award and the Audience Award at the Sundance Film Festival, as well as the Audience Award at the Toronto film festival. Here’s the trailer – be forewarned, it’s brutal material:

    The film is being distributed by Lionsgate, but The Weinstein Company (TWC) had been negotiating at Sundance for the rights. TWC claimed that on January 27, 2009 it received an oral offer for exclusive distribution rights from Cinetec Media, Inc., acting as agent of Smokewood Entertainment Group, the defendant. TWC says it accepted the offer orally, and that Cinetec was to provide the written agreement. This email exchange was later that day and the next:

    [6:29 pm, from TWC]
    Dear John and Bart: I am pleased to confirm on behalf of the Weinstein Company LLC that we have accepted the terms of your last proposal made by you during our breakfast meeting this morning and our subsequent telephone conversation with respect to the acquisition of the exclusive worldwide distribution rights in and to the feature film presently entitled “Push”: based on a novel by Saphire” [sic]. Our attorneys are drafting a customary deal memorandum consistent with the terms we agreed upon and will be forwarding to you shortly.We are pleased to have concluded this deal, as it has been an incredible journey to get here and appreciate all your efforts.

    [6:37 pm, from Cinetec]
    Gentlemen-Since our last conversation, I have been on a call with the producers and financiers explaining every sentence. I will call you after. Not being at the breakfast, I don’t know exactly what was discussed there, but am relaying the contents of our conversation this afternoon. Will call asap. Best, bw

    [7:05 pm, from TWC]
    Bart: Thank you for all your hard work on this title. I just got off the phone with Harvey [Weinstein] and I am glad to confirm that we have a deal. Additionally, we will work with you to accommodate your additional needs (i.e. Elephant Eye).

    Best regards,

    [7:12 pm, from Cinetec]
    Guys, I’m explaining every detail to the producers and financiers and taking comments and will call you when this conversation is over. Best, bw

    [2:04 am on January 28, 2009, from TWC]
    Earlier today, we accepted all of the terms and conditions of your offer, thereby closing a deal to acquire the rights to the film entitled ‘Push’. . . . [We have been] awaiting the written documentation of our deal [and] . . . fully intend to enforce the deal . . . with or without written documentation.

    [4:42 am, from Cinetec]
    [There had] been no agreement reached . . . [and there were several] [e]ssential points [that] had not and have not been agreed, including, without limitation, the division of profits between Weinstein and our client, and whether or not rights in the international territories could be granted. . . . [A]ll points under discussion with Weinstein were subject to explanation to and review by our clients and their counsel.

    [4:50 am, from TWC]
    [Your e-mail] constitute[d] a repudiation of the agreement which we definitely did reach.

    On February 2, Lionsgate, Smokewood and Cinetec announced that Lionsgate would be the distributor of the film. Two days later, TWC sued.

    Smokewood brought a motion to dismiss the complaint. TWC advanced four theories for why it should get to distribute the film – breach of agreement for exclusive license to distribute the film (oral or written), breach of oral agreement for non-exclusive license to distribute the film, and breach of binding preliminary commitment to negotiate in good faith. None were successful.

    First, on the oral exclusive license, it’s black letter law that an exclusive license has to be in writing, so that argument failed. On the written agreement theory, TWC argued that the above email exchange was a written agreement to license the film. The court noted that it’s only TWC that believes there is a firm deal, not Smokewood. Further, the emails don’t have any terms of the deal and lack a suggestion of finality. Even under the liberal standards on a motion to dismiss, this wasn’t good enough.

    On the oral non-exclusive license theory, the court held that an oral non-exclusive license may only be found in the narrow circumstances where one party created a work at the other’s request and handed it over, intending that that other copy and distribute it. That clearly wasn’t the case here; Push was complete before TWC ever entered the scene. The court didn’t think much of the argument, either:

    Plaintiff’s position in this case seems to be that a nonexclusive license should function as a sort of consolation prize for TWC’s failure to successfully secure an exclusive license. The cases cited by plaintiff do not support this argument, which, if accepted by the Court, would undermine copyright owner’s statutory rights by turning every failed negotiation for an exclusive license into a potential claim for a non-exclusive license.

    Finally, on the failure to negotiate in good faith, under New York law there can be a breach of a binding preliminary commitment to negotiate in good faith where open terms remain but the parties have agreed on certain important ones and have agreed to bind themselves to work out the remaining terms. It’s a narrow doctrine – “It is fundamental to contract law that mere participation in negotiations and discussions does not create binding obligation, even if agreement is reached on all disputed terms.” Further, “[t]here is a strong presumption against finding binding obligation in agreements which include open terms, call for future approvals and expressly anticipate future preparation and execution of contract documents.” The five factor test wasn’t met in this case.

    NPR’s “Morning Edition” story “Oprah, Tyler Perry And A Painful, ‘Precious’ Life.”

    Coming to theaters in November.

    The Weinstein Co. v. Smokewood Enter. Group, LLC, No. 09 Civ. 1972 (NRB), 2009 WL 3097201 (S.D.N.Y. Sep. 25, 2009).

    © 2009 Pamela Chestek

  • Who Owns “Tavern On the Green”?

    The New York Times is reporting that New York City has reversed its original opinion about whether it or the soon-to-be-ousted lessee of the building owns the trademark “Tavern on the Green.” According to the article (registration required), when the City originally put the lease out for bids it said that it could not convey the name. It now appears to be reconsidering that position.

    The current operator, which has a federal registration for the name, filed for bankruptcy on September 9 (S.D.N.Y. Docket No 09-15450-alg). The $19 million trademark is the most valuable asset it has – or doesn’t have.

    Who do you think owns it? Take the poll on the right.

    Photo by Erin.kkr, text © 2009 Pamela Chestek

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  • Recording It Doesn’t Make It So

    I’ve read so many standing cases that it takes something different for me to pay much attention. This is one.

    Donald W. Huntley, Esq. is a patent lawyer and plaintiff Huntley, L.L.C., also known as Huntley & Associates, his firm. (His web site is www.monopolize.com, unfortunately not live right now.) EPL Technologies, Inc. retained Mr. Huntley’s firm to file a patent for it and signed an engagement letter. EPL Technologies proceeded to stiff Huntley on the bill. Huntley filed a “Notice of Equitable Claim” with the PTO. The ‘476 patent issues to EPL Technologies, which assigned it to defendant Monterey Mushrooms, Inc. Entertaining lawsuit ensued.

    Huntley sued Monterey Mushrooms for infringement of the patent, twice. After the first lawsuit was filed, Monterey Mushrooms moved to dismiss for lack of subject matter jurisdiction and lack of standing. Huntley dismissed the suit without responding to the motion. About nine months later he took his second bite. The complaint alleged that Huntley L.L.C. owned an equitable interest in the patent, nothing more.

    No heavy lifting for the court on this one. First, only legal owners of patents have standing, and Huntley was neither inventor nor assignee of the patent. Second, Huntley didn’t even have an equitable interest. The engagement letter had no language about assignment or that any interest would inure to Huntley’s benefit if EPL Technologies didn’t pay the bill. Recording the purported interest with the PTO didn’t make it so (see 37 C.F.R. § 3.54, “The recording of a document . . . is not a determination by the [PTO] of the validity of the document or the effect the document has on the title to an application, a patent, or a registration.”), nor was it signed by either EPL Technologies or Monterey Mushrooms.

    Case dismissed with a bonus; Huntley has to pay Monterey Mushrooms’ attorney fees for having to defend the same claim twice.

    Huntley, L.L.C. v. Monterey Mushrooms Inc., Civ. Action No. 08-377-GMS, 2009 WL 2992553 (D. Del. Sep. 18, 2009).

    © 2009 Pamela Chestek

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